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Budget Connect +11 July 2014
Page 2
► Partner & National Leader of the Oil & Gas Tax Services,EY India
► Sanjay qualified as a Chartered Accountant in 1987 andjoined Arthur Andersen immediately thereafter
► Sanjay has over the past 26 years gained wide experiencein corporate, international and personal tax and exchangecontrol matters relating to multinational and domestic clientsin a wide range of industries especially EPC contractorsand oil & gas service providers.
► Sanjay has extensively worked on a range of fiscal,regulatory and business consulting assignments, includinginbound and outbound investment structuring.
► Sanjay has worked on assignments for Indian as well asmultinational companies including, Schlumberger,Weatherford, Fugro, NOV, Baker Hughes, Shelf Drilling,Diamond Offshore, Transocean, BP, Ensco, Aker Group,PGS, Halliburton, Dolphin Geophysical, Accenture, Lucent,Foster Wheeler, Bechtel, Technip etc.
Sanjay GroverPartner & National Leader Oil & Gas SectorTel +91 22 6192 0510Mobile +91 982 015 4845Fax +91 22 6192 1000Email [email protected]
Profile of Speakers
Heetesh VeeraSenior Partner – Indirect taxesTel +91 22 6192 0310Mobile +91 989 259 9365Fax +91 22 6192 1000Email [email protected]
► Heetesh is a Senior Partner, EY, Indirect Taxes forInfrastructure, Industrial & Consumer Products in India.Heetesh leads the firms Indirect Tax Team in WesternRegion
► Heetesh is a Chartered Accountant and has over 25 yearsof post qualification experience in Indian Indirect Taxation
► Heetesh has all along been an Indirect Tax specialist andhas both Consulting and Corporate work experience inIndian indirect taxation.
► He has been advising global multi-nationals and Indianlarge groups in all areas of Indirect taxes such asstructuring options for Import /Manufacturing and Sale, EPC/Works Contracts, advise on all types of Imports Incentives,Manufacture, Sales and Distribution, Implications ofService Tax, FTP Licenses and Schemes which helpscompanies to mitigate and optimize their Indirect Taxesincluding VAT /Service Tax Compliances and Closure ofAssessments.
► Heetesh and his team specialises in the areas ofInfrastructure, Pharmaceuticals, Consumer Products,Chemicals, Automobiles and Oil and Gas Industries etc. Itis supported by the firm’s global indirect tax network
Budget Connect +
Taxing
GAARSuper rich tax
GSTFiscal deficit
Retrospective amendments
Indirect tax
Budget Connect +
1. Budget backdrop
2. Budget 2014► Key policy
announcements► Direct Tax proposals► Indirect Tax proposals
Contents
Page 4
Key Performance Indicators – Macro View
► GDP growth rate at 4.7% (provisional estimate) in FY 2013-14► Share of Agriculture & allied services – 13.9%► Share of Industry – 26.1%► Share of Services – 59.9%
► Growth slowdown was broad based, affecting in particular the industry sector► Nominal GDP (provisional estimate) at 13.4%► GDP is expected to grow at 5.4% - 5.9% in FY 2014-15► Increased level of GDP growth is expected on better performance in the
manufacturing sector, improved balance of payments situation and modestglobal growth revival
► However, GDP growth to be on the lower side of the range above with theeffects of restarting the investment cycle playing out only gradually, higherinflation, expectation of a below-normal monsoon, benign outlook in Asianeconomies, geopolitical tensions
Budget Connect +
Page 5
Non Plan Expenditure / Subsidies
Expenditure(1)
2012-13(2)
P 2013-14(3)
BE 2014-15(4)
% change in(3) over (2)
% change in (4)over (3)
Non Plan 996747 1110400 1219892 11.40 9.86
Plan 413625 453085 575000 9.54 26.91
TOTAL 1410372 1563485 1794892 10.86 14.80
MajorSubsidies
(1)
2012-2013(2)
RE 2013-14(3)
BE 2014-15(4)
% change in(3) over (2)
% change in (4)over (3)
Food 85000 92000 115000 8.24 25.00
Fertilisers 65613 67971 72970 3.59 7.35
Petroleum 96880 85480 63427 - 11.77 - 25.80
TOTAL 247493 245451 251397 - 0.83 2.42
Rs crores
Budget Connect +
Page 6
Revenue
Revenue 2012-13(1)
RE 2013-14(2)
BE 2014-15(3)
% change in(2) over (1)
% change in(2) over (1)
Gross Tax Revenue 1036234 1158906 1364524 11.83 17.74
Non tax Revenue 137354 193226 212505 40.68 9.98
Total RevenueReceipts
879232 1029252 1189763 17.06 15.59
Corporation Tax 356236 393677 451005 10.51 14.56
Taxes on Income 201486 241691 284266 19.95 17.62
Wealth Tax 846 950 950 12.29 0
Customs 165346 175056 201819 5.87 15.29
Union Excise Duties 176535 179537 207110 1.70 15.36
Service Tax 132601 164927 215973 24.38 30.95
Taxes on UnionTerritories
3094 3067 3401 - 0.87 10.89
Rs crores
Budget Connect +
Page 7
Implied tax buoyancies
# Type of taxFY15 Tax buoyancy (% change
in tax revenue/ % change inGDP at market prices)
1 Gross Tax Revenue 1.32
2 Corporation Tax 1.09
3 T axes on Income other than Corporation Tax 1.324 Customs 1.145 Union Excise duties 1.156 Service Tax 2.31
► Overall expenditure increase of 12.9% is being financed by assuming a nominal growthof 13.4% and a buoyancy of 1.32 in gross tax revenues.
► This buoyancy was 1.36 in FY13 and 0.96 with respect to RE in FY14.
Budget Connect +
Page 8
Promises delivered?- An analysis of manifesto promises
# Manifesto Budget FY15
1 Provide a non-adversarial andconducive tax environment
u Govt. will not ordinarily bring about any change retrospectivelywhich creates a fresh liability
u Committed to provide a stable and predictable tax regime thatwould be investor friendly and spur growth
2 Rationalize and simplify the taxregime
u Tax provisions rationalized to reduce litigation as well as addressproblem of inverted duty structure
u Limited fiscal space
3 Overhaul the dispute resolutionmechanism
u CBDT High Level Committee to scrutinize fresh cases arising out ofretrospective amendment wrt indirect transfers
u Resident taxpayers can obtain advance ruling wrt IT liability abovea define threshold
u Additional benches for AARu Enlarge scope for IT Settlement Commissionu High level Committee to interact with Trade and Industry to
ascertain areas where clarity in tax laws is requiredu Transfer pricing regulations
u Strengthen administrative setup of APAsu Introduce range concept for determination of arm’s length
priceu Allow use of multiple year data
Budget Connect +
Page 9
# Manifesto Budget FY15
4 Bring on board all Stategovernments in adopting GST,addressing all their concerns
► Debate whether to introduce GST must come to an end► Some states apprehensive about surrendering their
taxation jurisdiction; others want to be adequatelycompensated
► FM has discussed matters with States► Hope to find a solution and approve the legislative scheme
for GST in course of the year► Assure States that government will be more than fair in
dealing with them
5 Provide tax incentives forinvestments in R&D, gearedtowards indigenization oftechnology and innovation
-
Budget Connect +
Promises delivered?- An analysis of manifesto promises
Budget Connect +
Taxing
GAARSuper rich tax
GSTFiscal deficit
Retrospective amendments
Indirect tax
Budget Connect +
1. Budget backdrop
2. Budget 2014► Key policy
announcements► Direct Tax proposals► Indirect Tax proposals
Contents
Page 11
Key policy announcements
Expenditure Management Commission
► Constitution of an Expenditure Management Commission to look into variousaspects of expenditure reforms
► Proposal to overhaul the subsidy regime including food and petroleum subsidiesto make it more targeted
Tax Administration
► Commitment to not ordinarily bring about any retrospective change
► Fresh cases arising out of retrospective amendments of 2012 in respect ofindirect transfers to be scrutinised by a High Level Committee constituted byCBDT before initiation of any action by the AO
Budget Connect +
Page 12
Key policy announcements
GST
► Intent to find a solution for implementation of GST in the course of this yearfollowed by approval of legislative scheme
Foreign Direct Investment
► FDI in Defence manufacturing and Insurance proposed to be increased to 49%from 26% with full Indian management and control, through the FIPB route
► Relaxation in threshold conditions for FDI in construction development – Built uparea requirement from 50,000 sq. mtrs to 20,000 sq. mtrs and capitalconditions from USD 10 Mn to USD 5 Mn with a 3 year post completion lock-in
Tourism
► Facility of Electronic Travel Authorisation (e-Visa) to be introduced in a phasedmanner at 9 airports
Budget Connect +
Page 13
Key policy announcements
InvITs
► Introduction of Infrastructure Investment Trusts (InvIT) for infrastructureprojects, similar to REITs, to attract long term finance
Banking
► Recapitalisation of public sector banks in a phased manner through sale ofshares to retail investors
► Government to look at consolidation of Public Sector Banks
► Structure to be put in place in the current financial year for continuousauthorisation of universals banks in the private sector
► 6 new Debt Recovery Tribunals to be set-up
Budget Connect +
Page 14
Key policy announcements
Digital India
► Launch a pan India programme “Digital India” to provide greater broad basedconnectivity, improved access to services through use of IT, greater transparencyin Government processes, etc
Infrastructure
► Institution to be established to provide support to mainstreaming PPPs called 3PIndia with a view to develop more nuanced and sophisticated models ofcontracting and develop quick dispute redressal mechanism
Budget Connect +
Page 15
Key Policy Announcements
Financial Sector
► Conclude process of consultations to enact Indian Financial Code based onrecommendations of Financial Sector Legislation Reforms Commission for bettergovernance and accountability
► To put in place a modern monetary policy framework in consultation with RBI, tomeet the challenge of an increasingly complex economy
► Liberalise the ADR/ GDR regime to allow issuance of depository receipts on allpermissible securities
► Revamp the IDR and introduce a more liberal and ambitious Bharat DepositoryReceipt
Budget Connect +
Budget Connect +
Taxing
GAARSuper rich tax
GSTFiscal deficit
Retrospective amendments
Indirect tax
Budget PLUS 2014
1. Budget backdrop
2. Budget 2014► Key policy
announcements► Direct Tax proposals► Indirect Tax proposals
Contents
Page 17
Rates of tax
► No changes proposed in tax rates for individuals
► Basic slab for exemption increased as under:
► For Indian resident individuals below 60 years - by INR 50,000 to INR 250,000
► For Indian resident individuals between 60 years and 80 years - by INR 50,000 toINR 300,000
► No changes proposed in corporate tax rates
► Surcharge and education cess to continue at existing rates
Budget Connect +
Page 18
► Domestic companies and mutual funds currently liable for payment ofdividend distribution tax
► This tax rate is applied on the ‘net’ amount, i.e., amount paid after reduction ofdistribution tax
► On or after 1 October 2014, for the purposes of determining tax ondistributed profits/ income, the net distributed profits/ income proposed to beincreased to such amount as would, after reduction of tax on such increasedamount, be equal to the net distributed profits/ income
► In other words, for dividends/ income to be distributed on or after 1 October2014, the ‘distribution tax’ to be payable on a ‘grossed up’ basis
Dividend and Income Distribution Tax
Budget Connect +
Page 19
Particulars INR
Dividend to bedistributed
85
DDT @ 15% 12.75
Dividend and Income Distribution Tax – Example*
*As given in the Memorandum explaining the provisions of the Finance (No 2) Bill, 2014
Particulars INR
Dividend amount 85Increase by Rs 15[(85*0.15)/ (1-0.15)]
15
Increased amount 100DDT @ 15% 15Dividend distributed 85
Existing Proposed
Budget Connect +
Page 20
► Enhanced compensation on compulsory acquisition of capital assets will betaxable in the year when final order of the court, tribunal or other authority ispassed
► Deduction from capital gains by investment in residential house under section54 and 54F is restricted to investment in ‘one residential house in India’
► Deduction from capital gains by investment in specified bonds under section54EC restricted to INR 5 million, even if investment is made in more than onefinancial year
► Transfer of Government Securities, carrying a periodic payment of interest,from one non-resident to another non-resident to not be considered as‘transfer’ for the purpose of charging of capital gains
Capital gains related provisions
Budget Connect +
Page 21 Budget Connect +
Proposed changes to investment linked deduction under Section 35AD
► Investment linked deduction under Section 35AD extended to the followingbusinesses, commencing operations on or after 1 April 2014► Laying and operating slurry pipeline for transportation of iron ore
► Setting up and operating a semiconductor wafer fabrication manufacturing unit
► Capital asset for which the deduction has been claimed is required to be usedfor the specified business for a period of 8 years► If this condition is not satisfied in any subsequent year after claiming the
deduction, the deduction already claimed as reduced by depreciation claimed onthe asset to be taxed as business income
► Units claiming benefit under Section 35AD will not be eligible to claim taxholiday under Section 10AA
► Investment linked deduction claimed under section 35AD to be added for thepurpose of computing the Adjusted Total Income (ATI) for AMT► However, depreciation claimed under section 32 to be reduced while computing
such ATI
Exemptions, deductions and incentives
Page 22
Investment allowance – impetus to manufacturing company
► Additional deduction @ 15% allowable to a company► For investments exceeding INR 250 million in new assets
► New assets to be acquired and installed between 1 April 2014 to 31 March 2017
► If assets sold or transferred (other than by way amalgamation or demerger) within5 years, additional deduction claimed in earlier taxable as business profits in theyear of such sale or transfer
Foreign dividend
► Sunset date for beneficial tax rate of 15% on dividend declared, distributed orpaid by a specified foreign company removed
Characterisation of income earned by FII /FPI
► Definition of capital asset under section 2(14) amended to provide that any securityheld by a FII/ FPI would be treated as a capital asset and income arising from transferof such security to be in the nature of capital gains
► Amendment to take effect from FY 2014-15
Exemptions, deductions and incentives
Budget Connect +
Page 23
Tax incentive for funding of long-term bonds
► Concessional tax rate of 5% on interest paid by an Indian Company tonon-residents on borrowings made in foreign currency extended up to1 July 2017
► Beneficial rate of 5% also extended to interest on borrowings made by way ofissuance of any long-term bond (including long term infrastructure bond)
► Amendment to take effect from 1 October 2014
Sunset date for tax holiday for units engaged in generation and distribution ofpower and laying network of new transmission or distribution lines extendedfrom 31 March 2014 to 31 March 2017
Exemptions, deductions and incentives
Budget Connect +
Page 24
► Effective 1 October 2014, specific tax regime introduced for REITs and InvITs(business trusts)
► Business trusts to raise capital by issue of listed units and/ or debts
► Income bearing assets to be held by acquiring control/ other specific interestin an Indian SPV from ‘sponsor’
► Capital gains of sponsor at the time of exchange of shares in SPV with units ofbusiness trust to be deferred ; taxable only at the time of disposal of units bysponsor
► Listed units (other than units acquired by the sponsor in exchange of SPV’sshares) to attract same levy of STT and capital gains tax benefits as equityshares of a company ie exemption from LTCGs; STCGs taxable @15%
Taxation of REITs and InvITs
Budget Connect +
Page 25
► Interest income of business trusts accorded pass through status – not taxablefor the trust; no withholding tax at SPV level
► Interest component of income distributed to unit holders to attract 5% withholdingtax in the hands of non resident and 10% in the hands of resident unit holders
► Dividend received by business trusts subject to DDT at the SPV level – exemptin the hands of the trusts. Dividend component of income distributed to unitholders also exempt
► Capital gains on disposal of assets by business trusts taxable. Distribution ofsuch gains exempt for the unit holders
► Any other income of the business trust taxable at the maximum marginal rate
► Interest on ECBs availed by business trusts taxable @ 5% in the hands of thenon resident lender
► Business trusts required to a file a return of income
Taxation of REITs and InvITs
Budget Connect +
Page 26
► The time limits for deeming an assessee to be an ‘assessee in default’ forfailing to deduct or deposit taxes has been revised as under:
Tax deduction at source (TDS)
Prescribedtime limit
Assessee having filed aTDS return
Assessee who has not filed aTDS return
Current 2 years from the end of thefinancial year in which the TDSstatement is filed
6 years from the end of financialyear in which thepayment/credit is made
Proposed 7 years from the end of financial year in which the payment/creditis made
Budget Connect +
Page 27
Disallowance of expenditure for non-deduction of taxat source (TDS)
Restricted disallowance
► In case of non-deduction or non-payment of TDS on payments made toresidents as per Section 40(a)(ia), disallowance restricted to 30% of amountof expenditure claimed
Enhanced coverage of Section 40(a)(ia)
► Disallowance under Section 40(a)(ia) extended to all expenditure on whichtax is deductible under Chapter XVII-B of the Act
► Certain payments like salary and director’s fee now covered within the ambitof Section 40(a)(ia)
Extension of time limit for payment of TDS under Section 40(a)(i)
► Section 40(a)(i) will now allow the deductor to claim deduction on paymentmade to non-residents, if tax is deducted and is paid on or before due date offiling of return
Budget Connect +
Page 28
► Central Government to notify computation and disclosure standards, fromtime to time, to be followed by any class of assessees or in respect of anyclass of income
► Where income is not computed in accordance with standards notified undersection 145(2), the assessing officer may make best judgment assessment
► Clarification in the memorandum that Accounting standards (AS) notifiedunder section 145(2) are not meant for maintenance of books of account
Income computation and disclosure standard
Budget Connect +
Page 29
► Mutual fund, securitisation trust, venture capital company or venture capitalfund to file a return of income under section 139(1) where the total income(including section 10 income) exceeds the maximum amount not chargeable totax
► The requirement to file statements of income distribution and tax paid beforethe income tax authority by mutual fund and securitisation trusts has beendispensed with
► No similar dispensation from filing Form 64 for venture capital company andventure capital fund
Return of income for certain exempt taxpayers
Budget Connect +
Page 30
Roll back provision in Advance Pricing Agreements (APA) from 1 October 2014
► Roll back provision introduced in APA scheme going back upto 4 years
► Eligibility for roll back subject to fulfilment of certain conditions, to beprescribed
Deemed international transactions
► Effective 1 April 2015, deemed international transaction to also covertransactions between two residents
Transfer Pricing
Budget Connect +
Page 31
Computation of Arm’s length price (ALP)
► ‘Range’ concept for computation of ALP proposed by the Finance Minister inhis speech, in addition to existing arithmetic mean concept
► Necessary amendments to the Act not part of the Finance Bill
► Use of multiple year data allowed for computation of ALP, proposed by theFinance Minister in his speech
► Existing provisions allow use of prior 2 years data only where it has aninfluence on determination of ALP
Transfer Pricing
Budget Connect +
Page 32
Corporate Social Responsibility
Presentation title
► CSR expenditure incurred as per Companies Act, 2013 is not an expenditureincurred wholly and exclusively for the purposes of business or professionand hence not deductible under Section 37(1) of the Act
► However, CSR expenditure covered under section 30 to 36 of the Act shall beallowed as a deduction, subject to fulfillment of prescribed conditions
Page 33
Power of survey► With effect from 1 October 2014, the power of survey is proposed to be
extended for the income tax authorities to verify compliances with TDS/ TCSprovisions
Power to call for information► With effect from 1 October 2014, a new provision is proposed to be
introduced to provide powers to prescribed income tax authorities to seekinformation or documents from any person for the purpose of verification ofinformation in his possession relating to any person which may be useful orrelevant to, any enquiry or proceedings under this Act
Failure to produce accounts and documents► Wilful failure to produce accounts and documents in response to a notice
under section 142(1) or directions issued under section 142(2A) punishablewith:► Imprisonment for a term of one year; and
► Prescribed fine
Procedural provisions
Budget Connect +
Page 34
Provisional attachment► Provisional attachment ceases to have effect after 6 months► Proposed to be extended w.e.f. 1st October 2014 upto total period of 2 years
or upto 60 days after date of assessment/ reassessment, whichever is later,with the permission of CIT/ CCIT/ DGIT/ DIT
Obligation to furnish statement of information► Prescribed reporting financial institution now required to furnish statement of
information► Statement of information now to be filed also in respect of reportable account► Penalty of INR 50,000 leviable on prescribed reporting financial institutions
on furnishing of inaccurate information in the statement► Amendments proposed to enable compliance with FATCA
Procedural provisions
Budget Connect +
Page 35 Presentation title
Indirect Transfer► Finance Bill 2012 introduced retrospective provisions for expansion of source
rule for taxation in India to capture certain offshore transfers► Due to retroactive application and lack of clarity in interpretation of key terms/
language of the provisions, investor sentiments have been adversely impacted► No change in law proposed, however to repose investor confidence, the FM
mentioned in the speech that all fresh cases to be referred to a High LevelCommittee before initiation of any action
► Ambiguity continues on outcome of pending cases
GAAR► Introduced to curb transactions lacking commercial substance and undertaken
with main purpose of obtaining a tax benefit► Finance Act 2013 deferred applicability of GAAR to FY 15► Press reports suggested deferral to FY16; however FM has not extended this relief
Indirect transfer & GAAR – Ambiguity continues …
Page 36
Advance for transfer of a capital asset could be taxed► Amount received as advance or otherwise in course of negotiations for
transfer of capital asset, proposed to be taxed as ‘Income from Other Sources,if amount is forfeited and negotiations do not result in transfer of such asset► Amendment proposed to include such sum in the definition of ‘income’► Consequential proposal that such sum should not be reduced from the cost
of acquisition in computing capital gains on future transfer of the asset
Income from other sources
Budget Connect +
Page 37
Transaction in commodity derivatives not speculative
► Transactions in commodity derivatives carried out in a recognised association,not to be regarded as a speculative transaction, provided it is chargeable toCTT
► Amendment in line with Circular No 3. dated 1 January 2014
► Amendment applicable retrospectively from FY 2013-14
Losses of a company carrying on the business of trading in shares, deemed tonot be speculative losses, for the purpose of section 73
Other provisions
Budget Connect +
Budget Connect +
Taxing
GAARSuper rich tax
GSTFiscal deficit
Retrospective amendments
Indirect tax
Budget Connect+
1. Budget backdrop
2. Budget 2014► Key policy
announcements► Direct Tax proposals► Indirect Tax proposals
Contents
Page 39
Customs duty
► General rate of BCD maintained at 10%► Rate of CVD and SAD rate also maintained
► Baggage Rules► Free baggage allowance raised from Rs 35,000 to Rs 45,000
► Rationalised inverted duty structure to incentivise domesticmanufacture - Sectors to benefit:► Steel► Textiles► Renewable energy► Food processing► Packaging► Petroleum► IT and Electronics
► BCD and CVD rates rationalised on various types of coal at 2.5%and 2% respectively to avoid ambiguity
Budget Connect +
Page 40
Customs duty
► Provision introduced for levy of safeguard duty on inputs/rawmaterials imported by an EOU and cleared into DTA
► Advance ruling facility extended to resident private limitedcompanies
► Scope of Settlement Commission expanded► Export duty on bauxite increased from 10% to 20%► Amendment introduced permitting disposal of imported goods
for infra projects and extended benefits to other consortiummembers
Budget Connect +
Page 41
► No change in median rate of central excise duty► Excise duty rates rationalised to promote domestic
manufacturing – sectors to benefit includes steel, foodprocessing, packaging, footwear, electronics, wind etc (wef 11July 2014)
► Excise Valuation Rules amended to prescribe that price (even ifbelow cost) at which goods are sold shall be transaction value, ifno additional consideration flows - directly or indirectly tomanufacturer (wef 11 July 2014)► Addresses the concerns raised post FIAT judgment► Changes only prospective
Central Excise
Budget Connect +
Page 42
► Mandatory fixed pre-deposit of duty demanded or penalty orboth with no separate requirement to obtain stay► 7.5% for first level appeal (Comm (A) or CESTAT)► 10% for second stage appeal (Tribunal)ceiling of Rs 10 crores of pre-deposit(from enactment of Finance Bill)
► Advance Ruling benefit extended to resident private limitedcompanies
► Clarified that excise duty exemption also available tosubcontractors manufacturing goods and supplied to maincontractors under ICB
Central Excise
Budget Connect +
Page 43
► Levy of 1% penalty per month of duty default introduced► Earlier mandate to pay duty on every consignment (till payment of
outstanding duty with interest) relaxed
► Applicants can approach Settlement Commission even if theyhave not filed returns
Central Excise
Budget Connect +
Page 44
► Significant limitation introduced on time for claiming credits oninput and input services - to be availed within six months
► Credit under reverse charge can be claimed immediately onpayment of service tax irrespective of payment of invoice value(except partial reverse charge)
► Re-credit of exports related reversals not permitted if proceedsuncollected for time allowed by RBI plus an additional one year
► Large Taxpayer Units no longer eligible for inter-unit credittransfer
► Input Service Distributor mechanism clarified
CENVAT credit
Budget Connect +
Page 45 Budget Connect+
Service tax
► Effective service tax rate remains unchanged at 12.36%► Negative list pruned (effective from President’s assent)
► Sale of space for advertisement other than print media taxable► Radio taxis or radio cabs taxable with 60% abatement
►Exemptions withdrawn (with immediate effect)► Clinical trials► Passenger transport in air conditioned vehicles► For education institutions:
► Rent on immovable property received by educational institutions► Restricted to specified services to education institutions
Page 46 Budget Connect+
Service tax
► Exemptions extended (effective 11 July 2014)► Services by Indian tour operators to foreign tourists for a tour outside India
► Other key amendments (Effective from President’s assent)► Time limit for completion of adjudication prescribed► Benefit of waiver of penalty limited to cases within normal period of
limitation► Stay applications redundant. Mandatory pre-deposit prescribed ranging from
7.5% - 10% for filing appeal► Advance Ruling option available to resident private limited companies► Rules to be prescribed for determination of rate of exchange for valuation of
services
Page 47 Budget Connect+
Service tax
► Other key amendments (Effective from 1 October 2014)► Amendments in the Place of Provision of Service Rules, 2012 (PoPS Rules)
► Place of supply condition for imported goods for reconditioning or re-engineering now performance based
► Location of service provider to be the place of supply for an Intermediaryof goods
► Hiring vessels and aircraft now covered under the Rule 3 of PoPS Rules► Point of taxation for reverse charge payments rationalised (for invoices issued
after 1 October 2014):► Date of payment; or► First day after three months from the date of invoice (i.e. where the
payment is not made)► Significant increase in interest rates for delay beyond six months (ranging
from 24% to 30%)
Page 48 Budget Connect+
Service tax
► Other key amendments (Effective from 1 October 2014)► Taxable portion for transport of goods by vessel reduced from 50% to 40% i.e.
effective rate reduced to 4.944%► Value of service portion for works contracts other than original works
rationalized to 70%► Domestic reverse charge provisions to apply with immediate effect on
following services:► Services by director to a body corporate► Services of a recovery to banks, financial institution and NBFC
Page 49 Budget Connect+
Service tax
► Rationalisation of procedures for claiming exemption/ refund ofservice tax on input services for SEZ units and developers:► Timeline of 15 days prescribed binding service tax authorities to issue
authorization of Form A2► Exemption available from date of issue of Form A1 by the SEZ authorities► Relaxation given to service providers to grant exemption up to 3 months of
provision of service of receipt of Form A2 from SEZ unit/ developer► Clarity on services used for authorised operations of SEZ unit/ developer -
invoice requirement and use for furtherance of authorised operations► Requirement of service tax registration of service provider for reverse charge
liability done away with
Thank YouContact our India Tax Desk | Global Tax Desk NetworkRiad Joseph | Mithun D'Souza |Office: +1 212 773 4496 | +1 212 773 4683Email: [email protected] | [email protected]
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