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AUDIT / TAX / ADVISORY / LINE OF BUSINESS

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KPMG IN INDIA

Union Budget 2010 – Indirect Tax Proposals

2© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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Expectation Gaps

Key Indirect Tax Proposals

At a Glance

Contents

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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At a Glance



Budget 2010 Highlights

At a Glance

●● Partial rollback of Excise duty incentive package (from 8% to 10Partial rollback of Excise duty incentive package (from 8% to 10%)%)●● Service tax and Basic Customs duty retained at earlier levelsService tax and Basic Customs duty retained at earlier levels●● ‘‘Earnest endeavorEarnest endeavor’’ to rollout GST from April 2011to rollout GST from April 2011●● Focus on rationalization, simplification and expansion of tax baFocus on rationalization, simplification and expansion of tax basese●● Thrust areas:Thrust areas:

●● Agriculture & food processingAgriculture & food processing

●● Green technologyGreen technology

●● Infrastructure & capital goodsInfrastructure & capital goods


Key Indirect Tax Proposals




Customs Duty

●● Increase in duty on petroleum products, precious metalsIncrease in duty on petroleum products, precious metals●● Scope of Project Imports expanded to cover mono rail and food/ Scope of Project Imports expanded to cover mono rail and food/

agro processing sectoragro processing sector●● Outright exemption from 4% ADC on goods imported in preOutright exemption from 4% ADC on goods imported in pre--

packaged form for retail salepackaged form for retail sale●● CVD on goods covered under M&TP Act (cosmetics, pharma CVD on goods covered under M&TP Act (cosmetics, pharma

products, etc.) brought under MRP based assessmentproducts, etc.) brought under MRP based assessment●● Reduction in duty on inputs imported for manufacture of various Reduction in duty on inputs imported for manufacture of various

items items



Customs Duty Movements

Rs 300 per 10 gmRs 200 per 10 gmSpecified Gold bars and coins

16.48% (w.e.f 26 June 2009)NilElectrical Energy supplied from SEZ to DTA/ Non-processing Area

9.6%12-18%Medical/ Surgical/ Dental equipment, etc.

Changes in Effective Customs Duty (w.e.f 27 February 2010)

5%

New Rate

Nil*Crude Petroleum

Old RateItem Description

* Basic Customs Duty



Excise Duty

●● Across the board increase by 2% on nonAcross the board increase by 2% on non--petroleum productspetroleum products●● Clean Energy Cess proposed on specified coalClean Energy Cess proposed on specified coal●● Excise duty exemptions:Excise duty exemptions:

●● Specified equipment used in dairy, poultry, etc.Specified equipment used in dairy, poultry, etc.

●● Parts of electrical vehiclesParts of electrical vehicles

●● Relief for MSME/ Small Scale sector:Relief for MSME/ Small Scale sector:●● Full Cenvat credit on capital goods in first yearFull Cenvat credit on capital goods in first year

●● Quarterly (instead of monthly) payment of Excise dutyQuarterly (instead of monthly) payment of Excise duty



Excise Duty Movements

● 10%

● Rs. 290 per metric tonne

● 8%

● Rs. 230 per metric tonne

Packaged Cement● Declared RSP exceeding

Rs. 190 per 50 kg

● In other cases

Changes in Excise Duty (Effective from 27 February 2010)

● Rs. 15.50 per litre/ Rs. 5.75 per litre

New Rate

● Rs. 14.50 per litre/ Rs. 4.75 per litre

Motor Spirit/ High Speed Diesel (intended for sale with brand name)

Old RateItem Description



Excise Duty Movements

4%NilSpecified Microprocessor for Computers/ different disk drives

4%NilElectrical vehicles/ Parts

22%20%Large Cars/ MUVs/ SUVs*

4%NilAviation Gas

Changes in Excise Duty (Effective from 27 February 2010)New RateOld RateItem Description

* For vehicles above 1500 cc, Rs 15,000 per unit continues



Service Tax - Coverage

●● Eight new categories introduced, including:Eight new categories introduced, including:●● Permitting commercial use/ exploitation of eventsPermitting commercial use/ exploitation of events

●● Specified health services (when cost is picked up by business enSpecified health services (when cost is picked up by business entities/ tities/ insurance companies)insurance companies)

●● Transfer of copyright for cinematographic films and sound recordTransfer of copyright for cinematographic films and sound recordinging

●● Services provided by electricity exchangesServices provided by electricity exchanges

●● Coverage ExpandedCoverage Expanded●● Construction services Construction services –– liable unless entire consideration paid after liable unless entire consideration paid after

completion of propertycompletion of property

●● Renting Renting per seper se, as well as lease of vacant land for undertaking construction, as well as lease of vacant land for undertaking construction

●● Air travel Air travel –– Domestic as well as international (in any class)Domestic as well as international (in any class)

●● IT software services otherwise than for furtherance of business IT software services otherwise than for furtherance of business or commerceor commerce

●● Transport of goods by rail (with 70% abatement and exemption in Transport of goods by rail (with 70% abatement and exemption in certain certain cases)cases)



Service Tax – Other Important Proposals

●● New exemptionsNew exemptions●● Erection/ Installation/ Commissioning of equipment for cold storErection/ Installation/ Commissioning of equipment for cold storage, age,

agricultural; dairy; poultry products, etc.agricultural; dairy; poultry products, etc.●● PrePre--packaged IT software (with singlepackaged IT software (with single--user license)user license)●● Transmission of electricityTransmission of electricity●● Transport of foodTransport of food--grains and pulsesgrains and pulses●● Indian news agencies under specified categories Indian news agencies under specified categories

●● Exports simplified:Exports simplified:●● Condition of Condition of ‘‘service provided from India and used outside Indiaservice provided from India and used outside India’’ omittedomitted●● Realignment of export criteria for certain services (e.g. CA, CSRealignment of export criteria for certain services (e.g. CA, CS, Cost , Cost

Accountants, etc.)Accountants, etc.)●● Relaxation in conditions for claiming refundsRelaxation in conditions for claiming refunds



Cenvat Credit

●● Retrospective amendment in credit rules to resolve disputes on Retrospective amendment in credit rules to resolve disputes on reversal of credit (in case of manufacture of both dutiable and reversal of credit (in case of manufacture of both dutiable and exempt goods)exempt goods)

●● Fixtures, moulds and dies permitted to be sent to Fixtures, moulds and dies permitted to be sent to ‘‘vendorsvendors’’ (in (in addition to job workers)addition to job workers)

●● Accelerated depreciation for reversal of credit on removal of Accelerated depreciation for reversal of credit on removal of computers and peripherals after usecomputers and peripherals after use

●● Credit eligibility extended to duty free supplies to Mega Power Credit eligibility extended to duty free supplies to Mega Power Projects based on tariff based competitive biddingProjects based on tariff based competitive bidding



GST

●● GST now proposed to be rolled out from April 2011GST now proposed to be rolled out from April 2011●● However, several proposals under the existing tax regime should However, several proposals under the existing tax regime should

facility move towards GST:facility move towards GST:●● Focus on building robust IT infrastructureFocus on building robust IT infrastructure

●● Further rationalization of rates under Excise and CustomsFurther rationalization of rates under Excise and Customs

●● While Excise rates have been aligned with Service tax, from a GSWhile Excise rates have been aligned with Service tax, from a GST T perspective, one would have expected otherwiseperspective, one would have expected otherwise

Delay in GST implementation should give both Government and industry to prepare for this important transition…


Expectation Gap




What did Budget 2010 overlook

●● Detailed roadmap for GSTDetailed roadmap for GST●● CST PhaseCST Phase--outout●● Rationalization of various Excise ExemptionsRationalization of various Excise Exemptions●● Consolidation of taxes (NCCD, R&D Cess etc.)Consolidation of taxes (NCCD, R&D Cess etc.)


Mumbai

Lodha ExcellusApollo Mills CompoundNM Joshi Marg, MahalaxmiMumbai 400 013Tel: +91 22 3989 6000Fax: +91 22 3983 6000

New Delhi

Building No.10, Tower B, 8th Floor, DLF Cyber City,Phase – IIGurgaon 122002 HaryanaTel +91 124 3074000Fax +91 124 2549101

Bangalore

Maruthi Info-Tech Centre11-12/1, Inner Ring Road Kormangala,Bangalore 560071Tel +91 80 3980 6000Fax +91 80 3980 6999

Hyderabad

8-2-618/2Reliance Humsafar, 4th FloorRoad No. 11, Banjara HillsHyderabad 500 034Tel +91 40 6630 5000Fax +91 40 6630 5299

Chennai

No.10 Mahatma Gandhi Road, Nungambakam, Chennai 600 034Tel +91 40 3914 5000Fax +91 40 3914 5999

Kolkata

Infinity Benchmark, Plot No.G-1, 10th floor,Block - EP & GP, Sector - V, Salt Lake CityKolkata 700091Tel: +91 33 44034066Fax: +91 33 4403 4199

Pune

703, Godrej Castlemaine,Bund Garden,Pune 411 001Tel +91 20 305 85764/65Fax +91 20 305 85775

Kochi

4/F, Palal TowersM.G.Road, Ravipuram, Kochi 682 016 Tel +91 484 309 4120 Fax +91 484 309 4121

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Documents

TAX Place Presentation Title Here - IBEF · Infinity Benchmark, Plot No.G-1, 10th floor, Block - EP & GP, Sector - V, Salt Lake City Kolkata 700091 Tel: +91 33 44034066 Fax: +91 33