A Glimpse of Union Budget 2015

UNION BUDGET2015-16

- a Glimpse

INDEX

Introduction Direct Taxes

o Corporate Taxationo Individual Taxationo Others

Indirect Taxeso Service Taxo CENVAT Credito Central Exciseo Customs

GST Way Forward

Union Budget 2015-16 - a Glimpse

Introduction

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The Hon’ble Finance Minister presented the NDA Government’s first full-year budgetbefore the lower house of the Parliament. With expectations rocketing sky high on the newGovernment and with the mandate the Government possesses, it has come up with earnestto unclog the process and put in place a strong foundation for the all new Indian Economy.

While no significant changes in the direct tax rates except for repealing the age oldwealth tax laws and increase in the surcharge for the super-rich for FY 2015-16, importantannouncements have been made signalling reduction of the tax rates for corporates in theyears to come coupled with removal of exemptions gradually to boost the confidence of theindustry.

With an increase in the Service Tax Rate to 14% and marginal changes in the medianrate of Customs Duty and Excise Duty, the Hon’ble Finance Minister has been assertive inhis speech on introduction of GST in 2016.

In this presentation, we have provided a glimpse of the tax proposals announced in thebudget for your reference.

Direct Taxes


Direct Taxes – Corporate

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Proposal to reduce Corporate Tax rate from 30% to 25% over the next four years, commencing fromthe FY 2016-17.

Proposal to increase Domestic Transfer Pricing threshold limit to Rs.20 crore.

Rate of TDS on Royalty and Fees for Technical Services reduced to 10% from 25% to facilitatetechnology inflow.

Additional investment allowance at the rate of 15% and additional depreciation at the rate of 35% fornew manufacturing units set up during the period April 01, 2015 to March 31, 2020 in the notifiedbackward areas of Andhra Pradesh and Telangana.

Surcharge on Domestic Companies having Total Income more than Rs.1 crore but less than Rs.10crores is increased to 7% from 5%.

Surcharge on Domestic Companies having Total Income more than Rs.10 crores is increased to 12%from 10%.

The definition of Company resident in India has been amended to: The Company is said to be resident in India if:

(a) it is an Indian company; or(b) its place of effective management, at any time in that year, is in India.

Direct Taxes - Individual

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No changes in the tax slabs proposed for Individuals and HUFs.

Provisions of Wealth Tax to be withdrawn and replaced with additional surcharge of 2 per cent onsuper rich with a taxable income of over Rs.1 crore.

Increase in threshold limit for health insurance premium from Rs.15,000 to Rs.25,000 and fromRs.20,000 to 30,000 in case of Senior Citizens.

Additional deduction of Rs. 30,000 towards medical expenditures for Senior Citizens aged morethan 80 Years and not covered under Medical Insurance.

Additional deduction of Rs.25,000 for differently abled persons under Section 80DD and 80U.

Additional deduction of Rs.50,000 towards contribution for the new pension Scheme under Section80CCD.

The exemption limit of transport allowance increased to Rs.19,200 from Rs.9,600.

New savings deduction introduced under Section 80C for sum paid or deposited as prescribed in thename of any girl child.

Direct Taxes

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Others

Extension of applicability of General Anti Avoidance Rules for 2 Years.

Donation made to National Fund for Control of Drug Abuse (NFCDA) to be eligible for 100%deduction under Section 80G of Income Tax Act.

Quoting of PAN made mandatory for any purchase or sale exceeding Rs 1,00,000/-.

Acceptance or re-payment of an advance of Rs.20,000 or more in cash for purchase of immovableproperty to be prohibited.

Beneficial Owner or Beneficiary of Foreign Assets will be mandatorily required to file the return evenif there is no taxable income.

Concealment of income / assets and evasion of tax in relation to foreign assets will be prosecutablewith non compoundable rigorous imprisonment upto 10 years.

Indirect Taxes - Service Tax


Service Tax

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Rate Changes(Effective from a date to be notified after enactment of Finance Bill 2015)

General Service Tax rate is proposed to be increased from 12.36% to 14%. Levy of Education Cess

and Secondary Higher Eductation Cess to be discontinued post increase in rate.

Proposal to introduce Swachh Bharath Cess of 2% on all or notified services.

Alternative tax rate changes in case of specified persons:

Particulars New Rate Old Rate

Air Travel Agents

- Basic Fare of Domestic Bookings 0.7% 0.6%

- Basic Fare of International Bookings 1.4% 1.2%

Insurer of Life Insurance Business

- Premium Charged in First Year 3.5% 3%

- Premium Charged in Subsequent Years 1.75% 1.5%

Service Tax

10


Other Rate changes in case of specified persons (contd…):


Forex Conversion Agency

- Upto Rs. 1 Lakh of Conversion Amount0.14%

(Min: Rs.35)0.12%

(Min: Rs.30)

- Rs. 1 Lakh – 10 Lakhs of Conversion Amount0.07%

(Min: Rs.140)0.06%

(Min: Rs.120)

- More than 10 Lakhs of Conversion Amount

0.014% (Min: Rs770

Max: Rs. 7,000)

0.012% (Min: Rs660

Max: Rs. 6,000)

Distributor or Selling Agent of Lottery

- Upto Rs. 10 Lakhs of aggregate face value of lottery

tickets printed (guaranteed prize payout is more than 80%)

Rs. 8,200 (On every Rs. 10 Lakhs)


- Upto Rs. 10 Lakhs of aggregate face value of lottery

tickets printed (guaranteed prize payout is less than 80%)



Service Tax

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Introduction of Service tax Levy by Exclusion from Negative List(Effective from a date to be notified after enactment of Finance Bill 2015)

Admission to entertainment events (other than recognized sporting event, cinematographic films,circus, dance theatrical performance) if the amount charged is more than Rs. 500.

Access to amusement facility providing fun or recreation.

Carrying out any process amounting to manufacture of alcoholic liquor for human consumptionincluding intermediate production of alcoholic liquor.

All Services provided by the Government or Local Authorities to a Business Entity, except specificallyexempted or covered by other entries in the Negative List.

Service Tax

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Introduction of Service tax Levy by Withdrawal of Exemption(Effective from April 01, 2015)

Specified services provided to the Government or Local Authority in relation to construction, repair,maintenance, renovation or alteration service. However, exemption shall continue if the said servicesprovided are in relation to historical monument, canal, dam, irrigation work, pipeline / conduit forwater supply or sewerage treatment.

Construction, Erection, Commissioning or Installation of original works pertaining to an airport orport.

Services provided by artist in folk or classical art, if the amount charged is more than Rs. 1,00,000/-.

Transportation of food stuff by rail or vessels or road. However, exemption to continue on transportof food grains including rice and pulses, flour, milk and salt.

Services provided by mutual fund agent to a mutual fund or Asset Management Company(“AMC”),distributor to a mutual fund or AMC or selling or marketing agent of lottery ticket to a distributor.Tax to be payable under reverse charge by mutual fund or AMC.

Provision of specified telephonic services i.e. departmentally run public telephone, etc.

Service Tax

13Union Budget 2015-16 - a Glimpse

New Services under Exemption List: (Effective from April 01, 2015)

Ambulance service provided by a clinical establishment for transportation of patients.

Life Insurance Service by way of Varishtha Pension Bima Yojana.

Services by a Common Effluent Treatment Plant Operator for treatment of effluent.

Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruitsand vegetables.

Admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve.

Exhibition of movie by the exhibitor to the distributor or an association of persons consisting of suchexhibitor as one of it’s members.

Services of a Goods Transport Agency for transportation of export goods from the place of removal tothe Inland Container Depot, a Container Freight Station, a Port or Airport.

Service Tax

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Abatements:(Effective from April 01, 2015)

A uniform abatement rate of 70% for transportation services by rail, vessel and road. AccordinglyService tax would be applicable on 30% of the service value.

Reduction of abatement to 40% for classes other than economy class with respect to air transport.

Withdrawal of abatement for chit fund foreman.

Changes in Service Tax Rules:(Effective from April 01, 2015)

Simplification of registration process. Registration to be issued within 2 days.

Introduction of authentication of Invoice / Consignment Note by means of digital signature subjectto conditions, safeguards as may be prescribed and enabling Service Tax assessees to maintainrecords in electronic form subject to conditions, safeguards as may be prescribed.

Service Tax

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Other changes

The value of reimbursable expenditure is now included as “consideration for services provided”subject to certain exceptions.

Service tax payable by service receiver being Body Corporate in respect of services provided by wayof supply of manpower or security services has been increased from 75% to 100%.

Service tax is payable under reverse charge by an Aggregator of services (i.e. a person who owns andmanages a web based software application and by means of the application and a communicationdevice, enables a potential customer to connect with persons providing service under a brand nameor trade name of aggregator). In case aggregator is a person located outside India, agent of theaggregator or a person appointed by him is liable to discharge service tax.

Rationalization of penalty provisions and provisions pertaining to recovery of service tax.Transitional provisions proposed to enforce the changes in penalty provisions for the pending cases.

The option of advance ruling is now extended to all resident firms as defined.

Matters pertaining to rebate of export of services shall now lie with Government after theadjudication of matters by Commissioner (Appeals) i.e., review of orders by Central Government.

“Service” definition amended to clarify inclusion of services provided by chit foremen & agents oflottery tickets.

Indirect Taxes - CENVAT Credit


CENVAT Credit

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Credit of duty paid on inputs and capital goods may now be availed in case goods are sent directly tothe job worker.

Time limit for availment of Credit on input and input services extended from 6 months to 1 Year.

Increase in time limit from 6 months to 2 years for return of Capital Goods sent to a Job Worker.

Credit of Service Tax can be availed on input services on which partial reverse charge is applicable irrespective of payment to the vendor.

“Exempted Goods” shall now include “non-excisable goods cleared for a consideration” for thepurposes of Rule 6.

Provisions of maintenance of records to substantiate the duty payment of goods transferred by firstor second stage dealer shall also apply to importer.

The power of the Central Government to impose restrictions on misuse of CENVAT Credit is alsoextended to registered importer.

Two separate recovery modes are now prescribed for “CENVAT Credit wrongly taken but notutilized” and for “CENVAT Credit wrongly taken and utilized”.

Indirect Taxes - Central Excise


Central Excise

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The standard ad valorem rate of duty of excisable goods has been increased from 12.36% to 12.5%.

The rate change is applicable to goods taxable under Medicinal and Toilet Preparations Act, 1955

Education Cess and SHE Cess leviable on Excise Duty and on CVD applicable on imported goodsgoods is being fully exempted with immediate effect.

Education Cess and SHE Cess is exempted on duties payable by DTA Clearances of EOU Unit.

MRP Valuation

Condensed milk put in unit containers are liable for MRP Valuation with an abatement of 30%.

Extracts, essences and concentrates of tea or mate including iced tea are now notified for MRPValuation with an abatement of 30%.

Lemonade, Soya milk drinks, fruit pulp based drinks and beverages containing milk are now liablefor MRP Valuation with an abatement of 35%.

The abatement percentage has been reduced from 35% to 25% for all kind of footwear.

MRP based assessment is being prescribed expressly for LED Lights or fixtures including LED lampswith an abatement of 35%.

Central Excise

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Others

Additional duty leviable on mineral waters and aerated waters, containing added sugar or other

sweetening flavor has been withdrawn and rate of Excise Duty has been increased to 18%.

Excise Duty on cut tobacco is being increased from Rs.60 per kg to Rs.70 per kg.

With respect to Pan Masala, Gutkha and Chewing Tobacco, the maximum speed of packing machineshas been specified as a relevant factor for determining the duty under Compounded Levy Scheme.

There has been a change in the mechanism for levy of duty on cigarettes and other products.

Changes have been effected in the duty structure of Petroleum and related products.

Clean Energy Cess on coal, ignite and peat increased from Rs.100 per tonne to Rs.300 per tonne.

Full exemption from Excise Duty is being provided to all goods which are consumed within thefactory of producer of Agarbatti.

Central Excise

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Others (Contd..)

Exemption from Excise Duty is being provided to round copper wire and tine alloys used in themanufacture of PV ribbon for manufacture of Solar PV Cells and Modules.

Exemption provided to solar water heater and system has been withdrawn. However an option ofpaying duty at NIL rate without CENVAT or duty at the rate of 12.5% with CENVAT is extended tosolar water heater and system.

Duty exemption on parts for use in manufacture of solar water heater and system is being continuedsubject to actual user condition.

Excise duty of 2% without CENVAT or 12.5% with CENVAT is being provided on tablet computer.

Excise duty exempted on parts and sub-parts, components and accessories for use in manufacture oftablet computer.

Validity period of concessional excise duty of 6% granted to specified goods used in the manufactureof electrically operated vehicles and hybrid vehicles has been extended up to March 31, 2016.

Excise Duty exempted on specified raw materials used in the manufacture of pacemakers.

Central Excise

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Others (Contd..)

Goods Manufactured domestically and supplied against International Competitive Bidding areeligible for full excise duty exemption provided that such goods when imported attract NIL BCD andNIL CVD. Conditions as applicable in case of imported goods are applicable even for goodsmanufactured in the DTA for claiming exemption.

Other Duty changes

Description of Goods New Rate

Old Rate

Waters, including mineral waters and aerated waters, containing added sugar orother sweetening matter of flavoured

18% 12%

Sacks and bags of polymers of ethylene other than for industrial use 15% 12%

Leather footwear with MRP less than Rs.1000/- 6% 12%

Mobile Handsets including cellular phone (paying duty @ 6% with CENVAT) 12.5% 6%

Wafers used in the manufacture of IC Modules for Smart Cards 6% 12%

Inputs used in the manufacture of LED Driver and MCPCB for LED lights and fixtures and LED Lamps

6% 12%

Chassis for ambulance 12.5% 24%

Central Excise

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Procedural Changes

Invoicing provisions amended to be in line with the amendment of CENVAT Credit Rules withrespect to direct dispatch of goods to job worker.

Direct dispatch of goods allowed to customers location by a registered dealer or importer subject to

Rule 11 & Rule 4 of Credit Rules.

Provision to issue digitally signed invoices and maintenance of records in electronic mode extendedto manufacturers and dealers.

Registration to be granted within 2 days. Process simplified to benefit manufacturers and dealers.

Rationalization of penalties under Section 11AC for cases with or without extended period of

limitation.

Indirect Taxes - Customs


Customs

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Exemption of BCD on evacuated tubes used in the manufacture of solar water heater and system.

Exemption of BCD and CVD on parts, components and accessories for use in manufacturing of tabletcomputer and SAD on these goods will also be exempt.

Exemption of BCD on High Density Polyethylene (HDPE) for manufacture of telecommunicationgrade optical fiber and optical fiber cables.

Concessional BCD is extended to AEC (Active Energy Controller) for manufacture of renewablepower system inverters subject to conditions.

Exemption of SAD on all goods [except populated PCBs] for use in the manufacture of ITA boundgoods subject to actual user condition.

Exemption of SAD on all inputs for use in the manufacture of LED Driver and MCPCB for LEDLights and Fixtures and LED Lamps subject to actual user condition.

Validity exemption granted to specified goods for use in the manufacturing of hybrid and electricallyoperated vehicles extended up to 31st March, 2016.

Exemption of CVD on specified raw materials for use in manufacture of pacemakers subject to actualuser condition. Further these goods also being exempted from SAD subject to actual user condition.

Exemption of BCD and CVD on artificial hearts (left ventricular assist devices).

Customs

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Rates Changes(Effective from March 01, 2015)


- Basic Customs Duty (“BCD”) on ulexite ore Nil 2.5%

- BCD on metallurgical coke [2704 00] 5% 2.5%

- Special Additional Duty (“SAD”) on Naphtha [2710] for use in manufacture of excisable goods

2% 4%

- BCD on Sulphuric acid [2807 00 10] for the manufacture of fertilizers 5% 7.5%

- BCD on isoprene [2901 24 00] 2.5% 5%

- BCD on styrene [2903 21 00], ethylene dichloride [2903 15 00] and vinyl chloride monomer [2903 21 00]

2% 2.5%

- SAD on styrene [2902 50 00], ethylene dichloride [2903 15 00] and vinyl chloride monomer [2903 21 00] for use in manufacture of excisable goods

2% 4%

- BCD on anthraquinone [2914 61 00] 2.5% 7.5%

- BCD on butyl acrylate [2916 12 10] 2.5% 7.5%

- SAD on melting scrap of iron or steel, stainless steel scrap for purposes prescribed

2% 4%

Customs

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Rates Changes (Contd..)


- BCD on antimony metal [8110 10 00] and antimony waste and scrap [8110 20 00] 2.5% 5%

- BCD on C Block Compressor [8414 90 11] Crank Shaft [8414 90 11] and Over Load Protector & Positive thermal co-efficient [8536 20 90] for the use in manufacture of Refrigerator compressors

5% 7.5%

- BCD on ceria zirconia compounds [2825 60 20], cerium compounds [2846 10 90] and zeolite [3824 90 90 ]

5% 7.5%

- BCD on Water Blocking Tape, ethylene propylene- non conjugated diene rubber and mica glass tape for manufacture of insulated wires and cables.

7.5% 10%

- BCD on metal parts for use in manufacture of electrical insulators subject to actual user condition.

7.5% 10%

- BCD on Organic LED (OLED) TV panels Nil 10%

- BCD on Import of vehicles falling under chapter 8702 or 8704 (commercial vehicles)

40% 10%

- Basic Customs duty on Digital Still Image Video Cameras with descriptions as specified

Nil 10%

- BCD on specified inputs for use in the manufacture of flexible medical video endoscope

2.5% 5%

Goods and Services Tax- Way Forward


GST – Way Forward

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The much waited reform in Indian Indirect taxation seems to have achieved a positive thrust withthe Constitutional Amendment Bill being moved at the lower house. The assertiveness of theHon’ble Finance Minister in his Budget speech showcases the Union Government’s commitmentto implement Goods and Service Tax laws.

The Finance Minister has asserted to put in place GST by April 01, 2016. With the advent of GST, agreater level of transparency and a greater investor confidence is expected in the days to come.

The draft provisions of the new law is proposed to be available shortly on the public domain afterthe Constitutional Amendment Bill is passed by the Upper House and consequently the Presidentof India assenting the same.

The new era of indirect taxation is going to play a transformative role in the way the Indianeconomy is going to function.

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Law

A Glimpse of Union Budget 2015