Budget 2015-16

Prepared By VSH & Associates-Team

Finance Minister Arun Jaitley announced a budget with the objective to improve quality of life and to pass benefits to common man.

Indian Govt has three major achievements: Jan Dhan Yojna, Coal Auction and Swacch Bharat programme.

The highlights of Jaitley’s budget for the Fiscal year that begins on April 1 are :

General Policies

Revenue

Non Tax revenue seen at Rs 2.21 lakh crore, Tax revenue seen at Rs 9.19 lakh crore, therefore Total Revenue Receipts seen at Rs 11.41 lakh crore.

Total capital receipts seen at Rs 6.35 lakh crore.

Revenue deficit seen at 2.8% of GDP.

Current FOREX reserve $340 bn, second best stock market in Asian economy.

Direct tax collection is going to be Rs. 14.49 lakh crore, out of which devolution to states is estimated to be Rs 5.23 lakh crore and share of central government will be Rs 9.19 lakh crore.

Expenditure

Budget expenditure of Rs. 17.77 lakh crore of which non planned is Rs. 13.12 lakh crore and planned is 4.65 lakh crore

Allocates 2.46 trillion rupees for defence spending

Allocates 331.5 billion rupees for health sector.

If revenue improves, hope to raise budgeted allocations for rural job scheme by 50 billion rupees.

Rs 5300 crore allocated for micro irrigation.

Fiscal Deficit

Fiscal deficit seen at 3.9% of GDP in 2015/16 and sets a target of 3% over three years.

Will meet the challenging fiscal target of 4.1% of GDP.

Current account deficit below 1.3% of GDP.

Growth

GDP growth seen at between 8 percent and 8.5 percent y/y

Aiming double digit growth rate, achievable soon.

Inflation

Monetary policy framework agreement with the RBI clearly states objective of keeping inflation below 6%.

Expects consumer inflation to remain close to 5% by march, opening room for more monetary policy easing.

Investment

Propose to do away with different types of foreign investment caps and replace them with composite caps.

To allow foreign investment in alternative investment fund.

Public investment needed to catalyse investment.

Divestment

Government targets 410 billion rupees from stake sales in companies.

Total stake sale in 2015/16 seen at 695 billion rupees.

Market Reforms

Propose to merge commodities regulator with SEBI.

To bring a new bankruptcy code.

Proposes to amend the RBI act this year, and provide for a monetary policy committee.

To set up public debt management agency.

Proposes to introduce a public contract resolution for disputed bills.

To establish an autonomous bank board bureau to improve management of public sector banks.

Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs. 20,000 crores, and credit guarantee corpus of Rs. 3,000 crores to be created.

In lending, priority will be given to SC/ST enterprises.

MUDRA Bank will be responsible for refinancing all Micro-finance Institutions which are in the business of lending to such small entities of business through a Pradhan Mantri Mudra Yojana.

A Trade Receivables discounting System (TReDS) which will be an electronic platform for facilitating financing of trade receivables of MSMEs to be established.

Postal network with 1,54,000 points of presence spread across villages to be used for increasing access of the people to the formal financial system.

NBFCs registered with RBI and having asset size of Rs. 500 crore and above may be considered for notifications as ‘Financial Institution’ in terms of the SARFAESI Act, 2002.

Policy Reforms

To enact a comprehensive new law on black money.

Propose to create a universal social security systems for all Indians.

To launch a national skills mission soon to enhance employability of rural youth.

To raise visa on arrival facility to 150 countries from 43.

Allocates 346.99 billion rupees for rural employment guarantee scheme.

1000 crore rupees added to Nirbhaya fund for women safety.

AIIMS in J&K, Punjab, Tamil Nadu, Himachal Pradesh and Assam.

Another AIIMS like institutior in Bihar.

Target of 8.5 lakh crore credit to be given to farmers in 2015-16.

Target of 8.5 lakh crore of credit for agriculture sector.

Initial sum of Rs. 150 Cr to create world class IT Hub to take advantage of our competitors.

ISM Dhanbad will be upgraded to full IIT. Govt. is pursuing policy of # Make-In-India in defense

not only to cater our needs but also for exports.

Embarked on two game changing reforms :

GST will put in place a state-of-the-art indirect tax system by 1st April, 2016.

JAM Trinity – Jan Dhan, Aadhar and Mobile – to implement direct transfer of benefits. The JAM Trinity will allow us to transfer benefits in a leakage-proof, well-targetted and cashless manner.

The year 2022 will be the Amrut Mahotsav, the 75th year, of India’s independence. The vision of what the Prime Minister has called ‘Team India’, led by the States and guided by the Central Government, should include:

A roof for each family in India. The call given for ‘Housing for all’ by 2022 would require Team India to complete 2 crore houses in urban areas and 4 crore houses in rural areas.

Each house in the country should have basic facilities of 24-hour power supply, clean drinking water, a toilet, and be connected to a road.

Substantial reduction of poverty.

Electrification, by 2020, of the remaining 20,000 villages in the country, including by off-grid solar power generation. Connecting each of the 1,78,000 unconnected habitations by all weather roads.

Providing medical services in each village and city is absolutely essential.

Two-thirds of our population is below 35. To ensure that our young get proper jobs, we have to aim to make India the manufacturing hub of the world. The Skill India and the Make in India programs are aimed at doing this.

The Eastern and North Eastern regions of our country are lagging behind in development on many fronts. We need to ensure that they are on par with the rest of the country.

To ensure that there is a senior secondary school within 5 km reach of each child, we need to upgrade over 80,000 secondary schools and add or upgrade 75,000 junior/middle, to the senior secondary level.

Increase in agricultural productivity and realization of reasonable prices for agricultural production is essential for the welfare of rural areas.

Financial Market

Enabling legislation, amending the Government Securities Act and the RBI Act included in the Finance Bill, 2015.

Forward Markets commission to be merged with SEBI.

Section-6 of FEMA to be amended through Finance Bill to provide control on capital flows as equity will be exercised by Government in consultation with RBI.

Proposal to create a Task Force to establish sector-neutral financial redressal agency that will address grievance against all financial service providers.

India Financial Code to be introduced soon in Parliament for consideration.

Vision of putting in place a direct tax regime, which is internationally competitive on rates, without exemptions.

Government to bring enabling legislation to allow employee to opt for EPF or New Pension Scheme. For employee’s below a certain threshold of monthly income, contribution to EPF to be option, without affecting employees’ contribution.

Black Money

Generation of black money and its concealment to be dealt with effectively and forcefully.

Investigation into cases of undisclosed foreign assets has been given highest priority in the last nine months.

Major breakthrough with Swiss authorities, who have agreed to: 1. Provide information in respect of cases

independently investigated by IT department;

2. Confirm genuineness of bank accounts and provide non-banking information;

3. Provide such information in time-bound manner; and

4. Commence talks for automatic exchange of information.

New structure of electronic filing of statements by reporting entities to ensure seamless integration of data for more effective enforcement.

Bill for a comprehensive new law to deal with black money parked abroad to be introduced in the current session.

Key features of new law on black money: Evasion of tax in relation to foreign assets to

have a punishment of rigorous imprisonment upto 10 years, be non-compoundable, have a penalty rate of 300% and the offender will not be permitted to approach the Settlement Commission.

Non-filing of return/filing of return with inadequate disclosures to have a punishment of rigorous imprisonment upto 7 years.

Undisclosed income from any foreign assets to be taxable at the maximum marginal rate.

Mandatory filing of return in respect of foreign asset.

Entities, banks, financial institutions including individuals all liable for prosecution and penalty.

Concealment of income/evasion of income in relation to a foreign asset to be made a predicate offence under PML Act, 2002.

PML Act, 2002 and FEMA to be amended to enable administration of new Act on black money. Benami Transactions (Prohibition) Bill to curb

domestic black money to be introduced in the current session of Parliament.

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

PAN being made mandatory for any purchase or sale exceeding Rs. 1 lakh.

Third party reporting entities would be required to furnish information about foreign currency sales and cross border transactions.

Provision to tackle splitting of reportable transactions. ¾ Leverage of technology by CBDT and CBEC to access information from either’s data bases.

Borrowings

Gross market borrowing seen at 6 trillion rupees.

Net market borrowings seen at 4.56 trillion rupees.

Gold

To develop a sovereign gold bond.

To introduce gold monetisation scheme to allow depositors to earn interest.

To develop an Indian gold coin, which will carry the Ashok Chakra on its face, to reduce the demand for foreign coins and recycle the gold available in the country.

Infrastructure

Investment in infrastructure will go up by 700 billion rupees in 2015/16 over last year.

Plans to set up national investment infrastructure fund.

Proposes tax free infrastructure bonds for projects in roads, rail and irrigation projects.

Proposes 5 “ultra mega” power projects for 4,000 MW each.

Second unit of Kudankulam nuclear power station to be commissioned.

Ports in public sector will be encouraged to corporatize under Companies Act.

Hiked roads budget by Rs 14,031 crore to boost infra.

DIRECTTAX

PROPOSALS

Rates for deduction of income-tax at source, computation of “advance tax” and charging of income-tax in different cases during the financial year 2015-2016 :For Individual, Hindu undivided family, association of persons,

body of individuals, artificial juridical person (Any assessee with age < 60 years)

Gross Total Taxable Income Rate of Tax

Upto Rs. 2,50,000                                                

Nil.

Rs. 2,50,001 to Rs. 5,00,000                           

10 per cent.

Rs. 5,00,001 to Rs. 10,00,000                            

20 per cent.

Above Rs. 10,00,000                                           

30 per cent

Individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person (Any assessee

with age > 60 years)

Gross Total Taxable IncomeRate of Tax

60 <Age<80

Age>80

Upto Rs. 3,00,000                                         

Nil. Nil

Rs. 3,00,001 to Rs. 5,00,000                           

10 per cent. Nil

Rs. 5,00,001 to Rs. 10,00,000                            

20 per cent. 20 per cent.

Above Rs. 10,00,000                                           

30 per cent 30 per cent

For Other Assesses

Category of Assesse Rate of Tax

Co-operativeSocieties

Taxable Income < Rs. 10,000 10 per cent.Rs. 10,000 < Taxable Income < Rs. 20,000

20 per cent.

Taxable Income > Rs. 20,000 30 per cent

Firms 30% of taxable income

Local Authorities 30% of taxable income

Domestic Company 30% of taxable income

Surcharge & Cess on Income Tax

Category of “Assesse” Total Income(T)Rate of

Surcharge

Every Individual or HUF or AOP or BOI (whether incorporated or not) or every artificial juridical person, cooperative societies, firms or local authorities

T > Rs. 1,00,00,000 

12% of such

income tax

 

Domestic company 

Rs. 10 Crore > T > Rs. 1 crore

7% of such income tax

T > Rs. 10,00,00,000 

12% of such

income tax

 

Company other than a domestic company  

Rs. 10 Crore > T > Rs. 1 crore

2% of such Income tax

T > Rs. 10,00,00,000 

5% of such Income tax

Payment made to a Non-Resident Person (other than a Company)

Sum of total payments, on which TDS to be deducted, exceeds Rs. 1 crore.

12% of such TDS

Notes :

Marginal relief shall be allowed in all the above cases.

For above persons, whose total income is taxable u/s 115JC & their total income exceeds Rs. 1 crore, surcharge at the rate mentioned above shall be levied and marginal relief shall also be provided.

In other cases, where income is taxable under sections 115-O, 11 5QA, 11 5R or 11 5TA, the surcharge shall be levied at the rate of 12%.

No surcharge will be levied on deductions (TDS) in other cases.

“Education Cess on income-tax” and “Secondary and Higher Education Cess on income-tax” shall continue to be levied at the rate of 2% and 3% respectively of income tax including surcharge wherever applicable.

CURB BLACK MONEY

Amended Section 269SS : Provides that NO PERSON shall accept from any person any loan or deposit or any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is Rs. 20,000 or more.

Amended Section 269T : Provides that NO PERSON shall repay any loan or deposit made with it or any specified advance received by it, in relation to transfer of an immovable property, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is Rs. 20,000 or more.

PROMOTE DOMESTIC MANUFACTURING AND IMPROVING THE INVESTMENT CLIMATE (Make-in-

India)

Deferment of provisions relating to General Anti Avoidance Rule (“GAAR”) Implementation of GAAR be deferred by two years and

GAAR provisions be made applicable to the income of the financial year 2017-18 (Assessment Year 2018-19) and subsequent years by amendment of the Act.

Investments made up to 31.03.2017 are proposed to be protected from the applicability of GAAR by amendment in the relevant rules in this regard.

The above amendment will take effect from 1st April, 2015.

Extension of eligible period of concessional tax rate under section 194LD Provide that the concessional rate of 5% withholding

tax on interest payment under this section will now be available on interest payable upto 30th June, 2017 (Initially was 1st June 2015).

This amendment will take effect from 1st June, 2015 [Clause 47].

Reduction in rate of tax on Income by way of Royalty and Fees for technical services in case of non-residents Reduction in rate of tax provided under section 115A on

royalty and FTS payments made to non-residents to 10%.

This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years [Clause 27]

Deduction for employment of new workmen (80JJAA) Extension of benefit to all assesses having

manufacturing units rather than restricting it to corporate assesses only.

Extension of benefit to units employing even 50 instead of 100 regular workmen.

“Additional wages” to mean the wages paid to the new regular workmen in excess of fifty workmen employed during the previous year.

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years [Clause 22].

Allowance of balance 50% additional depreciation Provides that the balance 50% of the additional

depreciation on new plant or machinery acquired and used for less than 180 days, which has not been allowed in the year of acquisition and installation of such plant or machinery, shall be allowed in the immediately succeeding previous year.

This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years [Clause 10].

EASE OF DOING BUSINESS/DISPUTE RESOLUTION

Raising the threshold for specified domestic transaction Provide that the aggregate of specified transactions

entered into by the assesse in the previous year should exceed a sum of twenty crore rupees for such transaction to be treated as ‘specified domestic transaction’.

This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years [Clause 24].

Rationalization of definition of charitable purpose Inclusion of ‘YOGA’ as a specific category in the

definition of charitable purpose on the lines of education.

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years [Clause 3].

Raising the income-limit of the cases that may be decided by single member bench of ITAT Provide that a bench constituted of a single member

may dispose of a case where the total income as computed by the Assessing Officer does not exceed fifteen lakh rupees.

This amendment will take effect from 1st day of June, 2015 [Clause 64].Abolition of levy of wealth-tax under

Wealth-tax Act, 1957 Abolish of levy of wealth tax under the Wealth-tax

Act, 1957 with effect from the 1st April, 2016. Information relating to assets which is currently

required to be furnished in the wealth-tax return shall be captured by suitably modifying income-tax return.

This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

BENEFITS FOR INDIVIDUAL TAXPAYERS

Tax benefits under section 80C for the girl child under the Sukanya Samriddhi Account Scheme New clause (11A) (proposed to be inserted in section 10

of the Act) provides that any payment from an account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 shall not be included in the total income of the assesse. As a result, the interest accruing on deposits in, and withdrawals from any account under the scheme would be exempt.

Further, provides that any sum paid or deposited during the year in the Scheme in the name of any girl child of the individual or in the name of any girl child for whom such individual is the legal guardian, would be eligible for deduction under section 80C of the Act.

These amendments will take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years [Clauses 7 & 15].

80CCC : Contribution towards Annuity Plans of LIC or other insurers Raising the limit of deduction under section 80CCC

from one lakh rupees to one hundred and fifty thousand rupees, within the overall limit provided in section 80CCE.

80CCD : Contribution towards New Pension System (NPS) Insertion of a new sub-section (1B) so as to provide for

an additional deduction in respect of any amount paid, of upto fifty thousand rupees for contributions made by any individual assesses under the NPS.

Omission of existing Sub-section (1A) : Provides that the amount of deduction shall not exceed one lakh rupees, within the overall limit provided in section 80CCE.

Additional Rs.50,000 deduction over & above the 80C limit of Rs.1.5 Lakhs.

Note : The below amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17.

80D : Health insurance premia (Individual & HUF) Raising the limit of deduction –

Any payment made on account of medical expenditure in respect of a very senior citizen (Age > 80 years ), if no payment has been made to keep in force an insurance on the health of such person, as does not exceed Rs. 30,000 shall be allowed as deduction under section 80D.

80DDB : Deduction for treatment of Specific Disease (Ind. & HUF) Assesse will be required to obtain a prescription

from a specialist doctor. Requirement of a certificate from a doctor working in a

Government hospital is no longer required to claim deduction.

Provide for a higher limit of deduction of upto Rs. 80,000 for the expenditure incurred in respect of the medical treatment of a very senior citizen (Age>=80 years)

Age Limit Existing Limit New Limit

<60 years Rs. 15,000 Rs. 25,000

>=60 years Rs. 20,000 Rs. 30,000

80DD : Person with Disability Raising the limit of deduction in respect of a person

with disability from Rs. 50,000 to Rs. 75,000.

80U : Person with Severe Disability Raising the limit of deduction in respect of a person

with severe disability from Rs. 1,00,000 to Rs. 1,50,000.

Enabling of filing of Form 15G/15H for payment made under life insurance policy Making the recipients of payments referred to in

section 194DA (recipients of payments made under life insurance policy) also eligible for filing self-declaration in Form No.15G/15H for non-deduction of tax at source in accordance with the provisions of section 197A.

This amendment will take effect from 1st June, 2015.

100% deduction for National Fund for Control of Drug Abuse Provides 100% deduction in respect of donations made

to the said National Fund for Control of Drug Abuse. This amendment will take effect from 1st April, 2016

and will, accordingly, apply in relation to the assessment year 2016-17.

SWACHCHH BHARAT : Tax benefits for Swachha Bharat Kosh and Clean Ganga Fund (w.e.f. 01-04-2015) Provides that donations made by any donor to the

Swachh Bharat Kosh and domestic donors to Clean Ganga Fund will be eligible for a deduction of 100% from the total income.

However, any sum spent in pursuance of Corporate Social Responsibility will not be eligible for deduction from the total income of the donor.

Exempt the income of Swachh Bharat Kosh and Clean Ganga Fund from income-tax.

TAX DEDUCTED AT SOURCE

194C – TDS ON PAYMENT TO CONTRACTOR Relaxation under sub-section (6 ) of section 194C of the

Act from non-deduction of tax shall only be applicable to the payment in the nature of transport charges (whether paid by a person engaged in the business of transport or otherwise) made to an contractor who is engaged in the business of transport i.e. plying, hiring or leasing goods carriage and who is eligible to compute income as per the provisions of section 44AE of the Act (i.e a person who is not owning more than 10 goods carriage at any time during the previous year) and who has also furnished a declaration to this effect along with his PAN (effect from 1st June, 2015).

194A : TDS ON INTEREST OTHER THAN INTEREST ON SECURITIES Exemption provided from deduction of tax from

payment of interest to members by a co-operative society shall not apply to the payment of interest on time deposits by the co-operative banks to its members.

However, the existing threshold limit of Rs 10,000 for non-deduction of tax shall also be applicable in case of interest payment on recurring deposits to safeguard interests of small depositors.

FURTHER Provides that deduction of tax under section 194A of the Act from interest payment on the compensation amount awarded by the Motor Accident Claim Tribunal compensation shall be made only at the time of payment, if the amount of such payment or aggregate amount of such payments during a financial year exceeds Rs.50,000/-.

These amendments will take effect from 1st June, 2015.

Rationalization of provisions relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) Provide that in case of non-furnishing of information or

furnishing of incorrect information under sub-section (6) of section 195(6) of the Act, a penalty of one lakh rupees shall be levied.

No penalty shall be imposable under this new provision if it is proved that there was reasonable cause for non-furnishing or incorrect furnishing of information under sub-section (6) of section 195 of the Act.

Amending the provisions of section 272A of the Act so as to provide for a penalty of Rs.100/- for each day of default during which the default continues subject to the limit of the amount deductible or collectible in respect of which the statement is to be furnished.

Insertion of a new provision in the Act for processing of TCS statements. The proposed provision shall also incorporate the mechanism for computation of fee payable under section 234E of the Act.

Amount of tax sought to be evaded for the purposes of penalty for concealment of income Provide that the amount of tax sought to be

evaded shall be the summation of tax sought to be evaded under the general provisions and the tax sought to be evaded under the provisions of section 115JB or 115JC.

However, if an amount of concealment of income on any issue is considered both under the general provisions and provisions of section 115JB or 115JC then such amount shall not be considered in computing tax sought to be evaded under provisions of section 115JB or 115JC.

Further, in a case where the provisions of section 115JB or 115JC are not applicable, the computation of tax sought to be evaded under the provisions of section 115JB or 115JC shall be ignored.

This amendment will take effect from 1st April, 2016 and will accordingly apply, in relation to the assessment year 2016-17 and subsequent assessment years.

INDIRECTTAX

PROPOSALS

Significant changes in Indirect Taxation

Service Tax:

Change in Service Tax Rate:

The rate of Service Tax is being increased from 12% plus Education Cesses to 14%. The ‘Education Cess’ and ‘Secondary and Higher Education Cess’ shall be subsumed in the revised rate of Service Tax. Thus, the effective increase in Service Tax rate will be from the existing rate of 12.36% (inclusive of cesses) to 14%, subsuming the cesses.

The new Service Tax rate shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015.

Till the time the revised rate comes into effect, the ‘Education Cess’ and ‘Secondary and Higher Education Cess’ will continue to be levied in Service Tax.

Provision for Levy of “Swachh Bharat Cess”

An enabling provision is being incorporated in the Finance Bill, 2014(Chapter VI/clause 117) to empower the Central Government to impose a Swachh Bharat Cess on all or any of the taxable services at a rate of 2% on the value of such taxable services. This cess shall be levied from such date as may be notified by the Central Government after the enactment of the Finance Bill, 2015. The details of coverage of this Cess would be notified in due course.

Registration under Service Tax:

Rule 4 is being amended to provide that the CBEC shall, by way of anorder, specify the conditions, safeguards and procedure for registration in service tax. In this regard Order No. 1/15-ST, dated 28.2.2015, effective from 1.3.2015 has been issued, prescribing documentation, time limits and procedure for registration. It has also been prescribed that henceforth registration for single premises shall be granted within two days of filing the application.

Changes in the Negative List:

The Negative List entry that covers “admission to entertainment event or access to amusement facility” is being omitted [section 66D (j)]. Consequently, the definitions of “amusement facility” [section 65 B (9)] and “entertainment event” [section 65B(24)] are also being omitted.

Implication of the changes would be as follows:-

(a) Service Tax shall be levied on the service provided by way of access to amusement facility providing fun or recreation by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks and theme parks.

(b) Service tax to be levied on service by way of admission to entertainment event of concerts, pageants, musical performances concerts, award functions and sporting events other than the recognized sporting event, if the amount charged is more than Rs. 500 for right to admission to such an event.

Services provided by the Govt. or Local Authority:

All services provided by the Government or local authority to a business entity, except the services that are specifically exempted, or covered by any another entry in the Negative List, shall be liable to service tax .

It has been proposed to levy service tax on the services provided by:

(a) chit fund foremen by way of conducting a chit.

(b) distributor or selling agents of lottery, as appointed or authorized by the organizing state for promoting, marketing, distributing, selling, or assisting the state in any other way for organizing and conducting a lottery.

Exemptions under Service Tax:

Exemption presently available on specified services of construction, repair, maintenance, renovation or alteration service provided to the Government, a local authority, or a governmental authority ( vide S. No. 12 of the notification No. 25/12-ST ) shall be limited only to:-

(a) a historical monument, archaeological site or remains of national importance, archeological excavation or antiquity;

(b) canal, dam or other irrigation work; and

(c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or

(iii) sewerage treatment or disposal.Note:-Exemption to other services presently covered under S. No. 12 of notification No. 25/12-ST is being withdrawn.

Exemption to transportation of food stuff by rail, or vessels or road will be limited to food grains including rice and pulses, flour, milk and salt. Transportation of agricultural produce is separately exempt, and this exemption would continue (S. Nos. 20 and 21 of notification No. 25/12-ST).

Exemptions are being withdrawn on the following services:

(a) services provided by a mutual fund agent to a mutual fund or assets management company,

(b) distributor to a mutual fund or AMC,

(c) selling or marketing agent of lottery ticket to a distributor. (S. No 29 of notification No. 25/12-ST).

Note:-The above changes in notification No. 25/12-ST, shall come into effect from the 1St day of April 2015.

Announcement of Exemption:

Any service provided by way of transportation of a patient to and from a clinical establishment by a clinical establishment is exempt from Service Tax. The scope of this exemption is being widened to include all ambulance services.(Amended in the entry at S. No. 2 of notification No. 25/12-ST refers).

Life insurance service provided by way of Varishtha Pension Bima Yojna isbeing exempted.

(Amendment in entry at S. No. 26A of notification No. 25/12-ST refers)

Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables is being exempted.

(New entry at S. No. 44 of notification No. 25/12-ST).

Service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve is being exempted. These services when provided by the Government or local authority are already covered by the Negative List.

(New entry at S. No. 45 of notification No. 25/12-ST).

Goods transport agency service provided for transport of export goods by road from the place of removal to an inland container depot, a container freight station, a port or airport is exempt from Service Tax vide notification No. 31/12-ST dated 20.6.2012. Scope of this exemption is being widened to exempt such services when provided for transport of export goods by road from the place of removal to a land customs station (LCS).

(Amendment in notification No. 31/12-ST refers).

Changes in Abatements: At present, service tax is payable on 30% of the

value of rail transport for goods and passengers, 25% of the value of goods transport by road by a goods transport agency and 40% for goods transport by vessels. The conditions prescribed also vary. A uniform abatement is now being prescribed for transport by rail, road and vessel and Service Tax shall be payable on 30% of the value of such service subject to a uniform condition of non-availment of Cenvat Credit on inputs, capital goods and input services.

At present, Service Tax is payable on 40% of the value of air transport of passenger for economy as well as higher classes, e.g. business class. The abatement for classes other than economy is being reduced and Service Tax would be payable on 60% of the value of such higher classes.

Reverse Charge Mechanism: Manpower supply and security services when

provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge. Presently, these are taxed under partial reverse charge mechanism.

Services provided by,-(i) mutual fund agents, mutual fund

distributors; and(ii) agents of lottery distributor are being

brought under reverse charge consequent to withdrawal of the exemption on such services.

Accordingly, Service Tax in respect of mutual fund agent and mutual fund distributor services shall be paid by the assets management company or, as the case may be, by the mutual fund receivingsuch services. In respect of agents of lottery, Service Tax shall be paid by the distributor of lottery.

CENVAT Credit Rules, 2004

Rule 4(7) is being amended to allow Cenvat Credit of Service Tax paid under partial reverse charge by the service receiver without linking it to the payment to the service provider. This change will come into effect from 1.4.2015.

The period for taking Cenvat Credit is being extended from six months from the date of invoice to one year from the date of invoice.

Excise :

Changes in Excise and Customs :

Changes in the Customs and the Central Excise law and rates of duty have been proposed through the Finance Bill, 2015 (Clauses 80 to 89, 163, 164 for Customs and Clauses 90 to 104, 163, 164, 184 and 188 for Central Excise). In order to prescribe effective rates of duty and to carry out changes in the Rules made under the respective Acts, the following notifications are being issued :

CUSTOMS Notifications Nos. Date

Tariff No.6/2015-Customs to No.11/2015-Customs

1st March, 2015

Non-Tariff No.27/2015-Customs (NT) 1st March, 2015

CENTRAL EXCISE

Tariff No.5/2015-CE to No.17/2015-CE 1st March, 2015

Non-Tariff No.3/2015-CE (NT) to No.11/2015-CE (NT)

1st March, 2015

CLEAN ENERGY CESS

No.1/2015-Clean Energy Cess 1st March, 2015

M&TP ACT

No.1/2015-M&TP 1st March, 2015

Unless otherwise stated, all changes in rates of duty take effect from the midnight of 28th February / 1st March, 2015. A declaration has been made under the Provisional Collection of Taxes Act, 1931 in respect of clauses 89, 90, 103, 104, 163, 164 and 188 of the Finance Bill, 2015 so that changes proposed therein take effect from the midnight of 28th February/ 1st March, 2015. The remaining legislative changes would come into effect only upon the enactment of the Finance Bill, 2015. Retrospective amendment in the notification issued under the Central Excise Act shall have the force of law only upon the enactment of the Finance Bill, 2015 but with effect from the date indicated in the relevant clause or Schedule.

Change in Excise Duty Rate:

Exemption of Education Cess and Secondary & Higher Education Cess (SHE) on all Excisable Goods : Education Cess levied on all excisable goods as a duty of excise under Section 91 read with Section 93 of the Finance Act, 2004 is being fully exempted. [Refer Notification No.14/2015-Central Excise dated 1st March, 2015]. Similarly, Secondary & Higher Education Cess leviable on excisable goods as a duty of excise under Section 136 read with 138 of the Finance Act, 2007 is also being fully exempted. [Refer Notification No. 15/2015-Central Excise dated 1st March, 2015].

Change in Ad Valorem rate of Excise Duty: Simultaneously, the standard ad valorem rate of duty of excise (i.e. CENVAT) is being increased from 12% to 12.5%. Specific rates of Basic Excise Duty on petrol, diesel, cement, cigarettes & other tobacco products (other than biris) are also being suitably changed. In this regard, the First Schedule to the Central Excise Tariff Act, 1985 has been amended by Clause 104 of the Finance Bill, 2015. These changes will come into force with immediate effect owing to a declaration under the Provisional Collection of Taxes Act, 1931. [Refer Sl.Nos.42, 43, 45, 50, 51, 52, 53, 90, 107, 205A, 244, 273, 278, 279, 281, 285, 286, 287, 288 and 289 of Notification No.12/2012-Central Excise, dated 17th March, 2012 as amended by Notification No.12/2015-Central Excise dated 1st March, 2015].

Other Basic Excise Duty rates (ad valorem as well as specific) with a few exceptions are not being changed.

Excise Duty structure on certain goods is being restructured as follows:

Wafers for use in the manufacture of integrated circuit (IC) modules for smart cards from 12% to 6%;

Inputs for use in the manufacture of LED drivers and MCPCB for LED lights, fixtures and LED lamps from 12% to 6%;

Mobiles handsets, including cellular phones from 1% without Cenvat credit or 6% with Cenvat credit to 1% without Cenvat credit or 12.5% with Cenvat credit. NCCD of 1% on mobile handsets including cellular phones remains unchanged;

Tablet computers from 12% to 2% without Cenvat credit or 12.5% with Cenvat credit;

Specified raw materials [battery, titanium, palladium wire, eutectic wire, silicone resins and rubbers, solder paste, reed switch, diodes, transistors, capacitors, controllers, coils (steel), tubing (silicone)] for use in the manufacture of pacemakers to Nil;

Pig iron SG grade and Ferro-silicon-magnesium for use in the manufacture of cast components of wind operated electricity generators to Nil, subject to certification by MNRE;

Solar water heater and system from 12% to Nil without Cenvat credit or 12.5% with Cenvat credit;

Round copper wire and tin alloys for use in the manufacture of Solar PV ribbon for manufacture of solar PV cells to Nil subject to certification by Department of Electronics and Information Technology (DeitY).

Changes in valuation of the goods for the purposes of levy of Excise Duty :

• All goods falling under Chapter sub-heading 2101 20, including iced tea has been notified under Section 4A of the Central Excise Act, 1944 (“the Excise Act”) for the purpose of assessment of Central Excise Duty with reference to the Retail Sale Price with an abatement of 30%. Such goods are also being included in the Third Schedule to the Excise Act; • Goods, such as lemonade and other beverages, have also been notified under Section 4A of the Excise Act for the purpose of assessment of Central Excise duty with reference to the Retail Sale Price with an abatement of 35%. Such goods are also being included in the Third Schedule to the Excise Tariff Act.

Broadening the Tax Base :

• Excise Duty of 2% without Cenvat credit or 6% with Cenvat credit has been levied on condensed milk put up in unit containers. It has also been notified under Section 4A of the Excise Act for the purpose of valuation with reference to the Retail Sale Price with an abatement of 30%;

• Excise Duty of 2% without Cenvat credit or 6% with Cenvat credit has been levied on peanut butter.

Relief measures under the Central Excise :

• Full exemption from Excise Duty is being extended to captively consumed intermediate compound coming into existence during the manufacture of Agarbattis. Agarbattis attract Nil Excise Duty.

Miscellaneous Changes in rate of Excise Duty for specified products:• Excise Duty on leather footwear (footwear with uppers made of leather of heading 4107 or 4112 to 4114) of Retail Sale Price of more than Rs. 1000 per pair from 12% to 6%;

• Excise Duty levied on the value of duty paid on rails for manufacture of railway or tramway track construction material is being exempted retrospectively for the period from March 17, 2012 to February 2, 2014, if no Cenvat credit of duty paid on such rails is availed;

• Excise Duty on cigarettes has been increased by 25% for cigarettes of length not exceeding 65 mm and by 15% for cigarettes of other lengths. Similar increases are proposed on cigars, cheroots and cigarillos;

• Maximum speed of packing machine is being specified as a factor relevant to production for determining Excise Duty payable under the Compounded Levy Scheme presently applicable to pan masala, gutkha and chewing tobacco. Accordingly, deemed production and duty payable per machine per month has been notified with reference to the speed range in which the maximum speed of a packing machine falls;

• The entry “waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured” in the Seventh Schedule to the Finance Act, 2005 related to levy of Additional Duty of Excise @ 5% is being omitted. Till the enactment of the Finance Bill, 2015, the said additional Duty of Excise of 5% leviable on such goods is being exempted. Simultaneously, the Basic Excise Duty on these goods has been increased from 12% to 18%;

• Excise duty on chassis for ambulances has been reduced from 24% to 12.5%; • Sacks and bags, other than for industrial use falling under Tariff Entry 3923 2100 duty would be leviable at the rate of 15%.

• Pig iron SG grade for manufacture of cast components of wind operated electricity generators falling under Tariff Entry 72011000 duty would be leviable at Nil rate.

• Ferro-silicon-magnesium for manufacture of cast components of wind operated electricity generators falling under Tariff Entry 7202 2900 duty would be leviable at Nil rate.

• Solar water heater and system falling under Sub Heading 841919 duty would be leviable at the rate Nil rate.

• Parts for use in the manufacture of solar water heater and system falling under 8419 or any other Chapter duty would be leviable at the rate Nil rate.

Customs: Reduction in duty on certain inputs to address the

problem of duty inversion.

Reduction in Basic Customs Duty to reduce the cost of raw materials.

Reduction in SAD to address the problem of CENVAT credit accumulation: All goods except populated PCBs, falling under any

Chapter of the Customs Tariff, for use in manufacture of ITA bound goods from 4% to Nil

Naphtha, ethylene dichloride (EDC), vinyl chloride monomer (VCM) and styrene monomer (SM) for manufacture of excisable goods from 4% to 2%.

Metal scrap of iron & steel, copper, brass and aluminium from 4% to 2%.

Inputs for use in the manufacture of LED drivers and MCPCB for LED lights, fixtures and LED lamps from 4% to Nil.

Increase in Basic Customs Duty:

1. Metallurgical coke from 2.5% to 5%.

2. Tariff rate on iron & steel and articles of iron or steel, falling under Chapters 72 and 73 of the Customs Tariff, from 10% to 15%. However, there is no change in the existing effective rates of basic customs duty on these goods.

3. Tariff rate on Commercial Vehicles from 10% to 40% and effective rate from 10% to 20%. However, customs duty on commercial vehicles in Completely Knocked Down (CKD) kits and electrically operated vehicles including those in CKD condition will continue to be at 10%.

Miscellaneous changes in Customs & Excise:

1. Export duty on upgraded ilmenite is being reduced from 5% to 2.5%.

2. Basic Customs Duty on Digital Still Image Video Camera capable of recording video with minimum resolution of 800x600 pixels, at minimum 23 frames per second, for at least 30 minutes in a single sequence, using the maximum storage (including the expanded) capacity is being reduced to Nil. Basic Customs Duty on parts and components of these cameras is also being reduced from 5% to Nil.

3. Concessional customs duty structure of Nil Basic Customs Duty, 6% CVD and Nil SAD on specified parts of electrically operated vehicles and hybrid vehicles, presently available upto 31.03.2015, is being extended upto 31.03.2016.

Thank YouVSH & Associates Chartered Accountants Address:G-8, East of Kailash New Delhi-110065 Contact No:Landline No.: 011-41070740-41Mobile No.: +91-981009308

Website: www.vshca.com & www.casandeepbhatnagar.comEmail Id: data@vshca.com & sandeep@vshca.com

Disclaimer:Changes explained above are not intended to be exhaustive and are meant only to draw attention to major changes. The text of the statutory provisions and the wordings of the notifications should be read carefully for interpreting the law.

Services Provided by Us:• Business start up

Services• Audit & Assurance

services• Direct Taxation

Services• Indirect Taxation

Services• Corporate Law

Services• Labour Law services• Outsourcing Services• Foreign Trade Policy

Matters