India Union Budget 2015 - Key Highlights | A BDO India Presentation

INDIA UNION BUDGET 2015Key Highlights

TABLE OF CONTENTS

ECONOMIC INDICATORS

DIRECT TAX PROPOSALS

INDIRECT TAX PROPOSALS

Budget Highlights 2015 - A BDO India Presentation

ECONOMIC INDICATORS

NUMBER HIGHLIGHTS

GDP Estimates

7.4% for FY 2014-15

next year estimated at 8.0 to 8.5%

Fiscal deficit estimates

4.1% for FY 2014-15

3.9% for next year

to be reduced to 3% by FY 2017-18

Inflation likely to be below 6%

Second best performing stock market amongst major economies


KEY POLICY ANNOUNCEMENTS

GST to be operational from April 1, 2016

Roadmap for direct tax regime at par with international standards

Competitive tax rates

Limit deduction / exemptions and incentivize investment

Predictable and non adversarial tax regime

Rigorous new law proposed to combat black money

New bankruptcy code to be at par with global standards

Ease of doing business in India

Launch of e-portal for quick approvals

Multiple prior permissions to be replaced with pre-existing regulatory mechanisms


DIRECT TAX PROPOSALS

KEY DIRECT TAX AMENDMENTS

Tax rates remain unchanged with a promise to reduce the corporate tax rate to 25% from 30% over next four years

No change in tax rates for individuals – Specific tax benefits provided

Additional surcharge of 2% levied on tax payers having income in excess of Rs. 10 million

Abolition of wealth tax

Royalty and Fees for Technical Services payable to Non Residents taxable at reduced rate of 10% from 25%

Provisions for taxability of Indirect Transfers clarified:

Specific exemption to small shareholders and smaller Indian contribution in value terms (INR 100 million)

Threshold value contribution by the Indian assets - specified at 50%

Only the income proportionate to the value attributed by Indian assets to be taxed in India

Indirect Transfer due to offshore mergers and demergers not to be taxed, subject to certain conditions


Income of FII earned on the sale of listed security, excluded from the chargeability of MAT

Implementation of GAAR has been deferred by a period of two years

Will apply in relation to the investments made after March 31, 2017

Separate tax regime outlined for Alternate Investment Funds registered as Category I (sectors having positive impact) and

Category II (other closed ended funds) with SEBI

Complete tax pass-thru status

Distribution made by the funds now made subject to 10% withholding

No tax pass-thru for losses, as loss incurred by AIF to be carried forward in the hands of AIF

Fund managers based in India not to constitute business connection (or the permanent establishment) for offshore funds, thereby

restricting the taxability of offshore funds in India

Test prescribed for ‘eligible fund manager’ and ‘eligible investment fund’



Test of examining residential status of a foreign company for Indian tax purposes made stringent

Shift from ‘controlled wholly’ to ‘place of effective management’

Monetary threshold for compliance with domestic transfer pricing increased to INR 200 million from INR 50 million

Fund managers based in India not to constitute business connection (or the permanent establishment) for offshore funds, thereby

restricting the taxability of offshore funds in India

Test prescribed for ‘eligible fund manager’ and ‘eligible investment fund’

Tax regime for REIT and Infrastructure Investment Trusts have been simplified. However, certain key issues remain un-addressed

Payment of interest by an Indian Permanent Establishment of a company engaged in the banking business, taxable in India

Cost and period of holding of assets in case of demerger to relate back to the cost and period of the demerged company. This is

line with the tax treatment in case of merger of companies.



INDIRECT TAX PROPOSALS

KEY INDIRECT TAX AMENDMENTS

Date of implementation of GST to be April 1, 2016. Game changing reforms on the anvil for GST

RATES OF TAXES/ DUTIES

Basic Customs Duty (BCD) rate retained at 10%

Excise Duty/CVD increased from 12% to 12.5%. Education and Secondary Higher Education Cess to be exempted

Service Tax rate increased from 12.36% to 14%. Education and Secondary Higher Education Cess subsumed in the rate of 14%

Swachh Bharat Cess proposed to be levied at 2% on all taxable services

CUSTOMS

BCD on certain imports, raw materials, intermediaries and their components reduced to minimise the impact of duty inversion

SAD reduced on import of certain inputs and raw materials to address the problems of CENVAT credit accumulations



CENTRAL EXCISE

Online Central Excise registration to be facilitated in 2 workings days

Central Excise assesses allowed to use digitally signed invoices

Penalty provisions rationalised to encourage compliance and early dispute resolution

SERVICE TAX

Negative list trimmed to widen the tax base

All reimbursable expenditure or cost incurred and charged by the service provider to form part of taxable services

Service Tax payable on reverse charge basis by a business entity on all services received from the Government and Local

Authority, unless specifically exempted



Service Tax to be levied on services provided by way of access to amusement parks, certain entertainment events, concerts,

pageants, etc

Service Tax exemption withdrawn in relation to construction, erection, commissioning of original works of an airport or port

Service Tax to be levied on any process/ jobwork for manufacture of alcoholic liquor for human consumption

Service Tax to be levied on activities undertaken by chit fund foremen, in relation to chit, and lottery distributors and selling

agents, in relation to lotteries

Uniform abatement of 30% of service value proposed for transport by rail, road (GTA) and vessels subject to non-availment of

CENVAT credit

Air transport of passengers by business class now costly. Abatement reduced from 60% to 40%

Abatement for services provided in relation to chit funds withdrawn

Manpower supply and security services, services provided by Mutual Fund agents and distributors and agents of lottery distributors

brought under full reverse charge



Service Tax exemptions extended to certain pre-cold storage services in relation to fruits, vegetables, etc so as to incentivise this

crucial sector

Service Tax exemptions extended to certain services like insurance premium on Varishta Beema Yojna, ambulances, admissions to

museums, zoo, etc

Online Service Tax registration (single premise) to be facilitated in 2 workings days

Service Tax assesses allowed to use digitally signed invoices

Penalty provisions rationalised to encourage compliance and early dispute resolution



CENVAT CREDIT

Time limit for availing CENVAT credit on input and input services increased from 6 months to 1 year

Time limit for return of capital goods from the job worker being raised from 6 months to 2 years

Direct dispatch of inputs and capital goods to job worker to be allowed subject to the prescribed conditions

CENVAT credit of Service Tax paid under partial reverse charge can be taken immediately on payment of such service tax by the

service recipient

Penal provisions introduced for incorrect availment of CENVAT credit


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SERVICE PORTFOLIO

Service OfferingsINDIRECT TAX

• Health Checks

• Multi State VAT Services

• Taxation of Goods & Services

• Foreign Trade Policy

• Transfer Pricing and Import Duty Study

• SEZ Compliance & Advisory

• STPI & EOU Compliance & Advisory

• Representation & Litigation Support

• Outsourcing and Compliance

• Location specific strategy for setting up new business/

industry in India - Special Incentive Schemes

TRANSACTION ADVISORY SERVICES

• Mergers & Acquisition, JV and Hive-offs- Structuring,

Negotiation, Documentation &

Implementation

• Corporate Restructuring - Advisory & Implementation

• Valuation

• Due Diligence

• Exchange Control & Corporate Law- Advisory & Compliance

• Corporate Finance & Investment Banking

• Capital Markets

• Employee Stock Option Plans

• India Entry Advisory & Support

DIRECT TAX

• Global Tax Services

• Cross Border Taxation

• Transfer Pricing

• Structuring Inbound/ outbound investments &

income

• Effective Tax Rate (ETR) minimization strategy

• Tax Advisory & Compliance

• Human Capital Services

• Representation & Litigation Support

• Information Exchange compliances

1 2

OUTSOURCING

• Treasury operations

• Bookkeeping

• Management Reporting

• Payroll Processing

• Audit assistance

• Employee taxation handling

• Accounts Receivable / Payable Management

• Design / Set up of accounting systems

BUSINESS ADVISORY

• Business Modelling : Business Plan Forecasting-

Structuring-Implementation & Review

• Project Finance :Working Capital Management- Cost to Revenue

Implications/Assessment

• Industry Analysis and Business Viability Studies

• Litigation Support

• Project Performance & Management Studies

• Financial Strategy

RISK ADVISORY SERVICES

• Internal Audit

• Standard Operating Procedures

• Performance Improvement Studies

• Enterprise Risk Management

• Corporate Governance

• SOX Advisory & Compliance

• IT Advisory

• ERP Advisory

• Forensic Advisory Services

4

3

5 6


Milind Kothari

[email protected]

Mumbai

Jiger Saiya

[email protected]

Mumbai

Note: This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and

you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO India LLP to discuss these matters in the context of your

particular circumstances. BDO India LLP and each BDO member firm in India, their partners and/or directors, employees and agents do not accept or assume any liability or duty of care for any loss arising

from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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CONTACT US

Pranay Bhatia

[email protected]

Mumbai

Shailesh Sheth

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Mumbai

Gurudas Pai

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Mumbai

Sumit Lunker

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Mumbai

Sagar Shah

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Pune

Neelesh Khandelwal

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Pune

Bhavesh Thakkar

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Pune

Neeraj Menon

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Pune

Partho Dasgupta

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Gurgaon

Prashant Raizada

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Gurgaon

Pradeep Kasthala

[email protected]

Hyderabad

For queries or feedback on Direct Tax, you may please connect with - For queries or feedback on Indirect Tax, you may please connect with -

MUMBAI | PUNE | NEW DELHI – GURGAON | HYDERABAD | AURANGABAD

India Union Budget 2015 - Key Highlights | A BDO India Presentation

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Transcript of India Union Budget 2015 - Key Highlights | A BDO India Presentation