Significant Budget Highlights – 2016-17 Indirect Tax

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EXCISE


Amendments made effective
immediately
The Clean Energy cess is to be
renamed as Clean Environment cess. The effective rate of Clean Energy cess
proposed to be increased from Rs.200 per tonne to Rs.400 per tonne. Infrastructure
cess is to be levied on motor vehicles under heading 8703 subject to certain
exceptions. Further, this cess is not CENVATABLE and CENVAT credit cannot be
utilized for its payment.

Amendments to be effective from
the date on which Finance Bill receives the assent of the President Amendments
in the Central Excise Act, 1944
Requirement of publishing and
offering for sale any notification issued, by the Directorate of Publicity and
Public Relations of CBEC under section 5A proposed to be done away with.  The time-limit for issuance of show cause notice under
section 11A for recovery of service tax not levied/paid/short levied/short
paid/erroneously refunded, for non-fraud cases is proposed to be enhanced by 1
year, i.e. from 1 year to 2 years.  It is
proposed to empower the Board under section 37B to issue orders, instructions
and directions for the implementation of any other provision of the Central
Excise Act, 1944.
Amendments effective from
01.04.2016
Amendments in the CENVAT
Credit Rules, 2004
The CENVAT Credit Rules, 2004 have
been simplified and rationalized with an endeavor to improve CENVAT credit
flow, reduce the compliance burden and associated litigations, predominantly
those relating to apportionment of credit between exempted and non-exempted final
products/services. Primary amendments include:  Banks
and other financial institutions are to be allowed to reverse credit in respect
of exempted services, on actual basis also, in addition to the option of 50%
reversal. Inputs and input services used in an activity which is not a ‘service’
under the Finance Act, 1994also to attract reversal provisions under rule 6. CENVAT
credit of service tax paid on amount charged for assignment by Government or
any other person of a natural resource available, over such period of time as
the period for which the rights have been assigned.
Amendments in the Central
Excise Rules, 2002
The Central Excise Rules, 2002 are
proposed to be amended as follows:
(a) Reduction of the number of
returns to be filed by a central excise assessee above a specified threshold to
13, that is, 1 annual return and 12 monthly returns. The said annual return is
also required to be filed by the service tax assessees above a specified
threshold. Thus, now three service tax returns need to be filed instead of two.
(b) Like under service tax, the
facility of revision of return to be available under central excise also.
(c) Manual attestation of copy of
invoice, meant for transporter, is not required in cases where invoices are
digitally signed.
(d) In case of finalization of
provisional assessment, the interest will be chargeable from the original date
of payment of duty.

SERVICE TAX

Amendments effective from
01.03.2016
Exemption withdrawn
Exemption with respect to
construction, erection, commissioning or installation of original works
pertaining to monorail or metro in respect of contracts entered into on/after
01.03.2016, has been withdrawn.
New Exemptions
Following services have been
exempted:
Services by way of construction,
erection, commissioning, etc. in respect of:
a) housing projects under Housing
For All (HFA) (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY)
b) low cost houses up to a carpet
area of 60 m2 in
a housing project under “Affordable housing in Partnership” component of PMAY
c) low cost houses up to a carpet
area of 60 m2 in
a housing project under any housing scheme of the State Government.
Services provided by the Indian
Institutes of Management (IIM) to their students, by way of the specified
educational programmes.
Other Amendments
CENVAT credit is being allowed to
service providers providing services by way of transportation of goods by a
vessel from India to abroad  Rule
5 of the Point of Taxation Rules, 2011 has been amended so as to clarify that
this rule shall apply mutatis mutandis in case of new levy on services and new
levy or tax shall be payable on all the cases other than specified in said
rule.
Information Technology Software (IT
Software) on media bearing RSP is exempted from service tax provided central
excise duty is paid on RSP in accordance with section 4A of the Central Excise
Act.
Further, IT Software recorded on
media which is “NOT FOR RETAIL SALE” is exempted from so much of the Central
Excise duty/CVD as is equivalent to the duty payable on the portion of the
value of such IT Software recorded on the said media, which is leviable to
service tax. In such cases, manufacturer/importer would therefore be required
to pay Central Excise duty/CVD only on that portion of value representing the
value of the medium on which it is recorded along with freight and insurance. Thus,
levy of excise duty and service tax is mutually exclusive.
Amendments effective from
01.04.2016
Exemptions withdrawn
With a view to broaden the tax base,
following exemptions are to be withdrawn:
Services provided by-
(i) a senior advocate to an advocate
or partnership firm of advocates providing legal service; and
(ii) a person represented on an
arbitral tribunal to an arbitral tribunal. Service tax would be payable under
forward charge on such services. Transport of passengers, with or without
accompanied belongings, by ropeway, cable car or aerial tramway
New Exemptions
Exemption has been provided with
respect to the following services:
Services of life insurance business
provided by way of annuity under the National Pension System. Services provided
by SEBI by way of protecting the interests of investors in securities and to
promote the development of, and to regulate, the securities market. Services
provided by Employee Provident Fund Organization (EPFO) to employees. Services
provided by Biotechnology incubators approved by Biotechnology Industry
Research Assistance Council (BIRAC) approved biotechnology incubators to the incubates.
Services provided by National Centre for Cold Chain Development by way of knowledge
dissemination. Services provided by Insurance Regulatory and Development
Authority (IRDA) of India. Services of general insurance business provided
under Niramaya Health Insurance scheme launched by National Trust for the
Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple
Disability in collaboration with private/public insurance companies. Services
provided by way of skill/vocational training by Deen Dayal Upadhyay Grameen
Kaushalya Yojana training partners. Services of assessing bodies empanelled centrally by
Directorate General of Training, Ministry of Skill Development &
Entrepreneurship.
Amendments in existing
exemptions
Hitherto, service tax payable on a
performance in folk or classical art forms of music/ dance/ theatre is exempt
provided the consideration therefore exceeds Rs. 1,00,000. This limit has been
increased to Rs. 1,50,000.
Rationalization of abatements
alongwith the conditions for availing such abatements
Abatement at the existing rate of
70% will continue to be available on transport of passengers and goods by rail
and on transport of goods by vessel, with the CENVAT credit of input services
now to be allowed [presently, the credit of input services is not allowed with
the abatement being claimed].
A lower rate of abatement of 60% for
transport of goods in containers by rail by any person other than Indian
railway, with the CENVAT credit of input services being allowed. Uniform rate
of abatement of 70% on services by way of construction of residential complex,
building, civil structure, or a part thereof, irrespective of the carpet area
of the units and amount charged for such units. Abatement on services by a tour
operator in respect of a tour only for the purpose of arranging or booking
accommodation for any person, retained at the existing rate of 90%. However,
abatement in respect of any other tour is rationalized from 75% and 60% to 70%.
A lower rate of abatement of 60% on
shifting of used household goods by a Goods Transport Agency (GTA) without
CENVAT credit on inputs, input services and capital goods. Abatement of 70% on
services of a foreman to a chit fund restored, without CENVAT credit on inputs,
input services and capital goods.
Amendments in Service Tax
Rules, 1994
Rule 6 of the Service Tax Rules,
1994 to be amended to extend the benefit of quarterly payment of service tax to
One Person Company (OPC) whose aggregate value of services provided is up to
Rs. 50 lakh in the previous financial year and an HUF. Further, payment of
service tax on receipt basis is also extended to such OPC. With respect to services provided by
mutual fund agents/distributor to a mutual fund or asset management company,
service tax to be payable under forward charge provisions, i.e. service
provider to be liable to pay service tax. Rule 6(7A) of the Service Tax Rules, 1994 to be amended
to provide that an insurer carrying on life insurance business to have an
option to pay tax at 1.4% of the total premium charged on single premium
annuity (insurance) policies, in cases where the amount allocated for
investment/savings on behalf of policy holder is not intimated to such policy
holder at the time of providing of service. With effect from 01.04.2016, any service (and not only
support services) provided by Government or local authorities to business
entities are leviable to service tax. Consequently, service tax would be
payable on any (and not only support services) service by the service recipient
on reverse charge basis from said date.
Amendments to be effective from
the date on which Finance Bill, 2015 receives the
assent of the President
Finance Act, 2015 had inserted Explanation
2 to the definition of “service” under section 65B(44) of the Finance Act, 1994
to specifically state that service tax is leviable on activities undertaken by
lottery distributors and selling agents, in relation to lotteries.
The said explanation is proposed to
be amended to clarify that it is the activity in relation to promotion,
marketing, organizing, selling of lottery or facilitating in organizing lottery
of any kind, in any other manner, of the State Government as per the provisions
of the Lotteries (Regulation) Act, 1998, carried out by a lottery distributor/selling
agent, which is leviable to service tax.  The
Negative List entry under section 66D(l) covering ‘educational services is proposed
to be omitted. The said benefit would continue by way of exemption under mega
exemption Notification No. 25/2012 ST dated 20.06.2012. Assignment by the Government of the right to use the
radio-frequency spectrum and subsequent transfers thereof is proposed to be
declared as a service. Section
67A is proposed to be amended to obtain specific rule making powers in respect
of Point of Taxation Rules, 2011. The time-limit for issuance of show cause notice under
section 73, for recovery of service tax not levied/paid/short- levied/short
paid/erroneously refunded, for non fraud cases is proposed to be enhanced by 1
year, i.e. from 18 months to 30 months.
Interest rates on delayed payment of
duty/tax across all indirect taxes are proposed to be made uniform at 15% p.a.
However, under service tax, in case where any amount is collected as service
tax but amount so collected is not paid to the credit of the Central Government
on/before the date on which such payment becomes due, proposed interest rate is
24% p.a. Power to arrest under section 91 proposed to be restricted only in
case where the tax payer has collected the tax of more than Rs 2 crore, but not
deposited it to Government. The monetary limit for launching prosecution under
section 89 proposed to be increased to Rs. 2 crore of the amount of service tax
collected but not deposited to the credit of the Central Government beyond a
period of 6 months from the date on which such payment becomes due.  Section 93A of the Finance Act, 1994 proposed to be
amended so as to allow rebate by way of notification as well as rules.
Amendments to be effective from
01.06.2016
Krishi Kalyan Cess
It is proposed to levy a Krishi
Kalyan Cess on ANY OR ALL the taxable services at the rate of 0.5% of
the value of taxable services. It is important to note here that unlike Swachh
Bharat Cess, service provider shall be allowed to utilize the CENVAT credit of Krishi
Kalyan Cess paid on input services for payment of such cess on the output
service provided by it.
Service tax proposed to be levied on
transportation of passengers, with or without accompanied belongings, by a
stage carriage by amending Negative List of services. However, transportation
of passengers by non-air conditioned stage carriage are being exempted vide
mega exemption notification.
 Service
tax proposed to be levied on transportation of goods by an aircraft or a vessel
from a place outside India up to the customs station of clearance by omitting
the negative list entry to said effect. However, said services are being
exempted vide mega exemption notification.

CUSTOMS

Section 2(43) has been
amended so as to include Special Warehouse licensed under Section 58A for
enabling storage of specific goods under physical control of the department, as
control over the other types of warehouses would be only record based.
Section 25 is being amended so as to omit the requirement of
publishing and offering for sale any notification issued, by the Directorate of
Publicity and Public Relations of CBEC. For this purpose, it has been proposed
to provide that every notification issued shall unless otherwise provided come
into force on the date of its issue by the Central Government for publication
in the official Gazette.
The period of
limitation has been increased from one year to two years in case of bonafide
error assessment. Amendments have been proposed in section 28, 47, 51 and 156 of the
Customs Act to provide for deferred payment of customs duties for importers and
exporters with proven track record. It will reduce the cargo release time and
transaction cost of EXIM trade. The details changes in this regard would be
prescribed by Rules.
The Principal
Commissioner or Commissioner are proposed to be empowered to license a public
and private warehouses in place of Deputy/Assistant Commissioner, subject to
such conditions as may be prescribed. Further, they would also be empowered for
licensing of special warehouse wherein dutiable goods may be deposited and be
locked by the proper officer and no person would enter the warehouse or remove
any goods there from without his permission. The bond amount for the
warehousing bonds submitted by importers availing duty deferred warehousing has
been increased to thrice the duty amount as against earlier requirement of
twice the duty amount. In addition to furnishing of bond, security may also be
required. In case of ownership of such goods being transferred to another person,
the transferee would need to execute bond and security.
The provisions of
Section 61 relating to period of warehousing has been extended to all goods
used by Export Oriented Undertakings, Units under Electronic Hardware Technology
Parks, Software Technology Parks, Ship Building Yards and other units manufacturing
under bond. Additionally Principal Commissioners and Commissioners have been
empowered to extend the warehousing period upto one year at a time.
Provisions relating to
control over warehousing goods and payment of rent and warehousing charges are
proposed to be done away with. Further, free samples from the warehouse can no
longer be taken away.  The payment of fees to Customs for supervision of manufacturing
facilities under Bond is no longer required.
Principal Commissioner
or Commissioner of Customs empowered to license such activities.  As a step towards Make
in India, the rates of customs and excise duty have been changed on certain
inputs to reduce costs and improve competitiveness of domestic industry in
sectors like Information technology hardware, capital goods, defence production,
textiles, mineral fuels & mineral oils, chemicals & petrochemicals,
paper, paperboard & newsprint, Maintenance repair and overhauling [MRO] of
aircrafts and ship repair.  Customs Single Window Project to be implemented at major ports and
airports starting from beginning of next financial year. Increase in free
baggage allowance for international passengers. New Simplified Baggage Rules,
2016 has been notified which would be effective from 1st April, 2016. Further Customs Baggage declaration regulation 2013
is also being amended so as to provide for custom declaration only for those
passengers who carry dutiable and/or prohibited goods.  The rate of interest
on delayed payment of duty has been revised to 15% from earlier rate of 18%.
RECOMMENDED READ  Expense before 1.4.2013 shall be disallowed if TDS not deducted

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