India Budget 2015-16

Progressive
INDIA BUDGET 2015-16
IndIa’s TrysT
WITh desTIny
The time has come for India to announce its
Most developed countries are experiencing the
The result is that this is not an India looking at
robust presence in the global community of
problems arising out of an increasingly elderly
itself with economic expectation; it is an eternal
nations.
gentry; India as a nation is becoming progressively
audience pinning its hope that India may possibly
younger.
lift the world out of the slowdown.
The world is experiencing demand satiation
Which is why the Union Budget 2015 is not just a
across a number of areas; India is probably the
document for Indian eyes. It is a document that
most under-consumed large country in the world.
needs to be interpreted by the world.
The timing cannot be more opportune.
The global economy is struggling with the ravages
of a slowdown; India appears to be moving out of
one.
MAKE IN
INDIA
BALM FOR INDIA.
HOPE FOR THE WORLD.
There is a growing recognition that what is good for India is good for the world.
Because India comprises a sixth of mankind. What would be beneficial for this high proportion
would inevitably be good for the wide world.
Because India possesses centuries of entrepreneurial experience, industrial discipline, engineering
competence and mineral resources – one of the most extensive value chains anywhere in the world.
Because more than anything, India possesses one of the last great captive home markets that
are still relatively under-consumed, providing attractive economies-of-scale and international
competitiveness to become a dependable global provider.
The time begins now.
USD 2tn
7.5%
7.4%
7.4%
Size of the
Indian economy
India’s economic growth in
the Oct-Dec, 2014
Projected annual GDP for
the FY 2015
Projected growth of India’s
service sector in FY 2015
USD 42bn USD 360bn
Total FDI inflows into India
during 2014
Projected value of total exports
from India during FY 2015
OUR PHILOSOPHY
01
02
Partner Driven Approach: We cater to all
our clients with personalised attention and
meet their business challenges with ease and
finesse.
Extraordinary Client Service: Our clientcentric approach is built around highly
customised
services
through
continuous
innovation to deliver value and growth to our
clients. We provide support to our clients that
they can rely on and encompasses all the
requirements to the best of our ability. We
believe in ‘total client satisfaction’.
03
Vibrant & Long-lasting Client Relationships:
Our client relationships are more than
just business partnerships. We Endeavour
to understand the client as well as their
business and build a vibrant and long-lasting
relationship.
04
Trust,
Reliability
and
Transparency:
For a relationship to flourish, it must be based
on trust, reliability and transparency – values
that we hold sacred.
CONTENTS
PART 1
10
Section 1
Foreword
10
Section 2
Budget Snapshot
12
Section 3
Economic Indicators &
Budget Financials
22
Section 4
Corporate Taxation
34
Section 5
International Taxation &
Transfer Pricing
44
Section 6
Personal Taxation
56
PART 3
Section 7
Others
62
88
Section 8
Central Excise
90
Section 9
Customs
110
Section 10
Service Tax
120
Section 11
SEBI & Capital Markets
138
Section 12
Tax Rate Structure
144
Section 13
Glossary
152
Basics
PART 2
32
Budget proposals
- Direct Taxes
This publication is for private circulation only.
Information in this publication is intended to provide general guidance only. While
all reasonable care is taken to ensure fool proof accuracy of content at the time
of drafting the document, we accept no responsibility for any errors or for any
omissions or for any loss, however caused or sustained, by the person who relies on
his interpretation of the document. Readers are advised to seek professional advice
before acting on the information provided in this publication.
The cover line, content and analysis provided in the document are the sole property
of DH Consultants P. Ltd. No reproduction in part or in whole, is allowed without our
prior written approval.
Budget proposals
- Indirect Taxes
PART 4
138
Miscellaneous
AGRICULTURE
FEEDING INDIA. FEEDING THE WORLD.
India is the second largest agricultural landmass in the world.
Surprisingly, even as India is considered one of the largest producers across a number of
crops, it possesses one of the lowest yields.
This sub-optimal utilisation of land is derived from legacy practices and inefficient resource
management.
What India needs is a combination of futuristic agriculture technologies, mindset
universalisation and the proactive embrace of global best practices.
With the objective of generating more from a finite land resource, utilizing precious land in
a sustainable way and raising enough not only to feed the world’s second largest population
cluster but also to feed the world at large.
The time is now.
10 11
INDIA BUDGET
2015-16
BUDGET PROPOSAL
DIRECT TAXES
BASICS
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
SECTION 1
FOREWORD
The result is that the new Indian government
are convinced that the Union Budget will have a
announced fast-track infrastructure development
decisive long-term impact.
to match the country’s growth ambition. This
manifested in announcements to increase public
investments,
establish
National
Investment
and Infrastructure Fund (NIIF), float tax-free
infrastructure bonds, revisit PPP models for
rebalancing risk, replace multiple permissions
with a pre-existing regulatory mechanism and
also introduce a plug-and-play model for mega
infra projects.
India brings to the reality of the moment some of
the most compelling natural advantages.
The country is among the youngest in the world;
more than 54% of its population is below 25 years
of age.
This sizable population cluster – probably the
T
– the implementation of JAM (Jan Dhan, Aadhar
and Mobile) leading to Amrut Mahotsav benefits in
2022 (India’s 75th year).
The Amrut Mahotsav in 2022 focuses on the
following dynamic objectives:
Housing for all
• Basic facilities (including 24-hour power supply)
Building on a natural advantage
he Economic Survey
2014-15 was tabled in
the Indian Parliament on
27 February 2015 and the
Union Budget 2015-16
was tabled in Parliament
on 28 February 2015. Both these are
more than economic statements; they
represent a grand perspective of a
robust optimistic India.
This impact is likely to be derived from three levels
largest in any country – needs to be educated and
trained towards employability.
in each house
•Access to livelihood means for at least one
member of each family
•
Connecting
each
of
178,000
unconnected
habitats through all-weather roads
• Providing a senior secondary school within 5 km
of each child.
• Providing medical services in each village
As a result, these documents extend beyond
In line with the priority, the Indian government
Overview
the usual economic indicators (gross domestic
intends to launch a National Skill Mission through
What we admire about the Union Budget 2015-
product, inflation, fiscal deficit, current account
the Skill Development and Entrepreneurship
16 is that for the first time the subjects of Jan
deficit, foreign exchange reserves and primarily
Ministry. The Mission will consolidate skill
Suraksha (universal social security system), public
tax sources) and application of revenues (primarily
initiatives
Ministries
investment, plug-and-play infrastructure, phased
planned and non-planned expenditures & outlays)
resulting in a standardization of procedures and
corporate tax rate reduction, gold monetization
that one would expect in them. They clearly
outcomes across 31 Sector Skill Councils.
(through sovereign gold bonds and gold coins),
indicate that India, at the cusp of emerging from
the protracted ‘doom and gloom’, is perched on a
long historic journey.
spread
across
several
Besides, the government expects to create a
Digital India through an aggressive National
Optical Fibre Network Programme running across
restoration of Cultural World Heritage Sites, Green
India and a law to curb black money and benami
transactions have been articulated.
750,000 kilometers networking 250,000 villages
The Union Budget 2015-16 then is a reflection of
that is expected to leapfrog rural realities into a
the government’s commitment towards change,
modern future.
growth, jobs and social upliftment.
government under the stewardship of Hon’ble Prime
The result is a ‘ray of hope’, which, considering the
In our opinion, the Union Budget 2015-16 is
Minister, Mr. Narendra Modi, which emphasise a
protracted slowdown, may now be considered a
Progressive, the theme of this review document.
long-term vision, quality and conviction. Among
major sentiment-driver and achievement.
A new direction
A number of things have emerged in the first
nine months of the leadership of the new Indian
the most visible of these signals being sent out
comprise transformational initiatives like ‘Make
in India’, ‘Skill India’ and ‘Digital India’ on the one
hand and ‘Swachh Bharat’ on the other with the
objective to energize the economy.
An insight
Knowledge Management Team
A number of economic commentators seeking
‘big bang’ announcements from the Union Budget
may have been disappointed in the short-term but
Mumbai, March 2015
12 13
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
SECTION 2
INDIA BUDGET
2015-16
SNAPSHOT
14 15
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
on or after 01-04-2015 but before 01-04-2020.
is proposed to be increased from H1,00,000 to
This allowance would be over & above the
H1,25,000.
existing allowance @15% u/s 32AC. Further,
in accordance with ‘Sukanya Samriddhi Account
Rules 2014’ proposed to be exempt u/s 10(11A).
• 100% deduction proposed to be allowed u/s 80G
for donations made to (i) Swachh Bharat Kosh,
(ii) Clean Ganga Fund and (iii) National Fund for
Control of Drug Abuse.
•Exemption of Transport Allowance proposed to
be increased from H800 pm to H1600 pm.
•TDS @10% on premature withdrawal from
Recognised Provident Fund provided the amount
of withdrawal is H30,000 or more. Failure to
furnish PAN to trustees of EPFS would attract
TDS at Maximum Marginal Rate.
•Acceptance or repayment of advance of H20,000
or more in cash for purchase of immovable
property proposed to be prohibited.
•No increase in Income-tax basic exemption
limit.
• Increase in Surcharge from 10% to 12%, if the
total income exceeds H1 Cr.
•Education Cess on income tax @ 2% and
Secondary and Higher Education Cess @ 1 %
continued for the financial year 2015-16.
• Limit of deduction u/s 80D for health insurance
premium increased from H15,000 to H25,000
(other than senior citizens) and from H20,000 to
H30,000 (senior citizens). Deduction of H30,000 is
proposed to be allowed for medical expenditure
of very senior citizen if there is no health
insurance in force.
•Deduction u/s 80DD for medical treatment
of dependent with disability proposed to be
•Investment in Sukanya Samriddhi Account
increased from H50,000 to H75,000. In case
Scheme will be eligible for deduction u/s 80C.
of severe disability amount of deduction is
• Limit of deduction u/s 80CCC for contribution to
certain pension funds increased from H1,00,000
to H1,50,000.
•For contributions made to National Pension
Scheme, deduction upto H50,000 is available
over and above the aggregate deductible limit of
H1,50,000.
proposed to be increased from H1,00,000 to
H1,25,000.
•Deduction u/s 80DDB on expenditure on specified diseases for very senior citizens proposed
to be increased from H60,000 to H80,000.
•Deduction u/s 80U in case of person with
disability increased from H50,000 to H75,000. In
regulations
to
specified
higher additional depreciation u/s 32(1)(iia)
also proposed on such assets @ 35% instead of
existing rate of 20%.
•Balance 50% additional depreciation u/s 32(i)
(iia) on eligible Plant & Machinery, acquired &
put to use for less than 180 days in a previous
year, proposed to be allowed in the immediately
succeeding previous year.
• Benefit of deduction u/s 80JJAA proposed to be
extended to all assesses having manufacturing
units instead of only to corporate assessee.
Further, criteria for employing new regular
workmen proposed to be reduced from 100 to 50
for being eligible for deduction.
• Special tax regime specified for certain Category
I & Category II Alternate Investment Fund
regulated by SEBI allowing pass through status
to Investment Funds.
•Threshold limit for applicability of transfer
pricing
Individual Taxation
MISCELLANEOUS
case of severe disability amount of deduction
•Any payment received from an account opened
DIRECT TAX – AT A GLANCE
BUDGET PROPOSAL
INDIRECT TAXES
domestic
transactions proposed to be increased from H5
Crs. to H20 Crs.
Corporate Taxation
• Corporate tax rate proposed to be reduced from
30% to 25 % over the period of 4 Years.
• Surcharge @7% for income above H1Cr and upto
•Share of income of a member of AOP or BOI
exempt u/s 86, proposed to be excluded in
computing Book Profit u/s 115JB, with a
corresponding increase in expenditure related
to such income
•Rationalisation of capital gains regime for the
sponsors existing at the time of listing of units
of REITs and InvITs. Rental income of REITs from
H10 Crs and @12% for income above H10 Crs.
their own assets to have pass through facility.
•No change in Surcharge rate for Foreign
International Taxation and Transfer
Pricing
Companies.
•Surcharge on DDT proposed to be increased
from 10% to 12%.
•Rate of tax on Royalty and FTS proposed to be
reduced from 25% to 10%.
•Sec. 32AD proposed to be inserted to provide
•Period of applicability of reduced rate of tax of
additional 15% Investment Allowance on cost
5% in respect of income of foreign investors (FIIs
of new eligible Plant & Machinery acquired
and QFIs) from corporate bonds and government
and installed in new unit set up in notified
securities proposed to be extended from 31-05-
backward area of Andhra Pradesh & Telangana
2015 to 30-06-2017 [Sec. 194LD].
16 17
•Sec. 195 to give power to CBDT to capture
information on foreign remittances which are
claimed to be not chargeable to tax.
• CBDT to notify rules for giving foreign tax credit
to Indian Residents u/s 90, 90A & 91.
Other relevant Proposals
•Provisions of General Anti Avoidance Rule
(GAAR) introduced vide Finance Act 2012 in
Chapter X-A which was applicable from 0104-2015 have been deferred for 2 more years
and would now proposed to apply w.e.f 01-042017. Investments made upto 31-03-2017 are
proposed to be protected from the applicability
of GAAR.
•Direct Tax Code (DTC) which was to replace
the present Act, shall not be enacted as major
recommendations have been incorporated in the
current Statute.
• Wealth Tax Act, 1957 has been abolished w.e.f FY
2015-16. Particulars and information in relation
to assets furnished in Wealth Tax Return shall
be incorporated in modified Income tax Return
to be notified.
•New comprehensive Law to be enacted in
the current session to deal with black money
stashed abroad.
•New Benami Transaction (Prohibition) Bill
to curb domestic black money also to be
introduced.
•Penalty u/s 271(1)(c) is proposed to be imposed
for additions made both under Normal provisions
& MAT provisions.
INDIA BUDGET
2015-16
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
other overseas branches shall be chargeable to
tax in India and shall also be liable for TDS.
•CBDT to prescribe rules for the purposes of
determination of ‘resident’ status in the case of
India seafarer.
• Residency criteria of companies widened by
introduction of Place of Effective Management
concept.
•In search cases, seized cash proposed to be
adjusted against the tax liability computed in the
settlement application.
•Share or interest of a foreign company or
entity outside India shall be deemed to derive
its value substantially from the assets located
in India, if on the specified date, value of such
assets represents at least fifty per cent of the
fair market value of all the assets owned by the
company or entity. However, the indirect transfer
provisions would not apply if the value of Indian
assets does not exceed H10 Crs.
•Indian entity shall be obligated to furnish
information relating to the offshore transactions
having the effect of directly or indirectly
modifying the ownership structure or control
of the Indian company or entity. In case of noncompliance, a penalty is proposed to be levied.
•Chartered Accountants who are disqualified
to be appointed as an auditor u/s 141(3) of the
INDIRECT TAX – AT A GLANCE
Central Excise
•As a move towards GST, EC and SHEC leviable
on excise duty proposed to be subsumed in BED
Companies Act, 2013 shall be not be considered
• BED increased from 12% to 12.5%
as an “accountant” for the purpose of the IT Act.
• Changes in duty rates of Petrol and HSD
• Benefit of non-deduction of tax at source u/s
194C on sums paid to transport contractor on
General and administrative
furnishing of PAN, proposed to be restricted
•It is proposed to provide that interest paid by
to transport contractor owning upto 10 goods
a PE or a branch of foreign bank to its HO and
BASICS
carriages.
Specific rates revised to subsume EC and
SHEC
Conversion of existing excise duty to the extent
of H4 per litre into Road Cess
•Excise duty on leather footwear of RSP > H1000
per pair reduced from 12% to 6%
• Excise Duty increased on:
Cement falling under chapter sub-heading
2523 29 from H900/MT to H1000/MT
Sacks and bags, other than for industrial use,
from 12% to 15%
Mobile handsets, including cellular phones
from 6% to 12.5% (with CENVAT credit)
• Clean Energy Cess on coal increased from H100/
MT to H300/MT. Effective rate increased from
H100 per/MT to H200/MT
• Excise Duty completely withdrawn from captively
consumed intermediate compound coming into
existence during the manufacture of Agarbattis;
•Concessional excise duty of 6% extended upto
31 March 2016 on specified goods for use in
manufacture of electrically operated vehicles
and hybrid vehicles
18 19
•
Penalty
provisions
are
being
INDIA BUDGET
2015-16
rationalized
• Excise Duty increased on goods covered under
to encourage compliance and early dispute
Medicinal and Toilet Preparations Act, 1955 from
resolution
12% to 12.5% ad valorem
Cases not involving extended period of
limitation
Penalty will be restricted to 10% of Duty
involved
No penalty if duty and interest is paid within
30 days of issuance of notice.
Reduced penalty of 25% of penalty applicable
if duty, interest and reduced penalty paid
within 30 days of order
Benefit of reduced penalty to be extended to
cases where penalty modified in appellate
proceedings
Cases involving fraud, collusion, misstatement,
suppression, extended period of limitation
Penalty will be 100% of duty involved, and
in case where the transactions are recorded
by the assessee, for the period from 8th
April 2011 till the bill receives the assent of
the President, penalty would be 50% of the
duty.
Reduced penalty of 15% is applicable if duty,
interest and reduced penalty is paid within
30 days of issuance of notice
Reduced penalty of 25% of duty imposed
is applicable if duty, interest and reduced
penalty is paid within 30 days of order.
Benefit of reduced penalty to be extended to
cases where penalty modified in appellate
proceedings
• Facility
provided
to
a
manufacturer
and
registered dealer and importer &/or port of
import to directly dispatch goods from vendor to
job worker/customer’s premises
• Penalty prescribed for delay in filing of
Annual Financial Information Statement or
Annual Capacity Statement
Return by an EOU
Customs
• Peak rate of duty remains unchanged.
• BCD increased on:
Iron and steel and articles thereof from 10% to
15%
Bauxite from 10% to 20%.
Motor vehicles used for passenger transport
and goods transport from 10% to 40%.
However, the effective Basic customs duty on
such Vehicles increased from 10% to 20%.
Metallurgical coke from 2.5% to 5%
• BCD reduction on:
Sulphuric acid for the manufacture of
fertilizers from 7.5% to 5%
Melting scrap of iron & steel, copper scrap,
brass scrap and aluminium scrap from 4% to
2%.
‘Metal parts’ for use in the manufacture of
electrical insulators is being reduced from
10% to 7.5%.
BASICS
BUDGET PROPOSAL
DIRECT TAXES
levied on imported Motor Spirit [Petrol] and High
specified CNC lathe machines and machining
Speed Diesel Oil [commonly known as Road
centres from 7.5% to 2.5%.
Cess] are being increased from H2 per litre to H6
C- Block for Compressor, Over Load Protector
• CVD and SAD are being fully exempted
Crank Shaft for compressor for use in
on specified raw materials for use in the
manufacture of Refrigerator compressors
manufacture of pacemakers.
from 7.5% to 5%.
Specified inputs for manufacture of flexible
medical video endoscope from 5% to 2.5%.
Active Energy Controller (AEC) for manufacture
of Renewable Power System (RPS) Inverters
conditionally reduced to 5%
• BCD brought down to zero:
Magnetron of upto 1 KW for manufacturing
microwave owens from 5% to NIL
HDPE for manufacture of telecommunication
grade optical fibre cables from 7.5% to Nil.
Black Light Unit Module for manufacture of
LCD/LED TV panels from 10% to Nil.
Organic LED (OLED) TV panels from 10% to
Nil.
Specified Digital Still Image Video Camera
capable of recording video and components
for use in the manufacture of such cameras is
being reduced to Nil.
Evacuated Tubes with three layers of solar
selective coating for manufacture of solar
water heater and system is being fully
exempted.
• SAD exemption in respect of:
• Assessees will be allowed to issue digitally
Rubber (EPDM), Water blocking tape and
boards, falling under any Chapter of Customs
signed invoices and maintain other records
Mica glass tape, for use in the manufacture of
Tariff, for use in the manufacture of ITA Bound
electronically
insulated wires and cables from 10% to 7.5%.
Items.
the Adjudicating Authority for fresh adjudication
compounds for manufacture of washcoats,
not to be considered as case eligible for filing
used in manufacture of catalytic converters,
application before Settlement Commission
from 7.5% to 5%.
per litre.
(OLP) & Positive thermal co-efficient and
All goods except populated printed circuit
Zeolite, ceria zirconia compounds and cerium
MISCELLANEOUS
Specified components used in manufacture of
Ethylene-Propylene-non-conjugated-Diene
• Proceedings remanded by Court or Tribunal to
BUDGET PROPOSAL
INDIRECT TAXES
Inputs for manufacture of LED drivers and
MCPCB for LED lights, fixtures and lamps.
• Scheduled rates of Additional Duty of Customs
• Current duty structure on specified goods for
manufacture of Electrically Operated Vehicles
and Hybrid motor vehicles BCD- Nil, CVD-6%
and SAD – Nil which are presently applicable
upto 31.03.2015, are being extended upto
31.03.2016.
• BCD and CVD are fully exempted on artificial
heart (left ventricular assist device).
• In case of imports for a Mega Power Project
when the status is provisional, condition of
executing fixed deposit receipt for a term of
36 months or more has been increased to 66
months.
• CVD and SAD exemption on specified goods
imported for use by Security Printing and
Minting Corporation of India Limited (SPMCIL)
are being withdrawn.
• Penalty provisions under Section 28 of the
Customs Act, rationalised as under:
No Penalty and the proceedings would be
deemed to be closed if customs duty along with
interest is paid within 30 days of receipt of the
Show Cause Notice, in cases not involving fraud,
collusion, suppression of fact etc.
Penalty reduced from 25% to 15% and the
proceedings would be deemed to be closed if
customs duty along with interest is paid within
30 days of receipt of the Show Cause Notice, in
cases involving fraud, collusion, suppression of
fact etc.
The above benefit extended to cases where
notice issued but not adjudicated before the
Finance Bill 2015 is enacted. The proceedings
20 21
INDIA BUDGET
2015-16
would be deemed to be concluded, if customs
in relation to chit and activities provided by
duty, applicable interest and penalty (wherever
lottery distributors and selling agents in
applicable) is paid within 30 days of the
relation to lotteries.
enactment of the Finance Bill. The conclusion
of the proceedings would be without prejudice to
prosecution proceedings.
In case of improper Import or Export, penalty
is leviable equal to 100% of the Customs duty
or H5,000/- whichever is higher. The penalty is
reduced to 10% of the duty or H5,000/- whichever
is higher if duty demanded alongwith applicable
interest and penalty is paid within 30 days of the
receipt of the order.
12% to 14% effective from a date to be notified.
• Education Cess and Higher Education Cess
abolished and subsumed in the above rate of
14%.
• Provision to levy Swachh Bharat Cess @ 2% or
less on value of all or any taxable services from
a date to be notified.
• Services made taxable by deleting the following
from
Negative
list
or
Mega
Exemption
notification:
Admission to entertainment event or access
to amusement facility except for exhibition
of cinematographic film, circus, recognized
sporting event etc.
Any
processes
production
distributor to a mutual fund or AMC.
to the following services:
(including
process)
for
intermediate
production
or
manufacture of alcoholic liquor for human
consumption.
Construction, erection, commissioning or
installation of original works pertaining to an
airport or port.
All services provided by the Government or
local authority to a business entity.
Activities undertaken by chit fund foremen
Services provided in relation to chit reduced
• Section 67 has been amended to provide that
all reimbursable expenditure or cost incurred
and charged by the service provider. The
Services provided by mutual fund agents/
distributors to AMC/mutual fund.
provision has now been clearly incorporated in
Section 67 due to contrary view taken by courts
Services provided by lottery agents to the
distributor of lottery.
in some cases.
• Penalty provisions under Section 76 and 78
received from an individual, HUF, or partnership
firm is extended to 100% from 75%.
Cases not involving extended period of
limitation
Penalty will be restricted to 10% of service
No penalty if service tax and interest is paid
All ambulance services.
Life insurance service of Varishtha Pension
Bima Yojna.
Services by way of operation of common
effluent treatment plant.
pre-cooling,
rationalised as under:
tax involved
• Exemption from service tax granted to:
Pre-conditioning,
40% from 60%.
consideration for a taxable service shall include
• The reverse charge mechanism is not extended
of Manpower supply and security services when
• Basic Service Tax rate is being increased from
BUDGET PROPOSAL
DIRECT TAXES
from 30% to NIL.
Services provided by a mutual fund agent/
• Liability of the service recipient (a body corporate)
Service Tax
BASICS
ripening,
waxing, retail packing, labelling of fruits and
vegetables.
Services by way of exhibition of movie by the
exhibitor (theatre owner) to the distributor.
Goods transport agency service provided for
transport of export goods from the place of
removal to a land customs station.
• Abatements amended:
Uniform abatement of 70% for transport by
rail, road and vessel is proposed. Hitherto
the quantum of abatement was 70% for rail
transport for goods and passengers, 75% for
road transport by goods transport agency and
60% for goods transport by vessels.
Air transport of passenger in first/business
class (other than economy class) reduced to
within 30 days of issuance of notice.
Reduced penalty of 25% applicable if service
tax, interest and reduced penalty paid within
30 days of order
Benefit of reduced penalty to be extended
to cases where in appellate proceedings the
penalty is modified
Cases involving extended period of limitation
Penalty will be 100% of Service Tax involved,
and in case where the transactions are
recorded by the assessee, for the period from
8th April 2011 till the bill receives the assent
of the President penalty would be 50% of the
Service Tax.
Reduced penalty of 15% is applicable if
service tax, interest and reduced penalty is
paid within 30 days of issuance of notice
Reduced penalty of 25% is applicable if
service tax, interest and reduced penalty is
paid within 30 days of order.
Benefit of reduced penalty to be extended
to cases where in appellate proceedings the
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
penalty is modified
•Facility of waiver of penalty under Section 80 if
reasonable cause could be shown for failure to
pay service tax has been withdrawn.
• Assessee allowed to use digitally signed invoices
and maintain electronic records.
Goods and Services Tax (GST)
• To revive growth and investment, India needs an
enabling tax policy. Towards this goal, GST to be
implemented by next year
CENVAT Credit Rules
• Amendment in Rule 4 of CCR along with Rule 11
of CER specifically to permit credit of excise duty
paid on inputs and capital goods sent directly to
job worker from another manufacturer/dealer
or importer subject to conditions.
•Time limit for availing CENVAT credit on inputs
and input services extended from present 6
months to 1 year from the date of invoice.
•Requirement of reversal of CENVAT credit in
case of return of capital goods from a job worker
extended from present 6 months to 2 years.
•Requirement of reversal of CENVAT Credit
made applicable to non-excisable goods also
apart from the exempted goods and exempted
services under Rule 6 of CCR.
•Rule 14 amended enabling revenue to recover/
reverse CENVAT Credit without interest incase
of credit wrongly taken but not utilised and
with interest in case credit wrongly taken and
utilised.
•Method of computation of interest has also
been prescribed. Penalty in terms of Sec. 76
of Finance Act 1994 invokable in case of credit
wrongly taken or utilised without suppression of
fact etc. Penalty u/s 78(1) of Finance Act 1994
invokable in similar case with suppression of
facts etc.
22 23
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
SECTION 3
ECONOMIC
INDICATORS &
BUDGET
FINANCIALS
24 25
INDIA BUDGET
2015-16
BUDGET PROPOSAL
DIRECT TAXES
BASICS
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
This Indian Budget 2015, on the foundation of
12) market prices in 2012-13 was 5.1 per cent,
action has been taken to remove regulatory
a growth target of 4 per cent for agriculture and
a ‘Boomerang-ing’ Indian Economy is, all set
which increased to 6.9 percent in 2013-14 and it
uncertainty by passing Ordinances to streamline
allied sectors in the Twelfth Plan, the growth
to usher-in a Renaissance-era in India – and be
is expected to further increase to 7.4 per cent in
land acquisition, e-auction of coal blocks for
registered in the first year at 2011-12 prices was
remembered as a the Bridge between the present
2014-15 (advanced estimates).
private companies, and auction of iron ore and
1.2 per cent, 3.7 per cent in 2013-14, and 1.1 per
other new coal mines. During April –December
cent in 2014-15.The total food grains production in
2014-15 growth in the eight core industries was
the country is estimated at 257.07 million tonnes
4.4 per cent growth. Electricity (9.7 per cent), coal
which is the fourth highest quantity of annual
(9.1 per cent), and cement (7.9 per cent) boosted
foodgrains production in the country. As compared
the performance, while natural gas (-5.1 per cent),
to last year’s production of 265.57 million tonnes,
fertilizers (-1.4 per cent), crude oil (-0.9 per cent),
current year’s production of foodgrains is lower by
refinery products (0.2 per cent), and steel (1.6 per
8.5 million tonnes. This decline has occurred on
cent) accounted for moderation in growth.
account of lower production of rice, coarse cereals
India and the Transformed-Developed India.
Growth rate in Gross Value Added (GVA) at basic
The Economy over the last year (i.e. F.Y. 2014-15)
prices in agriculture is projected to decline from
is already providing promising signals. The 2014-
3.7 per cent in 2013-14, an exceptionally good year
15 Economic Survey presented by the Hon’ble
from the point of view of rainfall, to 1.1 per cent in
Finance Minister focuses on two themes – “Create
2014-15, a year with not-so-favourable monsoon.
Opportunity” and “Reduce Vulnerability”.
The manufacturing sector registered a growth
India has emerged with brighter prospects
among the few large economies with propitious
economic outlook, amidst the mood of pessimism
and uncertainties that engulfs a large number
of advanced and emerging economies, today.
The economy stands largely relieved of the
vulnerabilities associated with an economic
slowdown, persistent inflation, elevated fiscal
deficit, slackening domestic demand, external
account imbalances and oscillating value of the
rupee. The growth rate in GDP at constant (2011GDP Growth Rate (%)
0
5.1
6.9
7.4
in GVA at basic prices of 6.2 per cent and 5.3 per
cent respectively in 2012-13 and 2013-14, and it
is expected to keep up the growth momentum in
2014-15 with a growth rate of 6.8 per cent. There is
and pulses due to erratic rainfall conditions during
Index of industrial Production (%)
the agricultural sector and bolster food security
continued momentum in the services sector with
2.9
the growth of the sector in 2014-15 expected to be
-0.1
2.1
including availability and affordable access,
strategy for agriculture has to focus on improving
yield and productivity.
2013-14.
Services
Key Indicators of Indian economy
The services sector accounting for 51.3 per cent
Industry
of India’s gross value added (GVA) at basic prices
The Index of Industrial Production (IIP) suggests
(current prices) in 2013-14, grew by 9.1 per cent
that the industrial sector is recovering slowly with
compared to 6.6 per cent total GVA growth and
a 2.1 per cent growth in April- December 2014-15
6.9 per cent GDP growth at market prices. During
over the 0.1 per cent in the same period last year.
2014-15, the FDI inflows to services grew by 105.8
The recovery is led by electricity, coal, and cement
percent compared to 2.2 per cent growth in overall
while manufacturing growth continues to remain
FDI inflows. In the first half of 2014-15, services
tepid. Except the mining sector, all other major
exports grew by 3.7 per cent to US$ 75.9 billion
industrial sectors have experienced slowdown in
and import of services grew by 5.0 per cent to
growth of credit in 2014-15 as compared to 2013-14.
US$ 39.9 billion, resulting in net services growth
To improve industrial growth, the new government
of only 2.4 per cent. Some available indicators of
2011-12 2012-13 2013-14 2014-15*
business and skill development and launching
fresh initiatives like Make in India and Digital
India, creating a National Industrial Corridors
Authority, streamlining environment and forest
clearances and labour reforms. In infrastructure,
the focus has been on resolving long-pending
issues like pricing of gas, establishing processes
and procedures for transparent auction of coal
and minerals, and improving power generation
* Estimated
1.1
10.6 per cent, higher than 9.1 per cent recorded in
has emphasized on rapidly improving ease of doing
2011-12 2012-13 2013-14 2014-15*
the monsoon season 2014.To improve resilience of
and distribution. To overcome critical constraints
holding up use of land and natural resources,
* Estimated
the different services in India for 2014-15 show
reasonably good performance of tourism, telecom,
aviation and railways. The IT–business process
management (BPM) industry grew by an estimated
Agriculture
12 per cent, reaching US$ 119 billion in 2014-15,
The agriculture sector registered an annual growth
while the export market at US $ 98 billion grew by
of 3.8 per cent in value added in the decade since
12.3 per cent and domestic market at US $ 20.9
2004-05 on the back of increase in real prices (31
billion grew by 10 per cent over the previous year.
per cent during 2004-05 to 2011-12). According to
The Software products and services revenues for
the new series of national income released by the
2015-16 are projected to grow at 12-14 per cent
CSO, at 2011-12 prices the share of agriculture
to reach US $133-136 billion as per NASSCOM.
in total GDP is 18 per cent in 2013-14. As against
The professional, scientific and technical activities
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
including R&D grew by 14.0 per cent in 2013- 14.
after having remained stubbornly sticky at around
reduce it further to 3 per cent of GDP by 2016-17.
However, India’s capacity for innovation has been
9-10% for the last two years. During the third
Achieving this target is daunting in the backdrop
lower than many countries. Even in quality of
quarter of 2014-15, the CPI food inflation declined
of only a moderate increase in indirect taxes and a
scientific research institutions India scores lower
considerably due to seasonal softening of food and
large subsidy bill despite significant decline in the
than China, Brazil, and South Africa.
vegetable prices after the late arrival of monsoon
subsidies burden in 2014-15, mainly due to lower
exerted some pressure on vegetable prices during
prices of crude oil in the international market in
June-August, 2014.
the second half of 2014-15.
a substantial decline in inflation. The Average
CPI inflation in the fuel and light group registered
The Budget for 2014-15 sought to contain the fiscal
Wholesale Price Index (WPI) (base year 2004-
a consistent decline during 2014-15, touching
deficit at 5,31,177 crs. (4.1 per cent of GDP) against
05 = 100) inflation declined to 3.4% in 2014-15
3.4% in the third quarter following the sharp
5,08,148 crs. (4.5 per cent of GDP) in 2013-14.
(April-December) as compared to an average of
decline in International Crude Oil prices. The main
6% during 2013-14. The decline was caused by
factors causing moderation in inflation include
lower food and fuel prices. During the first quarter
both global factors as well as domestic measures.
of 2014-15, WPI headline inflation stood at 5.8%
Global factors, namely persistent decline in
as mainly food and fuel prices were high. In the
crude prices and softness in the global prices of
second and third quarters of 2014-15, WPI inflation
tradables, particularly edible oils and even coal,
declined to 3.9% and 0.5% respectively.
helped moderate headline inflation
The retail inflation as measured by the Consumer
Fiscal Deficit
entailed an increase in the tax to GDP and non-
Price Index (CPI) (base year 2010= 100) moderated
Outlining the roadmap for fiscal consolidation,
debt receipts to GDP ratios to 10.6 per cent and
significantly since the second quarter of 2014-15.
the Budget for 2014-15 envisaged a fiscal deficit
9.8 per cent respectively and a continuance of the
It declined to an all time low of 5% in Q3 of 2014-15
target at 4.1 per cent of GDP and sought to
low level of total expenditure to GDP ratio at 13.9
Export Growth (US$) [%]
per cent
Import Growth (US$) [%]
The year 2014-15 (April-December) witnessed
macroeconomic
conjecture,
it
outlined
and it accepted the challenge. The fiscal
0.8
2.9
4.1
1.8
3.2
4.5
Over the last ten years, India’s merchandise trade
(on customs basis) increased manifold from
2.5 per cent in 2013.
In 2014-15 (April-January), imports grew by 2.2
per cent to US$ 383.4 billion from US$ 375.3
billion in 2013-14 (April-January). While value
of Petroleum, Oil and Lubricants (POL) imports
declined by 7.9 per cent in 2014-15 (April-January),
as a result of decline in the price of international
crude petroleum products. Gold and silver imports
grew by 8.0 per cent in 2014-15 (April-January).
WPI (%)
CPI (%)
2011-12
2012-13
2014-15*
Non POL and non- gold and silver imports which
2011-12
2012-13
2013-14
2014-15*
* Estimated
In 2014, FDI policy has been further liberalized.
FDI upto 49% through the Government route have
been permitted in the Defence industry. Higher
FDI has also been allowed on a case to case
basis. FDI upto 100% through automatic route
has been permitted in construction, operation
and maintenance of identified railways transport
infrastructure.
Norms
related
to
minimum
land
area,
capitalization and repatriation of funds for FDI
in construction, development projects have been
further liberalized. During April-November2014,
total FDI inflows (including equity inflow, reinvested
earnings, and other capital) were US $27.4 billion,
while FDI equity inflows were US $ 18.9 billion.
Gross fiscal deficit (% of GDP)
largely reflect the imports needed for industrial
During (April to November) 2014-15, the FDI inflows
Revenue Deficit (% of GDP)
activity grew by 7.8 per cent in 2014-15 (April-
to services grew by 105.8 per cent compared to
January), after registering a decline of 6.9 per cent
22.2 per cent growth in overall FDI inflows. The
Primary Deficit (% of GDP)
* Estimated
2013-14
3.6
importance of adherence to fiscal consolidation
1.0 per cent respectively in 2004 to 1.7 per cent and
2014-15*
0.3
the
global exports and imports from 0.8 per cent and
2013-14
-1.8
GDP was a daunting challenge given the then
in 2013-14 helping in improving India’s share in
2012-13
32.3
containing the fiscal deficit at 4.1 per cent of
Trade Imports and Exports
1.8
3.6
4.8
2.7
4.4
5.7
6.2
3.4
9.7
The Budget for 2014-15 had indicated that while
US$ 195.1 billion in 2004-05 to US$ 764.6 billion
2011-12
Trade Imports and Exports (%)
consolidation plan as enunciated in BE 2014-15
Fiscal Deficit (%)
6.0
10.4
7.4
8.4
8.9
Inflation index (%)
Foreign Direct Investment
21.8
Inflation
in 2013-14.
4.0
BUDGET PROPOSAL
DIRECT TAXES
BASICS
4.7
INDIA BUDGET
2015-16
-8.3
26 27
* Estimated
28 29
INDIA BUDGET
2015-16
total FDI inflows to the top five services in the
depreciation in the currencies of emerging markets
first eight months of this year are higher than for
with varying intensities depending upon the
the whole of 2013-14 owing to major inflows in
external financing requirement as indicated by the
telecommunications.
levels of CAD. The Rupee-US dollar exchange rate
FDI in Real Estate and Housing Sector fell to US$
703 million in the current fiscal (April – November,
2014). With 100 percent FDI permitted in the Film
Sector, India is emerging as the new favourite of
international studios.
BUDGET PROPOSAL
DIRECT TAXES
BASICS
Receipts Chart
In 2013-14, global uncertainty following the May
2013 announcement by the US Fed about its intent
to withdraw the quantitative easing led to a bout of
1%
has broadly remained stable during the year due
10% 3%
to the huge inflow of FDI and FII in the equity and
bond markets. Due to the weak economic outlook
17%
24%
9%
in Europe and Japan, the Rupee has appreciated
10%
against the Euro and Yen since September 2014
20%
Euro and Yen vis-à-vis the US dollar. On the whole,
8%
24%
5%
4%
8%
18%
16%
14%
the Rupee has exhibited resilience to global events
in view of the strong external-sector outcome.
Borrowings and other liabilities
Income Tax
Exchange Rates of Rupee per Foreign Currency
US dollar
Pound Sterling
Euro
Japanese Yen
(per 100 Yen)
April, 2014
60.36
101.08
83.35
58.86
May, 2014
59.31
99.94
81.49
58.28
June, 2014
59.73
100.98
81.24
58.53
July, 2014
60.06
102.62
81.39
59.07
Aug, 2014
60.90
101.81
81.14
59.17
Sep, 2014
60.86
99.31
78.60
56.77
Oct, 2014
61.34
98.72
77.91
56.87
Nov, 2014
61.70
97.28
76.99
53.05
Dec, 2014
62.75
98.11
77.36
52.60
Jan, 2015
62.23
94.54
72.77
52.54
Customs
Corporation Tax
Union Excise Duties
Service Tax and other taxes
Non Tax revenues
Non Debt Capital Receipts
Draw Down of Cash
Balance
Average exchange rates (H per foreign currency)
Particulars
MISCELLANEOUS
Expenditure Chart
in tandem with cross-currency movements of the
Exchange Rate
BUDGET PROPOSAL
INDIRECT TAXES
Central Plan
Subsidies
Interest payment
Defence
Other non plan expenditure
States’ share of taxes and duties
assistance of state and UT
and UT Governments
Non plan
Plan assistance to state
INFRASTRUCTURE
CREATING THE PATHWAYS OF SUCCESS
India is one of the most under-invested large countries from an infrastructure
perspective.
India only invests an average of about 6% of its GDP (estimated at USD 2 trillion)
in infrastructure as compared with China’s 11% (estimated GDP of USD 8 trillion).
The time has come to kick-start the Indian economy through sizable infrastructure
investments that do two things – increase downstream demand and also catalyse
the economy out of increased infrastructure use.
The time starts now.
32 33
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
• The enhancement of the threshold limit of Transport Allowance
• Indirect transfers – deemed income taxable in India – provisions clarified
Practical
• New comprehensive Law to be enacted in the current session to address black money
stashed abroad.
• Benami Transaction (Prohibition) Bill to curb domestic black money to be introduced.
Predictable
• Allowance of balance 50% Additional Depreciation in the immediately succeeding
previous year
• Sums received as advance or otherwise in relation to the transfer of immovable
property now covered within the ambit of u/s 269SS & 269T
DIRECT TAX
Proactive
• Taxation Regime for Real Estate Investment Trust (‘REIT’) and Infrastructure
Investment Trust (‘Invit’)
Promising
• Corporate tax rate proposed to be reduced from 30% to 25 % over four years
Progressive
• Modification in the definition of ‘accountant’
• Incentivising industrial development in Andhra Pradesh and Telangana
• Amendment in the provision for deduction for employment of New Workmen
Protective
• Contributions made to the Swachh Bharat Kosh and Clean Ganga Fund in pursuance
of CSR under section 135(5) of the Companies Act, 2013 not eligible for deduction U/S
80G.
• Levy of interest U/S 234B in other than Settlement Cases
• Modification in the definition of ‘Amount of tax sought to be evaded’
Prudent
• Deferment of provisions relating to general anti-avoidance rule
• Abolition of Wealth Tax Act, 1957
34 35
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
SECTION 4
CORPORATE
TAXATION
MISCELLANEOUS
36 37
INDIA BUDGET
2015-16
BUDGET PROPOSAL
DIRECT TAXES
BASICS
4.1
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Corporate Income Tax Rates
[w.e.f AY 2016-17]
No changes have been proposed in the basic Corporate Income Tax Rates. However, surcharge has been
increased by 2% for entities having income in excess of H1 Cr. Applicable Corporate income tax rates for
AY 2016-17 are summarised as under:
NORMAL TAX
Sl.
No.
1
2
3
4
5
6
Particulars
Domestic companies (with total income
less than H1 cr.)
Domestic companies (with total income
more than H1 cr. but less than H10 cr.)
Other domestic companies
Foreign companies (with total income
less than H1 cr.)
Foreign companies (with total income
more than H1 cr. but less than H10 cr.)
Other foreign companies
Tax
Surcharge E. Cess
(%)
(%)
S&H
E. Cess (%)
Effective
Tax (%)
30
-
2
1
30.90
30
7*
2
1
33.063
30
12#
2
1
34.608
40
-
2
1
41.20
40
2
2
1
42.02
40
5
2
1
43.26
* Surcharge has been increased from 5% to 7%. # Surcharge has been increased from 10% to 12%
MINIMUM ALTERNATE TAX (MAT)
Sl.
No.
Sl. No.
Particulars
Page
1
4.1
Corporate Income Tax Rates
37
4.2
Deferment of Provisions Relating to General Anti Avoidance Rule
37
4.3
Amendment in the provision for deduction for employment of New Workmen
38
4.4
Incentivising industrial development in the State of Andhra Pradesh & Telangana
38
4.5
Allowance of balance 50% Additional Depreciation in i mmediately succeeding
previous year
39
4.6
Prescribed conditions on maintenance of accounts, audit etc to be fulfilled by the
approved in house R&D facility
40
5
4.7
Cost of acquisition and period of holding of capital asset in the hands of resulting
company in Demerger
40
6
4.8
Tax Neutrality on merger of similar schemes of mutual funds
41
4.9
Modification in the definition of “Amount of tax sought to be evaded”
41
4.10
Contribution to schemes eligible for 100% deduction
42
4.11
Clarification on orders to be considered as erroneous and prejudicial to the interest
of revenue
42
4.12
Threshold limit for applicability of domestic transfer pricing provisions raised from
H5 Crs. to H20 Crs.
43
2
3
4
Particulars
Domestic companies (with total income
less than H1 cr.)
Domestic companies (with total income
more than H1 cr. but less than H10 cr.)
Other domestic companies
Foreign companies (with total income
less than H1 cr.)
Foreign companies
(with total income more than H1 Cr.
but less than H10 Cr.)
Other foreign companies
Tax
(%)
Surcharge E. Cess
(%)
(%)
S&H
E. Cess (%)
Effective
Tax (%)
18.5
-
2
1
19.055
18.5
7*
2
1
20.389
18.5
12#
2
1
21.342
18.5
-
2
1
19.055
18.5
2
2
1
19.436
18.5
5
2
1
20.008
* Surcharge has been increased from 5% to 7%. # Surcharge has been increased from 10% to 12%
4.2
Deferment of Provisions Relating To General Anti Avoidance Rule
[w.e.f AY 2018-19]
• Hitherto, provisions of GAAR were to come into
of GAAR. Further, it has been noted that the
effect from 01-04-2016. The implementation of
Base Erosion and Profit Shifting (BEPS) project
GAAR provisions has been reviewed. Concerns
under Organisation of Economic Cooperation
have been expressed regarding certain aspects
and Development (OECD) is continuing and
38 39
INDIA BUDGET
2015-16
BUDGET PROPOSAL
DIRECT TAXES
BASICS
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
India is an active participant in the project.
•
Accordingly, it is proposed to defer the
The report on various aspects of BEPS and
implementation of GAAR by two years, making it
Comments
•The likely scenario of benefits in the form of depreciation, additional depreciation & investment
recommendations regarding the measures to
applicable from AY 2018-19. Further, investments
allowance that would arise on addition of new eligible plant & machinery in new manufacturing units
counter it are awaited. It would, therefore, be
made up to 31-03-2017 are proposed to be kept
set up in the notified backward areas of Andhra Pradesh and Telangana vis-a-vis the addition of new
proper that GAAR provisions are implemented
outside the purview of GAAR.
plant & machinery in units located in other states is depicted as under:
as part of a comprehensive regime to deal with
BEPS and aggressive tax avoidance.
Notified backward areas of
Andhra Pradesh & Telangana
Particulars
Year 1
4.3
Amendment in the provision for deduction for employment of
New Workmen [Sec. 80JJAA]
[w.e.f AY 2016-17]
100
100
Normal Depreciation
15
15
Investment Allowance u/s 32AC
15
15
Investment Allowance u/s 32AD
15
-
35
assessee, which has acquired the factory by way
Additional Depreciation u/s 32(1)(iia)
companies on additional wages paid to new
of transfer from any other person or as a result
workmen. In order to encourage employment
of any “business re-organisation”.
Depreciation in future years
to all assessee having manufacturing units
rather than restricting it to corporate assessee
only. It is also proposed to deny deduction to
•Further, in order to enable the smaller units to
claim this incentive, it is also proposed to extend
the benefit to units employing 50 instead of 100
regular workmen.
Year 1
Investment in plant & machinery
•Deduction u/s 80JJAA is available to Indian
generation, it is proposed to extend the benefit
Year 2 onwards
Other states
Aggregate benefits
20
50
65
(@ 15% p.a.)
80
Year 2 onwards
50
(@ 15% p.a.)
50
65
The above tabulation depicts that 80% of the investment during the specified period in the Notified
backward areas of Andhra Pradesh & Telangana would be eligible for deduction in the year of investment
itself as against 50% in the other states.
These incentives are allowable only to the new unit set up in the specified area. It is not allowable to any
4.4
Incentivising industrial development in the state of
Andhra Pradesh & Telangana [Sec. 32AD & Sec. 32(1)(iia)]
other undertaking even though it has undertaken substantial expansion in the existing undertaking or
substantial addition to new plant & machinery in an existing undertaking.
[w.e.f AY 2016-17]
• Additional Investment Allowance [Sec. 32AD]
Comments
It is proposed to insert Sec. 32AD to allow
•The above investment allowance u/s 32AD is in
additional investment allowance @ 15% of the
addition to the investment allowance specified
cost of new eligible plant & machinery acquired
under the existing provisions of Sec. 32AC if it
and installed by the assessee in an undertaking
fulfils the specified conditions of both sections.
or enterprise set up in the notified backward
areas of Andhra Pradesh and Telangana on or
after 01-04-2015 for manufacture or production
of any article or thing. Further the eligible
plant & machinery needs to be acquired and
installed during the period beginning from 0104-2015 to 31-03-2020.
In order to ensure that the proposed incentive
contributes to economic growth of backward
areas, it is also proposed to restrict the
transfer of plant or machinery for a period of
5 years except in the case of amalgamation or
demerger or re-organisation.
• Higher rate of additional depreciation [32(1)(iia)]
It is proposed to insert a new proviso [being 1st
Proviso] below Sec. 32(1)(iia) to provide that
4.5
Allowance of balance 50% Additional Depreciation in immediately
succeeding previous year [Sec. 32(1)(iia)]
[w.e.f AY 2016-17]
•Hitherto, vide 2nd proviso to Sec. 32(1)(ii),
•The proposed amendment fortifies the view
P & M acquired and put to use for less than 180
taken in the case of DCIT –vs.- Cosmo Films Ltd
days in the previous year was restricted to 50%
(2012) 13 ITR(Tri) 340 (Del), MITC Rolling Mills P.
of the prescribed rate of 20%.
Ltd. (ITA No. 2789/Mum/2012), Birla Corporation
where an assessee, sets up an undertaking or
•It is proposed to provide that the balance
enterprise for manufacture or production of
additional depreciation of 10% [50% of 20%] on
any article or thing in the notified backward
eligible P & M acquired & used for less than 180
areas of Andhra Pradesh and Telangana on
days in a previous year shall be allowed in the
or after 01-04-2015 but before 01-04-2020,
immediately succeeding previous year.
additional depreciation u/s 32(1)(iia) shall be
admissible @ 35% instead of 20% on eligible
new plant & machinery. Further, existing 1st
proviso has been renumbered as 2nd proviso.
Comments
additional depreciation u/s 32(1)(iia) on eligible
Limited –vs.- DCIT (ITA No. 683 & 581/Kol/2011)
(HC). However it also nullifies the decision of
Chennai ITAT in the case of Brakes India Ltd.
(ITA No. 1069/Mds/2010) wherein a contrary view
was taken.
40 41
4.6
INDIA BUDGET
2015-16
Prescribed conditions on maintenance of accounts, audit etc to
be fulfilled by the approved in house R&D facility [Sec. 35(2AB)]
[w.e.f AY 2016-17]
•Sec. 35(2AB) provides for weighted deduction @
•It is also proposed that DSIR shall also submit
200% to a company engaged in the business of
the report in relation to the approval of the said
bio-technology or manufacturing or production of
R&D facility to the Principal CCIT or CCIT having
articles or things, for the expenditure (not being
jurisdiction over the company claiming the
expenditure incurred on land or building) incurred
weighted deduction. Similar amendment is also
on in house R&D facility. The company, apart
proposed in Sec. 35(2AA).
from, entering into an agreement with the DSIR,
is required to maintain separate books of accounts
and get the same audited for approved R&D facility.
Comments
• The DGIT (Exemptions) does not have jurisdiction
over the assessee company. In order to have a
• It is proposed to enlarge the scope of maintenance
better and meaningful monitoring mechanism for
of accounts and audit thereof by clarifying that
weighted deduction u/s 35(2AB), the facility would
both needs to be done in the manner prescribed.
now also be monitored by the Principal CCIT or
Further the audit report shall also be furnished
CCIT having jurisdiction over the assessee.
in the prescribed manner.
BASICS
4.8
BUDGET PROPOSAL
DIRECT TAXES
4.7
MISCELLANEOUS
Tax Neutrality on merger of similar Schemes of Mutual Funds
[Sec. 47(xviii) & Sec. 49(2AD)]
[w.e.f AY 2016-17]
• Several Mutual Funds are having different schemes
with similar features. SEBI has been encouraging
to consolidate these mutual funds to have simpler
and fewer numbers of schemes. However, since
the process will result in transfer of unit between
schemes, such merger/consolidation is treated
as ‘transfer’ u/s 2(47) of the IT Act and hence
chargeable to Capital Gains tax.
•To facilitate consolidation of different scheme of
mutual funds, in the interest of investors, it is
proposed to provide tax neutrality to unit holders
provided consolidation is of two or more schemes
of an equity oriented or two or more schemes of
fund other than equity oriented fund.
•Accordingly, it is now proposed to insert a new
Cost of acquisition and period of holding of capital asset in the
hands of resulting company in demerger [Sec. 49(1)(iii)(e)]
BUDGET PROPOSAL
INDIRECT TAXES
sub-section (xviii) to Sec. 47 to provide that in case
of transfer of unit in a consolidating scheme of
mutual fund for new unit in consolidated scheme
of mutual fund, shall not be regarded as transfer
and hence not exigible to capital gains tax.
•Further, sub-section (2AD) has been proposed
to be inserted in Sec. 49 to provide that cost of
the unit of the consolidated scheme of mutual
fund received pursuant to transfer exempt u/s
47(xviii), shall be cost of purchase of units in the
consolidating scheme of mutual fund.
•Consequential amendment has been proposed
in Sec. 2(42A) to provide that period of holding of
units in the consolidated scheme of mutual fund
also include the period for which the unit was
held in the consolidating scheme of mutual fund.
•The process of such consolidation has to be in
accordance with the Securities and Exchange
Board of India (Mutual Funds) Regulations, 1996
made under the SEBI Act, 1992.
[w.e.f AY 2016-17]
•Presently, there is no express provision in the
as increased by the cost of improvement incurred
IT Act for determining the cost of acquisition of
by the demerged company. Consequently, period
capital asset in the hands of resulting company
of holding of such asset in the hands of resulting
where capital assets are transferred by way
company will also include the period for which
of demerger. Such transfer are not regarded
the asset was held by the demerged company.
as transfers u/s 47(vib) for the purpose of
computing capital gain tax.
It is proposed to
amend Sec. 49(1)(iii)(e) to provide that cost of
acquisition of a capital asset acquired by the
resulting company shall be the cost for which the
demerged company acquired the capital asset,
4.9
Modification in the definition of “Amount of tax sought to be
evaded” [Sec.271(1)(c)]
[w.e.f AY 2016-17]
•Hitherto, penalty u/s 271(1)(c) is levied on the
normal provisions and the provisions of Sec.
Comments
amount of tax sought to be evaded by reason
115JB/115JC, then such amount shall not be
• The above amendment, seeks to treat ‘demerger’
of concealment of particular of income or
considered in computing tax sought to be evaded
at par with ‘amalgamation’ with regard to cost of
furnishing of inaccurate particulars of income.
under provisions of Sec. 115JB/115JC.
acquisition of capital asset as well as period of
•It is proposed to modify the definition of
holding in the hands of resulting company.
Comments
“amount of tax sought to be evaded” provided in
•The Delhi HC in the case of CIT –vs.- Nalwa
Explanation 4 to sub-section (1) of Sec 271 so
Sons Investments Ltd (2010) 327 ITR 543 (Del)
as to include that the amount of tax sought to
has held that penalty u/s 271(1)(c) cannot be
be evaded shall be the summation of tax sought
imposed on the concealment of income under
to be evaded under the normal provisions
normal provisions, if the total income of the
and under the provision of Sec. 115JB/115JC.
assessee is assessed as per Sec 115JB of the IT
Further, if an item is disallowed both under the
Act. The Apex Court has accepted the decision
42 43
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
of the Delhi HC & dismissed the SLP filed by the
under normal provisions and in computing
power under Sec. 263 on the ground that the AO
(2008) 8 DTR 161 (HP) -Assessment order was
Revenue. The proposed amendment nullifies the
Book Profit, then for the purpose computing the
should have made further enquiries.
erroneous & prejudicial to the interests of the
aforesaid decision of the Apex Court.
amount of tax sought to be evaded, disallowance
•If disallowance u/s 14A r.w.r 8D is made both
made in computing Book profit will be ignored.
Ranbaxy Laboratories Ltd –vs.- CIT (2012) 345
ITR 193 (Del) - CIT was justified in holding the
assessment as erroneous and prejudicial to
4.10
Contribution to schemes eligible for 100% deduction [Sec. 80G]
[w.e.f AY 2016-17]
•Under the existing provisions of Sec. 80G,
contribution made to certain funds and institutions
formed for a social purpose of national importance,
like the Prime Ministers’ National Relief Fund,
National Foundation for Communal Harmony etc
are eligible for 100% deduction.
•It is proposed to include the following funds in
the list of such eligible institutions:
- National Fund for Control of Drug Abuse [w.e.f
Meghalaya Plywood Ltd –vs.- CIT (2007) 210 CTR
144 (Gau) - Assessment order passed on the
Instruction No. 3 dated 25-05-2003
basis of the decision of jurisdictional HC, cannot
by the CIT if the order passed by the AO is
erroneous or prejudicial to the interests of
the revenue. The expressions “erroneous or
prejudicial to the interest of the revenue” is not
been defined in the IT Act.
•It is proposed to insert an Explanation to Sec.
263(1) to provide that order passed by the AO
shall be deemed to be erroneous or prejudicial
to the interests of Revenue, if the CIT or Principal
CIT opines that the same is passed :
-Without making inquiries or verification which
should have been made; or
-Allowing any relief without enquiring into the
claim; or
be considered as erroneous.
AY 2016-17]
- Swachh Bharat Kosh [w.r.e.f AY 2015-16]
- Clean Ganga Fund [w.r.e.f AY 2015-16] [For
resident assessee only]
• If any contribution is made to the Swachh Bharat
Kosh & Clean Ganga Fund, in pursuance of CSR
u/s 135(5) of the Companies Act, 2013 it will not
be eligible for deduction u/s 80G.
[w.e.f 01-06-2015]
proceedings under that section can be initiated
sticky loans.
any reference to the TPO required by CBDT
CIT –vs.- Himachal Pradesh Financial Coporation
Clarification on orders to be considered as erroneous and
prejudicial to the interest of revenue [Sec.263]
•Under the existing provision of Sec. 263,
considering the CBDT Circular on interest on
the interest of the revenue as AO has not made
4.12
Threshold limit for applicability of domestic transfer pricing
provisions raised from H5 Crs. to H20 Crs. [Sec.92BA]
[w.e.f AY 2016-17]
• Existing Transfer Pricing Regulations in India vide
-Without following the order, directions or
instructions of the Board; or
- Without considering the decision of Jurisdictional
HC or SC which is prejudicial to the assessee or
any other person.
Comments
• The proposed amendment fortifies the following
decisions :
Fab India Overseas Ltd –vs.- CIT (2011) 60 DTR
240 (Del) - The assessee supplied required
information regarding commission and general
charges to AO in response to a questionnaire and
the AO having assessed the assessee at a total
income far in excess of the declared income, it
cannot be said to be a case of lack of enquiry
and, therefore, CIT was not justified in exercising
Comments
Sec. 92BA provide that Transfer Pricing Provisions
This is a welcome move for the small sector
shall apply to “specified domestic transactions”
enterprises which will reduce the burden of
where the aggregate of such transactions in the
compliances and cost.
relevant previous year exceeds a sum of H5 Crs.
4.11
revenue since the same was passed without
• It is proposed to amend Sec. 92BA to enhance the
above threshold of H5 Crs. to H20 Crs.
44 45
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
SECTION 5
INTERNATIONAL
TAXATION AND
TRANSFER PRICING
46 47
INDIA BUDGET
2015-16
BASICS
5.1
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
“Eligible Fund Manager” not to constitute “Business Connection”
of offshore investment funds – position clarified
[Sec. 9A and 271FAB]
[w.e.f AY 2016-17]
•Presently, in terms of the existing provisions
in India of the said fund on fulfilment of specified
of Sec. 9(1)(i) of the IT Act w.r.t “Business
conditions. Further, an Eligible Investment Fund
Connection”, an India based fund manager
shall not be said to be resident in India merely
may create a sufficient nexus, and hence a
because the Eligible Fund Manager undertaking
“business connection”, for the concerned
fund management activities is based in India.
offshore Investment Fund even though such
fund manager may be an independent person.
The presence of the fund manager under
certain circumstances may lead to the off-shore
India on the basis of its control and management
the fund is a resident of a country or a specified
being in India. Accordingly, income of such
territory with which an agreement referred to
offshore Investment Fund from investments
in Sec. 90(1) or 90A(1) has been entered into;
made in countries outside India may also get
the aggregate participation or investment
Funds do not typically retain fund managers
based in India, instead many fund managers
5.1
Page
‘Eligible Fund Manager’ not to constitute ‘Business Connection’ of offshore
investment funds – position clarified
47
5.2
Reduction in tax rates of income by way of Royalty or Fees for Technical Services
49
5.3
Indirect Transfers – Deemed income taxable in India – provisions clarified
49
5.4
CBDT to notify rules for giving foreign tax credit to Indian residents
51
5.5
Interest paid by Indian Branch to Foreign Banking companies taxable in India and
liable to withholding tax
52
Concessional tax rate u/s 194LD relating to Income by way of interest on certain
securities extended upto 30-06-2017
52
IT Act and Depository Receipt Scheme, 2014 aligned to extend tax benefits to
depository receipts issued against specified securities
53
Residency Criteria of Companies – widened by introduction of Place Of Effective
54
5.6
5.7
5.8
that manage India focused offshore funds,
tend to be based outside India and only have
an advisory relationship in India that provide
recommendatory services.
Management concept
• In order to facilitate such fund managers to have
their base in India, it has been proposed to insert
a Sec. 9A to lay down a specific code for taxability
of such Offshore Investment Funds. The new
sec. provides that taxability of the income of
the Eligible Investment Fund from investment
made in India would not be impacted by the
fact that its Eligible Fund Manager is based in
India. Similarly, for income from investment
made outside India, its taxability shall not be in
India for the sole reason that its Eligible Fund
5.9
Amendment in MAT provisions for FIIs
54
5.10
Furnishing of information relating to all payments to non-residents
55
Fund are:
the fund is not a person resident in India;
• Considering the above risks, offshore Investment
Particulars
relevant year for being an Eligible Investment
Investment Fund being held to be resident in
taxed in India.
Sl. No.
• The conditions required to be fulfilled during the
Manager is based in India.
•Thus the new regime proposes that the Eligible
Fund Manager in India of an Eligible Investment
Fund shall not constitute a “business connection”
in the fund, directly or indirectly, by persons
being resident in India does not exceed 5% of
the corpus of the fund;
the fund and its activities are subject to
applicable investor protection regulations in
the country or specified territory where it is
established or incorporated or is a resident;
the fund has a minimum of 25 members
who are, directly or indirectly, not connected
persons;
any member of the fund along with connected
persons shall not have any participation
interest, directly or indirectly, in the fund
exceeding 10%;
the aggregate participation interest, directly
or indirectly, of 10 or less members along with
their connected persons in the fund, shall be
less than 50%;
the investment by the fund in an entity shall
not exceed 20% of the corpus of the fund;
no investment shall be made by the fund in its
associate entity;
48 49
INDIA BUDGET
2015-16
the monthly average of the corpus of the fund
excluding any income from the total income of
shall not be less than H100 crs. and if the fund
the Eligible Investment Fund, which would have
has been established or incorporated in the
been so included irrespective of whether the
previous year, the corpus of fund shall not be
activity of the eligible fund manager constituted
less than H100 crs. at the end of such previous
the business connection in India of such fund or
year;
not.
BASICS
5.2
BUDGET PROPOSAL
DIRECT TAXES
[w.e.f AY 2016-17]
• As per the existing provisions of Sec. 115A of the
IT Act, the Non-Resident taxpayers are liable
•It has also been proposed that the Fund
to pay tax @25% of gross amount of income by
manage, directly or indirectly, any business in
shall furnish a statement in a prescribed
way of Royalty and Fees for Technical Services
India or from India;
form regarding fulfilment of above specified
received from Government or an Indian concern in
conditions to tax authorities within 90 days from
pursuance of an agreement made by the foreign
the end of the financial year failing which the
company with Government or the Indian concern
Fund would be liable to penalty of H5,00,000.
after 31-03-1976 and where such agreement is
which constitutes a business connection
in India nor has any person acting on its
behalf whose activities constitute a business
Comments
connection in India other than the activities
• Several countries including the United Kingdom,
undertaken by the eligible fund manager on
Singapore, Hong Kong, United States, and New
its behalf;
Zealand provide for a safe harbour to prevent
the remuneration paid by the fund to an
eligible fund manager in respect of fund
offshore investment funds from having a taxable
presence in their respective jurisdictions.
management activity undertaken on its behalf
•Under the newly amended provision of Sec.
is not less than the arm’s length price of such
6 of the IT Act, a company (including foreign
activity.
company) shall be considered as resident in
•The conditions required to be fulfilled for being
an Eligible Fund Manager are:
the person is not an employee of the Eligible
Investment Fund or a connected person of the
fund;
the person is registered as a fund manager
or investment advisor in accordance with the
specified regulations;
the person is acting in the ordinary course of
his business as a fund manager;
the person along with his connected persons
shall not be entitled, directly or indirectly,
to more than 20% of the profits accruing or
arising to the eligible investment fund from
the transactions carried out by the fund
through such fund manager.
•However, this amendment shall not result in
India if the place of effective management at
MISCELLANEOUS
Reduction in tax rates of income by way of Royalty or Fees for
technical services [Sec.115A]
the fund shall not carry on or control and
the fund is neither engaged in any activity
BUDGET PROPOSAL
INDIRECT TAXES
with an Indian concern, the agreement is approved
by the Central Government or where it relates to
a matter included in the industrial policy, for the
time being in force, of the Government of India,
the agreement is in accordance with that policy,
and, which are not effectively connected with PE,
if any, of the non-resident in India.
• It is proposed to amend Sec. 115A of the IT Act to
reduce the above tax rate of 25% to 10% on the
gross amount.
technical services to 10%.
• Incidentally, vide the Finance Act, 2013, the rates
were increased to 25% from 10% to remove the
anomaly between the tax rate sec.115A and
DTAAs. However, the same is again proposed to
be restored to 10%.
• This may prove to be a relief for those non resident
taxpayers residing in countries with whom India
does not have DTAA as the income from Royalty
or fees for technical services arising to them
shall be taxable at par with other countries @10%
and shall facilitate increased inflow of technology.
The reduction of such rate is a well-foresighted
move towards the “Make-in-India” perspective.
Recently, the Revenue Authorities have been
raising demands on the payers/deductors by
taking a view that the rate of tax deduction in case
of non-residents, not having PAN should be 25%
any time is in India. This amendment would
Comments
have an adverse implication on offshore fund
•This amendment is proposed with a view to
having fund manager in India because place of
obviate the problems faced by small companies
effective management has now been defined as
and to facilitate the inflow of technology, thus,
a place where key management and commercial
reducing the rate of tax on royalty and fees for
instead of 20% by applying the provisions of sec.
206AA r.w.s 115A. However, with the proposed
amendment, the said issue is being put to rest
w.e.f FY 2015-16 onwards.
decision necessary for the business of an entity
as a whole and in substance are made. The
proposed insertion of Sec. 9A provides for a
welcome exception.
•By providing clarity on issues relating to
business connection and residential status of
offshore investment funds, India could benefit
immensely since it would provide a sense of
comfort for choosing India as the base for
investment managers. This would not only
develop the immense job opportunity that this
sector provides but would also help in developing
the related & complimentary talent pool in India.
5.3
Indirect transfers – Deemed income taxable in India – provisions
clarified [Sec. 9(1),47(viab),47(vicc), 271GA and 285A]
[w.e.f AY 2016-17]
•Presently, Explanation 5 to Sec. 9(1)(i) of the
IT Act provides that any share or interest in a
company or an entity registered or incorporated
outside India shall be deemed to be situated in
India if the share or interest derives its value
substantially from the assets located in India.
Hence, any transfer of such share/interest in a
Foreign Company/ entity results in an indirect
transfer of Indian assets. However, the term
“value” and “substantially” were not defined
under the IT Act leading to significant subjectivity
and uncertainty.
•It is proposed to amend Sec. 9(1)(i) of the IT
Act by inserting Explanation 6 to provide that
any transfer of interest in a foreign company
or entity shall be deemed to derive its value
substantially from the assets (whether tangible
or intangible) located in India, if on the specified
date, the value of Indian assets (not net off
liabilities) exceeds the amount of H10 crs. and
50 51
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
represents at least 50% of the fair market value
foreign company and such transfer does not
Comments
of all the assets (not net of liabilities) owned by
attract tax on capital gains in the country in which
such foreign company or entity.
the amalgamating company is incorporated;
•The Finance Act, 2012 had retrospectively
amended (w.e.f 01-04-1962) Sec. 9 of the IT
Act, by inserting Explanation 5 to sub-sec. (1)
(i) to provide for taxability of indirect transfer.
The said explanation clarified that an asset or
capital asset, being any share or interest in a
company or entity registered or incorporated
outside India shall be deemed to be situated in
India if the share or interest derives, directly or
indirectly, its value substantially from the assets
located in India. However the term “value” and
“substantially” were not defined under the Act.
•However, certain exceptions have been carved
•Any transfer in a demerger, of a capital asset,
out vide Explanation 7 and vide amendment in
being a share of a foreign company, which derives,
Sec. 47 of the IT Act such as:
directly or indirectly, its value substantially from
•Transfer outside India of share/interest in the
foreign company/entity which directly owns
the assets situated in India and the transferor
(whether individually or along with its AEs),
neither holds the management right or control,
nor holds voting power or share capital or
interest exceeding 5% in such foreign company/
entity; or
•Transfer outside India of share/interest in the
foreign company/entity which indirectly owns
the assets situated in India and the transferor
(whether individually or along with its AEs),
neither holds the right of management or
control in relation to such foreign company/
entity, nor holds any right in, or in relation to,
such company or entity which would entitle him
to the right of management or control in the
the share or shares of an Indian company, held by
the demerged foreign company to the resulting
foreign company, if the shareholders, holding
not less than 3/4th in value of the shares of the
demerged foreign company, continue to remain
shareholders of the resulting foreign company
and such transfer does not attract tax on capital
gains in the country in which the demerged
foreign company is incorporated.
•In case where all the assets owned, directly/
indirectly, by a company or entity are not
located in India, the income of the non-resident
transferor, from transfer outside India deemed
to accrue or arise in India, shall be only such
part of the income as is reasonably attributable
to the assets located in India. The relevant rules
in this regard shall be prescribed.
company or entity that directly owns the assets
•It is proposed to insert Sec. 285A of the IT Act
situated in India, nor holds such percentage
vide which the Indian concern through or in
of voting power or share capital or interest in
which the Indian assets are held by the foreign
such company or entity which results in holding
company or the entity shall be under obligation
of (either individually or along with associated
to furnish information relating to the off-shore
enterprises) a voting power or share capital or
transaction having the effect of directly or
interest exceeding 5% of the total voting power
indirectly modifying the ownership structure
or total share capital or total interest, as the
or control of the Indian company or entity. If
case may be, of the company or entity that
the Indian entity fails to do so, the income-tax
directly owns the assets situated in India.
authority in terms of newly inserted Sec. 271GA
•Any transfer, in a scheme of amalgamation,
of a capital asset, being a share of a foreign
company, which derives, directly or indirectly, its
value substantially from the share or shares of
an Indian company, held by the amalgamating
foreign company to the amalgamated foreign
company, if at least 25% of the shareholders of
the amalgamating foreign company continue
to remain shareholders of the amalgamated
of the IT Act may direct that such Indian concern
shall pay, by way of penalty:
a sum equal to 2% of the value of the
transaction in respect of which such failure
has taken place, if such transaction had the
effect of directly or indirectly transferring the
right of management or control in relation to
the Indian concern;
H5,00,000 in any other case.
•Considering the concerns raised by various
stakeholders regarding the scope and impact
of the amendments by the Finance Act 2012,
an Expert Committee under the Chairmanship
of Dr. Parthasarathi Shome was constituted by
the Government to go into the various aspects
relating to the amendments.
•The Committee, in this context, recommended
that for an indirect transfer to be taxable in
India, there should be a prescribed monetary
threshold and that the value of the foreign assets
should derive at least 50% of its value from the
5.4
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Indian assets. The above amendments seek to
rationalise the provisions of the IT Act and has
since accepted most of the recommendations
of the Committee on this aspect. However, the
recommendations of the Committee to provide
exemption to a foreign company listed on a
recognised stock exchange and whose shares
are frequently traded on the stock exchange;
and restructuring within the Group (other
than amalgamation and demerger) subject to
continuity of 100% ownership does not find its
way in the proposed amendments.
•It may also be noted that while Sec. 9 of the IT
Act was retrospectively amended vide Finance
Act, 2012 to provide for taxability of indirect
transfer, the above proposed amendments has
been made applicable w.e.f. AY 2016-17.
•Incidentally, the Delhi High Court in the recent
case of Copal Research Ltd. -vs.- DIT (2014)
270 CTR (Del) 223 has considered the threshold
of 50% for determining whether the foreign
company’s shares derive their value substantially
from the Indian Assets and accordingly it was
held that since the threshold was not breached,
there was no indirect transfer of Indian Assets.
CBDT to notify rules for giving foreign tax credit to Indian
Residents [Sec.295]
[w.e.f 01-06-2015]
• Presently, Sec. 91(1) of the IT Act provides for
relief to Indian residents in respect of incometax on the income which is taxed in India as well
as in the country with which there is no DTAA.
The present mechanism is to provide relief as
a deduction from the Indian income-tax of a
sum calculated on such doubly taxed income,
at the Indian rate of tax or the rate of tax of said
country, whichever is lower. In case of countries
with which India has entered into an agreement
for the purposes of avoidance of double taxation
Sec. 90 or 90A of the IT Act, a relief in respect of
income-tax on doubly taxed income is available
as per the respective DTAAs.
• Presently, the IT Act does not provide the manner
for granting credit of such taxes. Accordingly, it is
proposed to amend Sec. 295(2) of the IT Act so as
to provide that CBDT may make rules to provide
the procedure for granting relief or deduction, as
the case may be, of any income-tax paid in any
country or specified territory outside India, u/s 90,
90A or 91 of the IT Act, against the income-tax
payable under the IT Act.
Comments
Detailed Rules and procedure for grant of relief or
deduction of foreign tax credit is a welcome step
towards avoidance of future litigations.
52 53
5.5
INDIA BUDGET
2015-16
Interest paid by Indian branch to foreign banking companies
taxable in India and liable to withholding tax [Sec. 9]
[w.e.f AY 2016-17]
BASICS
5.7
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
IT Act and Depository Receipt Scheme, 2014 aligned to extend
tax benefits to depository receipts issued against specified
securities [Sec. 115ACA]
[w.e.f AY 2016-17]
•CBDT vide its Circular No. 740 dated 17-04-
• Accordingly, the PE in India shall be obligated to
1996 had earlier clarified that branch of a
deduct tax at source on any interest payable to
•The Depository Receipts Scheme, 2014 has
and acquisitions are permitted. Also, DRs can
foreign company in India is a separate entity
either the head office or any other branch or PE,
been notified by the Department of Economic
be freely held and transferred by both residents
for the purpose of taxation under the IT Act and
etc. of the non-resident outside India. Further,
affairs (DEA) vide Notification F.No.9/1/2013–
and non-residents.
accordingly TDS provisions would apply along
non-deduction would result in disallowance of
ECB dated 21-10-2014. This scheme replaces
with separate taxation of interest paid to head
interest claimed as expenditure by the PE and
“Issue of Foreign Currency Convertible Bonds
office or other branches of the non-resident,
may also attract levy of interest and penalty in
and Ordinary Shares (through depository receipt
which would be chargeable to tax in India.
accordance with relevant provisions of the IT Act.
mechanism) Scheme, 1993”.
•The principle enshrined in the said Circular is
Comments
•Since the tax benefits under the IT Act were
initially intended to be provided in respect of
sponsored GDRs and listed companies only,
clause (a) of the explanation Sec. 115ACA of the
•The current taxation scheme of income arising
IT Act has been amended in order to continue
now proposed to be incorporated in the IT Act by
While the principle laid down in the said Circular
in respect of depository receipts under the Act
the tax benefits only in respect of GDR’s against
amending Sec. 9(1) of the IT Act to provide that
always existed, the same did not find support of
is aligned with the earlier scheme which was
the issue of:-
in the case of a non-resident, being a person
the Indian Judiciary who have time and again held
limited to issue of Depository Receipts (DRs)
ordinary shares of issuing company, being
engaged in the business of banking, any interest
that in terms of the computation mechanism under
based on the underlying shares of the company
a company listed on a recognised stock
payable by the PE in India of such non-resident
the DTAA provisions, deduction of interest paid, by
issued for this purpose (i.e. sponsored GDR) or
exchange in India; or
to the head office or any other part of such
Indian branch to Head Office/ Overseas branches,
Foreign Currency Convertible Bonds (FCCB) of
non-resident outside India shall be deemed
is allowed as deduction and at the same time the
the issuing company and where the company
to accrue or arise in India. Such interest shall
said interest paid by the India PE is not chargeable
was either a listed company or was to list
be chargeable to tax in addition to any income
to tax under the provisions of IT Act being income
simultaneously. Besides, the holder of such DRs
attributable to the PE in India and the PE in India
to self. The proposed amendment seeks to nullify
was a non-resident only.
shall be deemed to be a person separate and
decisions in ABN Amro Bank, N.V. -vs.- CIT (2011)
independent of the non-resident person of which
241 CTR 552 (Cal), Bank of America -vs.- JCIT
it is a PE and the provisions of the IT Act relating
(2014) 149 ITD 145 (Mum.), Deutsche bank AG -vs.-
to computation of total income, determination of
ADIT (2014) 40 CCH 714 (Mum)(ITAT)
tax and collection and recovery would apply.
5.6
Concessional tax rate u/s 194LD relating to income by way
of interest on certain securities extended upto 30-06-2017
[Sec.194LD]
[w.e.f 01-06-2015]
• Sec. 194LD presently provides lower withholding
• To align the eligibility period u/s 194LC with Sec.
tax @ 5% in case of interest payable on or after
194LD, the bill proposes to amend Sec. 194LD to
01-06 -2013 but before 01-06-2015 to FIIs and
extend the concessional rate of 5% upto 30-06-
Qualified Foreign Investors (QFIs) on their
2017 also.
investments in government securities and rupee
denominated bonds of an Indian Company if the
rate of interest does not exceed the rate notified
by the Central Government.
Comments
The amendment shall incentivise and encourage
greater long term off-shore investment by FIIs and
QFIs in India.
Foreign currency convertible bonds of issuing
company.
Comments
This would align the taxation scheme of income
arising in respect of DRs under the IT Act with the
•As per the new scheme, Depository Receipts
earlier scheme which was limited to issue of DRs
(DRs) can be issued against the securities of
based on the underlying shares of the company
listed, unlisted or private or public companies
issued for this purpose (i.e. sponsored GDR) or
against underlying securities which can be debt
FCCB of the issuing company and where the
instruments, shares or units etc. Further, both
company was either a listed company or was to
the sponsored issues and unsponsored deposits
list simultaneously.
54 55
INDIA BUDGET
2015-16
Residency criteria of companies – widened by introduction of
Place of Effective Management concept [Sec. 6]
5.8
[w.e.f AY 2016-17]
• As per the existing provisions of Sec. 6 of the IT
resident in India. The principle of “POEM” is an
Act, a company is said to be a resident in India in
internationally recognised concept. This concept
any previous year, if:-
is also recognised and accepted by Organisation
for Economic Co-operation and Development
it is an Indian company; or
during that year, the control and management
of its affair is situated wholly in India.
•Sec. 6 is proposed to be amended to widen the
concept of residency test for companies as under it is an Indian company; or
its place of effective management, at any time
in that year, is in India.
•
POEM
shall
mean
a
(OECD). The proposed amendment is also in line
with the definition of resident as contained in the
proposed Direct Taxes Code, 2013.
• Since determination of POEM is a fact dependent
where
key
management and commercial decisions that
are necessary for the conduct of the business of
an entity as a whole are, in substance made.
course for the benefit of the taxpayers as well
to file return of income in India and offer their
global income for tax. Other complications like
dividend, TDS, etc. may also arise which will
require clarification. Business houses would
have to revisit their Group Structure to align it
with the new test of residency.
in case of shell companies which
from India where the companies used to avoid
becoming a resident in India by simply holding a
board meeting outside India.
•Based on the international precedents and
limited jurisprudence available in India, the
criteria for determining POEM generally is
where the board meetings are usually held,
where the Chief Executive Officer & other senior
•Now, with the POEM Concept finding place
officials usually carry on their activities, where
under the law, if at any time during the
the day to day management of the company is
previous year, such effective management is in
carried on, where the company’s head quarters
India, such companies would be regarded as
are located etc.
5.9
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Comments
Act to provide that income from transactions in
•The Revenue has been issuing notices for
securities (other than short term capital gains
payment of Minimum Alternate Tax in respect of
arising on transactions on which securities
capital gains on sale of shares by FIIs which are
transaction tax is not chargeable) arising to
exempt under the Treaty provisions. The above
a FII, shall be excluded from the chargeability
controversy has been put to rest by virtue of the
of MAT and the profit corresponding to such
above amendment. However, no clarity has been
income shall be reduced from the book profit.
provided w.r.t other foreign companies earning
The expenditures, if any, debited to the profit loss
capital gains exempt under the Treaty.
account, corresponding to such income are also
proposed to be added back to the book profit for
the purpose of computation of MAT.
5.10
be that those companies would be required
•The amendment was primarily to plug the
are incorporated outside India but controlled
• It is now proposed to amend Sec. 115JB of the IT
in determination of POEM would be issued in due
Comments
loophole
BUDGET PROPOSAL
DIRECT TAXES
exercise, a set of guiding principles to be followed
as tax administration. The ramification could
place
BASICS
Amendment in MAT provisions for FIIs [Sec. 115JB]
[w.e.f AY 2016-17]
•Vide Finance Act (No.2), 2014 it was provided
Act, 1992 would be treated as a capital asset.
that any securities held by FIIs which has
Consequently, the income arising to a FII from
invested in such securities in accordance
transactions in securities would always be in the
with the regulations made under the SEBI
nature of capital gains.
Furnishing of information relating to all payments to
non-residents [Sec. 195(6) and 271I]
[w.e.f 01-06-2015]
• Presently, Sec. 195(1) of the IT Act provides that
responsible for paying any sum, whether
any person responsible for paying any interest
chargeable to tax or not, shall furnish the
(other than interest referred to in Sec. 194LB
information as prescribed.
or 194LC or 194LD of the IT Act) or any sum
chargeable to tax (not being salary income) to
a non-resident, not being a company, or to a
foreign company, shall deduct tax at the rates in
force. Further, for such remittances which are
chargeable to tax, such person is also required
to furnish information in the manner prescribed
in Sec. 195(6).
•Now, it is proposed to amend the provisions of
Sec. 195(6) of the IT Act to widen the scope of
furnishing the information so that the person
• It is further proposed to insert Sec. 271I to provide
that in case of non-furnishing of information or
furnishing of incorrect information u/s 195(6) of
the IT Act, a penalty of H1,00,000 shall be levied.
Comments
The present mechanism of obtaining of information
was restricted only to remittances chargeable to
tax. However, the same defeats one of the main
principles of obtaining information for foreign
remittances i.e. to identify the taxable remittances
on which tax was deductible but was not deducted.
56 57
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
SECTION 6
PERSONAL
TAXATION
MISCELLANEOUS
58 59
INDIA BUDGET
2015-16
BUDGET PROPOSAL
DIRECT TAXES
BASICS
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Tax rates other than Corporate
6.1
[w.e.f AY 2016-17]
For individuals, Hindu Undivided Family, Association of Persons and Body of Individuals
Income Slabs (H)
Tax Rates*
0 - 2,50,[email protected]
Nil
2,50,001 – 5,00,000+
10.30% of income exceeding H2,50,000
5,00,001 – 10,00,000
H25,750 plus 20.60% of income exceeding H5,00,000
10,00,001 –1,00,00,000
H1,28,750 plus 30.90% of income exceeding H10,00,000
1,00,00,001 and above
H29,09,750 plus 34.608%# of income exceeding H1,00,00,000
* Tax rates are inclusive of Education Cess and Secondary Higher Education Cess @ 2% and 1%
respectively.
# Surcharge has been increased from 10% to 12% in case total income exceeds H1 cr.
@ In case of resident individual of age 60 years or more (Senior Citizen) the basic threshold limit of
H3,00,000 remains unchanged.
In case of resident individual of age 80 years or more (Very Senior Citizen) the basic threshold limit of
H5,00,000 remains unchanged.
+ Resident individual having total income less than H5,00,000 is eligible to claim Tax Rebate u/s 87A,
being lower of tax on total income or H2,000.
Deduction under chapter VI-A for individuals/HUFs
6.2
Sl. No.
Particulars
Page
6.1
Tax Rates other than Corporate
59
6.2
Deduction under chapter VI-A for Individuals/HUFs
59
6.3
TDS mechanism on withdrawal of accumulated balance from Employees Provident
Fund Scheme (EPFS)
61
6.4
Enabling of filing of Form 15G/15H for payment made under life insurance policy
61
6.5
Enhancement of threshold limit of Transport Allowance
61
[w.e.f AY 2016-17]
Sl.
No.
Section
1
80C
2
80CCC
3A
80CCD(1)
3B
80CCD(1B)
4
80CCE
5
80D
Particulars
Payment of Life Insurance Premium,
etc.
Contribution to certain Pension funds
Contribution to National Pension
scheme (NPS)
Existing Limit (H)
Proposed Limit (H)
1,50,000
1,50,000
1,00,000
10% of salary or
GTI (restricted to
1,50,000
Not Applicable
Aggregate ceiling for Sl. Nos. 1, 2 & 3A
Health Insurance Premium for
Individual/HUF
10% of salary or GTI
H1,00,000)
1,50,000
Additional
deduction up
to H50,000 over
deduction allowed
u/s 80CCD(1)
1,50,000
Please refer table below
60 61
Sl.
No.
6
Section
80DDB
7
80U
Particulars
INDIA BUDGET
2015-16
Existing Limit (H)
Proposed Limit (H)
40,000
60,000
60,000
40,000
60,000
80,000
Medical treatment for Specified Disease
- Individual
- Senior Citizen
- Very Senior Citizen
Deduction in case of person with
disability
- Disabled
- Severely disabled
50,000
1,00,000
75,000
1,25,000
Notes:
a.Deposit made by parent or legal guardian of girl child under Sukanya Samriddhi Account Scheme
eligible for deduction u/s 80C. Corresponding interest income and withdrawal from such account also
exempt u/s 10(11A). Proposed amendment to take effect retrospectively w.e.f 01-04-2015.
b. For Sec. 80DDB, instead of prescribed Medical certificate, prescription from the prescribed specialised
doctors shall be obtained (whether or not working in Government hospital).
BASICS
6.3
Scenario
No one in the family is above
60 years
No one in family is above
60 years & either one of the
parents are above 60 years
Atleast one member of
family is above 60 years and
either one of the parents are
above 60 years
Medical expenditure (where
at least one member
is above the age of 80
years without any health
insurance)
Self, Spouse
& Dependant
Children
(family)
15,000
15,000
Parents
(whether
dependant
or not)
15,000
20,000
Self, Spouse
Parents
Total
& Dependant (whether
deduction
Children
dependant
(family)
or not)
30,000
35,000
25,000
25,000
25,000
30,000
Total
deduction
50,000
55,000
MISCELLANEOUS
TDS mechanism on withdrawal of accumulated balance from
Employees Provident Fund Scheme (EPFS) [Sec. 192A]
[w.e.f 01-06-2015]
the employee considering it as income under
withdrawal of accumulated balance by an
the head salaries. However, trustee does not
employee from RPF is exempt from tax, provided
generally have details of year wise taxable
the employee has rendered continuous service
income of the employee.
with the employer for more than 5 years except
in specified circumstances. In case of premature withdrawal, the exemption is withdrawn
and the entire amount is taxable. Rule 10 of the
Part A of the Fourth schedule requires trustees
of the RPF or the person authorized thereof to
deduct tax at the time of making payment to
6.4
As proposed
BUDGET PROPOSAL
INDIRECT TAXES
•Under the existing provision of Sec. 10(12)
Maximum permissible deduction u/s 80D
Under existing provisions
BUDGET PROPOSAL
DIRECT TAXES
• In order to simplify the TDS application on such
withdrawal, it is proposed to insert Sec. 192A to
provide for fixed rate of TDS @ 10% on withdrawal
of H30,000/- or more. Further, in case the payee
does not furnish PAN, tax shall be deducted at
the maximum marginal rate.
Enabling of filing of Form 15G/15H for payment made under
life insurance policy [Sec. 197A]
[w.e.f 01-06-2015]
•Finance (No.2) Act, 2014, inserted Sec. 194DA
•To avoid such anomaly, it is proposed to amend
provides for deduction of tax at source @ 2%
Sec. 197A(1A) & 197A(1C), to provide non
from payments made under life insurance
deduction of tax at source u/s 194DA, in case
policy to residents which are chargeable to tax.
where tax on total income is likely to be nil
However, there was no corresponding provision
during the previous year, subject to submission
for non deduction of tax in case total taxable
of self declaration in Form No.15G and 15H.
income is nil.
20,000
NA
20,000
NA
40,000
NA
30,000
30,000
30,000
30,000
60,000
60,000
Comments
•Clause 2(a) & Clause 2(b) of Sec. 80D prescribes the threshold limit for claiming deduction u/s 80D of
medical insurance premium paid by an individual to keep in force an insurance on the health of the individual,
spouse, dependent children and parents at H15,000 each. The Memorandum to Finance Bill specifies that
the threshold limit of deduction u/s 80D(2)(a) and 80D(2)(b) shall increase from H15,000 to H25,000. However
in the Finance Bill 2015, corresponding amendments has not been proposed in Clause 2(a) & Clause 2(b) of
Sec. 80D. It is expected that this anomaly would be rectified while passing the Finance Bill.
6.5
Enhancement of threshold limit of Transport Allowance
[Rule 3 of the IT Rules]
[w.e.f AY 2016-17]
•The Budget also took a baby step in hiking the
Chennai have been left untouched. The hike in
tax-free transport allowance limit of salaried
the tax-free limit will cut tax by H2,966 in the
employees from H800 to H1,600 pm. The
highest 30% tax bracket. Tax cut will be lower at
aforesaid allowance was originally introduced in
H1,978 in 20% tax bracket. In the lowest 10% tax
the Finance Act 1998 w.r.e.f 01-08-1997. Since
bracket (those earning up to H5 lakh), tax cut will
then, the same has unfortunately remained
be limited to H989, or just H82 pm.
unchanged. The allowances of many such other
limits i.e. medical reimbursements, LTA, HRA
in Cities other than Mumbai, Kolkata, Delhi &
• The proposed amendment will be made in Rule
3 of the IT Rules.
62 63
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
SECTION 7
OTHERS
MISCELLANEOUS
64 65
INDIA BUDGET
2015-16
BUDGET PROPOSAL
DIRECT TAXES
BASICS
Sl. No.
7.10
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Particulars
Page
Provisions relating to Settlement Commission:
73
7.10.1
Widening the scope of filing application before Settlement Commission
74
7.10.2
Rectification Order by Settlement Commission
74
7.10.3
Immunity by Settlement Commission
75
7.10.4
Scope of Abatement of proceedings before Settlement Commission
75
enlarged
7.10.5
Bar on subsequent application
75
7.10.6
Application of seized Cash
75
7.10.7
Levy of Interest u/s 234B in Settlement Cases
76
7.11
Levy of Interest u/s 234B in other than settlement cases
76
7.12
Modification in the definition of ‘accountant’
76
7.13
Sums received as advance or otherwise in relation to transfer of immovable
77
property now covered with the ambit of disallowance u/s 269SS & 269T
Sl. No.
7.1
Particulars
Page
Taxation Regime for Real Estate Investment Trust (‘REIT’) and Infrastructure
Investment Trust (‘Invit’)
66
7.2
Time Limit to Intimate AO about accumulated fund not applied for Charitable or
Religious Purposes
70
7.3
Exemption of income of Swachh Bharat Kosh & Clean Ganga Fund
70
7.4
Mandatory furnishing of ROI by universities and hospitals referred to in Sec. 10
(23C)
70
7.5
Definition of ‘Charitable Purpose’ to include Yoga and rationalisation of scope of
71
Pass through status for Category – I & Category – II Alternative Investment Funds
71
7.7
Abolition of Wealth Tax Act, 1957
72
7.8
Withdrawal of exemption from TDS on payments to transport contractors owning
73
more than ten goods carriage
Assessment of Income of a person other than the person in whose case search is
initiated
78
an immovable property in cash
7.15
Enhancement of income limit for decision by Single Member Bench of ITAT
78
7.16
Rationalisation of provisions relating to Tax Deduction at Source (TDS) and Tax
78
7.17
73
Procedure for appeal by revenue when an identical question of law is pending
79
before Supreme Court
7.18
(‘AIF’)
7.9
Penalty for acceptance of advance or otherwise or repayment thereof for transfer of
Collection at Source (TCS)
advancement of any other object of general public utility
7.6
7.14
Rationalisation of provisions relating to deduction of tax at source on interest (other
79
than interest on securities)
7.19
Criteria for issuance of notice u/s 148 simplified
81
7.20
No requirement of furnishing of TAN for notified deductors/collectors
81
7.21
Exemption to specified income of Core Settlement Guarantee Fund
82
7.22
Order passed u/s 10(23C) appealable before ITAT
82
7.23
Rationalisation of MAT provisions for members of an AOP
82
7.24
Key features of proposed new Law on Black Money stashed abroad
83
7.25
More Comprehensive Anti-Benami Bill on cards
84
66 67
7.1
INDIA BUDGET
2015-16
Taxation Regime for Real Estate Investment Trust (‘REIT’) and
Infrastructure Investment Trust (‘Invit’) [Sec. 2(13A), 10(23FCA),
111A(1), 115UA[ w.e.f AY 2016-17] and Sec. 194-I & 194-LBA
[w.e.f 01-06-2015]
the alternative investment avenues in India’s
real estate and infrastructure sector, Securities
and Exchange Board of India (SEBI), on 10th
August, 2014 had proposed draft regulations
relating to two new categories of investment
vehicles namely, REIT and InvIT.
•Subsequently, on 26th September, 2014, SEBI
notified final regulations on REITs and InvITs.
While the final regulations capture certain key
amendments, greater clarity has been granted
by defining certain important terms in the
Securities and Exchange Board of India (Real
Estate Investment Trusts) Regulations, 2014
(SEBI REIT Regulations) dated 26 September,
2014.
• As per the SEBI REIT Regulations, parties to the
REIT include sponsor, re-designated Sponsor,
manager and trustee. These are defined as
under:
“Sponsor” has been defined to include
a person(s) who set(s) up the REIT and
designated as such at the time of application
made to SEBI.
i.
REIT assets in trust for the benefit of the unit
holders, in accordance with these regulations.
B.
Sponsor
Unit holder of the trust
(other than sponsor) &
Trust
Capital gain will
be deferred and
taxed at the time
of sale of units of
the business trust
Not Applicable
No Change
Not Applicable
defined to include a company or LLP in which
i.
the REIT holds or proposes to hold controlling
interest and minimum 50% equity stake,
amongst other criteria.
•As regards taxation, while, partial pass through
was given for REITs / InvITs in Finance Act 2014,
Benefit of
concessional
regime is not
available at
the time of off
loading of units of
business trust
Not Applicable
REITs / InvITs and pass through status on rental
income for REITs has been proposed in Finance
• Finance Bill 2015 propose to substitute “business
trust” to mean a trust registered as an InvIT
under Securities and Exchange Board of India
Long term capital gain
will be exempt u/s. 10(38)
of IT Act
(Infrastructure Investment Trusts) Regulations,
2014 made under SEBI Act, 1992 or REIT under
Securities and Exchange Board of India (Real
Short term capital gain
will be taxed @15%
Estate Investment Trusts) Regulations, 2014
stock exchange in accordance with aforesaid
regulations.
cover
•In order to rationalise the provision, following
a company or LLP or body corporate
proposal are made under the Finance Bill, 2015
incorporated in India which manages assets
which are summarised hereunder:
Not Applicable
STT shall be levied on sale
of units of business trust
on similar lines as in case
of unlisted equity shares
under an IPO
Bill, 2015
responsibilities of the Sponsor.
Benefit of concessional
regime is available at the
time of off loading of units
of business trust
Parity of tax treatment
on off loading of units
vis-a-vis offloading of
underlying shareholding
through an IPO
further rationalization of the capital gains tax for
to mean any person who has assumed the
to
Proposed amendments
Sale of listed units of business trust through Initial Offer at the time of listing of business trust on
recognised stock exchange
which are required to be listed on recognised
defined
Sponsor
Unit holder of the
trust (other than
sponsor) & Trust
MISCELLANEOUS
development activities through an SPV, which is
made under SEBI Act, 1992 and the units of
been
BUDGET PROPOSAL
INDIRECT TAXES
Exchange of shares of SPVs with units of the business trust
“Trustee” means a person who holds the
“Re-designated Sponsor” has been defined
has
Sl. No.
operational activities of the REIT.
•Also, a REIT is permitted to undertake property
BUDGET PROPOSAL
DIRECT TAXES
Existing Provisions
A
•With an objective to promote and systematize
“Manager”
BASICS
and investments of the REIT and undertakes
C.
ii.
Cost of units of
business trust to
be considered as
cost of shares to
the sponsor
Not Applicable
No Change
iii.
Holding period
of shares to be
included in the
holding period of
such securities
Not Applicable
No Change
Not Applicable
Sale of listed units of business trust
Long term capital gain
will be exempt u/s.
10(38) of IT Act
Short term capital gain
will be taxed @15%
Not Applicable
No Change
Not Applicable
68 69
Existing Provisions
Sl. No.
D.
ii.
Not Applicable
Not Applicable
Trust
Interest received
from SPV is not
taxable and, no
withholding of tax
by SPV
BASICS
Proposed amendments
Sponsor
Unit holder of the trust
(other than sponsor) &
Trust
Interest and withholding tax thereon
i.
E.
Sponsor
Unit holder of the
trust (other than
sponsor) & Trust
INDIA BUDGET
2015-16
Trust
Trust to withhold tax
@5% on payments
to non-resident unit
holder and 10% in
case of resident unit
holder
Trust
No Change
Sl. No.
Sponsor
Trust
Dividend received
from SPV to be
exempt
Income distributed by
business trust to unit
holder will be exempt
Trust
Trust to withhold tax @5%
on payments to nonresident unit holder and
10% in case of resident unit
holder
No Change
Rental income taxed
at MMR
No tax in the hands of
business trust
Unit holder of the
trust (other than
sponsor)
REIT to withhold tax
@10% in case of resident
unit holder and at the
rate in force on any sum
chargeable to tax in case
of non-resident unit
holder.
01-06-2015 where income
is credited or paid to a
business trust directly.
Trust
No Change
Distributed income in the
nature of rental income
arising on real estate
asset owned directly by
REIT shall be deemed to
be income of unit holder
chargeable to tax
Unit holder of the trust
(other than sponsor
No Change
Rate in force in relation
to an AY for the purpose
of TDS u/s. 195, shall be
the rate specified in the
Finance Act or the rate
specified in an agreement
u/s. 90(2) between India
and Government of any
country outside India,
whichever is beneficial
Disposal of assets by business trust
Trust
Not Applicable
Taxable as capital
gain at applicable
rates.
No Change
Not Applicable
Not Applicable
Other Income
Any other income
taxable at MMR
Business trust, being
REIT
No TDS u/s. 194-I of IT Act
w.e.f
Income distributed
by business trust to
unit holder will be
exempt
G.
Sponsor
Unit holder of the trust
(other than sponsor)
Unit holder of the
trust (other than
sponsor)
Not Applicable
Proposed amendments
Business trust,
being REIT
Income distributed
by business trust to
unit holder will be
exempt
DDT to be paid by
SPV and not by
Trust
F.
Unit holder of the
trust (other than
sponsor) & Trust
No Change
MISCELLANEOUS
Unit holder of the trust
(other than sponsor) &
Trust
Rental income arising to REIT on real estate assets held directly
Dividend income
Income distributed by
business trust will be
exempt
BUDGET PROPOSAL
INDIRECT TAXES
Existing Provisions
H.
Not Applicable
BUDGET PROPOSAL
DIRECT TAXES
Business trust, being REIT
No tax in the hands of
business trust
REIT to withhold tax
@10% in case of resident
unit holder and at the
rate in force on any sum
chargeable to tax in case of
non-resident unit holder.
No TDS u/s. 194-I of IT Act
w.e.f
01-06-2015 where income
is credited or paid to a
business trust directly.
Unit holder of the trust
(other than sponsor)
Distributed income in the
nature of rental income
arising on real estate asset
owned directly by REIT shall
be deemed to be income
of unit holder chargeable
to tax
Rate in force in relation
to an AY for the purpose
of TDS u/s. 195, shall be
the rate specified in the
Finance Act or the rate
specified in an agreement
u/s. 90(2) between India and
Government of any country
outside India, whichever is
beneficial
Comments
• Pass through status is given to the rental income arising to REIT on real estate assets held directly.
•REITs enable investors to channelise their investments into India’s real estate sector and infrastructure
sector through a regulated mechanism. REITs and INvITs would also provide liquidity to real estate and
infrastructure projects.
70 71
7.2
INDIA BUDGET
2015-16
Time Limit to Intimate AO about accumulated fund not applied
for Charitable or Religious Purposes [Sec. 11]
[w.e.f AY 2016-17]
BASICS
7.5
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Definition of ‘Charitable Purpose’ to include Yoga and
Rationalisation of scope of advancement of any other object
of general public utility [Sec. 2(15)]
[w.e.f AY 2016-17]
• Existing provision of Sec. 11(2), does not specify
Comments
the time limit for furnishing of Form 10 r.w.r. 17
•Hitherto, time limit for filing of Form 10 was
•Sec. 2(15) defines ‘Charitable purpose’ to
shall not be charitable purpose unless such
of IT Rules to be filed before the AO informing
prescribed under Rule 17. The said Rule provides
include activity in the nature of relief of the poor,
activity is undertaken in the course of actual
him about accumulation of fund which has not
that such form should be furnished before expiry
education, medical relief and advancement of
carrying out of such advancement of any other
been applied for charitable purpose. Further the
of time allowed u/s 139(1). As the Rule was not
any other object of general public utility. Proviso
object of general public utility and the aggregate
existing provisions allows for such accumulation,
mandatory in nature, the issue was subjected to
to Sec. 2(15), specifies that advancement of
receipts from such activity or activities, during
subject to conditions specified, for 10 years.
litigation. Supreme Court in CIT –vs-. Nagpur
any other object of general public utility shall
the previous year, do not exceed twenty percent
Hotel Owners’ Association (2001) 247 ITR 201
not be a charitable purpose, if it involves the
of the total receipts, of the trust or institution
(SC) held that details have to be furnished before
carrying on of commercial activity. However, this
undertaking such activity or activities, for the
completion of the assessment proceedings and
restriction shall not apply if the aggregate value
previous year.
any information supplied subsequent to the
of the receipts from the activities referred above
completion of assessment cannot be taken
is H25,00,000/- or less in the previous year.
• In order to remove ambiguity regarding the time
limit, the proposed amendment specifies that
such form shall be filed before due date of filing
ROI u/s 139(1). In case of failure to do so, benefit
of accumulation would not be available and such
income would be taxable at the applicable tax
rate as proposed in Sec. 13(9).
•Further, accumulation of funds as per the
manner specified is restricted to 5 years.
into consideration. The proposed amendment
nullifies the decision of Supreme Court allowing
the assessee to file the details after filing ROI
but before completion of assessment.
7.3
the Hon’ble Hyderabad ITAT in ACIT –vs.- Divya
received international recognition too by the UN,
Yog Mandir Trust (2013) 459 TS (Hyd.) wherein it
it is proposed to include yoga within the ambit of
has been held that yoga can be safely accepted as
activities in the nature of ‘Charitable Purpose’.
a system fit into the definition of ‘medical relief’
advancement of any other object of general
and providing yoga shivir/camps can be covered in
‘imparting education’.
public utility as mentioned in the above definition
[w.r.e.f AY 2015-16]
• Existing provisions of Sec. 10(23C) of the IT Act provide for exemption from tax in respect of income
of certain charitable funds or institutions. Considering the importance of “Swachh Bharat Kosh” and
7.6
“Clean Ganga Fund”, it is proposed to include these funds in the list of eligible entities entitled for
exemption u/s 10(23C).
7.4
The above amendment fortifies the view taken by
•In order to promote Yoga which has recently
•Further, it has been proposed to provide that
Exemption of income of Swachh Bharat Kosh & Clean Ganga
Fund [Sec. 10(23C)]
Comments
Mandatory furnishing of ROI by universities and hospitals
referred to in Sec. 10 (23C) [Sec. 139(4C)]
Particulars
Category - I
Category – II
Category – III
Legal form
Fund can be set up as a Trust, Company, LLP or any other body corporate
Criteria
Invest in start-up or early
stage ventures or social
ventures or SMEs or
infrastructure or other
sectors or areas which the
Government or regulators
consider as socially or
economically desirable
Investment
Condition
Funds shall invest not more than 25% of the corpus in Fund shall invest not more
one Investee Company
than 10% of the corpus in
one Investee Company
Tenure
Minimum tenure of 3 years
• Under the existing provisions of Sec. 139, all entities whose income is exempt u/s 10(23C), other than
university or educational institution specified in Sec. 10(23C) (iiiab) and hospital or other institution
specified in Sec. 10(23C)(iiiac), are mandatorily required to file their return of income.
10(23C)(iiiac) shall now be mandatory required to file return of income.
[w.e.f AY 2016-17]
• Vide SEBI (AIF) Regulations, 2012, AIFs have been classified into following three categories:-
[w.e.f AY 2016-17]
• It is proposed to amend Sec. 139(4C) to provide that entities covered under Sec. 10(23C) (iiiab) and Sec.
Pass through status for Category – I & Category – II Alternative
Investment Funds (‘AIF’)[Sec. 115UB]
Private equity funds or
debt funds which do not
fall in Category I and III and
which do not undertake
leverage or borrowing
other than to meet
day-to-day
operational
requirements
Funds that employ diverse
or
complex
trading
strategies and may employ
leverage including through
investment in listed or
unlisted derivatives
No tenure specified
72 73
INDIA BUDGET
2015-16
BASICS
•Vide Finance Act, 2013, Sec. 10(23FB) r.w.s 115U was amended to provide the scope of taxability of
income of certain Category I of AIF.
• It is proposed to insert Sec. 115UB to provide specific taxability regime for Category – I & Category – II
7.8
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Withdrawal of exemption from TDS on payments to Transport
contractors owning more than ten goods carriage [Sec.194C(6)]
[w.e.f 01-06-2015]
AIFs as well. The proposals are summarised hereunder:
Particulars
Category - I
Taxability in hands
of AIF
Category – II
Category – III
• Income in the nature of profits and gains of business or profession shall be
taxable at the applicable rates.
• Other Income such as Capital Gain & Income from Other Sources shall be
exempt from tax.
Taxability in hands
of Unit holder of
AIF
• Income in the nature of profits and gain of business or profession received
from AIF shall be exempt.
•Hitherto, as per sub-section (6) of Sec. 194C
The IT Department is of the view that as per the
amended vide Finance (No. 2) Act, 2009 w.e.f
provisions of Sec. 194(6) tax is not required to
01-10-2009, no tax was required to be deducted
be deducted on payments made to contractors
from any sum paid to a transport contractor
who owns goods carriage and not on transport
provided such contractor furnishes his PAN.
operators. Further, the abovementioned benefit
•It is proposed to amend sub-section (6) of the
Sec. 194C to restrict the benefit of non deduction
• Income received in the nature of Capital Gain & Income from Other Sources
shall be chargeable to tax
of tax on payment made to only those transport
• Income received by AIF would be exempt from TDS requirement.
any time of the previous year and a declaration
• TDS @ 10% under newly proposed Sec. 194LBB shall be deducted by AIF at
the time of payment of income in the nature of Capital Gain & Income from
Other Sources to unit holder
to this effect is furnished.
Comments
Carry forward and
set-off of losses
• Losses shall be allowed to be set off and carried forward to AIF as per
provisions of Chapter VI but same cannot be transferred to unit holders
taxpayers for their alleged failure to deduct tax at
Dividend Income
• Provisions of DDT shall not apply to the income paid by AIF to its unit holders
Return of
Income(ROI)
• Mandatory for AIF to file its ROI u/s 139
Withholding tax
Applicability
7.7
• Sec. 115UB shall also apply to Certain category I of AIF which was covered by
Sec. 115U
Abolition of Wealth Tax Act, 1957
[w.e.f AY 2016-17]
contractors owning ten or less goods carriage at
The IT Department has issued notices to large
source on payments made to transport operator.
7.9
person exceeds H30,00,000 on the valuation date
to be furnished in the wealth-tax return shall
against such other person.
i.e. last date of the previous year.
be captured by suitably modifying income-tax
surcharge rate by 2% to be levied on tax payers
earning taxable income exceeding H1 cr.
H9,000 cr. Further it will lessen the compliance
burden of the tax payers and also administrative
burden of the IT Department
2015.
used for any information contained therein.
over such other person and he shall proceed
in increase in tax collection from H1,008 cr. to
cure the defect and made applicable w.e.f 01-06-
requisitioned “belong to” any person other than
relating to assets which is currently required
is to be compensated by increase in the existing
the legislature. Hence the amendment is made to
or pertain to”. Further the term “relate to” is
or HUF or company, if the net wealth of such
same with additional surcharge of 2% will result
194C(6) does not convey the desired intention of
seized or requisitioned with the word “pertains
shall be handed over to the AO having jurisdiction
•The revenue loss on account of such abolition
stated that the language of the current Sec.
that the books of account or document seized or
and entities, it is proposed that information
•The abolition of wealth tax and substituting the
The memorandum to the Finance bill has itself
during the course of a search, the AO is satisfied
1957, wealth-tax @ 1% is levied on an individual
Comments
seeking its intervention.
used in relation to books of account or document
documents or assets seized or requisitioned
commensurate with the high cost of collection.
Commerce has also given a letter to the CBDT
• Existing provisions of Sec. 153C, provides that if
•Further, to track the wealth held by individuals
since revenue collection from the same is not
TDS certificate. The Associated Chamber of
[w.e.f 01-06-2015]
•Under the existing provisions of Wealth tax Act,
return form.
from state to state and is not able to collect the
Assessment of Income of a person other than the person in
whose case search is initiated [Sec. 153C]
the person searched, the books of accounts or
•It is proposed to abolish the Wealth Tax Act,
is available only to small transporters who move
• It is proposed to substitute the word “belong to”
7.10
Comments
Both the term “pertain to” & “relate to” are wider
in amplitude than the word “belong to” and seeks
to encompass within its ambit those cases where
photocopy of the original document is seized from
a person.
Provisions relating to Settlement Commission
74 75
7.10.1
INDIA BUDGET
2015-16
Widening the scope of filing application before Settlement
Commission [Sec. 245A]
BASICS
7.10.3
[w.e.f 01-06-2015]
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Immunity by Settlement Commission [Sec. 245H]
[w.e.f 01-06-2015]
•Under the existing provisions, an assessee
•
Hitherto, assessee can file application in
• Presently, Settlement Commission on fulfilment of certain conditions can grant immunity from penalty
may make an application before Settlement
respect of those years for which proceedings
& prosecution. However, there is no requirement to record reasons in writing as to why immunity has
Commission (ITSC) in respect of assessment
have commenced on 1st day of the assessment
been granted.
year or years which may be pending before AO
year and assessment has not been completed
on date on which application is made. Presently,
by virtue of clause (iv) of Explanation to Sec.
where a notice is issued u/s 148, the assessee is
245A(b).
eligible to make application to ITSC only for that
year and not for other assessment years.
•It is now proposed that ITSC is to record the reasons in writing while granting immunity from above
proceedings.
It is proposed to amend the above clause to
provide that a proceeding for any assessment
It is proposed to amend clause (i) of the
year shall be deemed to have been commenced
Explanation to Sec. 245A(b) to enable the
from the date on which the return of income has
assessee to approach ITSC even for other
been furnished u/s 139 or in response to notice
assessment years where the return has been
u/s 142 and concluded on the date on which the
filed and notice u/s 148 could have been issued
assessment is made or on the expiry of 2 years
but not been issued on that date.
from the end of relevant assessment year, where
no assessment is made.
7.10.4
Scope of Abatement of proceedings before Settlement
Commission enlarged [Sec. 245HA]
[w.e.f 01-06-2015]
• The existing provision of Sec. 245HA(1) provides for different situations where abatement of proceedings
before Settlement Commission takes place.
•It is proposed to insert clause (iiia) to Sec. 245HA(1) to provide that where an order has been passed
by the Settlement Commission u/s 245D(4) without providing the terms of settlement, the same shall
abate on the day on which such order u/s 245D (4) was passed.
7.10.2
Rectification Order by Settlement Commission [Sec. 245D(6B)]
7.10.5
[w.e.f 01-06-2015]
•Presently, Settlement Commission (ITSC) may
been made (before the end of the limitation
amend order passed u/s 245D(4) to rectify its
period of 6 months from the end of the
mistake apparent from record within 6 months
month in which the order u/s 245D(4) was
from the date of order.
passed ) by the Principal Commissioner or
•It is now proposed to substitute Sec. 245D(6B)
Commissioner or applicant.
to provide ITSC may rectify its order passed u/s
Comments
245D(4) as follows :
•
The
(a) Within 6 months from the end of the month in
which the order u/s 245D(4) was passed or
(b) Within 6 months from the end of the month
in which application for rectification has
proposed
Bar on subsequent application [Sec. 245K]
[w.e.f 01-06-2015]
•Presently, a person can approach ITSC once in a life time. However, such person can again approach
ITSC through a related person. This defeat the purpose of restricting the opportunity of approaching the
Commission only once.
• It is now proposed to amend Sec. 245K to provide that even the related persons as defined in Sec. 245K,
would also not be considered as eligible for filing application.
amendment
provides
for
additional time where the assessee or Revenue
files an application towards the end of limitation
period i.e. 6 months from the date of the order
7.10.6
Application of seized Cash [Sec. 132B]
[w.e.f 01-06-2015]
passed u/s 245D(4) at present.
• It is proposed to amend Sec. 132B allowing the assessee to adjust seized assets against the tax liability
arising in settlement application in search cases
76 77
7.10.7
INDIA BUDGET
2015-16
Levy of Interest u/s 234B in settlement cases [Sec. 234B]
[w.e.f 01-06-2015]
BUDGET PROPOSAL
DIRECT TAXES
BASICS
partnership
‘accountant’. In order to ensure that such audit
Liability Partnership Act, 2008
proposed that those persons who are not eligible
•In order to remove the anomaly, it is proposed
levied u/s 234B(1) will be increased or decreased
to insert sub-section (2A) to Sec. 234B to clarify
on the basis of the income determined among
the time period for levying interest u/s 234B in
others, in the order passed by the Settlement
settlement cases as below:
Commission
u/s
245D(4).
However
unlike
Sec. 234B(3) there is no specific provision in
Sec. 234B specifying the period for which the
aforesaid interest shall be computed.
• Further the Supreme Court in Brij Lal & Others
When an application is made to ITSC, @1%
for appointment as an auditor of a company u/s
141(3) of the Companies Act, 2013 shall also
not be considered as an “accountant” for the
purpose of the IT Act. Amendment on similar
lines is proposed for non-company assessee.
pm or part thereof on the additional amount
•It is also proposed to enlarge scope of
of income tax from the 1st day of assessment
disqualifications for persons who are authorised
year to the date of making such application
to represent the assessee in I.T. matters. As
and
per the amendments proposed in Sec. 288(4),
–vs.- CIT (2010) 194 Taxman 566 (SC) has held
On passing of the order u/s 245D(4), @1% pm
that interest u/s 234B is leviable only up to the
or part thereof on the incremental tax levied in
date order u/s 245D(1) is passed i.e. till date of
the order from the 1st day of assessment year
admission of application and not till the date of
to the date on which the order is passed.
order u/s 245D(4).
a person convicted by a court of an offence
involving fraud shall not be eligible to act as an
authorised representative of the assessee in I.T.
cases for a period of 10 years from the date of
such conviction.
7.11
[w.e.f 01-06-2015]
•Vide the existing provision of Sec. 234B(3),
•Sec. 234B(3) is proposed to be substituted
interest u/s 234B is computed on the tax on
proposing to compute interest u/s 234B on the
incremental income over the income determined
tax on incremental income over the income
in the intimation u/s 143(1) or order u/s 143(3),
determined in the intimation u/s 143(1) or on
for the period from the date of determination of
regular assessment, for the period from 1st day
total income u/s 143(1) or on regular assessment
of assessment year to the date of determination
to the date of determination of total income u/s
of total income u/s 147 or 153A.
147 or 153A.
7.12
[w.e.f 01-06-2015]
per
the
‘accountant’
Explanation
means
to
Chartered
288(2),
a.
The
expression
“accountant”
shall
mean
Accountant
a Chartered Accountant who holds a valid
within the meaning of Chartered Accountants
certificate of practice under the Chartered
Act, 1949.
Accountants Act, 1949.
• It is proposed to revise the definition of the term
‘accountant’ as follows:-
b.Various provisions of the IT Act (e.g. Sec. 44AB,
Sec. 80-IA, Sec 115JB etc.) require an assessee
(b) an officer or employee of the company
(c) a person who is a partner, or employee of an
officer or employee of the company
(d) a person who, or his relative or partner holds
any interest/security in the company, its holding,
subsidiary, fellow subsidiary, associate etc or is
indebted to them
(e) a person or a firm who has business relationship
with the company, its holding, subsidiary, fellow
subsidiary, associate etc.
(f) a person whose relative is a director or is in the
employment of the company as a director or key
managerial personnel
(g) a person who is in full time employment
(h) a person who has been convicted by a court of
an offence involving fraud and a period of ten
auditors of the company:-
years has not elapsed from the date of such
(a) a body corporate other than a limited liability
7.13
conviction
Sums received as advance or otherwise in relation to transfer of
immovable property now covered with the ambit of disallowance
u/s 269SS & 269T
[w.e.f 01-06-2015]
Comments
that no person shall receive any sum for transfer
• The amendment is proposed to curb generation
of immovable property in excess of H20,000
of black money arising on transfer of immovable
otherwise than by account payee cheque,
property in cash.
account payee bank draft or electronic clearing
Sec.
Limited
following persons shall not be appointed as the
system.
•
As
the
As per Sec. 141(3) of the Companies Act, 2013
•It is proposed to amend Sec. 269SS, to provide
Modification in the definition of ‘accountant’ [Sec. 288]
under
elsewhere
Comments
Levy of Interest u/s 234B in other than settlement cases
[Sec. 234B]
registered
MISCELLANEOUS
to obtain audit reports/certificates from an
reports/certificates are not influenced, it is
•Presently, Sec. 234B(4) specifies that interest
BUDGET PROPOSAL
INDIRECT TAXES
•The proposed amendment seeks to nullify the
decision in CIT –vs.- Madhav Enterprises (P) Ltd.
•Similarly it is proposed to amend Sec. 269T to
(2013) 356 ITR 588 (Guj) wherein it has been held
provide that no person shall repay any advance
that the provision of Sec. 269T is not applicable
received by it for transfer of immovable property
in case of repayment of earnest money/advance
in excess of H20,000 otherwise than by account
received for transfer of immovable property.
payee cheque, account payee bank draft or
electronic clearing system
78 79
7.14
INDIA BUDGET
2015-16
Penalty for acceptance of advance or otherwise or repayment
thereof for transfer of an immovable property in cash
[Sec. 271D & 271E]
loss) under the provisions of the IT Act in such
assessee the evidence or proof or particulars of
form and manner as may be prescribed.
7.17
are proposed to be covered by making consequential amendment in Sec. 271D & 271E respectively
[w.e.f 01-06-2015]
b) The application before the ITAT is required to
the assessee to file an application before the IT
be filed within 60 days from the date of receipt
Authorities for disposal of case of the relevant
of order of CIT(Appeals).
year in accordance with the decision of the High
Court & Supreme Court on identical question of
•In Sec. 255(3), it is proposed to enhance the monetary limit for disposal of cases by a single member
c)The application shall be filed only when an
acceptance is received from the assessee to
law in other years, it is proposed to introduce a
bench of ITAT from H5,00,000 to H15,00,000 (being the total income computed by the AO).
7.16
Procedure for appeal by Revenue when an identical question of
law is pending before Supreme Court [Sec. 158AA]
• In line with Sec. 158A wherein an option is given
[w.e.f 01-06-2015]
Rationalisation of provisions relating to Tax Deduction at Source
(TDS) and Tax Collection at Source (TCS)
the effect that the question of law in the other
Sec. 158AA to give similar option to the Revenue.
case is identical to the question of law arising
• Sec. 158AA proposes that
a) in cases where Revenue has filed an appeal or
a reference application before the Supreme
[w.e.f 01-06-2015]
in the relevant case.
d)If the Supreme Court in the other case
decides the question of law in favour of the
Court on a question of law which is identical
• In Sec. 200A, there is no provision for computing
TCS for the same period if the same is already
to the question of law on which appeal is
fee payable u/s 234E at the time of processing of
charged u/s 206C(7). Similar provisions already
required to be filed before the ITAT in the case
TDS/TCS Statement. Sec. 200A is proposed to be
exist for charging of interest on TDS.
of the same assessee, the CIT or principle CIT
amended to compute fee payable u/s 234E at the
time of processing of TDS/TCS Statement.
for furnishing of TCS correction statement.
Accounts Officer or Treasury Officer or Cheque
Similar provisions already exist for filing TDS
Drawing & Disbursing Officer for giving credit
correction statement.
of tax deducted by the office of Government.
• Presently, intimation generated after processing
of TDS statement is subject to rectification u/s
154, appealable u/s 246A and shall be deemed
as notice of demand u/s 156 of the Act. In order
to bring the processing of TCS statement at
par with the processing of TDS statement, it
is proposed to insert Sec. 206CB to provide for
processing of TCS statements. Consequentially,
amendment is also proposed in Sec. 154(1), Sec.
156 & Sec. 246A.
•In order to avoid charging of interest both u/s
220(2) and 206C(7), it is proposed to insert
Sec. 220(2C) to provide that no interest shall
be charged u/s 220(2) on the same amount of
the AO to file an appeal before the ITAT within
60 days from the date on which order of
Supreme Court is communicated to the CIT
or Principle CIT.
the ITAT stating that an appeal in the relevant
format for reporting of any payment of TDS/TCS
made through book entry mechanism by Pay &
Revenue, the CIT or Principle CIT may direct
may direct the AO to file an application before
•Presently, Sec. 192 does not provide for any
• Sec. 206C is proposed to be amended to provide
MISCELLANEOUS
prescribed claims (including claim for set-off of
• In line with the proposal made in Sec. 269SS & 269T, penalty for violation of the amendments therein
7.15
BUDGET PROPOSAL
INDIRECT TAXES
tax deductible u/s 192(1), obtain from the
[w.e.f 01-06-2015]
Enhancement of income limit for decision by Single Member
Bench of ITAT [Sec. 255]
BUDGET PROPOSAL
DIRECT TAXES
BASICS
case may be filed when the Supreme Court
decides the issue in the other case.
7.18
Sec. 200 & 206C is proposed to be amended to
provide that where Tax deduction/Tax collection
Rationalisation of provisions relating to deduction of tax at
source on interest (other than interest on securities) [Sec. 194A]
[w.e.f 01-06-2015]
has been made by government deductor without
production of challan, the Pay & Accounts
a.
Definition of “time deposits” to include
& Disbursing Officer shall furnish a prescribed
statement within the prescribed time before the
credited on recurring deposits without any
provision will attract penalty of H100 per day u/s
•It is proposed to insert sub-section (2D) to Sec.
192 to provide that the person responsible for
making the payment shall, for the purposes of
estimating income of the assessee or computing
•Under the existing provisions, no tax is
deductible at source on interest paid or
IT Authority. Failure to comply with the above
272A till the default continues.
b. Tax to be deducted on interest paid or credited
“recurring deposits’
Officer or Treasury Officer or Cheque Drawing
threshold limit.
•It is proposed to amend the definition of ‘time
deposits’ to include within its scope “recurring
deposits” for the purposes of deduction of tax
u/s 194A.
on time deposits by cooperative banks to its
members
•Sec. 194A(1) r.w. Sec. 194A(3)(i)(b) and 194A(3)
(viia)(b) provide for deduction of tax at source by
co-operative society engaged in the business
of banking on interest paid or credited in
excess of H10,000 on time deposits. However,
Sec. 194A(3)(v) provide for a general exemption
from deduction of tax at source on interest
paid or credited by a co-operative society to its
members.
80 81
•This has led to a dispute as to whether cooperative banks, for which specific provisions
for deduction of tax at source on interest paid
or credited on time deposits exists as stated
above, can take the benefit of exemption
provided u/s 194A(3)(v) to all co-operative
societies by making their depositors its
members.
• To resolve the dispute, it is proposed to amend
Sec. 194A(3)(v) to provide that any income paid
or credited by a co-operative society other than
a co-operative bank to its members will not be
subject to TDS u/s 194A(1).
Comments
The proposed amendment nullifies the decision
of Gujarat Urban Co-Operative Bank Federation
–vs.- UOI (2012) 75 DTR 354 (Guj) and Jalgaon
District Central Co-op. Bank -vs.- UOI (2004) 265
ITR 423 (Bom) wherein it has been held that cooperative banks are not required to deduct tax at
source on interest paid on time deposits to their
members in view of the exemption granted u/s
194A(3)(v).
The proposed amendment also forties the
decision of ACIT -vs.- The Belgaum District
Central Co-op Bank Ltd. (ITA No.324/Pnj/2013)
& Bhagani Nivedita Sahakari bank Ltd -vs.- ACIT
(2003) 87 lTD 569 (Pune) wherein it has been held
that co-operative banks are required to deduct
tax at source on interest paid on time deposits to
its members u/s 194A(3)(viia).
c.Threshold limit for non deduction of tax at
source on interest paid by banks, co-operative
societies and public companies not to be
computed branch wise where Core Banking
Solution system has been adopted
•Hitherto proviso to Sec. 194A(3)(i) provides
that the threshold limit for applicability of TDS
provision on interest paid or credited by banks,
co-operative societies and public companies
shall be computed with reference to each
branch of the respective entities.
•It is proposed to insert 2nd Proviso to Sec.
INDIA BUDGET
2015-16
194A(3)(i) to provide that threshold limit of
interest for the purpose of deduction of tax at
source shall not be computed separately for
deposits made in separate branches of a bank,
co-operative society or public company where
these entities have adopted core banking
solutions.
Comments
• Most of the banks, co-operative banks and public
companies are computerised and follow core
banking solutions for crediting interest. Core
banking solutions is a networking of branches
which enables customers to operate their
accounts and avail banking services from any
branch of the bank on core banking solution
network regardless of where he maintains his
accounts. The customer is no more the customer
of the branch. He becomes the customer of the
bank.
d.TDS on interest on compensation only at the
time of payment
•Sec. 56(2)(viii) & Sec. 145A provides that
interest income received on compensation or
enhanced compensation shall be deemed to
be the income of the year in which the same
has been received.
•Sec. 194A(3)(ix) provides for deduction of
tax at source on interest paid or credited on
compensation awarded by the Motor Accident
Claim Tribunal, if the amount exceeds H50,000.
• Since Sec. 145A & Sec. 56 provides for taxability
of interest determined on compensation or
enhanced compensation on receipt basis
and Sec. 194A(3)(ix) provides for deduction
of tax at source on interest determined on
compensation or enhanced compensation on
accrual basis, undue hardship and mismatch
is faced by the assessee.
•It is proposed to amend Sec. 194A(3)(ix) to
provide for deduction of tax at source only at
the time of payment of interest determined on
compensation or enhanced compensation, if
the amount exceeds H50,000.
BUDGET PROPOSAL
DIRECT TAXES
BASICS
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Criteria for issuance of notice u/s 148 simplified [Sec.151]
7.19
[w.e.f 01-06-2015]
•Sec. 151 which provides for sanction from certain IT Authorities before issuance of notice u/s 148 is
proposed to be amended as follows
Sl. No.
Exiting Provisions
Proposed Amendment
Issuance on Notice u/s 148 within 4 years
1
In case where an assessment is made u/s
143(3) or 147, no notice shall be issued by an
AO below the rank of ACIT or DCIT, unless
approval of JCIT is obtained.
Issuance on Notice u/s 148 after 4 years
2
In case where an assessment is made u/s
143(3) or 147, no notice shall be issued unless
prior approval of Principal CCIT or CCIT or
Principal CIT or CIT is obtained
3
In case, other than cases mentioned in Sl. No.
2 above, no notice shall be issued by an AO
below the rank of JCIT unless approval of JCIT
is obtained
No notice (irrespective of whether assessment
is made u/s 143(3) or 147) shall be issued
unless prior approval of Principal CCIT or
CCIT or Principal CIT or CIT is obtained
No requirement of furnishing of TAN for notified deductors /
collectors [Sec.203A]
7.20
[w.e.f 01-06-2015]
•The obtaining of TAN u/s 203A by a deductor
creates
No notice (irrespective of whether assessment
is made u/s 143(3) or 147) shall be issued by
an AO below the rank of JCIT unless approval
of JCIT is obtained.
a
compliance
burden
for
those
individuals or HUF who are not liable for
audit under Sec. 44AB. The quoting of TAN
for reporting of transactions on which tax is
required to be deducted is a procedural matter
and the same result can also be achieved in
certain cases by mandating quoting of PAN
especially for the transactions which are likely
to be one time transaction.
• Similar provisions for quoting of PAN in case of
TAN is there in the law in case of tax deduction
u/s 194-IA.
•It is proposed to amend the provisions of Sec.
203A of the Act to provide that the requirement
of obtaining and quoting of TAN u/s 203A shall
not apply to the notified deductor or collector.
82 83
7.21
INDIA BUDGET
2015-16
Exemption to specified income of Core Settlement Guarantee
Fund (SGF) [Sec. 10(23EE)]
[w.e.f 01-06-2015]
BASICS
•However, if the income is shared with the
specified income of the Core SGF set up by the
specified person, the whole of the amount so
Recognized clearing corporation to guarantee
shared shall be deemed to be the income of the
the settlement of trades executed in the stock
previous year in which such amount is shared.
exchanges.
•Similar exemption provisions are prescribed
to mean any recognized clearing corporation
for income by way of contribution to investor
which establishes and maintains the Core SGF
protection fund set up by recognized stock
and the recognized stock exchange being the
exchanges
shareholder of such clearing corporation.
• The above amendment seeks to nullify the decision in the case of Hindustan Construction Co. Ltd. -vs.DCIT (2013) 140 ITD 642 (Mum), ACIT -vs.- B. Seenaiah & Co. Projects Ltd. (2014) 150 ITD 189 (Hyd) w.r.t
7.24
Commodity
Key features of proposed new Law on Black Money stashed
abroad
• Provisions under IT Act
1.Concealment of income and assets and
Exchanges [Sec. 10(23EC)] and depositories
[Sec. 10(23ED)].
2002
1. The offence of concealment of income or
be prosecutable with punishment of rigorous
evasion of tax in relation to a foreign asset
imprisonment upto 10 years. Further, this
will be made a predicate offence.
offence will neither be compoundable nor be
Order passed u/s 10(23C) appealable before ITAT [Sec. 253]
• Under Prevention of Money-laundering Act,
evasion of tax in relation to foreign assets will
settled before ITSC.
7.22
MISCELLANEOUS
Comments
• The specified person for this purpose is defined
10(23EA)],
BUDGET PROPOSAL
INDIRECT TAXES
applicability of MAT on the share of income earned by an AOP.
• It is proposed to insert Sec. 10(23EE) to exempt
[Sec.
BUDGET PROPOSAL
DIRECT TAXES
2. This provision would enable the enforcement
agencies
to
attach
and
confiscate
2.Penalty for concealment of income and
unaccounted assets held abroad and launch
assets shall be levied @ of 300% of tax.
prosecution against persons indulging in
[w.e.f 01-06-2015]
3.Non filing of return or filing of return with
laundering of black money.
•Income received by a person on behalf of
•Hitherto, order received from the prescribed
inadequate disclosure of foreign assets will
3. The definition of ‘proceeds of crime’ under
any university or other education institution
authority is not appealable before ITAT. It is
be liable for prosecution with punishment of
Prevention of Money Laundering Act, 2002
existing solely for education purpose or any
proposed to amend Sec. 253(1), to make order
rigorous imprisonment up to 7 years.
is being amended to enable attachment and
other purpose on behalf of any hospital or other
passed u/s 10(23C)(vi) or (via) as appealable to
institution providing medical treatment, existing
the ITAT.
4. Income in relation to any undisclosed foreign
asset or undisclosed income from any
solely for philanthropic purpose is not liable for
foreign asset will be taxable at the maximum
tax under sub-clause (vi) & (via) of Sec. 10(23C),if
marginal rate. Exemptions or deductions
approved by prescribed authority.
which may otherwise be applicable in such
cases shall not be allowed.
7.23
Rationalisation of MAT provisions for members of an AOP
[Sec. 115JB]
5.Beneficial owner or beneficiary of foreign
assets will be mandatorily required to file
return, even if there is no taxable income.
[w.e.f AY 2016-17]
•Presently, a company which is a member of an
which no income–tax is payable in accordance
AOP is not liable to tax in respect of share of the
with Sec. 86 of the Act, should be excluded
income from such AOP. However, such company
while computing the MAT liability of the member
is liable to pay MAT on such share of income
under 115JB of the Act. The expenditures, if any,
since there is no specific exclusion u/s 115JB.
debited to the profit loss account, corresponding
• Accordingly, it has been proposed to amend Sec.
115JB of the IT Act to provide that the share of a
member of an AOP, in the income of the AOP, on
to such income are also proposed to be added
back to the book profit for the purpose of
computation of MAT.
6.
Abettors of the above offences, whether
individuals, entities, banks or financial
institutions will be liable for prosecution and
penalty.
7. Date of Opening of foreign account would be
mandatorily required to be specified by the
assessee in the return of income.
confiscation of equivalent asset in India where
the asset located abroad cannot be forfeited.
• Under Foreign Exchange Management Act,
1999
1. If any foreign exchange, foreign security or any
immovable property situated outside India is
held in contravention to the provisions of this
Act, then action may be taken for seizure and
eventual confiscation of assets of equivalent
value situated in India.
2. These contraventions are also being made
liable for levy of penalty and prosecution with
punishment of imprisonment up to five years.
84 85
7.25
INDIA BUDGET
2015-16
More Comprehensive Anti-Benami Bill on cards
• Benami Transactions (Prohibition) Act, 1988 had
been in force since 1988.
• In August 2011, the then Finance Minister Pranab
Mukherjee introduced Benami Transactions
(Prohibition) Bill 2011.
• The FM in his budget speech has said that a new
and more comprehensive Benami Transactions
(Prohibition) Bill will be introduced in the current
session of the Parliament.
• This law will
enable confiscation of benami property
provide for prosecution and
block major avenue of black money in the
form of benami property in real estate.
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
TECHNOLOGIES
EFFICIENCY FOR INDIA. EFFECTIVENESS FOR THE WORLD.
India is one of the oldest civilizations in the world.
Over the last two decades, India has demonstrated that it can leapfrog a number of
technology generations to climb to the cutting-edge.
However, the past is never enough to guarantee success in the future.
India needs to kick-start its technology virtuous cycle.
By investing in cutting-edge technologies. By creating world-beating products. By
developing proprietary technologies.
From product maker. To thought leader.
The opportunity is here.
88 89
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
• Time limit for taking CENVAT credit on inputs and input services increased
from six months to a year.
• Amendment of Settlement Commissions provisions which were redundant
Practical
• Retrospective excise duty exemption on rails for manufacture of railways or
tramway tracks
Predictable
Proactive
INDIRECT TAX
Promising
Progressive
Protective
Prudent
• Confirmation that GST will be introduced from 1 April 2016
• Basic customs duty reduction on certain inputs, raw materials, intermediates
and components (22 items)
• SAD reduced on the import of certain inputs and raw materials.
• Increase in clean energy cess on coal to ₹ 200 per tonne to finance clean
environment initiatives
• Rationalisation in penal provisions under Excise, Custom and Service Tax laws
to encourage compliance and early dispute resolution
• Online central Excise and Service Tax registration in two working days.
• Levy of 2% Service Tax on all or any taxable service, the collection (Swachh
Bharat Cess) being credited to the Consolidated Funds of India for financing
and promoting Swachh Bharat initiatives.
• Abolition of EC & SHEC from Excise and Service Tax, which are being
subsumed in GST
• Service Tax exemption from ambulance services provided to patients
• Excise duty on chassis for ambulance reduced from 24% to 12.5%.
90 91
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
SECTION 8
CENTRAL EXCISE
& CENVAT CREDIT
92 93
INDIA BUDGET
2015-16
BUDGET PROPOSAL
DIRECT TAXES
BASICS
Sl. No.
8.4
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Particulars
Central Excise Rules, 2002
Page
98
8.4.1
Introduction of maintaining the daily stock account digitally
98
8.4.2
Authentication of invoice by digital signature
98
8.4.3
Procedures prescribed for raising invoice for direct dispatch of goods to
98
job workers/customers
8.4.4
Recovery proceeding extended to penalty
99
8.4.5
Penal provision introduced under Rule 12 of CER
99
8.4.6
Confiscation and penal provision introduced for an importer
99
8.4.7
Amendment in Registration provisions
99
8.4.8
Scope of the definition of ‘export’ clarified for the purpose of rebate
99
8.4.9
Restriction under Rule 12CCC of Excise Rules, 2002 applied to Registered
99
Importers also
8.5
Central Excise(Removal of Goods at Concessional Rate of Duty for Manufacture of
100
Excisable Goods) Rules, 2001
8.6
Major changes in Tariff/Effective Duty Rates
100
[Effective from 01-03-2015]
8.7
Other Changes
105
[Effective from 01-03-2015]
8.8
Various Clarifications under CE
106
8.9
CENVAT Credit Rules
106
[effective from 11-07-2014 unless otherwise specified]
8.9.1
Time limit for taking CENVAT Credit on input and input services increased
106
from 6 months to 1 year
8.9.2
Specific and express provisions inserted to facilitate manufacturers or
106
output service providers to send inputs or capital goods directly to job
worker by amending Rule 4(1) and Rule 4(2) of CCR.
8.9.3
Further consequential amendments in Rule 4(5a) of CCR covering inputs
107
and/or capital goods transferred to job worker
Sl. No.
Particulars
Page
8.1
Pattern of Changes Proposed
94
8.2
General
94
8.3
Changes proposed in the Finance Bill, 2015
95
[Effective from enactment of the Bill]
8.3.1
Amendments made in Sec. 11A of CEA (Recovery of duty not paid or short
95
paid)
8.3.2
Changes under Penal provisions under Sec. 11AC of CEA
95
8.3.3
Changes related to Settlement Commission
97
8.3.4
Retrospective amendments in respect of Excise duty on value of rails
97
8.3.5
Other Legislative Changes
98
8.9.4
Scope of reversal of CENVAT Credit under Rule 6 extended to non-
107
excisable goods
8.9.5
Changes in the conditions for availment of CENVAT Credit on input
107
services pertaining to partial reverse charge
[Effective from 01-04-2015]
8.9.6
Recovery of CENVAT Credit wrongly taken but not utilized
107
8.9.7
Amendments to penalty provisions for wrong utilisation of CENVAT Credit
108
[Effective from enactment of the Bill]
94 95
8.1
INDIA BUDGET
2015-16
BASICS
8.3
Pattern of changes proposed
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Changes proposed in the Finance Bill, 2015
[Effective from enactment of the Bill]
Proposed changes in CE Act contained in clauses
Notifications Nos. 5-17/2015-CE all dated 01-03-
8.3.1 Amendments made in Sec. 11A of CEA
service tax legislations in Sec. 73 of FA Act, where
91 to 102 of Chapter IV of the Bill effective from the
2015 have been issued, notifying effective rates
(Recovery of duty not paid or short paid)
the recovery of unpaid admitted tax has been
date of enactment.
of duty as well as duty exemptions which have
• Clause (vi) to Explanation 1 to Sec. 11A has been
taken out of Sec. 73 and it is prescribed that the
inserted to provide that in cases where only
recovery would be henceforth made in Sec. 87
interest is to be recovered, the “relevant date”
of FA Act which is invoked for recovery of unpaid
shall be the date of payment of duty to which
confirmed demands through coercive measures
such interest relates.
like attachment of property, prosecution etc.
A declaration has been made in respect of Clause
become effective from the date of Notification
90, 103 & 104 of the Finance Bill, 2015 so that
Notifications Nos. 03-11/2015-CE (N.T.) all dated
the changes made through these clauses take
01-03-2015 have been issued, amending CE Rules
effect immediately from the midnight of 28th
& CCR have become effective from the date of the
February/1st March 2015. The other clauses would
notification.
• The expression “on the due date” in Clause b(ii)
Thus, it is expected that similar rules would be
be effective from the date of enactment of Finance
of Explanation - I has been deleted. Hitherto,
prescribed under Central Excise also. It is noted
Bill, 2015.
relevant date was considered to be the due date
that in the general rule making power given to
of return even in a case where the return may
the government under Sec. 37 of CEA, there is no
have been filed later. With this amendment, the
express enabling provision for initiating recovery
relevant date would shift to the date of filing of
proceedings in a particular manner. It is, in this
return.
context perhaps that the power has been drawn
8.2
General
• Explanation - 2 to Sec. 11A has been substituted
•Standard ad valorem rate of duty of excise is
being increased from 12% to 12.5%
Notification nos. 13/2012-Cus dated 17-032012 & 14/2012-Cus dated 17-03-2012 has been
•EC & SHEC earlier applicable on all excisable
goods is withdrawn and subsumed in the
rescinded as redundant vide Notification no.
9/2015- Cus dated 01-03-2015.
Basic Excise duty rate. Exemption Notification
Comments
No.14/2015-CE dated 01-03- 2015 & Notification
The exemption from levy of EC & SHEC on
No.15/2015-CE
dated
01-03-2015
have
excisable goods is invariable since these levies
been issued for this purpose. Consequently,
have been subsumed in basic excise duty.
manufactured excisable goods cleared from the
However, there is lack of clarity on the question
factory or from EOU/EHTP/STP to DTA would not
as to how the Cenvat Balance of EC & SHEC, if
attract EC & SHEC with effect from 01-03-2015.
any, would be utilised from 01-03-2015 onwards
Since the said levies have been subsumed in
since these balances are not available for
the basic excise duty rate no EC & SHEC would
adjustment with the basic duty.
be payable on CVD also and the exemption
from the enabling provision in Sec. 11A itself.
to provide that in cases where the SCN is issued
8.3.2 Changes in penal provisions under Sec.
after the presidential assent of the Finance Bill
11AC of CEA
2015, the amended provisions shall apply.
In the Finance Bill 2015 vide clause 92, the existing
•A new sub-Sec. 16 has been inserted under
Sec. 11A to provide that Sec. 11A shall not apply
to cases where the assessee has declared
the liability in the returns filed by him, but the
admitted tax has not been paid or short paid,
then such short/non-payment shall be recovered
in the prescribed manner to be notified at later
date.
Sec. 11A of CEA provides certain restrictions on
the authorities to recover tax beyond 1 year etc.
If by virtue of this amendment, the recovery of
unpaid tax which has been admitted in the return
is taken out of the purview of the said section
recovered
new set of provisions. At the outset, it must be
understood that till the new Sec. 11AC becomes
operative, the present provisions does not
empower the Government to impose penalty in
case of short payment or non-payment of duty or
erroneous refund of the duty, if such non-payment
etc. has not arisen as a result of collusion, fraud,
mis-statement, suppression etc. with the intent
Comments
and
Sec. 11AC of the CEA is being substituted by a
through
separate
prescribed
procedure, it is expected that the facilities like
limitation by time etc. hitherto available to the
assessee would not henceforth be made available.
Similar amendments have been proposed under
to evade to duty. For the first time in the history
of Central Excise, penalty is being proposed to
be imposed even in a case of non-compliance
without intent to evade payment of duty. It is a
matter to be examined legally as to whether the
Government has the power to impose penalty
in a case where the assessee has acted without
malafide intentions and has simply lodged a claim
for an exemption. It has so far been the precedent
position that in a bonafide case no penalty can
be imposed where there is no intent to evade
96 97
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
payment duty. In this case reference may be made
of the duty provided the transaction is recorded
the period of 30 days would be counted from the
• The SCN has been issued after the Finance Act,
to the case of Chemphar Drugs Liniments Vs. CCE
in the specified records as defined in clause (c)
date of the Order of the Appellate Authority or
2015 receives assent of the president and the
[1989 (40) E.L.T. 276 (S.C.)] in support of the said
of Explanation 1 to Sec. 11A. It may be noted that
Court.
Order is also passed for obvious reason after the
proposition.
existing Sec. 11AC(1)(b) read with clause (c) of
In the new Sec. 11AC (1)(a), even in a bonafide
case, imposition of a mandatory penalty of 10%
of the duty involved or `5000 which ever is higher
is being proposed. However, to give some relief a
proviso has been inserted in the same sub-section
to the effect that the penalty would not be payable
if the duty involved is paid alongwith interest either
before the issue of SCN or within 30 days of the
issue of SCN and the proceeding would be deemed
to be concluded.
There is a further proposition in the Bill which
relates to a bonafide non payment of duty which is
suo moto paid by the assessee alongwith interest
within 30 days of the receipt of the order, the new
Sec. 11AC(1)(b) proposes to impose a penalty of
25% of the penalty confirmed in the Order provided
that the penalty is also paid within 30 days of
the receipt of the order alongwith the duty and
interest. Thus, in this case the bonafide assessee
would be liable to pay penalty equal to 2.5% of duty
Explanation 1 to Sec. 11A had been introduced w.e.f
08-04-2011. Hence, the facility under the existing
Sec. 11AC(1)(b) has been allowed to continue till
the Finance Act, 2015 is enacted and receives the
assent of the President. However, this proviso will
become redundant once the Finance Bill, 2015
receives the assent of the President. Thus, in this
budget the Government proposed to de-recognised
the fact that the assessee may have failed to pay
the duty but have maintained appropriate records
of the transaction in the specified manner and
thereby has acted in a bon-fide manner.
11AC(1)(d): If the duty demanded in the notice and
the interest payable thereon u/s 11AA is paid within
30 days of the communication of the SCN then the
assessee would be liable to pay penalty @ 15%
of the duty sought to be imposed subject to the
condition that such penalty is also paid alongwith
the duty and interest and then such proceeding
will be deemed to be concluded.
involved and confirmed by the order (25% of 10%
11AC(1)(e): If the duty confirmed in the order and
of the penalty).
the interest payable thereon u/s 11AA is paid
Sec. 11AC(1)(c), (d) and (e) all deal with imposition
of penalty in cases involving suppression of fact
etc. the following have been proposed through
these sub-sections:
11AC(1)(c): As a fundamental provision, if duty is
not paid or short paid or erroneously refunded,
the assessee is liable to pay penalty to the extent
of 100% of the duty involved. However, a proviso
has been inserted in the proposed sub-section to
the effect that in cases where the details related
to such transactions are recorded in the specific
records beginning with 08-04-2011 upto the date
on which Finance Bill receives the assent of the
President the penalty shall be 50% of the duty. This
proposition is to cover the existing Sec. 11AC (1)(c)
where the assessee is given the option to pay 50%
within 30 days of the communication of the Order
then the assessee would be liable to penalty @ 25%
of the duty sought to be imposed, subject to the
condition that such penalty is also paid alongwith
the duty and interest and then such proceeding
will be deemed to be concluded.
Sec. 11AC(2) and (3) deals with a situation where
the amount of duty involved is modified in the Order
passed by the Central Excise Officer u/s 11A(10).
In case the Appellate Authority or Court modifies
the amount of duty then the amount of penalty
payable under 11AC(1)(c) and Interest payable u/s
11AA shall stand modified accordingly and would
have to be paid by the assessee. In 11AC(3) it has
been provided that where the duty or penalty is
increased by the Appellate Authority or Court then
Explanation 1 and 2 have been inserted in Sec.
11AC where the following has been clarified:
Clause (1) of Explanation (1) – Cases involving
pending proceedings where no SCN has been
issued before the enactment would be governed
by the amended provision of Sec. 11AC. This
Explanation is seeking to impose penalty, which
may be higher in certain circumstances for an
offence committed prior to the enactment of the
section. It is a matter of legal examination as to
enactment of the Finance Bill, 2015 in that case
the application of 11AC(1)(b) and (e) is perfectly
in order.
•However, if we consider a situation where the
SCN is issued prior to even the Finance Bill, 2015
in that event 11AC would not have been invoked
in a bonafide case or without suppression and
hence this provision cannot be then applied
because 11AC can only be invoked in cases
where intention to evade duty is established.
whether a higher penalty can be imposed for an
8.3.3 Changes related to Settlement Commission
offence committed earlier when for the same
•Proviso to clause (c) of Sec. 31 of the CEA has
offence lower penalty was prescribed at that point
been amended to omit the expression “in any
of time. It is a settled position that penalty prevalent
appeal or revision”. Prior to the amendment,
at the time when the offence was committed can
remand proceedings arising out of appeal and
only be imposed. Reference in this regard may
revisions only were not eligible to approach
be made to the cases of Elgi Equipments Ltd. vs.
the Settlement Commission. In view of the
Commissioner of Central Excise Coimbatore [2001
said amendment, remands by Courts or
(128) E.L.T. 52 (S.C.)] & Lal Mining Engg Works Vs.
Appellate Tribunal or any other authority under
CCE, Mumbai
any proceedings would not be entitled for
Clause (2) of Explanation (1) clarifies that where
the Order has not been passed before the date on
which Finance Bill, 2015 receives the assent of
the President, the assessee will still be eligible to
approaching Settlement Commission. Thus, one
can approach the Settlement Commission, if the
matter is pending before adjudicating authority
and has not been adjudicated.
follow proviso to Sec. 11AC(1)(a) or Sec. 11AC(1)
•Sec. 32B is proposed to be amended so as
(d), as the case maybe, subject to the condition
to enable Vice Chairman or Member of the
that the duty, interest and reduced penalty is made
Settlement Commission to officiate as Chairman
within 30 days from the date on which the Finance
in the absence of the Chairman of the Settlement
Bill, 2015 receives assent of the President.
Commission. Prior to the proposed amendment,
Clause (3) of Explanation (1) clarifies that where an
Order is passed after the date on which the Finance
only one of the Vice Chairman could officiate in
the absence of Chairman.
Bill, 2015 has received assent of the President,
8.3.4 Retrospective amendments in respect of
then the assessee would be eligible to reduce
Excise duty on value of rails
penalty under Sec. 11AC(1)(b), 11AC(1)(e), as the
•The Third Schedule annexed to the Finance
case may be subject to the condition that payment
Bill, 2015 amends Notification No. 12/2012-CE
of penalty is also made within the prescribed
dated 17-03-2012 as amended by Notification
time. In this context we can examine two different
No. 3/2014 CE dated 03-02-2014. In the Third
situation are examined here-in-below:
Schedule, the amendment made on 03-02-2014
has been given retrospective effect from 17-03-
98 99
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
2012. It may be seen that entry in Sl.No. 205A
claim would be subject to the provisions of Sec.
11(7) in order to make the provisions of Rule 11
Similar simpler procedures for de-registration has
was inserted in 2014 and the value of rails used
11B of CEA.
applicable to a registered importer who issues a
been proposed in the Notification.
as inputs were exempted from the levy of excise
duty @ 12% subject to the condition that no
8.3.5 Other Legislative Changes
CENAVTABLE invoice.
Circular No. F. No. 201/24/2013-CX.6 dated 28-
Minimum penalty u/s 37(4) or u/s 37(5) of the CEA
8.4.4 Recovery proceeding extended to penalty
02-2015 in this regard has been issued by CBEC
has been increased from H2000/- to H5000/-. Sec.
The power to initiate recovery of duty, declared
detailing the registration procedures.
•In Sec. 102 of the Finance Bill, 2015 the power
37(4) or 37 (5) of CEA are invoked in specified
as payable in the return, and interest as provided
to make this amendment retrospective has been
situations like removal of excisable goods in
in Rule 8(4) of CER has been extended to cover
given and it has also been provided that in view
contravention etc. for confiscation of goods and
‘penalty’ imposed u/r 8(3A), which was earlier not
of this amendment, if any refund arises, it would
imposition of penalty. Prior to the proposed
included therein.
be granted provided the application of refund
amendment, such penalties were imposable
for the claim is made within six month from the
equal to the duty involved on the goods or H2,000
date of on which the Finance Bill, 2015 receives
whichever was greater.
CENVAT credit was availed on the same.
the assent of the President and that refund
8.4
Central Excise Rule, 2002
[Effective from 01-03-2015 unless otherwise specified]
8.4.1 Daily Stock account may be now maintained
Similar procedural amendments have been made
digitally
in Service Tax Rules.
•Rule 10 of CER is being amended to provide for
issue of digitally signed invoices and preservation
of records in electronic form by a manufacturer.
8.4.3 Procedures prescribed for raising invoice
for direct dispatch of goods to job workers/
customers
for use on board or supplied to a foreign going
Penalty of one hundred rupees per day subject
aircraft. The term has been now been explicitly
to a maximum of twenty thousand rupees for the
clarified to include export of goods outside India as
period of delay has been introduced in case of delay
well. [Notification No. 8/2015-Central Excise (N.T.)
of submission of return or statement prescribed in
dated 01-03-2015]
Rule 12 of CER
Rules, 2002 applied to Registered Importers also
for an importer
[Notification No. 10/2015-Central Excise (N.T.)
Hitherto, the provisions of confiscation and penalty
dated 01-03-2015]
were not applicable to a registered importer under
Hitherto, where a manufacturer, first stage or
Rule 25 of CER.
second stage dealer, or an exporter including
Rule 25 has been amended to apply to the
registered importer as well. Further the amount of
in Rule 11 of CER. Rule has now been amended
goods from the supplier to job worker/job workers.
8.4.7 Amendment in Registration provisions
to allow the manufacturer to authenticate an
The procedure has been prescribed by inserting a
Vide Notification No. 7/2015-CE (N.T), amendments
invoice by using digital signature. Further, where
proviso in Rule 11(2) of CER which provides that
to the registration process in Central excise has
transporter’s copy is digitally signed, the hard
the invoice issued by the supplier should indicate
been made to simplify the registration formalities
copy of the same shall be self attested by the
that manufacturer or the output service provider
like mandatory online application, mandatory
manufacturer.
as the buyer and the job worker as the consignee.
quoting of PAN etc. to ensure that registration is
Identical proviso has been inserted separately for
granted within two working days of the receipt of a
suppliers who are registered dealer or importer.
duly completed application form.
safeguards and procedures to be followed by an
assessee preserving digitally signed records is
Further, in case goods imported under the cover of
expected from CBEC in this regard.
bill of entry are sent directly to buyer’s premises;
Comments
This amendment is flowing from Digital India
initiative and is a welcome change for the benefit
for assesses at large.
importer’s invoice shall specifically mention that
the goods are directly sent from place or port of
import to the buyer’s premises.
Consequential amendment has been made in Rule
8.4.9 Restriction under Rule 12CCC of Excise
8.4.6 Confiscation and penal provision introduced
introduced to expressly permit direct movement of
conditions,
of duty in case of export. The term export has been
CER
New sub-rules (8) and (9) have been introduced
for
The existing provisions of Rule 18 provide for rebate
restricted to mean goods shipped as provision
In the Union budget 2015 provisions have been
notifications
for the purpose of rebate
8.4.5 Penal provision introduced under Rule 12 of
8.4.2 Authentication of invoice by digital signature
Corresponding
8.4.8 Scope of the definition of ‘export’ clarified
penalty has been increased from H2,000 to H5,000.
a merchant exporter is prima facie found to be
knowingly involved in any of the acts such as
removal of goods without the cover of an invoice
and without payment of duty, issuing duty of
excise invoice without delivery of goods specified
in the said invoice etc. the Chief Commissioner
of Central Excise may order for withdrawal of
facilities or impose the restrictions as specified
in this notification. The said restrictions have
been now been made applicable to Registered
Importers also.
100 101
8.5
INDIA BUDGET
2015-16
Central Excise(Removal of Goods at Concessional Rate of Duty
for Manufacture of Excisable Goods) Rules, 2001
[Effective from 01-03-2015 unless otherwise specified]
8.5.1 Amendment in Central Excise (Removal
provide that instead of general bond with surety
of Goods at Concessional Rate of Duty for
or security, submitting letter of undertaking would
Manufacture of Excisable Goods) Rules, 2001
be sufficient for manufacturers against whom no
[Notification No. 09/2015 Central Excise (N.T.)
show cause notice has been issued alleging willful
dated 01-03-2015]
non-payment or suppression of duty, or where no
A manufacturer who intended to receive subject
action is proposed under any notification issued in
goods for specified use at concessional rate of duty
pursuance of Rule 12CCC of CER or Rule 12AAA of
had to earlier execute a general bond with surety
CCR, i.e. manufacturers with clean track record.
BASICS
Sl. No.
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
Particulars
7
Leather Footwear
8
Wafers for use in the manufacture of Integrated
Circuit (IC) modules for smart cards
9
inputs or capital goods used in the manufacture
10
- Non-availment of Cenvat credit on inputs or
capital goods
- Availing CENVAT credit
12
Post budget
(A) Changes in Effective Duty Rates
Impact
abatement)
+ H120 per
MT
12.5 % of
inputs or input service or capital goods used in
(RSP less
the manufacture of such goods)
30% of
14
abatement)
+ H125 per
15
MT
12%
12.5%
16
4
High Speed Diesel
Sacks and Bags (including cones) of polymers,
ethylene, poly (vinyl Chloride) and others
5
Sacks and Bags of polymers of ethylene, other
6
12.5%
12%
NIL
12%
NIL
12%
NIL
12%
NIL
12%
NIL
24%
12.5%
12%
NIL
H900 per
H1000 per
tonne
tonne
12%
6%
Chassis for use in the manufacture of motor
with all fitments, furniture and accessories
12%
18%
necessary for an ambulance from the factory
manufacturing such motor vehicles
14% + H5
14% + H15
per Litre
per Litre
12%
18%
17
Certain Goods used in the manufacture of
pacemaker, namely:- Battery, Titanium,
Palladium wire, Eutectic wire, Diodes etc.
18
Ordinary Portland cement
12%
15%
Cigarettes, containing tobacco, other than filter
H990 per
H1280 per
driver or MCPCB for LED lights and fixtures or
cigarettes of length not exceeding 65 mm
thousand
thousand
LED Lamps
than for industrial use
6%
vehicles cleared as ambulance duly fitted
sweetening matter or flavoured
3
1%
parts thereof
Waters, including mineral waters and aerated
waters, containing added sugar or other
1%
Parts, components or accessories for use in the
manufacture of tablet computer, including sub-
Bulk Cement
2
Parts for use in the manufacture of solar water
heater and system
- Packaged Cement (Non Trade meant for
institutional / industrial consumer – NFR) &
2%
Solar water heater and System
(provided no credit has been taken in respect of
less 30% of
12%
photovoltaic cells or modules
13
12% of (RSP
6%
Tin alloys for use in the manufacture of
interconnect) for manufacture of solar
Cement other than from Mini cement plant
- Packaged Cement (Trade)
12%
generators
[Effective from 01-03-2015 unless otherwise specified]
Photovoltaic (PV) ribbon (tinned copper
1
6%
Pig iron SG grade and Ferro-Siliconcomponents of wind operated electricity
Changes in Tariff / Effective Duty Rates
Pre budget
12%
Impact
Mobile handsets including cellular phones
Magnesium for manufacture of cast
Particulars
Post budget
of such goods)
11
Sl. No.
Pre budget
Tablet Computer
(provided no credit has been taken in respect of
or security. Now, the Rule has been amended to
8.6
MISCELLANEOUS
19
All inputs for use in the manufacture of LED
-
102 103
Sl. No.
20
Particulars
Pre budget
Post budget
Condensed Milk put up in unit containers
- Non-availment of Cenvat credit on inputs or
input services
- Availing CENVAT credit
Impact
BASICS
Sl. No.
10
12%
2%
12%
6%
(B) Changes in Additional Duty of Excise
Petrol
H2 per litre
H6 per litre
2
High Speed Diesel
H2 per litre
H6 per litre
3
Waters, including mineral waters and aerated
5%
NIL
12% of (RSP
+ H120 per
MT
components of wind operated electricity
12
Photovoltaic (PV) ribbon (tinned copper
inputs or input service or capital goods used in
30% of
abatement)
+H125 per
MT
12%
12%
5
15
6
7
per Litre
12%
18%
12%
15%
Cigarettes, containing tobacco, other than filter
H990 per
H1280 per
cigarettes of length not exceeding 65 mm
thousand
thousand
12%
6%
8
Leather Footwear
Wafers for use in the manufacture of Integrated
Circuit (IC) modules for smart cards
9
12%
6%
inputs or capital goods used in the manufacture
of such goods)
12%
NIL
12%
NIL
12%
NIL
12%
NIL
12%
NIL
24%
12.5%
12%
NIL
H900 per
H1000 per
tonne
tonne
12%
6%
12%
2%
parts thereof
Chassis for use in the manufacture of motor
vehicles cleared as ambulance duly fitted
with all fitments, furniture and accessories
manufacturing such motor vehicles
17
Certain Goods used in the manufacture of
pacemaker, namely:- Battery, Titanium,
Palladium wire, Eutectic wire, Diodes etc.
18
19
Ordinary Portland cement
All inputs for use in the manufacture of LED
driver or MCPCB for LED lights and fixtures or
LED Lamps
20
Condensed Milk put up in unit containers
- Non-availment of Cenvat credit on inputs or
input services
Tablet Computer
(provided no credit has been taken in respect of
12.5%
necessary for an ambulance from the factory
per Litre
than for industrial use
6%
Parts, components or accessories for use in the
manufacture of tablet computer, including sub-
18%
14% + H15
Sacks and Bags of polymers of ethylene, other
Parts for use in the manufacture of solar water
heater and system
16
14% + H5
ethylene, poly (vinyl Chloride) and others
-
the manufacture of such goods)
14
12.5%
Waters, including mineral waters and aerated
Sacks and Bags (including cones) of polymers,
1%
Solar water heater and System
(provided no credit has been taken in respect of
sweetening matter or flavoured
4
1%
Tin alloys for use in the manufacture of
(RSP less
Bulk Cement
High Speed Diesel
Impact
generators
12.5 % of
- Packaged Cement (Non Trade meant for
3
Post budget
Pig iron SG grade and Ferro-SiliconMagnesium for manufacture of cast
13
abatement)
waters, containing added sugar or other
Pre budget
photovoltaic cells or modules
less 30% of
2
MISCELLANEOUS
Mobile handsets including cellular phones
interconnect) for manufacture of solar
Cement other than from Mini cement plant
institutional / industrial consumer – NFR) &
Particulars
- Availing CENVAT credit
(C) Changes in Effective Duty Rates
- Packaged Cement (Trade)
BUDGET PROPOSAL
INDIRECT TAXES
capital goods
sweetening matter or flavoured
1
BUDGET PROPOSAL
DIRECT TAXES
- Non-availment of Cenvat credit on inputs or
11
1
waters, containing added sugar or other
INDIA BUDGET
2015-16
12%
2%
104 105
Sl. No.
Particulars
Pre budget
Post budget
12%
6%
- Availing CENVAT credit
INDIA BUDGET
2015-16
Impact
BASICS
8.7
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Other Changes
[Effective from 01-03-2015 unless otherwise specified]
(D) Changes in Additional Duty of Excise
1
Petrol
H2 per litre
H6 per litre
2
High Speed Diesel
H2 per litre
H6 per litre
3
Waters, including mineral waters and aerated
waters, containing added sugar or other
5%
NIL
sweetening matter or flavoured
8.7.1 “Resident Firms” – eligible to apply for
10 of the said Notification. In case of goods for a
Advance Ruling defined.
Project for which certificate regarding Ultra Mega
Vide Notification No.11/2015-CE (N.T.) dated 01-
Power Project status is provisional, the exemption
03-2015], ‘Resident firms’ has been now defined as
is subject inter alia to condition that the Chief
a class of person for the purposes of Sec. 31 of CEA
Executive Officer of the Project furnishes a bank
and the expressions “firm”, “sole proprietorship”,
guarantee or fixed deposit receipt for a term of 36
“One person company” and “resident” has been
months or more.
defined.
8.6.2 Other Changes in Tariff / Effective Duty
Rates
• Abatement in MRP valuation
Abatement from all Footwear reduced to 25%
• Clean Energy Cess
The tariff rate of Clean Energy Cess levied on
coal, lignite and peat, is being proposed to be
increased from H100 per tonne to H300 per tonne.
However the effective rate of Clean Energy Cess
is proposed to be increased from H100 per tonne
from 35%
1
8.7.2 Conditions for Customs exemption apply
Notification No.12/2015-CE, dated 01-03-2015 to
to domestic manufactured goods against ICB
prescribe furnishing of bank guarantee or fixed
projects
deposit receipts for a period of 42 months from 36
Following goods are being notified under Sec.
Presently goods manufactured domestically and
months.
4A of the CEA for the purpose of assessment
supplied against ICB are eligible for full excise
of Central Excise duty with reference to the
duty exemption provided that such goods when
Retail Sale Price:
imported are exempted from BCD & CVD.
to H200 per tonne.
Sl. No.
The above condition No. 42 is being amended vide
Particulars
Extracts, essences and concentrates, of tea or mate and preparation with a
Abatement
30%
basis of these extracts, essences or concentrates or with a basis of tea or
mates
2
Condensed Milk put up in unit containers
30%
3
LED lights or fixtures
35%
4
All goods specified under chapter 2202 except mineral waters and aerated
35%
waters
•Full exemption from excise duty is being extended to captively consumed intermediate compound
coming into existence during the manufacture of Agarbattis.
8.7.4 Extension of tenure of BG for compliance of
conditions in case of Mega Power Project status
Notification No. 12/2012-CE dated 17-3-2012
The said condition no. 41 is being amended vide
provided Nil excise duty on goods for setting up of
Notification No.12/2015-CE, dated 01-03-2015 so
Mega Power Project specified in List No. 11 of the
as to provide that if imported goods are eligible
said Notification. In case of goods for a Project for
for exemption of BCD & CVD subject to certain
which certificate regarding Mega Power Project
conditions, then the said conditions shall also
status is provisional, the exemption is subject inter
apply mutatis mutandis to such goods when
alia to condition that the Chief Executive Officer of
manufactured domestically and supplied against
the Project furnishes a bank guarantee or fixed
ICB for the purposes of availing of the said excise
deposit receipt for a term of 36 months or more.
duty exemption.
The above condition no. 43 is being amended vide
8.7.3 Extension of tenure of BG for compliance of
Notification No.12/2015-CE, dated 01-03-2015 to
conditions in case of Ultra Mega Power Projects
prescribe for furnishing of bank guarantee or fixed
Notification No. 12/2012-CE dated 17-3-2012
deposit receipts for a period of 66 months from 36
provided Nil excise duty on goods for setting up
months.
of Ultra Mega Power Project specified in List No.
106 107
8.8
INDIA BUDGET
2015-16
Various Clarifications under Central Excise
BASICS
BUDGET PROPOSAL
DIRECT TAXES
CX dated 28-02-2015 issued by CBEC that where on
and Recovery of arrears in instalments
identical allegation a Noticee has been exonerated
Sec. 11(2) of CEA empowers the Central Excise
in the quasi-judicial proceedings and such order
Officers to issue an order to any other person from
has attained finality, Chief Commissioner shall
whom money is due to such person from whom
give direction to the Central Excise Officer in the
recovery of arrears is required to be made. Such
concerned Commissionerate to file an application
notice for recovery to other person is generally
referred to as Garnishee Notice.
goods or exempted service has not been amended,
This amendment was necessary since there was a
thereby restricting the implication of this change
working capital blockage in CENVAT credit till the
to rule 6 of CCR.
to the manufacturer. With the above amendment,
the said blockage has been lifted.
CENVAT credit of input services was allowed on
transferred to job worker
or after the date on which the payment is made
Rule 4(5a) of CCR has been amended in the
of the value of the input service and the service
through Public Prosecutor requesting the court to
following manner:
tax paid or payable as indicated in the invoice.
allow withdrawal of the prosecution in accordance
• Availment of CENVAT Credit would be permissible
These instructions shall mutatis mutandis apply to
a job worker and from there subsequently to
relation to the powers of recovery officer to amend
the prosecution filed under the Finance Act, 1994
or withdraw the Garnishee Notice.
and under the Customs Act, 1962.
The circular clarifies that on occasions when the
8.8.3 Clarification issued for ‘place of removal’
assessee comes forward to pay the arrears, the
Clarification has been issued vide Circular No.
within 180 days has been extended to 2 years.
recovery officers have the powers to add, amend,
999/6/2015-CX dated 28-02-2015 for ‘place of
• The period of 180 days/2 years in case of inputs/
vary or rescind the Garnishee Notice. Further
removal’ as follows:
capital goods, as applicable, shall be computed
•For manufacturer exporter - Port/ICD/CFS
from the date of receipt of the input and/
of arrears of taxes, interest and penalty in
instalments upto a 24 months.
8.8.2 Clarifications relating to withdrawal of
prosecution filed in a court
It has been clarified vide Circular No. 998/5/2015-
where the goods are handed over for further
delivery to the foreign buyer
• Merchant exporter - Factory gate, warehouse or
depot of the manufacturer where the goods are
handed over to the transporter
another job worker for further processing
•The requirement of reversal of CENVAT credit
if capital goods not returned from a job worker
or capital by the first job worker, in terms of
amended provisions of rule 4(5a) of CCR.
8.9.4 Scope of reversal of CENVAT Credit under
Rule 6 extended to non-excisable goods
•Requirement of CENVAT credit reversal in rule
6 of CCR in respect of clearance of exempted
goods has been extended to clearance of non
excisable goods also.
8.9
CENVAT Credit Rules
•An Explanation has been inserted to define the
[Effective from 01-03-2015 unless otherwise specified]
value of non-excisable goods which shall be the
invoice value and where such invoice value is
not available value shall be determined by using
8.9.1 Extension of time limit for availing CENVAT
to facilitate manufacturers or output service
Credit on input and input services from 6 months
providers to send inputs or capital goods directly
to 1 year
to job worker
Time limit for availing CENVAT credit on input and
Rule 4(1) and Rule 4(2) of CCR has been amended
input services extended from 6 month to 1 year
to allow the manufacturer or output service
from the date of issue of invoice or prescribed
provider to avail CENVAT credit on receipt of inputs/
documents under Rule 9(1) of CCR.
capital goods by the job worker sent directly by the
Comments
manufacturer.
It is pertinent to note that the definition of exempted
8.9.2 Specific and express provisions inserted
partial reverse charge [Effective from 01-04-2015]
4(5a) of CCR covering inputs and/or capital goods
Circular No. 996/3/2015-CX dated 28-02-2015 in
also has discretionary powers to allow recovery
CENVAT Credit on input services pertaining to
•Hitherto in case of partial reverse charge, the
even if inputs and/or capital goods are sent to
Circular also provides that the Commissioner
8.9.5 Changes in the conditions for availment of
8.9.3 Further consequential amendments in Rule
with law.
Clarification has been issued by CBEC vide
MISCELLANEOUS
Comments
time it is received from job worker after processing
8.8.1 Clarifications relating to Garnishee Notice
BUDGET PROPOSAL
INDIRECT TAXES
reasonable means consistent with the principles
of valuation under CE Act.
• Thus, CENVAT credit pertaining to inputs or input
services used in or in relation the manufacture
of non-excisable goods is not allowed
However, pursuant to the amendment, the credit
is allowed after the payment of the service tax
alone and the requirement of payment of the
value of service has been done away with.
•Further, in case of partial reverse charge, if the
value of input service and the service tax payable
thereon was not paid within 3 months from the
date of invoice, the manufacturer or service
provider was required to reverse the entire
CENVAT credit availed in this regard. However,
second proviso to Rule 4(7) of the CCR has been
amended to provide for reversal of service tax
only to the extent paid by the service provider.
8.9.6 Recovery of CENVAT Credit wrongly taken
but not utilized
The amendments made in Rule 14 of CCR vide
Notification No. 6/2015 – CE (N.T.) dated 01-032015 is in respect of recovery of CENVAT Credit
wrongly taken or erroneously refunded.
The erstwhile Rule 14 as it stood prior to the
amendment applied only to cases where credit
had been taken and utilised wrongly or has been
erroneously refunded. In terms of the earlier
provisions in such a situation the credit was
recoverable alongwith interest and the provision of
Sec. 11A and 11AA of the CE Act was applicable in
respect of a manufacturer and it was recoverable
with interest and the provisions of Sec. 73 and 75
under the Finance Act, 1994 was applicable in
output service provider. Hence, in the erstwhile
provision, there was no machinery provision to
108 109
INDIA BUDGET
2015-16
BUDGET PROPOSAL
DIRECT TAXES
BASICS
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
recover credit purported to be wrongly availed but
The sub-rule (2) of Rule 14 has been made
•Rule 15 of the CCR has been suitably amended
•In other cases 10% penalty or H5,000/- (only in
not utilised.
applicable to both Rule 14(1)(i) and (ii). However,
to align the provisions of penalties pertaining to
case of CE Act) whichever is higher, would be
Rule 14(2) has two parts to it, the first part is to
contravention of the provisions of the CCR, in
imposable on him;
ascertain when the purported wrong credit is
lines with the amended penal provisions under
taken and the second is when it is deemed to
the central excise and service tax regulations
In the amended provision, the authority have been
given powers to recover the credit amount even in
the case where the credit has taken wrongly but
not utilized but no interest is chargeable for the
obvious reason that no prejudice has been caused
to the revenue authorities since the amount has
remained unutilized. In view thereof in the amended
Rule 14(1)(i), the machinery provision of the Sec.
11AA of the CE Act and Sec. 75 of the Finance Act,
1994 has not been invoked. Thus, legally speaking
once it is accepted that the purported wrong credit
has not been utilized, it cannot be subjected to
imposition of interest since in 14(1)(i) the provision
for imposition of interest has not been invoked.
The amendment has curved out a separate
provision (Rule 14(1)(ii) to cover cases where credit
has been wrongly taken and utilized or has been
erroneously refunded and in that case the credit so
taken and utilized would be recovered alongwith
interest from the manufacturer or provider of
output service and the provision of Sec. 11A and
11AA of CE Act and Sec. 73 and 75 of the Finance
Act, 1994 shall apply mutatis mutandis.
In the amended Rule 14, a new sub-rule (2) has
also been introduced which lays down the method
have been utilized. Since Rule 14(1) applies to a
specific situation that credit has been taken but
not utilized, the second leg of Rule 14(2) cannot
be applied to the situation covered under Rule
14(1)(i). If this interpretation is not taken, then a
situation will arise where in the very next month
when the wrong credit was availed but not utilized,
it would form a part of the opening balance and
by applying the second leg of Rule 14 (2), it would
be deemed to be utilized. This would give rise
to a situation where the Rule 14(1)(i) would be
redundant, and it is a settled position of law that
an interpretation cannot be taken which renders
below:
• The opening balance of the month to be utilized
first;
•Credit admissible in terms of the CCR taken
during the month to be utilized next;
•Credit inadmissible in terms of the CCR taken
during the month to be utilized thereafter
is disputed by the department or the matter
is already under dispute in respect of other
assessees and avails the credit but does not utilize
it and discloses the availment in the return. Once
the above amendment becomes effective after the
enactment of the Finance Bill, 2015, the assessee
would be subject to the following situations:
Cases
not
involving
fraud,
collusion,
decision in the case of Jagir Singh vs Ranbir Singh
and Anr.[(1979) 1 SCC 560] wherein it was held that
what cannot be done directly cannot be allowed to
be done indirectly as that would be an evasion of
statute. It was further held that it is a well known
principle of law that the provisions of law cannot
be evaded by shift or contrivance and in an indirect
mis-
or circuitous manner the objects of a statute
wrong utilisation of CENVAT Credit [Effective from
enactment of the Bill]
• Hitherto, as per Rule 15 of the CCR, if any person
takes or utilizes CENVAT credit in respect of
input or capital goods or input services, wrongly
or in contravention of the provisions of CCR, such
person is liable to penalty not exceeding the duty
or service tax, as the case may be or H2000/whichever is greater. Where the CENVAT credit
has been taken or utilized by a manufacturer or
output service provider for the reasons of fraud
etc. Provisions of Sec. 11AC of CEA or Sec. 78 of
Finance Act respectively were applicable.
Show Cause Notice or within 30 days of issuance
of the Notice, no penalty would be imposable on
him;
•If he reverses the credit within 30 days of the
receipt of the Order, then penalty @ 2.5% would
be imposable on him;
etc.:
•If he reverses the credit within 30 days of the
receipt of the Show Cause Notice, then penalty
@ 15% would be imposable on him;
•If he reverses the credit within 30 days of the
receipt of the Order, then penalty @ 25% would
be imposable on him;
•
If he
reverses
the
credit
pertaining
to
transactions recorded between 08-04-2011 to
the assent of the Finance Bill, 2015, then penalty
@ 50% would be imposable on him;(only in case
•If he reverses the credit before the issuance of
8.9.7 Amendments to penalty provisions for
of a deeming fiction which has been described as
some input, capital goods or input service which
reference is made is the Hon’ble Supreme Court’s
and when the utilization occurred. It is provided
The utilization would be ascertained by application
desirous of lodging a claim of CENVAT credit on
statement, etc. :
cannot be defeated.
month that would be considered as credit taken.
There may be a situation where the assessee is
a provision redundant or otiose. In this regard
of ascertaining as to when credit has been taken
that in all cases it would be the last day of the
Comments
Cases involving fraud, collusion, mis-statements,
of CE Act)
•In any other cases 100% penalty would be
imposable on him.
It is needless to say that even if the assessee suo
moto reverses the credit, he does not lose the
legal recourse otherwise available to him, inorder
to contest the denial of credit.
110 111
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
SECTION 9
CUSTOMS
MISCELLANEOUS
112 113
INDIA BUDGET
2015-16
BASICS
9.1
BUDGET PROPOSAL
DIRECT TAXES
Proposed changes in the Finance Act contained in
Notifications Nos. 6-11/2015-Customs all dated
clauses 80-88 of Chapter IV of the Bill, effective
01-03-2015 have been issued, notifying effective
from the date of enactment.
rates of duty as well as changes in various Tariff
89 of the Finance Bill, 2015 so that the changes
Page
rates which have become effective from the date
of Notification
made through this clause take effect immediately
Notifications No. 27/2015-Customs (N.T.) dated
from the midnight of 28th February/1st March
01-03-2015 have been issued, amending Sec.
2015. The other clauses would be effective from
28E of the Customs Act, 1962 and have become
the date of enactment of Finance Bill, 2015.
effective from the date of the notification
9.2
Particulars
MISCELLANEOUS
Pattern of changes proposed
A declaration has been made in respect of Clause
Sl. No.
BUDGET PROPOSAL
INDIRECT TAXES
Changes proposed in the Finance Bill, 2015
[Effective from enactment of the Bill]
9.2.1 Waiver of Penalty under Sec. 28(2).
9.2.3 Conclusion of Proceedings in certain cases
9.1
Pattern of Changes Proposed
113
Proviso inserted in Sec. 28(2) of the Customs Act,
Explanation – 3 inserted in Sec. 28 of the Act, in
9.2
Changes proposed in the Finance Bill, 2015
113
1962 (Act for short) in terms of which in case a
terms of which, in cases where a notice has been
show cause notice has been issued u/s 28(1) of
issued but not adjudicated before the Finance Bill
113
the Act and the proper officer is satisfied that the
2015 is enacted, the proceedings would be deemed
duty demanded along with the applicable interest
to be concluded, if the proper officer is satisfied that
has been paid by the noticee, no penalty shall be
the noticee has paid the duty, applicable interest
imposed and the proceedings would be deemed
and penalty (wherever applicable) within 30 days of
to be closed. Earlier, the facility was available only
the enactment of the Finance Bill. The conclusion
prior to issuance of the notice in cases, which did
of the proceedings would be without prejudice
not involve fraud, collusion, suppression of fact
to Sec. 135, 135A and 140 of the Act (relating to
etc.
prosecution and offenses by companies).
9.2.2 Reduction of Penalty from 25% to 15% u/s
9.2.4 Reduction of payment of penalty to 10% or
28(5).
H5000 whichever is higher u/s 112(b)(ii)
Sec. 28(5) of the Act has been amended requiring
Sec. 112(b)(ii) of the Act has been amended to
the noticee to pay 15% penalty in place of earlier
allow noticee to pay penalty @ 10% of the duty or
25% in cases where the noticee suo moto pays
H5,000/- whichever is higher if the duty demanded
the duty demanded along with interest within 30
for improper importation of goods is paid alongwith
days of the receipt of the notice. This provision
applicable interest within 30 days of the receipt
is applicable in cases where duty has not been
of the order. Earlier there was no such facility
paid or has been short paid or refund has been
available to the noticee and he had to mandatorily
erroneously granted by reason of fraud, collusion,
pay 100% penalty in cases where Sec. 112 of the
suppression of facts etc.
Act was invoked.
[Effective from enactment of the Bill]
9.2.1
Waiver of Penalty under Sec. 28(2).
9.2.2
Reduction of Penalty from 25% to 15% u/s 28(5).
113
9.2.3
Conclusion of Proceedings in certain cases
113
9.2.4
Reduction of payment of penalty to 10% or H5000 whichever is higher u/s
113
112(b)(ii)
9.2.5
Reduction of payment of penalty to 10% or H5000 whichever is higher u/s
114
114(ii)
9.2.6
Matters remanded to the adjudicating authority not to be considered as
114
eligible for application before the Settlement Commission.
9.2.7
Provisions pertaining to Settlement commission omitted, wherever
114
rendered redundant
9.3
Miscellaneous changes
114
[Effective from 01-03-2015]
9.4
9.3.1
“Resident Firms” – eligible to apply for Advance Ruling defined.
114
9.3.2
Increase in the rate of additional duty of customs/Road Cess
114
9.3.3
Education Cesses in respect of CVD abolished
114
Major changes in rates of duties of Customs
[Effective from 01-03-2015]
115
114 115
INDIA BUDGET
2015-16
9.2.5 Reduction of payment of penalty to 10% or
amended to omit the expression “in any appeal
H5000 whichever is higher u/s 114(ii)
or revision” has been removed. Prior to the
Sec. 114(ii) of the Act applicable for improper
amendment, remand proceedings arising out of
export of goods have been amended to allow
appeal and revisions only would not be eligible
noticee to pay penalty @ 10% of the duty or H5000/-
to approach the Settlement Commission. In view
whichever is higher if the duty demanded for
of the said amendment, remands by Courts or
Sl. No.
improper exportation of goods is paid alongwith
Appellate Tribunal or any other authority under
applicable interest within 30 days of the receipt
any proceedings would also be covered.
(A) BCD
of the order. Earlier there was no such facility
available to the noticee and he had to mandatorily
pay 100% penalty in cases where Sec. 114 of the
Act was invoked.
9.2.7
Provisions
commission
pertaining
omitted,
to
wherever
Settlement
rendered
redundant
Various provisions pertaining to the Settlement
9.2.6 Matters remanded to the adjudicating
Commission viz. Sec. 127B(1A), Sec. 127(6), Sec.
authority not to be considered as eligible for
127E, explanation to Sec. 127H and Sec. 127E of
application before the Settlement Commission.
the Act, omitted being redundant.
Proviso to Sec. 127A(b) of the Act has been
9.3
Miscellaneous Changes
[Effective from 01-03-2015]
BUDGET PROPOSAL
DIRECT TAXES
BASICS
9.4
BUDGET PROPOSAL
INDIRECT TAXES
Major changes in rates of duties of Customs
[Effective from 01-03-2015]
Particulars
Pre budget
Post budget
1
Ulexite Ore
2.50%
Nil
2
Metallurgical Coke
2.50%
5.00%
3
Butanes
5.00%
2.50%
4
Sulphuric Acid for manufacture of fertilizers
7.50%
5.00%
5
Isoprene
5.00%
2.50%
6
Styrene
2.50%
2.00%
7
Ethylene Dichloride (EDC)
2.50%
2.00%
8
Vinyl Chloride Monomer (VCM)
2.50%
2.00%
9
Anthraquinone
7.50%
2.50%
10
Butyl Acrylate
7.50%
5.00%
11
Water blocking tape for use in the manufacture
10.00%
7.50%
10.00%
7.50%
10.00%
7.50%
10.00%
7.50%
of insulated wires and cables falling under
9.3.1 “Resident Firms” – eligible to apply for
vide Notifications 13/2012-Cus and 14/2012-Cus
Advance Ruling defined.
dated 17-03-2012. The effect of these Notifications
Vide Notification No. 27/2015-Customs (N.T.) dated
was that the imported goods post 17-03-2012
01-03-2015 “resident firms” has been defined as
attracted EC & SHC once on the BCD.
a class of person for the purposes of Sec. 28E(c)
(iii) of the Act and the expressions “firm”, “sole
proprietorship”, “One person company” and
“resident” has been defined. Sec. 28(E)(c)(iii) of the
Act covers definition for the purposes of Advance
Ruling.
12
rubber (EPDM) for use in the manufacture
of insulated wires and cables falling under
heading 8544 (except sub-heading 8544 11)
13
of insulated wires and cables falling under
heading 8544 (except sub-heading 8544 11)
Notification No.15/2015-CE dated 01-03-2015.
of excisable goods, the aforesaid Customs
customs/ Road Cess
Notifications have been considered redundant
No.
6/2015-Customs,
7/2015-Customs both dated 01-03-2015, the
additional duty leviable on motor spirit/petrol and
high speed diesel has been increased to H6 per
litre. Earlier the duty was H2/- litre.
Mica glass tape for use in the manufacture
Notification No.14/2015-CE dated 01-03-2015 and
14
With the exemption of EC and SHEC on clearance
Notification
Ethylene – Propylene – non-conjugated diene
w-e-f 01-03-2015 is exempted vide exemption
9.3.2 Increase in the rate of additional duty of
Vide
heading 8544 (except sub-heading 8544 11)
In the Union Budget 2015, EC & SHEC on excise
duty for the clearances of excisable goods made
and hence have been rescinded vide Notification
9/2015-Cus dated 01-03-2015.
noted Excise Duty and Service tax EC and SHEC have
9.3.3 Education Cesses in respect of CVD
been subsumed as a part of the movement towards
abolished
GST. As BCD would not be a part of the proposed
The EC and SHEC on CVD were earlier exempted
GST, cess on the same is not being subsumed.
‘Metal parts’ for use in the manufacture of
electrical insulators
15
Unwrought antimony; powders
5.00%
2.50%
16
Antimony waste and scrap
5.00%
2.50%
17
Ceria zirconia compounds for use in
7.50%
5.00%
7.50%
5.00%
7.50%
5.00%
manufacture of washcoat for catalytic
Comment
EC and SHEC on BCD as earlier continues. It may be
MISCELLANEOUS
converters
18
Cerium compounds for use in manufacture of
washcoat for catalytic converters
19
Zeolite for use in manufacture of washcoat for
catalytic converters
Impact
116 117
Sl. No.
20
Particulars
Pre budget
Post budget
The following goods for use in the manufacture
INDIA BUDGET
2015-16
Impact
Sl. No.
30
of refrigerator compressor falling under tariff
item 8414 30 00:-
21
5.00%
Over Load Protector (OLP) and positive thermal
maximum storage(including the expanded
7.50%
5.00%
Evacuated tubes with three layers of solar
7.50%
Nil
solar water heater and system
31
Organic LED(OLED) TV panels
32
Black Light Unit Module for manufacture of LCD
and LED TV panels
33
34
7.50%
or Machining Centres (tariff item 8457 10 10,
7.50%
(b) Sub-parts for use in the manufacture of
(b) In a form other than (a) above.
7.50%
2.50%
Parts and accessories of the machines of
heading 8472
28
35
single sequence, using the maximum
storage(including the expanded capacity)
10.00%
20.00%
10.00%
10.00%
5.00%
2.50%
mechanism not in a pre-assembled condition,
or not
36
7.50%
Nil
The following goods for use in the manufacture
of Flexible Medical Video Endoscope (heading
9018), namely:-
7.50%
5.00%
(i) CCD/CMOS Camera Sensor;
(ii) Main printed circuit board of CCD/CMOS
Camera Sensor;
(iii)Objective Lens for CCD/CMOS Camera
of recording video with minimum resolution
per second , for atleast 30 minutes in a
10.00%
-
in a Completely Knocked Down (CKD) kit
Nil
Digital Still Image Video Cameras capable
of 800*600 pixels, at minimum 23 frames
10.00%
kit with engine, gear box and transmission
7.50%
inverters
29
Nil
Electrically operated vehicles whether, imported
or sub-assemblies, for assembling a complete
Active Energy Controller(AEC) for use in
manufacture of Renewable Power System(RPS)
5.00%
containing all the necessary components, parts
items mentioned in (a) above.
27
Nil
a pre-assembled condition;
(a) Parts, components or accessories for use in
the manufacture of tablet computer.
10.00%
gearbox and transmission mechanism not in
2.50%
8457 10 20)
26
Nil
Motor vehicles:
assembling a complete vehicle with engine,
CNC Systems for use in the manufacture of
CNC Lathes (tariff item 8458 11 00, 8458 91 00)
Magnetron(upto 1 KW) used for the manufacture
components, parts or sub-assemblies , for
8457 10 10, 8457 10 20)
25
10.00%
Down(CKD) kit containing all the necessary
Linear Motion Guides for use in the
00, 8458 91 00) or Machining Centres (tariff item
Nil
(a) imported as a Completely Knocked
2.50%
10 20)
manufacture of CNC Lathes (tariff item 8458 11
5.00%
Impact
capacity)
of domestic microwave oven
Ball screws for use in the manufacture of CNC
Machining Centres (tariff item 8457 10 10, 8457
Post budget
with minimum resolution of 800*600 pixels, at
30 minutes in a single sequence, using the
Lathes (tariff item 8458 11 00, 8458 91 00) or
Pre budget
Parts and components of Digital Still Image
minimum 23 frames per second , for atleast
selective coating for use in the manufacture of
MISCELLANEOUS
Video Cameras capable of recording video
7.50%
8414 30 00.
24
Particulars
ii. Crankshafts
refrigerator compressor falling under tariff item
23
BUDGET PROPOSAL
INDIRECT TAXES
i. C-Block compressor
coefficient for use in the manufacture of
22
BUDGET PROPOSAL
DIRECT TAXES
BASICS
Sensor;
10.00%
Nil
(iv)Light Guide/Image Guide optical fiber
bundle;
(v) Ultrasound Transducer;
(vi)Main printed circuit board of Ultrasound
Transducer.
-
118 119
Sl. No.
Particulars
37
Artificial Heart(left ventricular assist device)
38
High Density Polyethylene(HDPE) for
manufacture of telecommunication grade
Pre budget
Post budget
5.00%
Nil
Impact
7.50%
Nil
(B) CVD u/s 3(5), i.e. SAD
Sl. No.
9
11
(a) Parts, components or accessories for use
in the manufacture of tablet computer.
(b) Sub-parts for use in the manufacture of
1
(iv) Eutectic Wire ;
4.00%
Nil
4.00%
Nil
4.00%
2.00%
4.00%
2.00%
4.00%
2.00%
4.00%
2.00%
4.00%
2.00%
(vii) Reed Switch;
(viii)Diodes;
(ix)Transistors;
(x)Capacitors;
(xi)Controllers;
(xii) Coils(steel) ;
(xiii) Tubing (silicone).
All goods(except populated Printed Circuit
Boards) for use in the manufacture of ITA bound
24/2005, 25/2005 and 21/2012 as amended via
Notification No 11/2015.
5
Ethylene Dichloride(EDC) for use in the
manufacture of excisable goods
6
Vinyl chloride Monomer(VCM) for use in the
manufacture of excisable goods
7
Naptha for use in the manufacture of excisable
goods
8
The following goods, namely:(a) Melting scrap of iron or steel;
(b) Stainless steel scrap, for the purpose of
melting.
Ilmenite, upgraded(beneficiated ilmenite
including ilmenite ground)
(v) Silicone Resins and Silicone Rubbers;
goods
Post budget
4.00%
2.00%
4.00%
2.00%
4.00%
Nil
5.00%
2.50%
(C) Export Duty
(iii) Palladium wire;
Styrene for use in the manufacture of excisable
Pre budget
items mentioned in (a) above.
(ii)Titanium;
4
MISCELLANEOUS
The following goods, namely:-
Aluminium scrap
(i)Battery;
goods covered by Notification numbers 25/1998,
Particulars
10
of pacemakers (tariff item 9021 50 00), namely:-
2
BUDGET PROPOSAL
INDIRECT TAXES
(b) Brass scrap.
The following goods for use in the manufacture
(vi) Solder Paste;
BUDGET PROPOSAL
DIRECT TAXES
BASICS
(a) Copper scrap;
optical fibres or optical fibre cables
1
INDIA BUDGET
2015-16
Impact
120 121
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
SECTION 10
SERVICE
TAX
MISCELLANEOUS
122 123
INDIA BUDGET
2015-16
BUDGET PROPOSAL
DIRECT TAXES
BASICS
Sl. No.
10.3
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Particulars
Amendments to Notification No. 25/2012-ST [Mega Exemption Notification]
Page
129
[Effective from 01-04-2015]
10.4
10.3.1
Insertions in Mega Exemption Notification
129
10.3.2
Deletions in Mega Exemption Notification
130
Amendments to Notification No. 26/2012-ST [Abatement Notification]
131
[Effective from 01-04-2015]
10.5
Amendments to Notification No.30/2012-ST [Reverse Charge Mechanism]
132
[Effective from 01-03-2015 or 01-04-2015 unless otherwise specified]
10.6
Amendments to ST Rules
133
[Effective from 01—3-2015 or from a date to be notified]
10.7
Notification 42/2012-S.T. dated 29-06-2012 rescinded
135
[Effective from 01-03-2015]
10.8
Exemption to services of a GTA for transport of export goods widened
135
[Effective from 01-04-2015]
10.9
Scope of Advance Ruling extended to all specified resident firms
[Effective from 01-03-2015]
Sl. No.
Particulars
Page
10.1
Pattern of Changes Proposed
124
10.2
Changes proposed in the Bill
124
[Effective from enactment of the Bill or from a date to be notified]
10.2.1
Amendments in Sec. 65B of the FA Act
124
10.2.2
Change in the service tax rate - Sec. 66B of the FA, Act
125
10.2.3
Levy of Swachh Bharat Cess – Clause 117 of the Bill read with Para 123 of
125
the Budget Speech
10.2.4
Changes in the Negative List – Sec. 66D of the FA Act
125
10.2.5
Other Changes proposed in the Bill
126
135
124 125
10.1
INDIA BUDGET
2015-16
Pattern of changes proposed
BASICS
BUDGET PROPOSAL
DIRECT TAXES
taxable services. This levy would be on the value of
Delhi Chit Fund Association. This decision was
such services from a date to be notified later.
by dismissing the SLP filed by the Department
2015 have been issued, amending Mega exemption
clauses 105–116 of Chapter V of the Bill, effective
notification,
from the date of enactment or from a date to be
Charge mechanism, ST Rules, and few other
notified by the Central Government.
notifications.
Abatement
notification,
Reverse
Notification No. 03-09/2015-ST all dated 01-03-
against the High Court Order [2014-TIOL-23SC-ST]. In view of the proposed amendment
any activity, including activities carried out by
a distributor/selling agent of lottery tickets or
by a foreman of chit fund for a consideration
10.2
or selling agent in relation to promotion/
•The under mentioned terms have now been
marketing/selling of the lottery
defined under the FA Act:
“Foreman of chit fund” shall have the same
meaning as is assigned to the term “Foreman”
in clause (j) of Sec. 2 of the Chit Funds Act, 1982;
Court in the case of Delhi Chit Fund (supra), the
clarification in the education guide could not be
To overcome the divergent legal positions, the
above amendment is proposed to validate the
intention of the legislature to tax the aforesaid
conducting or organising a chit in any manner
activities carried out by a lottery distributor,
foreman of chit fund specifically.
At present, the definition of ‘Service’ excludes a
•Definitions of phrases “Amusement facility” &
“Government” means the Departments of the
transaction in money or actionable claim [Sec.
“Entertainment event” is proposed to be deleted
Central Government, a State Government and
65B(44)(a)(iii)]. Disputes arose whether services
from Sec. 65B(9) and Sec. 65B(24) of FA Act,
its Departments and a Union territory and its
in relation to ‘chit fund’ or ‘lottery etc’ were
in line with the amendment in the Negative
Departments, but shall not include any entity,
exempt from levy of service tax in view of the
List wherein services by way of admission to
whether created by a statute or otherwise, the
said exclusion.
entertainment events or access to amusement
accounts of which are not required to be kept in
accordance with article 150 of the Constitution
The taxability of ‘chit fund’ had been dealt with
Bharat initiatives or any related purpose.
The provisions of FA Act with respect to levy and
collection of service tax shall mutatis mutandis
Comments
Services provided by a foreman of chit fund for
Comments
the purpose of financing and promoting Swachh
in money or actionable claim has now been
applied or implemented.
10.2.1 Amendments in Sec. 65B of the FA Act
to the Consolidated Funds of India and used for
apply to the levy of Swachh Bharat Cess as well.
In view of the decision of the Hon’ble Delhi High
[Effective from enactment of the Bill or from a date to be notified]
The collection on this account would be credited
in relation to or for facilitation of a transaction
brought within the tax net.
Changes proposed by the Bill
MISCELLANEOUS
due consideration upheld the contention of the
further upheld by the Hon’ble Supreme Court
Proposed changes in the FA Act contained in
BUDGET PROPOSAL
INDIRECT TAXES
facilities has been made leviable to service tax.
In Para 123 of his Budget speech, the Hon’ble
Finance Minister has indicated that the levy may
be @ 2% or less when it is introduced. The levy of
Swachh Bharat cess @2% on the value of services
may therefore effectively enhance the service tax
rate from 12.36% to 16%.
Although the Swachh Bharat Cess is proposed
to be collected as Service Tax, there is no clarity
a to whether, CENVAT Credit of such levy would
be extended in line with education cess to a
manufacturer or output service provider. The TRU
letter dated 28-02-2015 related to changes in
Service Tax is also silent in this regard. However,
one view could be that the levy being collected as
service tax would be covered in Rule 3(1) (ixb) of
CCR, which allows credit of service tax leviable on
eligible input service. By extending the said view,
it would be also permissible for a manufacturer to
in the education guide issued in June 2012
10.2.2 Change in the service tax rate – Sec. 66B
avail and utilise the Swachh Cess for payment of
wherein it had been specifically clarified that
of the FA Act
his output excise liability.
“Lottery distributor or selling agent” means a
providing services in relation to chit fund is not a
The Central Government has proposed to enhance
person appointed or authorised by a State for
transaction only in money and the consideration
the basic service tax rate from 12% to 14% vide
the purposes of promoting, marketing, selling
received for such services shall be chargeable to
amendment of Sec. 66B. The education cess (2%)
or facilitating in organising lottery of any kind,
service tax.
and secondary and higher education cess (1%) is
or the rules made there under.
in any manner, organised by such State in
accordance with the provisions of the Lotteries
(Regulation) Act, 1998.
The assessee in the case of Delhi Chit Fund
Association vs. UOI [2013 (30) STR 347 (Del)]
contended that the activities performed by
abolished and subsumed in the above rate of 14%
to be effective from a date to be notified by the
Government.
•Definition of “Service” in Sec. 65B (44) of FA
them is covered in the expression ‘transaction
10.2.3 Levy of ‘Swachh Bharat Cess’ – Clause
Act has been amended to specifically cover the
in money or actionable claim’ and hence not
117 of the Bill read with Para 123 of the Budget
following activities under the service tax net
exigible to service tax in view of Sec. 65B (44)(a)
Speech
(iii) of the FA Act. The Hon’ble High Court after
It is proposed to introduce ‘Swachh Bharat Cess’
Services provided by a Lottery distributor
@ 2% or less, as a service tax, on all or any of the
10.2.4
Changes in the Negative List – Sec. 66D
of the FA Act
•Levy of service tax on any service received by
a business entity from Government or local
authority
Presently, only ‘support services’ [as defined in
Sec. 65B (49) of FA Act] provided by Government/
Local authority to business entities are liable to
service tax.
The expression ‘support services’ contained
in Sec. 66D (a)(iv) of FA Act has been replaced
126 127
with ‘any service’. Correspondingly, ‘any service’
INDIA BUDGET
2015-16
At present, Sec. 66D(j) of FA Act excludes
to
to exemplify the scope of this provision. This
become taxable from a date to be notified.
entertainment event or access to amusement
amendment is in the nature of a clarification
To facilitate all stake holders, the term
facility from the ambit of service tax. It is
and hence is likely to apply retrospectively
‘Government’ has now been defined under
proposed to bring such activity within the tax net
and the principles of interpretation should be
Sec. 65B (26A) to mean departments of Central
by omitting Clause (j) from Sec. 66D.
accordingly applicable.
reverse charge basis by the business entities.
‘Local Authority’ is already defined in Sec.
65B(31) of FA Act, which would continue to apply.
As a consequential amendment, the definition
of the term ‘support services’ contained in Sec.
65B (49) of FA Act has been omitted.
• Levy of service tax on job work involving process
amounting to manufacture of alcoholic liquor for
human consumption
admission
is proposed to be introduced in this section
consideration
Territory. The tax would have to be paid on 100%
for
BUDGET PROPOSAL
DIRECT TAXES
provided by Government/local authority would
Government, State Government and Union
charged
BASICS
Accordingly, service tax is proposed to be
levied on fees charged for services provided by
amusement parks, amusement arcades, water
parks and theme parks.
reimbursable expenditure or cost incurred and
entertainment event of concerts, pageants,
charged by the service provider, except in such
musical
circumstances, and subject to such conditions
performances
concerts,
award
functions and sporting events will be liable to
service tax. However by way of a specific entry
in Mega Exemption notification, exemption has
exceed H500 per person. Recognized sporting
worker which involves process amounting to
events where the participants represent any
manufacture of any goods (as defined in Sec.
district, state, zone or country shall however
65B (40) of FA Act) is exempted in view of the
continue to be exempted.
FA Act, the process amounting to manufacture
of liquor for human consumption is taken out
of the Negative List and brought under the
service tax net. This appears to have been done
primarily for the reason that liquor for human
consumption does not attract central excise duty
but is exigible to state excise duty levied under
the State Acts. As a consequential amendment,
it is proposed to omit the expression ‘alcoholic
liquors for human consumption’ from Sec.
65B(40) of FA Act.
changes have been brought in Entry 30 of Mega
Exemption
Notification
covering
job-work
arrangements.
•Levy of service tax on admission to an
entertainment event or access to amusement
facility
as may be prescribed.
Sec. 66F (1) prescribes that reference to a main
service shall not include reference to any service
which is used for providing the main service. To
now been proposed to be inserted on a situation
involving agency services provided by any bank
omitted.
• Proposed amendments in Penal provisions Sec.
76 & 78 of FA Act.
In the Bill, vide Clause 111, the existing Sec.
76 of the FA Act is proposed to be substituted
by a new set of provisions. At the outset, it is
necessary to take note that Sec. 76 of FA Act, till
the amendment becomes operative, only covers
short payment or non-payment of tax due to
reasons other than resulting from suppression
or 1% per month till the failure continues,
Delhi High Court in the case of Intercontinental
whichever is higher, subject to a maximum of
Consultants & Technocrats Pvt. Ltd. vs. Union
50% of the service tax payable.
of India [2013 (29) STR 9 (Del.)] wherein it was
held that the reimbursements will not be liable
The revenue is in challenge against the said
services - Sec. 66 F of FA Act
are available on specified records has been
impose penalty amounting to H100/- per day
‘Betting, gambling or lottery’
of interpretation of specified description of
true and complete details of transactions
in the back drop of the decision of the Hon’ble
provision for valuation in Sec. 67 of the FA Act.
•Illustration inserted to explain the principles
Sec. 73(4A) providing for reduced penalty if
the FA Act with Rule 5(1) of the Valuation Rules
distribution/selling of lottery not covered under
10.2.5 Other changes proposed in the Bill
Rules by omitting sub-rule 6A.
of facts etc. The present provision seeks to
to service tax in absence of any machinery
Please refer to Para 10.2.1(b) above.
MISCELLANEOUS
The proposed amendment is an attempt to align
•
Conducting a chit fund and activities of
facilitate all stake holders an illustration has
In line with the above amendment, corresponding
amended to provide that consideration for
In view thereof, fees for admission to an
At present, services provided by a job-
By this proposed amendment in Sec. 66D(f) of
Explanation to Sec. 67 of the FA Act has been
a taxable service shall now also include all
been provided to events where the fee does not
Negative List contained in Sec. 66D.
• Valuation of taxable services – Sec. 67
BUDGET PROPOSAL
INDIRECT TAXES
order before the Hon’ble Supreme Court and the
matter has been admitted.
•Recovery of service tax not levied/ not paid or
short levied/ short paid – Sec. 73
Service tax authorities are being empowered
to effect recovery without service of notice
by invoking the provision of Sec. 87 in cases
where the admitted service tax payable as
disclosed in the ST-3 return has not been paid
by the assessee either in full or in part.
Comment
to RBI. Services by RBI is in the Negative List
Sec. 87 provides for different coercive measures
[Sec. 66D(b) of FA Act]. Through the illustration it
for recovery of unpaid dues which includes
has been clarified that agency services provided
deduction of money owed to the tax payer,
by other banks to RBI would not be exempted
detention of movable or immovable properties
from the levy as it is an ‘input service’ for RBI and
belonging to the tax payer etc. Consequential
not a service provided by RBI. The illustration
amendment has been made in Rule 6 of ST
The proposed substitution of Sec. 76 of FA
Act with the new provision is similar to the
amendments being sought in Central Excise in
Sec. 11AC (1)(a) & Sec. 11AC(1)(b) of the CEA.
The amended provision would continue to cover
only cases where a notice has been issued. In
the new Sec. 76(1) of FA Act, in a bonafide case,
imposition of a mandatory penalty not exceeding
10% of the tax involved is being proposed.
However, to give relief a proviso (i) has been
inserted in the same sub-section to the effect
that the penalty would not be payable if the tax
involved is paid along-with interest within 30
days of the receipt of SCN. However, there is no
clarity as to whether the proceedings would be
deemed to be concluded. To continue with the
relief, proviso (ii) has been inserted to the effect
that penalty of 25% of the penalty imposed under
Sec. 76(1) would be payable if the tax along with
interest and the said penalty is also paid within
30 days of the receipt of the order. Thus, in this
case the bonafide assessee would be liable to
pay penalty equal to 2.5% of duty involved and
128 129
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
confirmed by the order (25% of 10% of the
proceedings. In case of such modification, the
At present, Sec. 80 of the FA Act empowers the
will now face hardships. It is however, also
penalty), if maximum penalty of 10% has been
amount of penalty payable under Sec. 78(1) shall
adjudicating/appellate authority to exercise
a matter of legal examination as to whether
confirmed.
also stand modified accordingly and where the
their judicious discretion and waive penalty
penalty can be at all levied in case of non-
duty or penalty is increased by the Appellate
imposable u/s 76 & 77 of the FA Act in cases
payment or short payment of tax due to bonafide
Authority or Court then the period of 30 days
where the tax payer could establish reasonable
reason e.g. claiming an exemption or pursuing a
would be counted from the date of receipt of
cause for non-compliance.
reasonable interpretation of the legal provisions.
Proposed Sec. 76(2) of FA deals with a situation
where the amount of tax involved in the Order
passed by the Central Excise Officer u/s 73(2) of
FA is modified in appeal or court proceedings.
In case of such modification, the amount of
penalty payable under Sec. 76(1) shall also stand
modified accordingly and where the duty or
penalty is increased by the Appellate Authority
or Court then the period of 30 days would be
counted from the date of receipt of the Order
of the Appellate Authority or Court to claim the
benefit of reduced penalty.
In the Bill, vide Clause 112, the existing Sec. 76
of the FA Act is proposed to be substituted by a
new set of provisions. Sec. 78 of FA Act covers
provisions relating to imposition of 100% penalty
in cases where service tax has not been paid or
short paid or erroneously refunded in situations
involving suppression of fact etc. Sec. 78 is
proposed to be substituted with new provisions
where 100% penalty is sought to be imposed in
case of short payment or non-payment of tax or
erroneous refunds involving suppression of fact
etc. The proposed Sec. 78(1) is similar to Sec.
76(1) discussed here-in-before. It is proposed
that the assessee would have to pay 15% of
service tax as penalty, in case the tax demanded
is paid along with interest and such penalty,
within 30 days of receipt of the notice [proviso (i)
of Sec. 78(1)]. To continue with the relief, proviso
(ii) has been inserted to the effect that penalty
of 25% of the service tax demand confirmed in
the order would be payable, if the tax along with
interest is also paid within 30 days of the receipt
of the order.
Proposed Sec. 78(2) of FA Act deals with a
situation where the amount of tax involved in
the Order passed by the Central Excise Officer
u/s 73(2) of FA Act is modified in appeal or court
the Order of the Appellate Authority or Court to
claim the benefit of reduced penalty.
the Hon’ble Tribunals have been pleased
• Transitory Provisions - Sec. 78B
to waive penalty in cases holding that the
This new provision is proposed to introduce
transitory provision in relation to the new Sec. 76
& 78 of FA Act and are discussed here-in-below:
Sec.
78B(1)
–
Cases,
involving
There are a plethora of judgments wherein
pending
proceedings where no SCN has been issued till
the enactment of the Finance Bill 2015, would
be governed by the amended provision of Sec.
76 or Sec. 78 of FA Act as enacted. This new
provision is seeking to impose penalty, which
may be higher in certain circumstances for an
appellants had shown reasonable cause for non
compliance. [Atwood Oceanics Pacific Ltd. vs
CST, Ahmedabad [2013 (32) STR 756 (Tri-Ahmd)]
and Mount Housing & Infrastructure Ltd. vs.
CCE &ST, Coimbatore [2014 (35) STR 389 (TriChennai)]].
It is proposed to withdraw the said Sec.80 from
the FA Act. With the withdrawal of the said
section many bonafide assessees who could
• Appeals to Appellate Tribunal – Sec. 86
Appeals to the Appellate Tribunal against order
of Commissioner (Appeals) in case of service
tax export rebate would henceforth lie before
Revisional authority set up by the Central
Government.
Such case already pending before Tribunal from
the date on which the Finance Bill 2012 was
enacted till the date on which the Bill is enacted
would be transferred to the Revisional Authority
in accordance with Sec. 35EE of the CE Act.
otherwise have received the waiver of penalty
offence committed prior to the enactment of
the section. It is a matter of legal examination
as to whether a higher penalty can be imposed
for an offence committed earlier when for the
same offence lower penalty was prescribed at
Amendments to Notification No. 25/2012-ST
[Mega Exemption Notification]
10.3
[Effective from 01-04-2015/from a date to be notified]
that point of time. It is a settled position that
penalty prevalent at the time when the offence
was committed can only be imposed. Reference
in this regard may be made to the cases of Elgi
Equipments Ltd. vs. Commissioner of Central
Changes made in Mega Exemption Notification
Comments
No. 25/2012–ST dated 20-06-2012 vide Notification
Hitherto, all health care services provided by a
No. 06/2015–ST dated 01-03-2015.
clinical establishment including the services of
Excise Coimbatore [2001 (128) E.L.T. 52 (S.C.)] &
10.3.1
Lal Mining Engg Works Vs. CCE, Mumbai
in Mega Exemption Notification:
Sec. 78B(2) – Provides that in cases covered
under existing Sec. 73(4A) of FA Act (dealing
with situations where the non payment or short
payments have been noticed during the course
of audit/investigation or verification) if notice has
not been served or no order has been passed
before enactment of the Bill, the penalty leviable
shall not exceed 50% of service tax involved.
•Power to waive penalty in certain cases now
withdrawn – Sec. 80
Specific Services exempted by insertion
•Entry no. 2 of the Mega Exemption Notification
exempts Health care services provided by a
clinical
establishment,
authorised
medical
transportation of patients in an ambulance were
exempt from service tax. With this amendment,
the scope of the exemption has been widened to
include ambulance services provided by other
parties as well.
practitioner or para medics. Entry no. 2 has
•Services of life insurance business provided
been now split in two parts. Entry No. 2(i) retains
under the “Varishtha Pension Bima Yojna”
the earlier exemption provided to Health Care
scheme. (Entry No. 26A)
Services and Entry No. 2(ii) is being introduced
to grant exemption to services provided by way
of transportation of a patient in an ambulance
even by persons other than those specified in
Entry no. 2.
•Services by operator of Common Effluent
Treatment Plant by way of treatment of effluent.
(Entry 43)
• Services by way of pre-conditioning, pre-cooling,
130 131
INDIA BUDGET
2015-16
ripening, waxing, retail packing, labeling of fruits
a structure meant predominantly for use as (i)
and vegetables which do not change or alter the
an educational, (ii) a clinical, or (iii) an art or
essential characteristics of the said fruits or
cultural establishment.
vegetables. (Entry 44)
a residential complex predominantly meant
for self-use or the use of their employees or
national park, wildlife sanctuary, tiger reserve or
other persons specified in the Explanation 1
zoo. (Entry 45)
to clause 44 of Sec. 65B of the said FA Act.
• Service provided by way of exhibition of movie by
The above exemption has been withdrawn and
an exhibitor to the distributor or an association
hence-forth the exemption shall only be limited
of persons consisting of the exhibitor as one of
to the construction, erection, commissioning,
its members. (Entry no. 46)
installation, completion, fitting out, repair,
exhibition of cinematographic film, circus,
dance, or theatrical performance including
drama or ballet.
or
alteration
performance or any sporting event other
than a recognized sporting event, where the
consideration for admission is not more than
H500 per person. [Entry No. 47]
of ‘national park’, ‘recognised sporting event’,
‘tiger reserve’, ‘trade union’, ‘wildlife sanctuary’
and ‘zoo’ have been incorporated.
from
Mega
Exemption
Notification:
• At present, services provided to the Government,
a local authority or a governmental authority by
way of construction, erection, commissioning,
installation, completion, fitting out, repair,
maintenance, renovation, or alteration of the
following are exempted from service tax: a civil structure or any other original works
meant predominantly for use other than for
commerce, industry, or any other business or
liquor for human consumption now chargeable
has been continued.
to service tax. [to come into effect from a date to
now attract service tax:
a mutual fund agent/distributor to a mutual
fund or AMC shall now attract service tax.
selling or marketing agent of lottery tickets to
a distributer or a selling agent. [Entry No. 29]
•Carrying out of any intermediate production
be notified] [Entry No. 30]
•The exemption to services by way of making
telephone calls from (i) departmentally run
public
telephone,
(ii)
guaranteed
public
telephone operating only for local calls and (iii)
free telephone at airport and hospital where no
bills are being issued has been withdrawn. [Entry
No. 32]
process as a job worker in respect of alcoholic
of
importance, canals, dams or irrigation works,
plants for water supply, water treatment and
erection,
commissioning
or
installation of original works pertaining to
airports and ports will now attract service tax.
[Entry No. 14]
•Consideration charged by a performing artist
for services in folk or classical art forms of (i)
In-line with the above additions, the definitions
MISCELLANEOUS
historical monuments, sites of archaeological
•
Construction,
award function, concert, pageant, musical
profession.
renovation,
sewerage treatment. [Entry No. 12]
recognised sporting event.
10.3.2Deletions
maintenance,
BUDGET PROPOSAL
INDIRECT TAXES
21(a) of the Mega Notification, as it stands today,
•Services provided by the following persons shall
•Services by way of admission to a museum,
• Services by way of right to admission to-
BUDGET PROPOSAL
DIRECT TAXES
BASICS
music, or (ii) dance, or (iii) theatre brought into
the service tax net if such consideration exceeds
H1,00,000. Services provided by such artists as
a brand ambassador continues to be taxable
irrespective of the consideration charged. [Entry
No. 16]
•Transportation of tea, coffee, jaggery, sugar,
milk products and edible oil by rail or a vessel or
by a goods transport agency in a goods carriage
were earlier exempt from service tax and have
now been brought within the service tax ambit.
These services were earlier exempt under Entry
No. 20 (i) and 21 (d). The exemption is now
limited to transportation of milk, salt and food
grains including flours, pulses and rice. It may
be noted that the exemption to transportation of
agricultural produce granted in Entry 20(h) and
10.4
Abatement Notification No. 26/2012-ST
[Effective from 01-04-2015]
Changes made in Notification No. 26/2012–ST
• Services provided in relation to chit
dated 20-06-2012 vide Notification No. 08/2015–ST
Abatement of 30% on “Services provided in
dated 01-03-2015.
relation to chit” has been withdrawn.
• Transport of goods/ passengers by rail
• Transport of goods in a vessel
Hitherto, service tax was payable on 30% of
Abatement on “Transportation of goods in a
the value of services of rail transport of goods
vessel” was 60% which has now been increased
and passengers (with or without accompanied
to 70%.
belongings) without any condition. Now, the
abatement shall be available subject to the
condition that Cenvat credit on inputs, capital
goods and input services, used for providing the
taxable services has not been taken under CCR.
• Transport of passengers by air
Hitherto, an abatement of 60% was provided on
taxable services of transport of passengers by
air (with or without accompanied belongings).
The said abatement continues for economy
• Goods Transport Agency
class travel and in case of other than economy
Abatement on “Transportation of goods by
class the abatement has been reduced to 40%.
Goods Transport Agency” was 75% which has
now been reduced to 70%.
132 133
10.5
INDIA BUDGET
2015-16
Amendments in Notification No.30/2012-ST
[Reverse Charge Mechanism]
10.6
[Effective from 01-03-2015/01-04-2015/from a date to be notified]
BUDGET PROPOSAL
DIRECT TAXES
BASICS
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Amendments to ST Rules
[Effective from 01-03-2015/ 01-04-2015/ from a date to be notified]
10.5.1 Changes made in Notification No. 30/2012–ST dated 20-06-2012 (Reverse Charge Mechanism) vide
Changes made in ST Rules vide Notification No.
be submitted, revocation of registration etc. In
Notification No. 07/2015 – ST dated 01-03-2015:
05/2015–ST dated 01-03-2015 as under:
case of applicants seeking registration for single
Pre Budget
Sl. No.
1B
Particulars
Services provided by a mutual
fund agent/ distributor to a
mutual fund/AMC
1C
Services provided by a selling/
marketing agent of lottery
tickets to a lottery distributor/
selling agent
8
% of service
tax payable
by the
person
providing
service
Post Budget
% of service
tax payable
by the
person
receiving the
service
% of service
tax payable
by the
person
providing
service
% of service
tax payable
by any
person liable
for paying
service tax
other than
the service
provider
25/2012-S.T dated 20-06-
NIL
100
the service tax registration shall be granted
within 2 days of on-line filing of the ACES form.
a person who owns/manages a web based
Further, the assessee can download the
software application and who enables a potential
Registration Certificate from the ACES website
customer to connect by means of the application
and such certificate would be accepted as proof
and a communication device with persons
of registration. There will be no need for a signed
providing service of a particular kind under the
copy.
Further, the aggregator or his representative
• Option to maintain e-records & authentication
by digital signature
whosoever is situated in the taxable territory
Assesses may opt to authenticate the service
shall be liable to pay service tax. In the absence
invoices/bill/challan issued under Rule 4A/
Exempt vide Mega
of the physical presence of the aggregator or
consignment notes issued under Rule 4B by
Exemption Notification No.
his representative in the taxable territory, the
means of a digital signature. Simultaneously,
aggregator shall appoint a person in the taxable
option of maintaining records in electronic form
territory who shall be the person liable to pay
is provided to the tax payer. The above shall be in
the service tax.
accordance with the corresponding notifications
25/2012-S.T dated 20-06-
NIL
100
2012 [Sl. No. 29 (e)]
25
75
NIL
100
services
11
An “aggregator” has been defined to mean
premises, it has been clarified by the CBEC that
2012 [Sl. No. 29 (c)&(d)]
Services provided by way of
supply of manpower or security
“aggregator”
brand name or trade name of the aggregator.
Exempt vide Mega
Exemption Notification No.
• Services provided by a person involving an
• Registration
issued by the CBEC, if any.
Changes brought in Rule 4 of the ST Rules [Sub-
• Upward Revision in the alternate rate for
Services provided by a person
rule (1A) omitted & sub-rule 9 inserted] by way
payment of service as provided in Sub-Rules (7),
involving an aggregator in any
of an Order No. 1/2015-ST dated 28-02-2015 to
(7A), (7B) & (7C) of Rule 6 in respect of services
specify the procedure for obtaining service tax
provided by Air Travel Agents, insurer carrying
registration such as steps for on-line filling
on life insurance business, money changer,
up of Form ST-1, time limit for submission of
lottery distributor/selling agent are as under:-
manner
[Effective from 01-03-2015]
Not Applicable
NIL
100
documents, nature of documents required to
134 135
INDIA BUDGET
2015-16
Particulars
Pre-budget
Post-budget
Services of booking of
(i) 0.6% of the basic fare in case of
(i) 0.7% of the basic fare in case of
tickets for travel by air
provided by an air travel
agent
domestic bookings
(ii) 1.2% of the basic fare in case of
domestic bookings
(ii) 1.4% of the basic fare in case of
international bookings
international bookings
Services provided by an
3% of the premium charged from
3.5% of the premium charged from
insurer carrying on life
policy holders in the first year and
policy holders in the first year and
insurance business
1.5% of the premium charged in the
1.75% of the premium charged in the
subsequent years
subsequent years
(i) 0.12% of the gross amount
(i) 0.14% of the gross amount
Services of purchase or
sale of foreign currency,
of currency exchanged for an
of currency exchanged for an
including money
amount upto H1,00,000 subject to
amount upto H1,00,000 subject to
changing
the minimum amount of H30
the minimum amount of H35
(ii) H120 and 0.06% of the gross
(ii) H140 and 0.07% of the gross
Services of promoting,
amount of currency exchanged
amount of currency exchanged
for an amount exceeding
for an amount exceeding
H1,00,000 and upto H10,00,000
H1,00,000 and upto H10,00,000
(iii) H660 and 0.012% of the gross
(iii) H770 and 0.014% of the gross
amount of currency exchanged
amount of currency exchanged
for an amount exceeding
for an amount exceeding
H10,00,000, subject to maximum
H10,00,000, subject to maximum
amount of H6,000
amount of H7,000
(i) Guaranteed price payout is more
marketing, organising
10.7
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Notification 42/2012-S.T. dated 29-06-2012 rescinded
[Effective from 01-03-2015]
Initially Notification No. 42/2012 – ST dated 29-
The exemption being now available in view of Rule
06-2012 had been issued to exempt the services
9 read with Rule 2(f) of the POPSR (introduced
provided by a commission agent located outside
w.e.f. 01-07-2012), the notification 42/2012 became
India to an Indian exporter on fulfilment of certain
redundant and has now been rescinded vide
conditions as prescribed in the said Notification.
Notification No. 03/2015-ST dated 01-03-2015.
10.8
Exemption to services of a GTA for transport of export goods
widened
[Effective from 01-04-2015]
Vide Notification No. 04/2015–ST dated 01-03-
transportation of export goods from any container
2015 exemption has been extended to GTA service
freight station/ inland container depot to the port
for transportation of goods to a land customs
or the airport from which the goods are to be
station also. Such exemption already exists for
exported.
10.9
Scope of Advance Ruling extended to specified resident firms
[Effective from 01-03-2015]
(i) Guaranteed price payout is more
than 80%:
or in any other manner
BASICS
H7,000 on every H10,00,000 (or
than 80%:
Vide Notification No. 9/2015-ST dated 01-03-2015,
Notification No. 4/2013-ST dated 01-03-2013 )
H8,200 on every H10,00,000 (or
‘resident firms’ has been made eligible to apply
and ‘resident private limited company’ (earlier
assisting in organising
part of H10,00,000) of aggregate
part of H10,00,000) of aggregate
for Advance Ruling. The expression ‘Firm’ has
introduced vide Notification No. 15/2014-S.T
lottery provided by a
face value of lottery tickets
face value of lottery tickets
been defined to include partnership firms, LLP,
dated 11-07-2014). The expression ‘resident’ shall
distributor or selling
printed by the organising State
printed by the organising State
sole proprietorship and one person company.
have the meaning assigned to it in Clause (42) of
agent
for a draw
for a draw
Earlier, the facility was available only to ‘resident
Section 2 of the IT Act, 1961 in so far as it applies
public limited company’ (earlier introduced vide
to a resident firm.
(ii) Guaranteed price payout is less
(ii) Guaranteed price payout is less
than 80%:
H11,000 on every H10,00,000 (or
than 80%:
H12,800 on every H10,00,000 (or
part of H10,00,000) of aggregate
part of H10,00,000) of aggregate
face value of lottery tickets
face value of lottery tickets
printed by the organising State
printed by the organising State
for a draw
for a draw
PEOPLE
INDIA. THE WORLD’S SECOND LARGEST RESOURCE BASE.
India is not just a country; it is a statement of endless possibilities.
Because the country comprises the second largest population cluster in the world.
Because the country accounts for the largest English-speaking engineering student flow
in the world.
Because the country combines a robust democracy with an impartial judiciary. Enhancing
international confidence.
Because a number of global investors find in India compelling social realities that can
inspire them to invest for the long-term.
The moment is now.
138 139
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
SECTION 11
SEBI & CAPITAL
MARKETS
140 141
11.1
INDIA BUDGET
2015-16
Expansion in the framework of offer for sale (“OFS”) through
stock exchange mechanism
BUDGET PROPOSAL
DIRECT TAXES
BASICS
BUDGET PROPOSAL
INDIRECT TAXES
a) Where option for cut-off price is given:
based on the cut-off price determined in the
non-retail category.
i) Sellers shall mandatorily announce floor
price latest by 5 pm on T-1 day to stock
exchange
In order to encourage retail participation in OFS,
demand in retail category at the cut-off price,
to enable other large shareholders to use the OFS
allocation shall be on proportionate basis.
mechanism and expand the universe of companies
to use OFS mechanism framework, SEBI issued
circular dated 08-08-2014 for modifying OFS
framework in the following manner:
11.1.1 The OFS mechanism shall be available to
top 200 companies by market capitalization in any
of the last four completed quarter
11.1.2 Any non-promoter shareholder of eligible
companies holding at least 10% of share capital
may also offer shares through the OFS mechanism.
Promoters/ promoter group entities of such
companies may participate in the OFS to purchase
11.1.7 In case of disclosure of the floor price,
seller shall disclose the floor price latest by 5 pm
on T-1 day to the stock exchange.
Retail investors may be allocated shares at
entered by them.
d) Allocation to retail investors shall be made
11.2
bids shall take place as per normal secondary
market transactions.
Amendments to SEBI (Delisting of Equity Shares)
Regulations, 2009
SEBI at its Board meeting on 19-11-2014 had
that they have contacted all the public
or
amended
shareholders about the offer in the manner
Retail investors may be allocated shares at a
amendments are detailed below:
discount to the bid price entered by them.
11.2.1 Change in Threshold limits for successful
11.2.2 Determination of Offer Price :
delisting:
SEBI has modified Reverse Book Building process
a) 90% of the total share capital of the company
(‘RBB’) for determination of offer price i.e it
bids of total value of not more than H2,00,000
aggregated across the exchanges. However, if the
b) Single clearing price for OFS
cumulative bid value of such investors exceeds
Retail investors shall be allocated shares at
H2,00,000 in the retail category the bids shall
a discount to cut off price determined in the
become ineligible. Individual retail investors shall
retail category.
category and non-retail category.
h)In respect of bids in the retail category,
11.1.9 Discount to retail investors may be offered
2011.
on all valid bids and shall be separate for retail
bidding at cut-off price.
in the non-retail category.
cash equivalents. Pay-in and pay-out for retail
the retail category, irrespective of the bid price
11.1.4 The cut off price shall be determined based
after allotment shall be eligible for allocation
b) Retail investors may enter a price bid or opt for
of the bid.
upfront in the notice of OFS to the exchange.
a discount to the cut-off price determined in
general category.
g) Any unsubscribed portion of retail category
reservation for retail investors shall be disclosed
(Substantial
have the option to bid in the retail category and the
retail portion of OFS.
the extent of 100% of order value in cash or
Acquisition of Shares and Takeovers) Regulations,
mean an individual investor who places cumulative
iii there shall be no indicative price for the
clearing corporation shall collect margin to
reserved for retail investors. Retail investor shall
subscription.
at the floor price and for price bids at the value
a) Multiple Clearing price for OFS-
11.1.3 Minimum 10% of the offer size shall be
allocated on proportionate basis in case of over
c) Margin for bids placed at cut-off price shall be
(Issue of Capital and Disclosure Requirements)
SEBI
rejected. Retail bids at cut-off price shall be
The details of discount and percentage of
to compliance with applicable provisions of SEBI
and
by the seller
f) Retail bids below the cut-off price shall be
11.1.8 Seller may offer discount to retail investor.
as follows:
2009
bids, based upon the floor price declared
e) Seller may offer discount to retail investors on
the said cut off price.
ii) Exchanges will decide upon the quantity of
shares eligible to be considered as retail
shares latest by 5 pm on T-2 day (T day being the
shares from non-promoter shareholder, subject
Regulations,
11.1.6 Seller shall announce intention of sale of
day of the OFS) to the stock exchange.
MISCELLANEOUS
11.1.10 The discounted price may be below the
Delisting
Regulation,
2009.
Key
prescribed.
and
b)Atleast
would be a price at which the shareholding of
25%
of
the
number
of
public
shareholders (holding shares in dematerialized
the promoter, after including the shareholding of
the public shareholders who have tendered their
shares, reaches the threshold limit of 90%.
floor price.
mode as on date of Board of Directors meeting
11.1.11 To make it easier for retail investors to
approving such delisting proposal) tender their
11.2.3 Prohibition from making delisting offer:
shares in the reverse book building process.
The promoter/ promoter group shall be prohibited
In subsequent press release dated 22-01-
from making a delisting offer if any entity belonging
2015, the above requirement of mandatory
to the said group has sold shares of the company
participation of 25% of the public shareholders
during a period of six months prior to the date of
(holding shares in dematerialized mode) has
the Board meeting which approves the delisting
been done away with provided the acquirer and
proposal.
participate in OFS, SEBI via its circular dated 0112-2014 decided that seller may give an option to
11.1.5 Any unutilized portion shall be offered to
retail investors to place their bid at cut-off price
non-retail category of investor. In case of excess
in addition to placing price bids. In order to do so,
following conditions shall be applicable to the OFS:
the Merchant banker are able to demonstrate
142 143
INDIA BUDGET
2015-16
11.2.4 Use of Stock Exchange Platform &
11.2.6 Exemption from RBB process:
Appointment of Merchant Banker:
Companies whose paid up capital does not exceed
a) Stock Exchange platform can be used for offers
H10 crs and net worth does not exceed H25 crs as
made under Delisting, Buyback and Takeover
on the last day of the previous financial year are
Regulations.
exempted from following the RBB process. The
b) Board of Directors of the company will be
required to appoint merchant banker.
11.2.5 Failure of attempt to Delisting :
Option to the acquirer to delist the shares of the
company directly through Delisting Regulations
pursuant to triggering Takeover Regulations has
been provided. However, if the delisting attempt
fails, the acquirer would be required to complete
the mandatory open offer process under the
takeover Regulations and pay interest @ 10% p.a.
for the delayed open offer.
BASICS
11.4
BUDGET PROPOSAL
DIRECT TAXES
exemption would be available only if (a) there was
SEBI in its circular dated 30-06-2014 and 30-12-
to a Foreign Financial Institution (FFI) agreement,
no trading in the shares of the company in the last
2014 (together referred to as “the Circulars”) had
may register with US authorities to avoid potential
one year from the date of the board resolution
laid down the requirement for Indian Financial
withholding under FATCA.
authorizing the company to go for delisting and
Institution to get registered with US authorities
(b) trading of shares of the company has not been
and obtain a Global Identification Number (GIIN) to
suspended for any non-compliance during the
avoid potential withholding under Foreign Accounts
same period.
Tax Compliance Act (FATCA). The Government of
India have reached an agreement in substance on
11.2.7 Timelines
Delisting timeline has been reduced from 137
calendar days (around 117 working days) to 76
working days.
the terms of an Inter-Governmental Agreement
(IGA) to implement FATCA and India is now treated
as having an IGA w.e.f11-04-2014
11.4.1 Time limit applicable to Indian Financial
1 jurisdiction for the purpose of registration and
obtaining GIIN was 31-12-2014.
Key amendments to SEBI insider trading Regulations, 2014
11.4.2 Overseas branches of Indian Financial
Institutions in a jurisdiction having IGA 2 agreement
In a move to align the Insider Trading Regulations
that they did not possess UPSI shall be on such
or in a jurisdiction that does not have an IGA but
in India with international practices and to
connected persons.
permits financial institutions to register and agree
strengthen the legal and enforcement framework,
SEBI had approved to bring new SEBI (Prohibition
of Insider Trading) Regulations, 2014 at its Board
Meeting on 19-11-2014 with following key features:
11.3.3 Wider disclosure requirements:
Company is now required to disclose UPSI at least
2 days prior to trading by officials. Officials with
access to UPSI all-round the year to formulate
11.3.1 Enhanced Definition of “Insider”
their pre-determined trading plans and disclose
Definition of ‘Insider’ has been widened to include
the same to stock exchanges. Clear prohibition on
any person with access to unpublished price
communication of UPSI has been provided except
sensitive information (‘UPSI’) including persons
for legitimate purposes, performance of duties
connected on the basis of contractual, fiduciary or
or discharge of legal obligations. To facilitate
employment relationship. UPSI has been defined
legitimate business transactions, UPSI can be
as information not generally available and which
communicated with safeguards.
may impact the price.
11.3.4
Prohibition
on
directors
and
key
11.3.2 Definition of “Connected persons”
management personnel to trade in derivatives of
Immediate relatives would be presumed to be
the securities of the company
connected persons and onus of establishing
MISCELLANEOUS
Inter Governmental agreement with United States of America
under Foreign Accounts Tax compliance Act (FATCA)Registration
Institution having overseas branches in Model
11.3
BUDGET PROPOSAL
INDIRECT TAXES
11.4.3 Overseas branches of Indian Financial
Institutions in a jurisdiction that does not have an
IGA and does not permit financial institutions to
register and agree to FFI may not register and their
overseas branches would eventually be subject to
withholding under FATCA.
11.4.4 It is further advised that if registration of the
parent is a pre-requisite for a branch to register,
such intermediaries may register as indicated in
11.4.1 & 11.4.2.
11.4.5 As per the circular dated 30-12-2014, it
was clarified that FFIs who have registered with
US authorities but have not obtained a GIIN should
indicate to the withholding agents that GIIN is
applied for.
144 145
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
SECTION 12
BUDGET
PROPOSALS –
DIRECT TAX RATE
STRUCTURE
146 147
INDIA BUDGET
2015-16
INCOME TAX RATES:
Tax Rates*
0 - 2,50,[email protected]
Nil
2,50,001 – 5,00,000+
10.30% of income exceeding H2,50,000
5,00,001 – 10,00,000
H25,750 plus 20.60% of income exceeding H5,00,000
10,00,001 –1,00,00,000
H1,28,750 plus 30.90% of income exceeding H10,00,000
1,00,00,001 and above
H29,09,750 plus 34.608%# of income exceeding H1,00,00,000
Sl.
No.
respectively.
MISCELLANEOUS
@ In case of resident individual of age 60 years or more (Senior Citizen) the basic threshold limit of
Particulars
Tax (%)
Surcharge E. Cess S & H E. Cess
(%)
(%)
(%)
Effective
Tax (%)
Domestic companies (with total
income less than H1 cr.)
30
-
2
1
30.90
2
Domestic companies (with total
income more than H1 cr. but less than
H10 crs.)
30
7*
2
1
33.063
3
Other domestic companies
30
12#
2
1
34.608
4
Foreign companies (with total income
less than H1 cr.)
40
-
2
1
41.20
5
Foreign companies (with total income
more than H1 cr. but less than or equal
to H10 crs.)
40
2
2
1
42.024
6
Other foreign companies
40
5
2
1
43.26
# Surcharge has been increased from 10% to 12% in case total income exceeds H1,00,00,000.
* Surcharge has been increased from 5% to 7%.
H3,00,000 remains unchanged.
In case of resident individual of age 80 years or more (Very Senior Citizen) the basic threshold limit of
H5,00,000 remains unchanged.
# Surcharge has been increased from 10% to 12%.
Minimum Alternate Tax (MAT)
+ Resident individual having total income less than H5,00,000 is eligible to claim Tax Rebate u/s 87A,
being lower of tax on total income or H2,000.
Sl.
No.
Tax Rates*
0 -10,000
10.30%
10,001 – 20,000
H1,030 plus 20.60% of income exceeding H10,000
20,001 – 1,00,00,000
H3,090 plus 30.90% of income exceeding H20,000
1,00,00,001 and above
H30,86,910 plus 34.608%# of income exceeding H1,00,00,000
* The tax rates are inclusive of education cess and secondary higher education cess @ 2% and 1%
respectively.
# Surcharge has been increased from 10% to 12% in case total income exceeds H1,00,00,000.
For Local Authorities
Local Authorities are taxable at the rate of 30%. Surcharge has been increased from 10% to 12% where
the total income exceeds H1,00,00,000. Education Cess is applicable at the rate of 2%. Secondary and
Higher Education Cess is applicable @ 1% on income tax.
Particulars
Tax (%)
Surcharge E. Cess S & H E. Cess
(%)
(%)
(%)
Effective
Tax (%)
1
Domestic companies (with total
income less than H1 Cr.)
18.5
-
2
1
19.055
2
Domestic companies (with total
income more than H1 Cr. but less than
H10 Cr.)
18.5
7*
2
1
20.389
3
Other domestic companies
18.5
12#
2
1
21.342
4
Foreign companies (with total income
less than H1 Cr.)
18.5
-
2
1
19.055
5
Foreign companies
(with total income more than H1 Cr. but
less than H10 Cr.)
18.5
2
2
1
19.436
6
Other foreign companies
18.5
5
2
1
20.008
For Co-operative Societies
Income Slabs (H)
BUDGET PROPOSAL
INDIRECT TAXES
1
* Tax rates are inclusive of Education Cess and Secondary Higher Education Cess @ 2% and 1%
BUDGET PROPOSAL
DIRECT TAXES
For Corporates
For individuals, Hindu Undivided Family, Association of Persons and Body of Individuals
Income Slabs (H)
BASICS
* Surcharge has been increased from 5% to 7%.
# Surcharge has been increased from 10% to 12%.
Alternate Minimum Tax (AMT)
It is applicable on all persons other than companies. In case of Individual, Hindu Undivided Family,
Association of Persons and Body of Individuals, it applies only if Adjusted Total Income exceeds H20,00,000.
For Partnership Firms
Adjusted Total Income is computed by increasing Total Income by any Deduction claimed under chapter
Partnership firms are taxable at the rate of 30%. Surcharge has been increased from 10% to 12% where
VIA [Sec. 80-IA to Sec. 80RRB (Except Sec. 80P)] and Sec. 10AA.
the total income exceeds H1,00,00,000. Education Cess is applicable at the rate of 2%. Secondary and
Higher Education Cess is applicable @ 1% on income tax.
AMT would be computed at the rate of 18.5% on adjusted total income. Surcharge has been increased
from 10% to 12% where the adjusted total income exceeds H1,00,00,000. Education Cess is applicable at
the rate of 2%. Secondary and Higher Education Cess is applicable @ 1% on income tax.
148 149
INDIA BUDGET
2015-16
Securities Transaction Tax (STT)
BASICS
1
2
3
4
Transactions
Particulars
Rate
Purchase/Sale of equity shares (delivery based)
0.1%
Purchase of units of equity-oriented mutual fund
(delivery based)
Sale of units of equity-oriented mutual fund (delivery
based)
Sale of equity shares, units of equity-oriented mutual
fund (non-delivery based)
Nil
Effective Rate*
5.263
6.071
- Resident
33.33
38.449
- Non Resident
42.85
49.432
- Resident
42.85
49.432
- Non Resident
53.85
62.121
(1) Distribution by MF under an Infrastructure Debt fund scheme
Purchaser /
(2) To an individual or HUF excluding (1) above
to a non-resident
Seller
Purchaser
(3) To any other person excluding (1) & (2) above
0.001%
Seller
0.025%
Seller
Sale of an option in securities
0.017%
Seller
6
Sale of an option in securities, where option is exercised
0.125%
Purchaser
7
Sale of a futures in securities
0.01%
Seller
8
Sale of unit of equity oriented fund to the Mutual Fund
0.001%
Seller
* including surcharge of 12% & Education Cess
# Excludes equity oriented funds
Capital Gains
Short term capital Long term capital
gains tax1
gains tax
Sale transactions of securities which attract STT
Commodities Transaction Tax (CTT)
commodities) entered in a recognised association
15%
Nil
Sale transactions of securities not attracting STT
CTT is levied on the value of taxable commodities transaction:
Sale of commodity derivative (other than agricultural
MISCELLANEOUS
Basic Rate
Payable by
5
Transactions
BUDGET PROPOSAL
INDIRECT TAXES
DDT Rates for Mutual Fund# (MF) for payments to -
STT is levied on the value of taxable securities transaction as under:
Sl.
No.
BUDGET PROPOSAL
DIRECT TAXES
Rate
Payable by
0.01%
Seller
Individuals (residents and non-residents)
Progressive slab
20% with
rates
indexation;
(3) To any other person excluding (1) & (2) above
Partnerships (resident and non-resident)
30%
10% without
indexation (for
listed securities
Wealth Tax (WT)
Resident companies
Levy of Wealth tax has been abolished.
30%
/zero coupon
bonds)
Dividend Distribution Tax (DDT)
Dividends distributed by an Indian Company are exempt from income tax in the hands of all shareholders.
Overseas financial organizations specified in Sec. 115AB
DDT shall be computed on the amount determined after grossing up dividend paid by the rate of tax
(excluding surcharge and cess) on such dividend.
Grossing up is required to be done only of the Basic Rate and not of the Effective Rate. The rates of DDT
40% (corporate)
FIIs
30%
10%
Other foreign companies
40%
20% with
Local Authority
30%
indexation;
As per
indexation (for
progressive slab
listed securities/
rates
zero coupon
are as below:
10% without
DDT Rates for Companies
Basic Rate
Effective Rate*
17.647
20.358
Co-operative Society
bonds)
*including surcharge of 12% & Education Cess
1
To be increased by surcharge (applicable if any), education cess and secondary and higher education cess
150 151
INDIA BUDGET
2015-16
SPECIAL RATES FOR NON-RESIDENTS The following incomes in the case of non-resident are taxed at
special rates on gross basis:
Nature of Income
Dividend(2)
Rate(1)
20%
Interest received on loans given in foreign
currency to Indian concern or Government of
20%
India
Interest received on infrastructure debt funds
referred to in Sec. 10(47)
Interest of the nature and extent referred to in
Sec. 194LC and Sec. 194LD
Income received in respect of units purchased in
foreign currency
5%
5%
20%
Royalty or technical fees3
10%
Interest on FCCB
10%
These rates will further be increased by surcharge (applicable if any), education cess and secondary and
1
higher education cess.
2
Other than dividends on which DDT has been paid.
3
Rate decreased from 25% to 10%.
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
152 153
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
SECTION 13
GLOSSARY
MISCELLANEOUS
154
INDIA BUDGET
2015-16
BASICS
BUDGET PROPOSAL
DIRECT TAXES
BUDGET PROPOSAL
INDIRECT TAXES
MISCELLANEOUS
Corporate Office
ACIT
Assistant Commissioner of Income
Tax
JCIT
Joint Commissioner of Income Tax
LLP
Limited Liability Partnership
MAT
Minimum Alternate Tax
MMR
Maximum Marginal Rate
NPS
National Pension Scheme
PAN
Permanent Account Number
PA
Per Annum
PE
Permanent Establishment
POEM
Place of Effective Management
POPSR
Place of Provision of Service Rules,
2012
AE
Associated Enterprise
AIF
Alternative Investment Funds
AMT
Alternate Minimum Tax
AO
Assessing Officer
AOP
Association Of Persons
AY
Assessment Year
BCD
Basic Customs Duty
BILL
The Finance Bill, 2015
CBDT
The Central Board of Direct Taxes
CIT
The Commissioner of Income Tax
PY
Previous Year
CCIT
The Chief Commissioner of Income
Tax
QFI
Qualified Institutional Investor
R&D
Research and Development
CBEC
Central Board of Excise and
Customs
RBI
Reserve Bank of India
CCR
CENVAT Credit Rules, 2004
REIT
Real Estate Investment Trust
CE Act
Central Excise Act, 1944
ROI
Return of Income
RPF
Regional Provident Fund
Rules
The Income Tax Rules, 1962
SAD
Special Additional Duty
SEBI
The Securities and Exchange Board
of India
Deputy Commissioner of Income
Tax
SCN
Show Cause Notice
SPV
Special Purpose Vehicle
DDT
Dividend Distribution Tax
STT
Securities Transaction Tax
DTA
Domestic Tariff Area
ST Rules
Service Tax Rules, 1994
DTAA
Double Taxation Avoidance
Agreement
TCS
Tax Collected at Source
EOU
Export Oriented Unit
TDS
Tax Deducted at Source
FCCB
Foreign Currency Convertible Bonds
TAN
Tax Deduction Account Number
GAAR
General Anti Avoidance Rule
The Act
Income-Tax Act, 1961
GDR
Global Depository Receipts
TPO
Transfer Pricing Officer
HUF
Hindu Undivided Family
UOI
Union of India
Invit
Infrastructure Investment Trust
VAT
Value Added Tax
ITAT
The Income Tax Appellate Tribunal
CE Rules Central Excise Rules, 2002
CTT
Commodity Transaction Tax
CVD
Additional Duty of Customs levied
under section 3(1) of the Customs
Tariff Act, 1975
DCIT
701, Leela Business Park, Andheri-Kurla Road, Andheri (E), Mumbai - 400 059.
Tel: +91 22 6672 9999 | Fax: +91 22 6672 9777
Email : [email protected] | Website : www.dhc.co.in
Ahmedabad
703, Venus Atlantis, 100 Ft. Road,
Corporate Road, Prahlad Nagar,
Ahmedabad - 380 015
Tel: +91 (79) 4032 0441/4032 0442
Bengaluru
No. 45, 1st Floor, 2nd Main, Sankey Road,
(Above Indian Bank), Lower Palace Orchards,
Bengaluru - 560 003.
Tel: +91 (80) 6454 2545/6454 2546
Chennai
5B, A Block, 5th Floor, Mena Kampala Arcade,
New No 18 & 20, Old No 113/114,
Theyagaraya Road, T. Nagar, Chennai - 600 017.
Tel: +91 (44) 4213 2024 / 4554 4143
Fax: +91 (44) 4354 6876
Coimbatore
Shree Shanmugappriya, 2nd Floor,
454, Ponnaiyan Street, Crosscut Road,
Gandhipuram, Coimbatore - 641 012.
Tel: +91 (422) 2237793 / 2238793
Fax: +91 (422) 2233793
Hyderabad
Raja Pushpa House, 3rd floor, Plot No-34,
Silicon Valley, Madhapur,
Hyderabad - 500 081.
Tel: +91 (40) 42007771/0
Fax: +91 (40) 42007772
Jaipur
Manish Mansion, Plot No. 247,
1st Floor Frontier Colony,
Near Punjab National Bank,
Adarsh Nagar, Raja Park,
Jaipur - 302 004.
Tel: +91 (141) 2604 743
Jamnagar
Aparna, Behind Jevandeep Hospital,
Near Hotel Bansi , Off. Indira Marg,
Jamnagar - 361 001.
Tel: + (0288) 2665023
Kolkata
Constantia, “B” Wing, 7th Floor,
11, Dr. U.N. Brahmachari Street,
Kolkata - 700 017.
Tel: +91 (33) 4002 1485
Fax: +91 (33) 4002 1478
Devarati, 1st Floor,
8, Dr. Rajendra Road,
Kolkata - 700 020
Tel: +91 (33) 2474 6303
Fax: +91 (33) 2476 9341
Usha Kiran Building, Flat No. 4A,
4th Floor, 12A, Camac Street,
Kolkata - 700 017.
Tel: +91 (33) 3201 6298
Bagrodia Niket, 1st Floor, 19C,
Sarat Bose Road, Kolkata - 700 020.
Tel: +91 (33) 4025 4900
Mumbai
42, Free Press House,
215, Nariman Point, Mumbai-400 021
Tel: +91 (22) 6132 6999
Fax: +91 6729 9500 / 501
Fax: +91 (020) 6729 9555
(22) 2285 6237
131, Mittal Court, 13th Floor, C Wing,
Nariman Point, Mumbai - 400 021.
Tel & Fax: +91 (22) 4002 5858
New Delhi
3rd Floor, 52-B, Okhla Industrial Estate,
New Delhi - 110 020.
Tel: +91 (11) 4711 9999
Fax: +91 (11) 4711 9998
Pune
C-10,Godrej Eternia,
Old Mumbai Pune Highway,
Wakdewadi,
Pune - 411005.
Tel: +91 (020)
Notes
A
Product
[email protected]
As the world is converging into a single global
entity, technology is blurring the lines between
geographies, services and solutions. And in this era
of a flat, borderless world, DHC is committed to
going beyond service, into value addition in the true
sense of the word.
• To understanding not just what our clients want,
but what their business needs
• To meeting not just immediate requirements, but
providing long term solutions
• To being not just reactive to client’s needs but
being proactive to solve their future issues
Because at DHC, we believe there’s a thin line
between ‘delivering a service’ and ‘delivering
value’.