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Grant thornton budget 2012



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  • 1. Overview of the Union Budget 2012-13Contents 1 Foreword 2 Key policy announcements 3 Fiscal and economic review 4 Snapshots of tax proposals 5 Direct tax proposals 6 Indirect tax proposals 7 Contact us© Grant Thornton India LLP. All rights reserved.
  • 2. Overview of the Union Budget 2012-13 2 Foreword Foreword Despite the crisis in Euro zone, slow recovery in the United States, political “The Budget seemed more benign than it is. instability in the Middle East and subsequent rise in crude oil prices, the resilience While most of the amendments were of India’s domestic economy is once again evident with this year’s GDP anticipated such as tinkering of personal tax Key policy growth estimate of over 6.5%. However, this consumption-driven growth may not rates, small exemptions for the middle income announcements be sustainable in the long run unless it is accompanied with an investment-driven group and widening the net of service tax and growth. taking the rate up, the fine print has wider ramifications. Retrospective amendments to address Vodafone like situations, bringing Against this backdrop, growth and stability remained central to the Budget this year. domestic related party transactions under the Fiscal and By setting the fiscal deficit target of 5.1% for 2012-13 and expressing its intentions ambit of transfer pricing are a case in economic review to keep central subsidies under 2% of GDP in 2012-13, and further bring them point. Measures announced to boost down to 1.75% of GDP in the next 3 years, the government has steered clear of infrastructure, agriculture, aviation and power populist measures. industries is very heartening." Snapshot of tax Pallavi J Bakhru proposals The Budget endeavours to shore up investment in infrastructure with proposals Partner & Practice Leader to make more sectors eligible for Viability Gap Funding under PPP scheme and Tax & Regulatory Services other measures including tax free bonds of Rs 60,000 crore for financing Walker, Chandiok & Co infrastructure projects in 2012-13 alone. Direct tax proposals Nevertheless, the common man, hard-pressed by inflation, also has some reasons to cheer while the Budget proposes revisions in income tax exemption limit for the general category and brings forth the provision for allowing External Commercial Borrowing (ECB) to promote low cost housing. However, an upward revision in service tax and other indirect taxes is likely to affect purchasing Indirect tax power of aam admi, on the other hand. proposals Overall the Budget attempts to do a balancing act with a focus on structural reforms. We have developed this report in view of providing you a comprehensive overview of the Budget and we hope that you find it useful. Contact us Tax & Regulatory Services Team Grant Thornton India LLP
  • 3. Overview of the Union Budget 2012-13 3 Subsidies Rationalisation of key policies Foreword • Attempt to keep subsidies below 2% of Gross Domestic • Amendment to the Fiscal Responsibility and Budget Product (GDP) during Financial Year (FY) 2012-13 Management (FRBM) Act – key features being concepts of: • Subsidies fully provided for effective administration of the - Effective revenue deficit – difference between revenue Key policy proposed Food Security Legislation announcements deficits and grants for creation of capital assets • Nation-wide roll out of mobile-based Fertilizer Management - Medium-term expenditure framework System to provide complete information on movement of statement – to set forth a 3-year rolling target for fertilisers and subsidies expenditure indicators Fiscal and • Goods and Service tax (GST) network to be set-up as economic review Budget Estimates National Information Utility and operational by August 2012 • Gross Tax Receipts estimated at Rs 1,077,612 crores for FY • 20 crore people enrolled under UID-Aadhaar mission. 2012-13 Adequate funds allocated for further enrolment of 40 crores Snapshot of tax • Total expenditures budgeted at Rs 1,490,925 crores for FY • White Paper on Black Money to be presented in Parliament proposals 2012-13 in the Budget session • National Food Security Bill, 2011 is presently before Disinvestments Parliamentary Standing Committee Direct tax • Bill regarding Public Procurement Legislation to be proposals • For FY 2012-13, while 51% ownership and management introduced in Parliament to combat corruption control to remain with the Government, disinvestments target have been set at Rs 30,000 crores Indirect tax proposals Contact us
  • 4. Overview of the Union Budget 2012-13 4 Financial Sector Textile Sector Foreword • Introduction of Rajiv Gandhi Equity Saving Scheme which • Financial stimulus of Rs 3,884 crores for waiver of loans of allows income tax deduction of 50% to new retail investors handloom weavers investing upto Rs 50,000 in equities Key policy Power and Coal Sector • Rs 15,888 crores proposed for capitalisation of public sector announcements banks and financial institutions • ECB to part finance Rupee debt of existing power projects • Central KYC depository to be developed in FY 2012-13 Transport Sector Fiscal and Infrastructure Sector economic review • Road Transport and Highways Ministry allocation • Government to establish joint venture companies in PPP enhanced by 14% to Rs 25,360 crores mode by defence PSUs • ECB proposed for capital expenditures for road toll systems Snapshot of tax • Tax free bonds of Rs 60,000 crores for financing infrastructure projects in FY 2012-13 • Direct import of Aviation Turbine Fuel for Indian carriers proposals permitted • Introduction of National Manufacturing Policy to raise share of manufacturing in GDP to 25% creating 10 crore jobs • Equity participation of foreign airlines in an airport undertaking upto 49% is under consideration • External Commercial Borrowings (ECB) allowed for low Direct tax cost housing projects • ECB with a ceiling of US$1 billion to be permitted for 1 year proposals in respect of working capital requirements of airline industry • Rural Infrastructure Development Fund allocation enhanced to Rs 20,000 crores out of which Rs 5,000 crores has been assigned towards creating warehousing facilities Indirect tax proposals Contact us
  • 5. Overview of the Union Budget 2012-13 5 Agriculture Employment Foreword • Target for agriculture credit flow to increase by • Allocation for National Rural Livelihood Mission Rs 1,00,000 crores to Rs 5,75,000 crores in FY 2012-13 increased by 34% to Rs 3,915 crores • Interest subvention scheme to continue in FY 2012-13 • Prime Ministers Employment Generation Programme Key policy • Additional subvention of 3% available for prompt payments allocation enhanced by 23% to Rs 1,276 crores in FY 2012-13 announcements • Allocation of Rs 1,000 crores for National Skill • Regional Rural Bank credit refinance fund set-up for disbursing short-term crop loans Development Fund in FY 2012-13 • Allocation for Accelerated Irrigation Benefit Program Fiscal and enhanced by 13% to Rs 14,242 crores Social Security economic review • Irrigation and Water Resource Finance Company to be operationalized to mobilise large resources to fund projects • Allocation under National Social Assistance Program enhanced by 37% to Rs 8,447 crores in FY 2012-13 Snapshot of tax Micro, Small and Medium Enterprises proposals Defence • India Opportunities Venture Fund of Rs 5,000 crores to be set up with Small Industries Development Bank of India • Provision of Rs 1,93,407 crores made for defence services of which Rs 79,579 crores is towards capital expenditure Direct tax Healthcare proposals Education • No case of polio reported in the last one year • Allocation for National Rural Health Mission to Rs 20,882 • Allocation for Sarva Shiksha Abhiyan enhanced by 21.7% Indirect tax crores in FY 2012-13 to Rs 25,555 crores in FY 2012-13 proposals • National Urban Health Mission to be launched in FY 2012-13 to meet the health needs of the urban poor Contact us
  • 6. Overview of the Union Budget 2012-13 6 Indirect Tax Foreword • The exact date and rate of GST has not been announced and • This years Union Budget has proposed certain key the target date of 1 April 2012 for implementation has clearly amendments to the structure of Indirect Taxation in India been missed Key policy • The commitment to implement GST (Goods and Services • Central Sales Tax has not been abolished announcements Tax) has been reiterated. Though there is no appointed date, the Finance Minister has given all indications for its early implementation “The Budget 2012-13 is a painful pill with Service Fiscal and Tax being extended to all services (without the economic review • The Constitutional Amendment Bill required to implement credits of GST) and a sharp 2% hike in the GST had been introduced in the Parliament and referred to the Service Tax and Central Excise rates. This will Parliamentary Standing Committee in March 2011. The lead to price rises across the board. But the recommendations of the Committee are still awaited compass is set on Indirect Tax reforms and the Snapshot of tax various steps taken to lead to an early proposals implementation of GST are welcome.” • The Empowered Committee of State Finance Ministers has approved the basic structure of the proposed GST Amrita Mitra Partner – Indirect Tax Direct tax Grant Thornton India LLP proposals • The intention to merge the Service Tax and Central Excise legislation into one Common Tax Code has been announced. • The levy of Service Tax has been extended to all services with Indirect tax a short negative list proposals • The above developments are a clear precursor to GST Contact us
  • 7. Overview of the Union Financial Budget 2012-13 7 Economic Growth GDP trends 10.00 Foreword 8.4 8.4 7.6 • GDP growth rate during FY 2011-12 is estimated to be 6.9% 8.00 6.9 as compared to 8.4% during previous two FYs. Global 6.00 %age economic slack and oil price rise triggered this fall in GDP Key policy growth 4.00 announcements • During FY 2011-12, the services sector is expected to grow at 2.00 9.4% as against 9.3% last year. Its contribution to GDP is 0.00 estimated at 59% 2009-10 2010-11 2011-12 2012-13AE Fiscal and • However, Manufacturing sectors growth has been Financial Years economic review lacklustre. It has seen a steep fall from 9% during April- December 2010 to 3.9% during April-December 2011 Sectoral Composition of GDP • Growth in exports reduced from 40.5% during FY 2010-11 to 23.5% during FY 2011-12 with insignificant change in the rate Financial Agriculture Industry Services Snapshot of tax Years of growth in imports proposals • Inflation remained a major concern during FY 2011-12 due to 2010 – 11 14.5 27.8 57.7 upsurge in global commodity prices and crude oil though Wholesale Price Index moderated from 9% during April- 2011 – 12AE 13.9 27.0 59.0 Direct tax November 2011 to 7% in February 2012 proposals • Foreign exchange reserves augmented by US$ 6.7 billion from US$ 304.8 billion at end of March 2011 to US$ 311.5 billion at end of September 2011 Headline Inflation 12.00 9.6 9.1 Indirect tax 10.00 8.1 proposals 8.00 %age 6.00 3.8 4.00 2.00 Contact us 0.00 2008-09 2009-10 2010-11 2011-12AE Financial Years
  • 8. Overview of the Union Financial Budget 2012-13 8 Fiscal Deficit Foreword Gross Fiscal Deficit • Increase in fiscal deficit from 4.8% in FY 2010-11 to 7.00 6.5 estimated 5.9% of GDP during FY 2011-12. It is expected to 5.9 drop to 5.1% of GDP during FY 2012-13 6.00 Key policy 5.1 4.8 5.00 announcements Key Initiatives %age 4.00 • Pradhan Mantri Gram Sadak Yojana (Bharat Nirman) 3.00 Fiscal and proposes to connect 54,648 habitations involving construction economic review of 146,184 km of rural roads 2.00 • Draft National Policy on Electronics (released on 03 1.00 October 2011) envisions creating a globally competitive electronics system design and manufacturing industry 0.00 Snapshot of tax 2009-10 2010-11 2011-12AE 2012-13AE proposals • Draft National Policy on Information Technology 2011 Financial Years focuses on deployment of information communication technology in all sectors of the economy • Additional budgetary support of Rs 91,800 crores to enhance Direct tax productivity and resilience of agriculture proposals • Green India mission proposes additional afforestation of 10 million hectares of forest lands, wastelands and community lands with projected expenditure of Rs 46,000 crores Indirect tax proposals Contact us
  • 9. Overview of the Union Budget 2012-13 9 Direct tax proposals Foreword • No change in Corporate tax rate, Minimum Alternate Tax, • Submission of Tax Residency Certificate made a necessary Surcharge and Education Cess (but not the sole) condition for availing tax treaty benefits • Minimum Alternate Tax to be applicable to Insurance, • Indirect transfer of capital asset proposed to be taxed in India. Key policy Banking and Companies engaged in the generation or Clause introduced to validate all actions of the tax officer announcements supply of electricity, etc notwithstanding anything contained in any judgement, decree • Scope for Alternate Minimum Tax extended to all tax or order. (Vodafone decision reversed) payers (other than companies) claiming specified deduction • General Anti Avoidance Rules provisions introduced Fiscal and • Concessional rate of taxation of dividends from foreign • Consideration for computer software (even off the shelf) economic review subsidiaries @ 15% extended by 1 year proposed to be treated as royalty • Cascading effect of Dividend Distribution Tax in multi-tier • Reduced withholding tax rate of 5% applicable on foreign structure removed borrowings by companies engaged in specified businesses Snapshot of tax • Weighted deduction introduced for expenditure on Notified • Personal income tax slabs widened proposals Agriculture Projects and Skill Development Projects in • Filing of income tax return made mandatory for residents manufacturing sector having any assets outside India or having signing authority in • Weighted deduction for in-house research extended by 5 any account outside India years • Tax Officer permitted to appeal against Dispute Direct tax • Investment linked deduction extended coupled with Resolution Panel order proposals weighted deduction for specified businesses • Power companies to get additional depreciation as well as extension in terminal date for availing tax holiday Indirect tax • Pass through status accorded for all investments by proposals Venture Capital Funds / Companies • Deeming provisions introduced to treat share premium received in excess of fair market value as income in the hands of closely held investee company Contact us • Share capital, share premium etc in the books of closely held company treated as explained only if source is proved
  • 10. Overview of the Union Budget 2012-13 10 Transfer pricing Foreword • Advance pricing agreement introduced in transfer pricing “While the DTC has been deferred, the Union (prospective) Budget has brought in some key provisions of the DTC in the Bill like the anticipated general anti Key policy avoidance rules (GAAR) and the advance pricing • Definition of international transaction and intangible property agreements (APA). The most glaring thing that announcements clarified (retrospective) comes out of the amendments is the introduction of key provisions retrospectively to overrule recent • International transaction includes business restructuring or judgments in the area of international tax and Fiscal and reorganization, covered; whether or not it has bearing on the transfer pricing. This would surely not boost the confidence of the foreign investor. A welcome economic review profit, income, losses or assets of such enterprises at the time amendment is the APA regime introduced of the transaction or at any future date (retrospective) to provide a progressive mode of dispute resolution in the area of transfer pricing. Of course the APA Snapshot of tax • Transfer Pricing Regulations apply to specified domestic scheme should also practically turn out to be a transactions between domestic related parties (prospective) favorable and unbiased platform for the proposals multinationals and not be construed as another round of aggressive transfer pricing audit. On the • Tax authorities can appeal against the order incorporating the other hand by bringing domestic transactions in the Direct tax DRP directions (prospective) ambit of transfer pricing, the compliance burdens on the tax payer is going to increase multifold.” proposals • Currently, the arm’s length range is based on a uniform Karishma R. Phatarphekar tolerance band of 5% around the transfer price. The 5% band Partner - Transfer Pricing has been replaced with 3% (prospectively) Grant Thornton India LLP Indirect tax proposals • Amendments propose to eliminate viewing of this 5% range as a standard deduction and also clarifies that the new provision disabling the standard deduction will be applicable for all assessment proceedings pending before the Assessing Contact us Officer as on 1 October 2009. However, the proposed amendment limits the tax authorities ability to re-open or rectify assessments concluded before 1 October 2009
  • 11. Overview of the Union Budget 2012-13 11 Indirect tax proposals Foreword Roadmap to GST laid out Rates increase for manufacture and services • There are clear indications that GST will be implemented • The rate of Service Tax has been increased from 10% to 12% Key policy within a short time span announcements • The standard rate of Central Excise Duty has been increased • The Constitutional Amendment Bill was introduced in the from 10% to 12% Parliament in March 2011 and is before the Parliamentary Fiscal and Standing Committee for recommendations • The merit rate of Central Excise duty has been increased from economic review 5% to 6% • The Empowered Committee of State Finance Ministers have approved the basic structure. The IT enabled GST Network • The lower merit rate of Central Excise Duty on specified 130 (GSTN) has been approved and will become operational by Snapshot of tax products has increased from 1% to 2% proposals August 2012. A common PAN-based registration, return and payment processing platform for all states will check tax evasion • The Basic Custom Duty (BCD) rate remains the same at 10% Direct tax Effective Dates • The drafting of legislation for Centre and State GST is under proposals progress • The Central Excise rates will be effective from midnight of 16 • The Government has extended the levy of Service Tax on all March 2012 Indirect tax services with a short negative list proposals • The Service Tax rate will be effective from 1 April 2012 • The provisions of Central Excise and Service Tax are proposed to be merged into a Common Tax Code Contact us • Common registration and return provisions have been proposed. The CENVAT Credit Rules are already common
  • 12. Overview of the Union Budget 2012-13 12 Foreword Service Tax Excise • Proposal to tax all services except those in the negative list • Duty increased to more than 12% in few cases such as comprising of 17 heads automobile and cement Key policy announcements • Alignment made to harmonize Central Excise and Service Tax • Duty evasion of amount more than Rs 30 lakh is a cognizable into a Common Tax Code. offence where person can be arrested without warrant Fiscal and • A common simplified registration form and a common return • Benefit of reduced penalty, i.e. 25% of the penalty amount is economic review comprising of one page proposed in this direction available only if penalty along with duty and interest paid within 30 days • Place of Supply Rules for determining the location of service Snapshot of tax and consumption to be put in public domain for stakeholder’s • Interest is not payable on credit wrongly taken unless the same proposals comments is utilized • Point of Taxation Rules to be rationalized to be in line with the • The rate for CENVAT reversal for exempt services/ goods other proposed changes under Rule 6(3) of CENVAT Credit Rules is revised from 5% Direct tax to 6% proposals • CENVAT Credit permitted on number of services to reduce Customs cascading of taxes Indirect tax • The peak rate of customs duty on non-agricultural goods proposals • New Scheme announced for simplification of refunds remains at 10% • Revision Application Authority and Settlement Commission being introduced in Service Tax for dispute resolution Contact us
  • 13. Overview of the Union Budget 2012-13 13 Foreword • Exemption given to the following sectors: • Transfer of unutilized credit of Additional duty (SAD) lying in • Agriculture balance at the end of each quarter to another factory of the • Fuel for power manufacturer is permitted • Machinery for mining Key policy • Protective warning systems for railways • The duty free allowance under Baggage Rules is increased from announcements Rs 25,000 to Rs 35,000 for person of Indian origin and Rs • Specific road construction 12,000 to Rs 15,000 for children upto 10 years of age • Aircraft machineries • New leases of aircrafts Fiscal and • Exemption from Countervailing Duty (CVD) is provided economic review • Iron ore plants retrospectively to foreign going vessels from 1 March 2011 to • Steel coating material 16 March 12 • Textile machinery Snapshot of tax • Specific medical devices like stents proposals • LED and LCD TV • Mobiles • Life saving drugs, etc Direct tax proposals • Export duty on chromium ore is enhanced from Rs 3,000 per tonne to 30% ad valorem Indirect tax • Method of computation of education cess and secondary & proposals higher education cess is simplified to avoid computation of such cesses twice Contact us
  • 14. Overview of the Union Budget 2012-13 14 Rates of income - taxes Foreword Personal tax Corporate tax • Personal income-tax slabs proposed to be revised as under: • No change in corporate tax rate Key policy • No change in Minimum Alternate Tax (MAT) rate (18.5%) announcements Existing Slab Revised Slab (Rs) (Rs) Tax rate (%) • No change in surcharge for domestic companies (5%) • No change in surcharge on foreign companies (2%) Upto 180,000 Upto 200,000 NIL • Marginal relief provisions to continue Fiscal and 180,001 to 500,000 200,001 to 500,000 10 • Education Cess and Secondary and Higher Education Cess at economic review 500,001 to 800,000 500,001 to 1,000,000 20 2% and 1%, respectively to continue • No change with respect to excluding Education Cess and Above 800,000 Above 1,000,000 30 Secondary and Higher Cess on tax deducted or collected at Snapshot of tax source, in case of domestic companies and other resident proposals persons • Minimum exemption limit for women changed from Rs • Concessional rate of 15% for dividend received from foreign 190,000 to Rs 200,000 (the category of women below the age subsidiary has been extended by 1 more year of 60 years has been removed) Direct tax • Limits remain unchanged for senior citizens (age of 60 years Securities Transaction Tax (STT) proposals and above but less than 80 years) at Rs 250,000 • STT payable by purchaser and seller in respect of delivery • Limits remain unchanged for very senior citizen (age of 80 based transaction for equity shares in company / units of years and above) at Rs 500,000 equity oriented fund entered into through a recognised stock Indirect tax • Education Cess and Secondary and Higher Education Cess at exchange reduced from 0.125% to 0.1% proposals 2% and 1% respectively to continue Contact us
  • 15. Overview of the Union Budget 2012-13 15 MAT Alternate Minimum Tax (AMT) to be levied on all Foreword persons, other than companies • It is proposed to widen the scope of MAT provision and levy MAT to companies which prepare their profit and loss • It is proposed to widen the scope of AMT and include all accounts in accordance with provisions of the Act governing class of assesses (other than companies) under the ambit of Key policy such companies such as Insurance companies, Banking AMT provisions who are claiming deductions vide chapter announcements companies or Companies engaged in the generation or supply VI-A under the heading C-deduction in respect of certain of electricity, etc incomes (i.e. Sections 80H to 80RRA, other than Section 80P) or under Section 10AA of the Income Tax Act, 1961 (IT Act) • It is also proposed that Book profit is to be increased by the Fiscal and amount standing in the revaluation reserve relating to the economic review revalued asset which has been retired or disposed, if the same • The proposed provisions shall not apply to an individual or a is not credited to the profit and loss account Hindu Undivided Family (HUF) or an association of persons (AOP) or a body of individuals (BOI) (whether incorporated or not) or an artificial juridical person if the Snapshot of tax • This amendment will take effect from Assessment Year (AY) adjusted total income (i.e. total income as increased by the proposals 2013-14 (FY 2012-13) deduction under chapter VI-A, as mentioned above and Section 10AA) of such person does not exceed Rs 2 million Direct tax • Tax credit in respect of AMT paid would continue to be proposals available for a period of subsequent 10 AYs • This amendment will take effect from AY 2013-14 (FY 2012- Indirect tax 13) proposals Contact us
  • 16. Overview of the Union Budget 2012-13 16 Removal of cascading effect of Dividend Distribution Expenditure on skill development project Foreword Tax (DDT) • A new provision (Section 35CCD) is proposed to be • To remove the cascading effect of DDT in multi-tier introduced in the IT Act to allow weighted deduction of corporate structure, it is proposed that a company (holding 150% of the expenses (not being expenditure in the nature of company) receiving dividend from it Indian subsidiary where: cost of any land or building) incurred on skill development Key policy - such Indian subsidiary has paid DDT on the dividend projects in manufacturing sector announcements paid to the holding company; - can take credit of the DDT that the Indian • The eligible projects for this weighted deduction shall be subsidiary has paid while distributing dividend in the notified by the Board in accordance with the prescribed Fiscal and same year guidelines economic review - additional condition that the holding company should • This amendment will take effect from AY 2013-14 (FY 2012- not be a subsidiary of any other company has been 13) removed. • The proposed amendment will take effect from 1 July 2012 Snapshot of tax Weighted deduction to in- house scientific research proposals Expenditure on Notified Agricultural extension • Under Section 35(2AB), weighted deduction of 200% for projects expenditure (not being in the nature of cost of any land or • A new provision (Section 35CCC) is proposed to be building) incurred on in-house research and development Direct tax introduced in the IT Act to allow weighted deduction of facilities, have been extended for a further period of 5 years proposals 150% of the expenditure incurred on notified agricultural i.e. up to 31 March 2017 extension projects • This will take effect from AY 2013-14 (FY 2012-13) Indirect tax • The eligible projects for this weighted deduction shall be proposals notified by the Board in accordance with the prescribed guidelines • This amendment will take effect from AY 2013-14 (FY 2012- 13) Contact us
  • 17. Overview of the Union Budget 2012-13 17 Investment linked incentives Exemption in respect of income received by certain Foreword foreign companies • Investment linked deductions proposed to be extended to the following businesses commencing operations on or after 1 • Exemption is provided to foreign companies in respect of any April 2012: income received by it in India in Indian currency on account Key policy - setting up and operating of an inland container depot of sale of crude oil to any person in India subject to specified announcements - a container freight station conditions - bee-keeping and production of honey and beeswax Extension of sunset clause - power companies - setting up and operating a warehousing facility for storage of sugar • The terminal date of availing deduction for the undertaking Fiscal and • Weighted deduction of 150% of the capital expenditures (as engaged in business of generation and distribution of power, economic review against current 100% deduction) proposed to be allowed to transmission and distribution of power by laying network of the following businesses commencing operations on or after 1 transmission and distribution lines, undertaking renovation or April 2012: modernization of existing distribution lines is extended from Snapshot of tax - setting up and operating a cold chain facility 31 March 2012 to 31 March 2013 proposals - setting up and operating a warehousing facility for storage of agricultural produce Additional depreciation to power companies - building and operating a hospital with at least one • It is proposed to extend the benefit of additional depreciation Direct tax hundred beds for patients to taxpayers engaged in the business of generation or proposals - developing and building a housing project under a generation and distribution of power scheme for affordable housing - production of fertilizers • This amendment will take effect from AY 2013-14 (FY 2012- • This amendment will take effect from AY 2013-14 (FY 2012- 13) Indirect tax 13) proposals • Investment linked deduction would continue to be available to hotel owners where it owns the hotel but the operation of such hotel is transferred to another person. This amendment will take effect retrospectively from AY 2011-12 (FY 2010-11) Contact us
  • 18. Overview of the Union Budget 2012-13 18 Computation of tonnage income Thresholds for tax audit Foreword • The following amendment has been proposed for calculation • Threshold for tax audit is proposed to be revised as under, from of tonnage income of a qualifying ship and will take effect AY 2013-14 (FY 2012-13) from AY 2013-14 (FY 2012-13) Existing Revised Key policy Audit under threshold threshold announcements (Rs) (Rs) Qualifying Existing amount Proposed 44AB - Tax audit for persons 6 million 10 million ship having of daily tonnage amount of daily carrying on business net tonnage income tonnage income 44AB - Tax audit for persons Fiscal and 1.5 million 2.5 million carrying on profession economic review Rs 46 for each 100 Rs 70 for each 100 up to 1,000 tons tons exceeding 1,000 Rs 460 plus Rs 35 for Rs 700 plus Rs 53 for • The due date for furnishing the tax audit report is aligned with but not more than each 100 tons each 100 tons the due date for filing the tax return Snapshot of tax 10,000 exceeding 1,000 tons exceeding 1,000 tons proposals Rs 3,610 plus Rs 28 Rs 5,470 plus Rs 42 Thresholds for applicability of tax on presumptive basis exceeding 10,000 for each 100 tons for each 100 tons but not more than 25,000 exceeding 10,000 exceeding 10,000 • For the purpose of presumptive taxation under Section 44AD, tons tons threshold limit of total turnover or gross receipts is proposed to Direct tax Rs 7,810 plus Rs 19 Rs 11,770 plus Rs 29 be increased from Rs 6 million to Rs 10 million for each 100 tons for each 100 tons proposals exceeding 25,000 exceeding 25,000 exceeding 25,000 • This amendment will take effect from AY 2013-14 (FY 2012-13) tons tons. • Further, the following persons are proposed to be carved out of presumptive taxation : - professionals covered under Section 44AA Indirect tax proposals - persons earning income in the nature of commission or brokerage - persons carrying on agency business • This amendment will take effect retrospectively from AY 2011- Contact us 12 (FY 2010-11)
  • 19. Overview of the Union Budget 2012-13 19 Clarification in relation to amalgamation and Share premium in excess of Fair Market Value (FMV) Foreword demerger involving subsidiary to be treated as income • Even where a subsidiary company amalgamates with its • It is proposed to insert a new provision (Section 56(2)(viib)) holding company, in order to obtain a tax neutral treatment of where any consideration received for issue of shares is in the amalgamation in the hands of such shareholder (i.e. excess of face value of shares, then the consideration Key policy holding company), there was a requirement to issues of shares exceeding FMV of the shares shall be chargeable to income announcements to shareholders of the amalgamating company (i.e. the tax under the head Income from other sources subsidiary), which was impossible to achieve as the holding • The FMV shall be higher of the following: company could not issue shares to itself. This requirement has – FMV, as per the prescribed guidelines; or Fiscal and been dispensed with. – FMV as may be substantiated by the issuing company economic review • Similarly, in case of a demerger, where demerged company is • This provision is proposed to be applicable only for a subsidiary company and the resulting company itself is the companies in which public are not substantially interested (i.e. holding company, the requirement relating to issues of shares closely held companies). Further, this provision is not by such resulting company (i.e. holding company) to the applicable to venture capital undertaking, with respect to Snapshot of tax demerged company (i.e. subsidiary company) has been shares issued to venture capital company / fund proposals dispensed with • This will take effect from AY 2013-14 (FY 2012-13) • This amendment will take effect from AY 2013-14 (FY 2012- 13) Exemption of any sum or property received by an HUF from its members Direct tax Provisions relating to Venture Capital Fund (VCF) or proposals Venture Capital Company (VCC) • It is proposed to exclude any sum or property received by an HUF from its members without consideration or inadequate • Sectoral restrictions on business of Venture Capital consideration, from taxation Undertaking (VCU) to claim exemption from income by • The proposed new provision will take effect retrospectively Indirect tax VCF or VCC have been done away with i.e. pass through from 1 October 2009 proposals status is accorded for all investments by VCF or VCC • It is also proposed that income accruing to VCF or VCC shall be taxable in the hands of investor or accrual basis with no deferral Contact us • This amendment will take effect from AY 2013-14 (FY 2012- 13)
  • 20. Overview of the Union Budget 2012-13 20 Clarification in connection with cost to previous Relief from long term capital gains tax to an Foreword owner individual or an HUF on sale of a residential property • It is proposed that in the following transactions the cost of • A new provision (Section 54GB) is proposed to be capital assets in the hands of the recipient would be equal to introduced to allow relief from long term capital gains on sale the cost of such assets in the hands of the previous owner of residential property (house or a plot of land) whereby the Key policy (transferor): sale consideration is reinvested in the equity of a Small announcements Enterprise (as per the Micro, Small and Medium Enterprises - transfer of capital assets in course of demutualisation/ corporatisation of a recognised Act, 2006) and which is utilised by such company for the stock exchange as a result of which AOP/BOI purchase of new plant and machinery Fiscal and (previous owner) is converted into a company • The above relief is available subject to fulfillment of certain economic review (recipient) prescribed conditions such as lock in period for 5 years for - transfer of capital assets/ intangible assets on investment and assets purchased, minimum shareholding conversion of sole proprietary concern / firm requirement, time frame for utlisation of subscription amount (previous owner) into a company (recipient) by the company, etc Snapshot of tax • The said exemption applies to any transfer of a residential • This amendment will take effect retrospectively from AY property made before 31 March 2017 proposals 1999-00 (FY 1998-99) • This amendment will take effect from AY 2013-14 (FY 2012- 13) FMV to be considered as full value of consideration Direct tax proposals • A new provision is proposed to be inserted (Section 50D) Reference to Valuation Officer under which FMV of capital asset (on the date of transfer) is to be considered as full value of consideration for • The powers of Assessing officer has been widened with transactions where sales consideration is not ascertainable or respect to cases to be referred to a Valuation Officer. As per Indirect tax cannot be determined the amended provisions, the Assessing officer could now proposals • This amendment will take effect from AY 2013-14 (FY 2012- refer a case to Valuation Officer even when FMV is lower 13) than stated by the tax payer (as against earlier provisions where the reference could only be made if FMV was higher) • The proposed provision will take effect from 1 July 2012 Contact us
  • 21. Overview of the Union Budget 2012-13 21 Transfer of capital assets not situated in India Transfer of capital assets not situated in India Foreword • It is proposed to tax indirect transfer of capital assets in India • A validation clause has been introduced whereby any notice by inserting the following deeming / clarificatory sent or purported to have been sent, taxes levied, demanded, amendments: assessed, etc with regard to such transfers is deemed to have – definition of capital asset to include controlling been valid notwithstanding anything contained in any Key policy interest in an Indian company. It states that any rights judgement, decree or order. announcements in or in relation to Indian company, including rights of management of control or any other rights Reassessment of income in relation to any asset whatsoever will deemed to be regarded as capital located outside India Fiscal and asset – definition of transfer to specifically include economic review • To reassess the income in relation to any asset located outside disposition or parting with any interest directly or India (including financial interest in any entity), which has indirectly irrespective of whether such transfer is escaped assessment, the following amendments are proposed: effected or dependent upon or flowing from transfer Snapshot of tax of shares of company registered or incorporated – time limit for issue of notice for reopening of an proposals outside India. assessment to be increased to 16 years – the term through under in Section 9(1)(i) to mean – income shall be deemed to have escaped assessment and include by means of, in consequence of or by where a person is found to have any asset (including reason of financial interest in any entity) located outside India Direct tax – any share or interest in a company or entity registered – the reassessment provisions are procedural in nature proposals or incorporated outside India is deemed to be and will take effect from 1 July 2012 for enabling situated in India if the share or interest derives, reopening of proceedings for an AY prior to this directly or indirectly its value substantially from the date. It is further proposed that the extended period Indirect tax assets located in India of 16 years for initiating reassessment will also apply proposals – withholding tax provisions under Section 195 applies to any AY beginning on or before 1 April 2012 /to be applicable to non-residents irrespective of whether non-resident has a residence or place of business or business connection in India or any other presence in India Contact us • This amendment will take effect retrospectively from AY 1962-63 (FY 1961-62)
  • 22. Overview of the Union Budget 2012-13 22 General Anti-Avoidance Rules (GAAR) Foreword • GAAR (under Chapter X-A) is a broad set of provisions • Where GAAR is triggered, the consequences could be as which seek to tax an impermissible avoidance follows: arrangement(which may be a step, a part or whole of an – disregarding or combining any step of the arrangement and hereinafter referred to as Transaction) arrangement Key policy whose main purpose is to obtain a tax benefit and: – ignoring the arrangement for the purpose of taxation announcements – creates rights or obligation which wouldnt arise law between persons dealing at arms length; or – disregarding or combining any party to the – results in the misuse or abuse of the provisions of the arrangement Fiscal and Act in any way; or – reallocating expenses and income between the parties economic review – lacks commercial substance either wholly or in part; to the arrangement or – relocating place of residence of a party, or location of – is entered or carried out in a manner which would a transaction or situs of an asset to a place other than not be employed for bonafide purposes provided in the arrangement Snapshot of tax • Specific provisions are inserted which describes the – considering or looking through the arrangement by proposals circumstances under which transaction is deemed to lack disregarding any corporate structure commercial substance – re-characterizing equity into debt, capital into revenue • Onus lies with the tax payer to prove that the main purpose etc. of the arrangement was not to obtain tax benefit • It is also provided that a scheme for regulating the condition Direct tax and the manner of application of GAAR provisions would be proposals prescribed • This will take effect from AY 2013-14 (FY 2012-13) Indirect tax proposals Contact us
  • 23. Overview of the Union Budget 2012-13 23 Tax treaty related amendments Expansion of definition of Royalties Foreword • The following amendments are proposed in relation to • The definition of royalty has now been amended to clarify applicability of provisions under Double Taxation Avoidance and include the transfer of any right for use or right to use a Agreement or an agreement with Government of foreign computer software (including granting of a licence), country or specified territory outside India (together referred irrespective of the medium through which such right is Key policy to as treaty) transferred announcements • submission of Tax Residency Certificate (TRC), containing • Further, royalty would also cover consideration in respect of prescribed particulars, made a necessary condition for availing any right, property or information whether or not: treaty benefits. – possession or control of such right, property or Fiscal and • Treaty benefits cannot be availed where provisions of information is with the payer; economic review Chapter-X –A i.e. GAAR are invoked – such right, property or information is used directly by • This amendment will take effect from AY 2013-14 (FY 2012- the payer; and 13) – the right, property or information is located in India. • Further any meaning assigned, through notification, to a term • The term process which has now been specifically defined to Snapshot of tax used in a treaty but not defined (in the IT Act or the said include transmission by satellite (including up-linking, proposals treaty ) is proposed to be effective from the date on which the amplification, conversion for down-linking of any signal), relevant treaty came into force cable, optic fibre or by any other similar technology, whether • This amendment will take effect retrospectively from 1 or not such process is secret. October 2009 (for Section 90) and 1 June 2006 (for Section Direct tax • The above clarifications have been introduced with 90A) proposals retrospective effect from 1 June 1976 Indirect tax proposals Contact us
  • 24. Overview of the Union Budget 2012-13 24 Tax Deduction at Source (TDS) Foreword Section Proposed Amendment TDS shall not be required on any interest payable: a) to an individual or a HUF, who is resident in India Section 193 of the IT Act- TDS b) on any debenture issued by a company in which the public are substantially interested Key policy from payment of interest on c) where the aggregate amount of interest paid during a FY does not exceed Rs 5,000 and the interest is announcements debentures paid by account payee cheque. This amendment will take effect from 1 July 2012. Payments made to entertainer is subject to TDS. The rate of TDS for all payments covered under Section 194E Section 194E of the IT Act - Fiscal and of the IT Act is proposed to be increased to 20% TDS from payment to non- economic review resident entertainer This amendment will take effect from 1 July 2012. Any remuneration or fees or commission payable to a director of a company, other than those on which tax is Section 194J of the IT Act - deductible under Section 192, shall be liable for TDS under the provisions of Section 194J TDS from payment to director Snapshot of tax This amendment will take effect from 1 July 2012. proposals Section 194LA of the IT Act - Increase in exemption limit from Rs 100,000 to Rs 200,000 Exemption on enhanced compensation This amendment will take effect from 1 July 2012 Any person responsible for paying any sum to a resident transferor by way of consideration for transfer of any Direct tax immovable property (other than agricultural land), shall deduct an amount equal to 1% of such sum as income- proposals Section 194LAA – TDS from tax thereon. The requirement to deduct TDS applies only where the consideration exceeds the prescribed payment for immovable threshold. Also, withholding tax proof is made a pre-condition for the registering office to register the property. property in certain cases This amendment will take effect from 1 October 2012 Indirect tax Tax shall be charged at the rate of 5% on any income of a non-resident (not being a company) or a foreign proposals Section 194LC- TDS from company by way of interest on foreign current borrowings from sources outside India between 1 July 2012 and 1 July 2015 by specified companies. payment of interest to a non- resident by an Indian company This amendment will take effect from 1 July 2012 Contact us
  • 25. Overview of the Union Budget 2012-13 25 Tax collection at source (TCS) Cases where tax is not deducted at source due to Foreword bonafide reasons • TCS proposed to be introduced on the following: • It is proposed to dilute the responsibility of the assessee in TCS on TCS Rate default by providing that a person, who fails to deduct tax on (%) the sum paid to a resident shall not be deemed to be an Key policy assessee in default in respect of such tax if such resident: Sale of certain minerals 1 announcements − has duly furnished his return of income Cash sale of bullion and jewellery - if sale consideration exceeds Rs 0.2 million 1 − has taken into account such sum for computing income in such return of income; and Fiscal and • The proposed new provision will take effect from 1 July 2012 − has paid the tax due on the income declared by him economic review in such return of income Liability to pay advance tax in case of non deduction • Further, the person is required to furnish a certificate to this of tax effect from a Chartered Accountant in the prescribed form • Similar changes are also introduced in relation to TCS Snapshot of tax • It is proposed that where a person receives any income • The proposed provision will take effect from 1 July 2012 proposals without TDS or TCS, he shall be liable to pay advance tax • It is also proposed that where the payer fails to deduct the with respect to such income. This amendment will take effect whole or any part of the tax on the payment made to a retrospectively from AY 2012-13 (FY 2011-12) resident and he is not deemed to be an assessee in default (where the payee has paid the tax on such payment – as Direct tax explained above), such payment will be allowed as a proposals deduction. This will take effect from AY 2013-14 (FY 2012- 13) Indirect tax proposals Contact us
  • 26. Overview of the Union Budget 2012-13 26 Deductions under Chapter VIA for individual and HUF Deductions under Chapter VIA in relation to donation Foreword – Effective from AY 2013-14 (FY 2012-13) payment Deduction for life insurance premium • Deduction in respect donation (Section 80G and 80GGA) in excess of Rs 10,000 is proposed to be allowed only if such • Deduction in respect of premium paid on life insurance policy sum is paid by any mode other than cash Key policy issued on or after 1 April 2012 is proposed to be allowed announcements provided premium payable for any of the years does not exceed 10% (presently 20%) of actual capital sum assured Eligibility conditions for exempt life insurance policies (Section 80C). Corresponding amendment brought in Fiscal and Section 10D • Any sum received under life insurance policy issued on or economic review Deduction for preventive health check-up after 1 April 2012 will be exempt provided premium payable for any of the years during the term of the policy does not exceed 10% (presently 20%) of the actual capital sum assured • Under Section 80D, a deduction of Rs 5,000 is allowed for Snapshot of tax expenditure incurred during the year by a tax payer on proposals account of preventive health check-up of self, spouse, dependent children or parents • The above deduction to be within the overall limits of Rs Direct tax 15,000 / Rs 20,000 prescribed under the said Section of the proposals Act Deduction for interest on savings account Indirect tax proposals • Deduction upto Rs 10,000 proposed to be allowed in respect of interest on deposits (not being time deposit) in a savings account with a banking company, co-operative society engaged in banking business and post office (Section Contact us 80TTA)
  • 27. Overview of the Union Budget 2012-13 27 Filing of income tax return in relation to assets Dispute Resolution Panel (DRP) Foreword located outside India • The Assessing Officer shall now have the right to appeal to • It is proposed to make it compulsorily for a resident taxpayer the Appellate Tribunal against the order passed in pursuance to file a return of income (even if his taxable income is below of directions of the DRP in respect of an objection filed on or the basic exemption limit) if any one of the following is after 1 July 2012 Key policy triggered: • It is further clarified that the power of the DRP to enhance announcements - the taxpayer has any asset located outside India, the variation shall include and shall always be deemed to have including any financial interest in any entity outside included the power to consider any matter arising out of the India; or assessment proceedings relating to the draft assessment order. Fiscal and - the taxpayer has signing authority in any account This power to consider any issue would be not withstanding economic review located outside India that such matter was raised by the eligible assessee or not. • This amendment will take effect retrospectively from AY This amendment will take effect retrospectively from AY 2009-10 (FY 2008-09) 2012-13 (FY 2011-12) Snapshot of tax proposals Direct tax proposals Indirect tax proposals Contact us
  • 28. Overview of the Union Budget 2012-13 28 Extension of time for completion of assessments and reassessments Foreword Proceedings under Section Current time frame Proposed time frame 143 – Scrutiny Assessment 21 months from end of AY 24 months from end of AY 143 & 92CA – Scrutiny Assessment & Transfer 33 months from end of AY 36 months from end of AY Key policy Pricing Assessment announcements 148 – Income Escaping Assessment 9 months from end of FY in which notice issued 12 months from end of FY in which notice issued 148 & 92CA - Income Escaping Assessment & 21 months from the end of FY in which notice 24 months from end of FY in which notice issued Transfer Pricing Assessment issued Fiscal and 250 – Appellate Proceedings 9 months from end of FY in which notice issued 12 months from end of FY in which notice issued economic review 254 – Appellate Tribunal 263 – Revision of orders prejudicial to revenue 250 – Appellate Proceedings 21 months from end of FY in which notice issued 24 months from end of FY in which notice issued Snapshot of tax 254 – Appellate Tribunal proposals 263 – Revision of orders prejudicial to revenue 92CA – Transfer Pricing Direct tax proposals Indirect tax proposals Contact us
  • 29. Overview of the Union Budget 2012-13 29 Penalties Foreword Section Existing Provisions Proposed Amendment Explanation 7 to Section 271 - Failure to furnish returns , Specified domestic transaction will be covered. Consequent amendment to be made to comply with notices, Covers international transaction only Section 271G and Section 271AA also concealment of income Key policy (wef FY 2012-13) announcements Section 271 AA - Failure to keep and maintain information Provides penalty only if there is a Additionally, penalty shall be levied : and document in respect of failure to keep and maintain any • if any person fails to report the international transaction or specified domestic international transaction information and document as required transaction, or Fiscal and (wef 1 July 2012) by Section 92D(1) and 92D(2) • maintains or furnishes an incorrect information or document economic review The provision covers the cases of Section 271 AAA- undisclosed search which have been initiated This penalty is applicable upto 1 July 2012. A new Section 271AAB has been proposed income in the case of search under Section 132 on or after 1 June hereinafter 2007 Snapshot of tax Penalty shall be imposable, where search has been initiated on or after 1 July 2012: proposals (a) at the rate of 10% of the undisclosed income of the specified previous year, if taxpayer admits during the course of search the undisclosed income Provides to charge penalty at the rate Section 271 AAB (New Section) of 10% of the undisclosed income of (b) at the rate of 20 % of the undisclosed income of the specified previous year , if Direct tax the specified previous year taxpayer does not admit the undisclosed income at the time of search but at the time of proposals filing return after search (c) in other cases penalty may range from 30% to 90% of undisclosed income Indirect tax proposals Contact us
  • 30. Overview of the Union Budget 2012-13 30 Penalties - contd Foreword Section Existing Provisions Proposed Amendment A person shall be liable to pay a sum between Rs 0.01 million to Rs 0.1 million if he fails to deliver or delivers an incorrect information under Section 200(3) or 206C(3) of the IT Act Key policy Section 271 H- Penalty for announcements failure to furnish TDS/TCS However, no penalty shall be levied if the person proves that he had returns (New Section wef 1 delivered the required statement within one year of the period July 2012) prescribed under the said Sections Similar amendment shall also be made to Section 273B Fiscal and economic review Section 272 A - Penalty for Section 272A (2)(k) provides for the penalty of Rs 100 A proviso is proposed to be inserted after Section 272A(2)(k) to failure to answer questions, per day to be levied in case a person fails to deliver the provide that no penalty shall be levied under this Section for late furnish statements , etc. (wef statement (i.e. TDS and TCS returns) within the time filing of TDS /TCS returns 1 July 2012) prescribed in Section 200(3) or 206C(3) Snapshot of tax proposals Direct tax proposals Indirect tax proposals Contact us
  • 31. Overview of the Union Budget 2012-13 31 Unexplained cash credits Foreword • It is proposed to amend the existing provisions with respect to unexplained cash credits to provide that any explaination offered by a closely held company with regard to credit of share application money, share capital, share premium or any Key policy such amount shall be deemed to be non-satisfactory unless: announcements − the resident person whose name credit has been recorded offers explanation about nature and source of such credit; and Fiscal and − tax authorities find such explanation to be economic review satisfactory • This will take effect from AY 2013-14 (FY 2012-13) Assessment of charitable organization in case Snapshot of tax commercial receipts exceed the specified threshold proposals • It is proposed to provide that any charitable trust or institution registered under Section 12AA and 10(23C) will not get benefit of tax exemption in the year in which its Direct tax receipts from commercial activities exceed the threshold proposals whether or not the registration or approval granted or notification issued is cancelled, withdrawn or rescinded. • This will take effect retrospectively from AY 2009-10 (FY Indirect tax 2008-09) proposals Contact us
  • 32. Overview of the Union Budget 2012-13 32 Transfer pricing Foreword - The APA has binding force only on the taxpayer with Introduction of advance pricing agreement (wef 1 whom it is signed and in respect of the relevant July 2012) international transaction vis-à-vis the jurisdictional commissioner of income-tax • An APA is an agreement between the taxpayer and the taxing Key policy authority announcements - The APA shall not be binding/annulled in the following instances: • It will enable determination of the arm’s length price or specify the manner/ methodology in which arm’s length price • Change in Law shall be determined Fiscal and economic review • If the taxpayer has signed the APA with the • The agreement is CBDT based on misrepresentation of facts. . CBDT will annul in this case by way of an order - valid for not more than five years Snapshot of tax - On conclusion of APA, the taxpayer is required to file proposals - available to all taxpayers falling within the ambit of Indian revised return(s) with the Assessing Officer who has to TP legislation complete the assessment/reassessment within one year from the end of the FY in which the revised return is filed - The APA enabling provisions are imported from the DTC Direct tax and detailed rules and forms are expected to be issued by proposals the Government shortly - APAs to be entered by the CBDT with the approval of Central Government Indirect tax proposals - Ability to use any method other than one of the prescribed 5 methods available Contact us
  • 33. Overview of the Union Budget 2012-13 33 International transactions (retrospective effect from Intangibles (retrospective effect from 1 April 2002) 1 April 2002) Foreword • Intangible property has been specifically explained. Other • The definition of international transactions has been amended than marketing, technical, artistic, data processing, engineering to : related intangibles it includes intangibles related to: Key policy - elaborate on tangible, intangible property, services, - “customers” like customer lists, open purchase orders; announcements financing transactions; and - “human capital” like trained & organized work force; - “location” like leasehold interests and also mentions and - include transactions of business restructuring or lastly it also has an open item to include reorganization, covered; whether or not it has bearing on - “any item that derives its value from intellect content Fiscal and the profit, income, losses or assets of such enterprises at rather than its physical attributes economic review the time of the transaction or at any future date • This kind of a broad definition leaves the tax authority to Specified domestic transactions (wef 1 April 2013) construe significant items as intangibles and this could have a Snapshot of tax major impact on the characterization of entities when • Specified domestic transactions’ broadly comprise conducting a function, asset and risk analysis of the proposals transactions entered into by domestic related parties or by an international transaction undertaking with other undertakings of the same entity for the purposes of section 40A, Chapter VI-A, section 10AA Direct tax and which exceed a monetary threshold of Rupees 5 crore proposals during a FY Indirect tax proposals Contact us
  • 34. Overview of the Union Budget 2012-13 34 Reduction in 5% variation and disenabling standard Power of the transfer pricing officer (TPO) Foreword deduction • The TPO is empowered to determine Arm’s Length Price of an • Currently, the arm’s length range is based on a uniform international transaction noticed by him in the course of tolerance band of 5% around the transfer price. However, the proceedings before him, even if the said transaction was not Government had amended proviso to sub section (2) of referred to him by the Assessing Officer. Although this Key policy amendment takes effect retrospectively from 1st June 2002, section 92C in the Finance Act, 2011, whereby the announcements reopening of any proceeding would not be done only on account Government was to notify an allowable variation for different business activities and types of transactions. The current 5% of such an amendment. The proposed changes could have band has been replaced with 3% ramifications where taxpayer has entered in to free of cost transactions (i.e. loan guarantee or extended short term liquidity Fiscal and to its associated enterprises) and has not charged any price for economic review • There were two litigation issues around the 5% range. One was that it was not allowed as a standard deduction by the tax such services and consequently not reporting it as international transactions in its disclosure authorities and the other was that new proviso of the variation was being applied retrospectively for AYs prior to Snapshot of tax the amendment date of 1 October 2009 • The Assessing Officer cannot under section 147 or section 154 proposals enhance the assessment or reduce a refund in respect of • Major tribunals for both these issues had ruled in favour of completed proceedings the tax payer. However, the proposed amendments overturn these tribunal decisions and do not permit the 5% range as a Direct tax standard deduction and also clarifies that the new provision proposals disabling the standard deduction will be applicable for all assessment proceedings pending before the AO as on 1 October 2009. This would mean that even for AYs prior to 2010-11 pending before the AO as on 1 October 2009 the Indirect tax new provisions of the variation would prevail and thereby proposals standard deduction not permitted to the tax payers. However, the proposed amendment limits the tax authorities ability to re-open or rectify assessments concluded before 1 October 2009 Contact us
  • 35. Overview of the Union Budget 2012-13 35 Stringent penalties for non reporting international Foreword transactions or specified domestic transaction • Section 271AA has been amended to levy penalty at the rate of 2% of the value of the international transaction or specified domestic transaction, if the taxpayer Key policy announcements - fails to maintain prescribed documents or information or; - fails to report such transaction which is required to be Fiscal and reported, or; economic review - maintains or furnishes any incorrect information or documents Snapshot of tax - This would be in addition to penalties in section proposals 271BA and 271G. This amendment will take effect from 1 July, 2012 Filing of accountants report Direct tax proposals • Filing of Form 3CEB under section 92E for non-corporate taxpayer revised to 30 November Indirect tax proposals Contact us
  • 36. Overview of the Union Budget 2012-13 36 Service Tax - Betting, gambling or lottery Foreword - Entry to Entertainment Events and Access to Rate change – effective 1 April 2012 Amusement Facilities - Transmission or distribution of electricity • The rate of service tax is being restored to the statutory rate - Specified services relating to education of 12%. This is aligned to the excise duty rate. The earlier - Services by way of renting of residential dwelling for use Key policy notification reducing the rate to 10% has been rescinded. as residence announcements - Financial sector • Consequent changes have also been made in composition - Service relating to transportation of passengers rates such as works contract services - Service relating to transportation of goods Fiscal and - Funeral, burial, crematorium or mortuary services Taxation of Services based on negative list approach economic review – effective from a date to be notified including transportation of the deceased • There is paradigm shift in the way services are proposed to be • Presently the word ‘service’ has not been defined. The taxed in future. Taxation will be based on what is popularly Finance Bill 2012 proposes to is specifically define the word Snapshot of tax ‘service’. Service shall also include certain activities that have proposals known as ‘Negative List of Services’. been specified as declared services. • Negative list of services covers specified 17 services as under: • If an activity meets the characteristics of a ‘service’ it is Direct tax - Services provided by Government or local authority taxable unless specified in the negative list or otherwise proposals - Services provided by Reserve Bank of India exempted by a notification. - Services by a foreign diplomatic mission located in India - Services relating to agriculture • Most of 88 exemptions to be rescinded or merged in a mega - Trading of goods exemption notification. Proposed exemptions under Mega Indirect tax - Processes amounting to manufacture or production of Notifications shall include services provided to specified proposals goods organisations, temporary transfer of copyrights in - Selling of space or time slots for advertisements other cinematographic films, etc. than advertisements broadcast by radio or television - Access to a road or a bridge on payment of toll charges • A new charging section is proposed to be introduced to levy Contact us service tax on all services, other than those in the negative list, provided or agreed to be provided in the taxable territory by one person to another.
  • 37. Overview of the Union Budget 2012-13 37 • The existing provisions and charging sections will cease to Service Tax Rules Foreword apply after the new provisions become effective but will remain relevant in respect of services provided prior to the • With the proposed introduction of the Place of Provision of applicability of the new provisions Services Rules, 2012 and the proposed omission of the Export of Services Rules, 2005 (as amended) a transaction will qualify Key policy Other changes proposed consequent to negative list as export when it meets following requirements: approach – effective from a date to be notified announcements - the service provider is located in Taxable territory CENVAT Credit Rules - service recipient is located outside India - service provided is a service other than in the negative Fiscal and • In the light of negative list it is proposed that the service- list economic review specific references in the CENVAT Credit Rules will be - the place of provision of the service is outside India and replaced by broad descriptions retaining the essence of the - the payment is received in convertible foreign exchange existing provisions Place of Provision of Services Rules, 2012 Snapshot of tax • The definition of output service shall include exports of proposals service where payment is not received within the period • The Finance Bill 2012 proposes to introduce the Place of specified under the RBI requirements. Thus the benefit of not Provision of Services Rules, 2012. The draft rules have been reversing the input tax credits for exports without treating released for comments and feedback for the time being. The them exempt will continue for the period specified for essence is that a service should be taxed in the jurisdiction of Direct tax realizing export proceeds consumption proposals • In terms of the proposed amendment to the valuation rules • It is proposed that these Rules will replace the existing Export services shall exclude interest on (a) deposits; and (b) delayed of Services Rules, 2005 and the Taxation of Services Indirect tax payment of any consideration for the provisions made (Provided from Outside India and Received in India) Rules, proposals (services/goods). This will keep such amounts outside the 2006 value and thus not be relevant for reversal of credits under CENVAT Credit Rules • Interest on loans and advances will now be an exempt Contact us income. This will require reversal of credits used for earning such income. Specified provisions have been proposed for such reversal
  • 38. Overview of the Union Budget 2012-13 38 Valuation Rules • Value of service shall exclude interest on (a) deposits; and (b) Foreword delayed payment of any consideration for the provisions made • Negative list will require some reformulations away from (services/goods) service-specific provisions. The abatements available for certain taxable services and composition rate for works Abatements Key policy contract services will undergo change • With the introduction of the negative list approach, changes announcements • Presently for works contract services, value of services is are proposed in the abatements available for services equal to the total amount charged for the contract reduced by involving both goods and services. It is proposed to increase the value of property transferred in goods for State VAT the taxable portion of value and liberalise the input tax Fiscal and purpose. If the value is not so deduced, it is proposed that an credits. Though the taxable portion of services may appear on economic review ad-hoc percentage of the total value as would be allowed as a higher side, but the availability of credits will lead to deduction towards goods. The input tax credit on goods reduction in costs and hence prices for the consumers. This forming part of the property on which VAT is payable shall will result in neutrality of taxes i.e. the burden of taxes will not not be available as they are not used in the provision of raise the cost per se but passed on to the point of Snapshot of tax service. However taxes paid on capital goods and input consumption proposals services will be available SEZ changes • The taxable portion for services involved in supply of food and drinks in a restaurant or as outdoor catering is being • There are no changes proposed in the present Budget. Direct tax raised. The abatement available is being adjusted to allow the However it is proposed that service-specific criterion for proposals industry to utilize credit on capital goods, specified inputs determination of services provided exclusively within the SEZ (other than foods and beverages) and input services shall be taken care at the time of introducing negative list Indirect tax • Value of service shall include any amount realized as • Prior to 1 March 2011 services provided to SEZs were treated proposals demurrage, or by any other name, for the provision of a as exempt services and CENVAT credit had to be reversed service beyond the period originally contracted or in any other under CENVAT Credit Rules. The amendment introduced manner relatable to the provision of service. It shall also with effect from 1 March 2011 has now been made effective include accidental damages due to unforeseen actions not from 10 February 2006. This will neutralize the investigations Contact us relatable to the provision of service or demands for reversal of credits in respect of services provided to SEZs for the past
  • 39. Overview of the Union Budget 2012-13 39 Reverse charge provisions • Rules have to been amended to provide that the ‘date of Foreword payment’ shall be the earlier of, the dates of entry into books • The term ‘taxable territory’ has been defined and only services of accounts or actual credit in the bank account. When there provided in taxable territory will be liable to tax. Any service is change in effective rate of tax or an introduction of new provided in the State of Jammu & Kashmir will not be liable levy between the date of entry in books or actual credit in Key policy to tax. The Place of Supply Rules, 2012 will determine bank, the date of payment shall be the date of actual credit in announcements whether a service is being provided in Jammu & Kashmir the bank account, if the amount is credited through a banking instrument more than four working days after the date of • Where the service provider is located in Jammu & Kashmir such change but the services are provided in taxable territory, the tax will Fiscal and be collected from the service receiver • Best judgement provisions have been introduced where the economic review tax-payer is unable to furnish one or more of the details • A new scheme is proposed to be introduced to ensure proper needed i.e. date of payment or date of invoice or both to collection. For the services of hiring of a motor vehicle determine point of taxation designed to carry passengers, supply of manpower for any Snapshot of tax purpose and works contract both the service provider and CENVAT changes – effective 1 April 2012 proposals service receiver will be considered as persons liable to pay the tax on a predetermined percentage. The scheme can be given • A simplified scheme for refunds is being introduced by effect on enactment; however it is proposed to time it with substituting the earlier provisions under CENVAT Credit Negative List approach as a part of the comprehensive reform Rules. The new scheme does not require correlation between Direct tax exports and input services used in such exports. Any goods or proposals Rules of interpretation services that qualify as inputs or input services will be entitled to be refunded in the ratio of the export turnover to total • Separate principles are proposed to be introduced for turnover. The notification prescribing the detailed manner interpretation of specified description of services and bundled and safeguards will be issued shortly Indirect tax proposals services • Credit on motor vehicles is liberalised and will be allowed Point of Taxation Rules – effective 1 April 2012 other than those falling under tariff heading 8702, 8703, 8704, 8711 and their chassis. The credit of service tax paid on their • Continuous supply of service has been redefined to bring out hiring, insurance and repair will also be allowed Contact us concept with better clarity, namely recurrent nature of services and the obligation for payment periodically or from time-to-time
  • 40. Overview of the Union Budget 2012-13 40 • Credit on goods can now availed without bringing them into • The restrictions of Rs 2 lakh limiting the use of excess service Foreword premises subject to due documentation regarding their tax paid are being omitted allowing unlimited amount of delivery and location permissible adjustments – effective 1 April 2012 • Credit of tax paid by all service receivers on reverse charge is • A common simplified registration format for Central Excise Key policy allowed on the tax payment challan and Service Tax is being placed for public comments, together announcements with further liberalization in registration requirements, • Rules relating to distribution of credits of input services by an particularly centralized registrations – will come into force input service distributer have been amended to ensure after inviting comments from stakeholders scientific allocation to only such units where they have been Fiscal and put to use based on proportion of turnover • A new simplified one page common return with Central economic review Excise: to be called Excise & Service Tax Return (EST for • The rate for CENVAT reversal for taxable/ exempt services/ short) is being introduced. It is also being proposed that the goods has been revised from 5% to 6% cycles for the payment service tax and filing of return should coincide. Assessees paying tax of Rs25 lakh or more in Snapshot of tax Service Tax Rules – effective 1 April 2012 previous year and new assessees other than individuals and proposals firms would be required to make monthly payments and file • Service providers may issue invoice within 30 days from the monthly returns. The periodicity for others would be date completion of taxable service or receipt of any payment quarterly – will come into force after inviting comments from towards value of taxable services whichever is earlier. Banking stakeholders Direct tax or financial institutions may issue an invoice with 45 days of proposals such event Exemption given retrospective effective - effect when the Bill receives the Presidential assent • Presently individuals and firms are allowed to pay service tax on the basis of date of payment for eight specified services. • Exemption provided for the setting up of common facilities Indirect tax The said facility has been extended to all services up to a for treatment and recycling of effluents and solid wastes is proposals turnover of Rs 50 lakh in a financial year provided the taxable made applicable effective 16 June 2005 as against 25 July 2011 turnover did not exceed Rs 50 lakh in the previous financial year. The above limits shall be computed taking into account • Exemption relating to repair of roads is extended for the the turnover of the entity as a whole and not any single earlier period commencing from 16 June 2005 as against 27 Contact us registration July 2009
  • 41. Overview of the Union Budget 2012-13 41 • Service tax exemption is granted with retrospective effect on • It is proposed to introduce Special Audit Provisions Foreword management, maintenance or repair service in relation to non- separately under the Finance Act, 1994 to give comprehensive commercial Government buildings from 16 June 2005 till the powers for such audit relevant for service tax purposes. coming into force of the negative list when such repair will be Presently the same are made available and applicable through exempted by the new mega notification the Central Excise Act Key policy announcements Penalty waiver for Renting of Immovable Property • The period for issue of demands in normal situations is being Service - effect when the Bill receives the raised from 12 months to 18 months Presidential assent • Provisions relating to Settlement Commission under Central • The taxability of Renting of Immovable Property Services had Fiscal and Excise Act are made applicable to Service Tax. On the date of been a subject of litigation. In the matter of Retailers Assn. of economic review the enactment of the Finance Bill, notification containing India v/s Union of India, Honourable Supreme Court, had Service Tax (Settlement of Cases) Rules, 2007 along the lines ruled in October 2011, that litigants should pay 50% of the of Central Excise (Settlement of Cases) Rules, 2007, will come arrears within six months in three equated instalments and for into effect. This should encourage quick settlement of the balance, solvent surety should be furnished to the Snapshot of tax disputes and save the business from the worries of satisfaction of the Jurisdictional Commissioner. It is proposed proposals prosecution in certain situations that penalty may be waived for those taxpayers who pay the service tax due as on the 6 March 2012, in full along with • The periods for filing appeals in service tax are being aligned interest within six months with Central Excise. New limitations will apply to decisions or Direct tax orders passed after the date on which Finance Bill, 2012 proposals Other legislative changes - effect when the Bill receives the Presidential assent (unless specified receives the assent of the President otherwise) • At present in service tax, appeals against the order of Indirect tax • The small scale exemption notification has been amended in Commissioner (Appeals) lie before the Tribunal; whereas in proposals line with Point of Taxation Rules stating that the threshold Central Excise, a revision mechanism is available to hear exemption from service tax would be value of taxable services certain specified matters. It is proposed to introduce revision charged in the first consecutive invoices valuing up to Rs 10 mechanism for service tax, to the extent applicable lakh. Presently the threshold is linked to sum total of first Contact us consecutive receipts – effective 1 April 2012 • Prosecution for non-issue of invoice within time specified would be invoked only if the same is done knowingly with the intent to evade payment of service tax
  • 42. Overview of the Union Budget 2012-13 42 Central Excise • For units undertaking substantial expansion in the state of Foreword Jammu and Kashmir, the exemption period of 10 years would Rate be computed from the date of commencement of commercial • Rate of excise duty on non petroleum products is increased production from the expanded capacity. This amendment has from 10% to 12% a retrospective effect Key policy • Merit rate of excise duty is increased from 5% to 6% • Packing, repacking, labeling or relabeling of containers, announcements including declaration or alteration of Retail Sale Price on • 1% excise duty on 130 items is increased to 2% with few cigarettes would be deemed to be manufacture. exceptions being coal, mobile handsets and cellular phones, articles of jewellery, fertilizers • Tariff value for jewellery other than silver is fixed at 30% of invoice value. However, this would not be applicable in case Fiscal and of jewellery manufactured from precious metal or old economic review Important legislative changes jewellery provided by retail customer • Definition of inter-connected undertaking is amended to • Manufacturer receiving goods under Notification no. 34/ incorporate with the definition given under the Monopolies 2001- CE(NT) dated 21 June 2001 i.e. goods received under and Restrictive Trade Practices Act, 1969 which is more Snapshot of tax concessional or without payment of duty, are required to file conservative and has a wider scope proposals quarterly returns instead of monthly • Amount of duty evasion resulting in imprisonment of 7 years • Tariff value of articles of apparel (tariff heading 6201) is has been increased from Rs 1 lakh to Rs 30 lakh reduced from 45% to 30% of Retail Sale price • Duty evasion punishable with imprisonment of 3 years or • Optional payment in case of manufacturer of exempted Direct tax more would a cognizable offence. In all other cases, it would goods or provider of exempted is services increased from 5% proposals be a non-cognizable offence to 6% • Order of stay from any court would not be included to • Manufacturer having more than one manufacturing unit calculate the period of 1 year or 5 years for issuance of show would be allowed to transfer additional duty of customs cause notice Indirect tax under section 3(5) of the Customs Tariff Act paid on inputs proposals • Benefit of reduced penalty of 25% is available only if the to its other unit on quarterly basis penalty is also paid within 30 days. Earlier only tax and • Form of excise return is amended to include details of inter- interest amount was required to be paid unit transfer of CENVAT Credit • Bail would not be granted in case of offences resulting in • The above would come into effect from the date of Contact us imprisonment of more than 3 years without giving the public enactment of Finance Bill, 2012 prosecutor an opportunity to present his case
  • 43. Overview of the Union Budget 2012-13 43 Central Excise Exemption from excise duty Foreword • Footwear, whether imported or domestic, with RSP not Changes in CENVAT Credit Rules, 2004 exceeding Rs 500 is fully exempted from duty subject to • In case of removal of capital goods after use, higher of the condition that RSP indelibly marked/embossed on footwear following would be payable itself. Key policy • Per quarter reduction of 2.5% (other than computer • Exemption to branded silver jewellery continues. announcements and peripherals) • Gold coins are (purity 99.5% & above)/Silver coins (purity • Duty payable @ 12% on the transaction value 99.9% & above) exempt subject to condition that Earlier, transaction value was applicable only if capital goods manufactured from gold or silver on which appropriate duty Fiscal and were sold as scrap paid. economic review • Excise duty paid on motor vehicles including parts, other than • Exemption is granted to intraocular lens ( levied last year vide used for transportation of persons, would be eligible for Notification No 1/2011-CE) CENVAT credit by the manufacturers • Benefit of concessional rate of Rs 30 per square metre under • Transfer of unutilized credit of SAD lying as closing balance Notification No 4/2006 – CE is extended to polished marble Snapshot of tax slabs. proposals at the end of each quarter to another factory of the manufacturer is permitted • Exemption to pipes used for water supply projects is • The Honble Supreme Court observed that interest would be extended to pipes executed in river bed with zero energy applicable from the date of incorrect availment of cenvat consumption, provided these are integral part of project. Direct tax credit and date of utilization would be irrelevant. Now the • Exemption applicable to cigarettes having length not proposals words availed or utilized has been changed to availed and exceeding 60 mm is now applicable to length not exceeding utilized thus making utilization as the basis to charge interest 65 mm on wrong availment. Indirect tax Retrospective amendment is made to Rule 14 of the proposals CENVAT Credit rules, 2004 to nullify the effect of above decision. In other words, interest is not payable on credit wrongly taken unless the same is utilized Contact us
  • 44. Overview of the Union Budget 2012-13 44 Foreword Increased rate of duty Key policy Product/ Description Existing rate Proposed rate announcements Cement • Packaged Cement manufactured in mini – • 10% ad valorem • 6% ad valorem + Rs cement plant 120 Fiscal and • Packaged cement manufactured in plant • 10% ad valorem + specific • 12% ad valorem + Rs economic review other than mini plant amount 120 • Cement not cleared in packaged form • 10% ad valorem • 12% ad valorem Motor vehicles (length not exceeding 4 meters) Snapshot of tax • Engine capacity not exceeding 1200cc (petrol, • 10% ad valorem • 12% ad valorem LPG or CNG) proposals • Engine capacity not exceeding 1500cc • 10% ad valorem • 12% ad valorem (diesel) • 22% ad valorem • 24% ad valorem • Motor vehicle (other than above) having engine capacity not exceeding 1500cc • 22% + Rs 15,000 ad valorem • 27% ad valorem Direct tax • Engine capacity exceeding 1500cc proposals Chassis for automobiles 10% / 22% ad valorem + Rs 15% /25% ad valorem 10,000 Indirect tax Cigars, cheroots and cigarillos 10% ad valorem or Rs 1,227 per 12% ad valorem or Rs proposals thousand 1,370 per thousand Contact us
  • 45. Overview of the Union Budget 2012-13 45 Foreword Increased rate of duty Key policy Product/ Description Existing rate Proposed rate announcements Unbranded precious metal jewellery (except NIL 1% silver jewellery). Fiscal and Pan masala, gutkha, chewing tobacco, zarda, The rate of duty under the compounded levy scheme is increased economic review scented tobacco Snapshot of tax proposals Direct tax proposals Indirect tax proposals Contact us
  • 46. Overview of the Union Budget 2012-13 46 Foreword Reduced rate of duty Key policy Product/ Description Existing rate Proposed rate announcements Batteries of electrically operated vehicles 10% Concessional rate of duty of supplied to manufacturers 6% Iodine 10% 6% Fiscal and economic review LED lamps 10% 6% Processed food products of soya 10% 6% Matches manufactured by ‘semi – mechanized 10% 6% Snapshot of tax units proposals Parts of blood pressure monitors and blood 10% 6% glucose monitoring systems on actual user basis Direct tax proposals Indirect tax proposals Contact us
  • 47. Overview of the Union Budget 2012-13 47 CUSTOM Foreword • Full BCD exemption is provided to shuttle less looms, • The peak rate of customs duty on non-agricultural goods remains parts/components of shuttle less loom by actual users for at 10% manufacturing specified silk machinery. The exemption is available to only new machinery Key policy Increase in rates BCD/CVD announcements • Concessional 5% duty rate available to specified textile Products Pre Post machinery is restricted to new textile machinery budget budget rates rates (%) Fiscal and (%) • Relief measures in terms of full exemption from BCD is economic review Completely built Units of large cars/ MUVs / 60% 75% provided to certain items as under SUVs permitted for import without type approval (value exceeding US$40,000 and • Initial setting up and substantial expansion of fertiliser engine capacity exceeding 3000cc for petrol Snapshot of tax and 2500cc for diesel) project – upto 31 March 2015 proposals Boric acid 5% 7.50% • Steam coal - along with reduction of CVD from 5% to 1% upto 31 March 2014 Digital Still Cameras of certain specifications Nil 10% • Natural gas/LNG imported for power generation by a Flat rolled products (HR and CR) of non alloy 5% 7.50% power generation company Direct tax steel • Uranium concentrate, sintered natural uranium proposals Standard gold bars and platinum bars 2% 4% dioxide, sintered uranium dioxide pellets for generation of nuclear power Non standard gold 5% 10% • Steel tube and wire, cobalt chromium tube, Hayness Gold ore/concentrate and ore bars for refining 1% 2% Indirect tax alloy – 25 and polypropylene mesh for manufacture of (CVD) proposals coronary stents / coronary stent systems and artificial Cut and polished coloured gemstones Nil 2% heart valves subject to actual user condition Bicycles 10% 30% • Equipment imported for road construction projects Parts of bicycles 10% 20% awarded by Metropolitan Development Authorities Contact us along with Nil CVD and Nil SAD • Tunnel excavation and specified lining equipment along with Nil CVD and Nil SAD
  • 48. Overview of the Union Budget 2012-13 48 Foreword • Coal mining projects • Method of computation of Education Cess and Secondary & • New and retreaded aircraft tyres along with Nil CVD Higher Education Cess is simplified to exempt the cesses as • Part of aircraft and testing equipment for maintenance leviable on CVD portion of customs duty and avoid and repair of air craft imported by third party MRO computation of such cesses twice Key policy Units announcements • Tunnel boring machines for hydel and road projects • In the notification exempting SAD, a condition is inserted for all infrastructure projects and parts required for requiring the importer of the specified goods to declare the assembly of such machines State of destination where the goods are intended to be sold • Tri band phosphor for the first time on payment of VAT after import and Fiscal and declaration of importer’s VAT registration number in that economic review • Waster paper State • Lithium ion batteries for the manufacture of battery packs for supply to electric or hybrid vehicle manufacturers along with 6% CVD and Nil SAD • CENVAT Credit Rules are amended to permit transfer of Snapshot of tax unutilised credit of SAD lying in balance at the end of each proposals quarter to other registered premises of same manufacturer • Relief measures in terms of reduction of BCD is provided to certain agriculture and agro-processing items, prescribed items in textile industry, railway safety equipment and railway track • The duty free allowance under Baggage Rules is increased from Direct tax laying machines, machinery and instruments for surveying and Rs 25,000 to Rs 35,000 for adult passenger of Indian origin and proposals prospecting of mines, certain fertilisers, certain life saving Rs 12,000 to Rs 15,000 for children upto 10 years of age drugs / vaccines, capital goods & plants imported for setting up or substantial expansion of iron ore pellet plants or iron ore • Project import status as available to installation of mechanized beneficiation plants, coffee brewing and vending machines of handling systems and pallet racking systems in mandis / Indirect tax commercial type warehouses for food grains and sugar is extended to such proposals systems installed for handling horticultural produce • The new rates come into effect from 17 March 2012 • Project import status with 5% BCD is granted to green houses Contact us set up for protected cultivation of horticulture and floriculture produce
  • 49. Overview of the Union Budget 2012-13 49 Legislative Amendments • Section 104A of the Customs Act is inserted to provide that Foreword bail in case of offences punishable with a term of • Section 2 and Section 7 of the Customs Act is amended to imprisonment of 3 years of more shall not be granted by a include ‘air-freight stations’ resulting into empowering Central Court or Magistrate without opportunity being given to Public Board of Excise and Customs to appoint air freight stations for Prosecutor to present his case Key policy uploading of import cargo and loading of export cargo as in announcements case of Inland Container Depots • Monetary limits for adjudication of cases involving confiscation of goods and imposition of penalty has been • Section 28AAA of the Customs Act is introduced to provide enhanced Fiscal and for recovery of duties from the person to whom the duty credit economic review scrips were issued and such scrips were obtained by means of • Exemption from CVD is provided retrospectively to foreign collusion or wilful misstatement or suppression of facts. Such going vessels from 1 March 2011 to 16 March 12 person and such recovery shall be without prejudice to any action that may be taken against the importer. Also provisions Snapshot of tax related to provisional attachment of property are made • Export duty on chromium ore is enhanced from Rs 3,000 per proposals applicable to Section 28AAA tonne to 30% ad valorem • Section 47 of the Customs Act is amended to insert a new • The above would come into effect from the date of enactment proviso to provide that the Central Government may specify of Finance Bill, 2012 Direct tax proposals the classes of importers who shall pay customs duty electronically • Section 104 of the Customs Act is amended to provide that all Indirect tax offences (except an offence punishable with term of proposals imprisonment of 3 years of more) shall be non-cognizable and bailable and all offences punishable with term of imprisonment of 3 years of more shall be cognizable. Contact us
  • 50. Overview of the Union Budget 2012-13 50 To know more about the firm, please visit or contact any of our offices as Foreword mentioned below: NEW DELHI BENGALURU CHANDIGARH National Office “Wings”, First Floor SCO 17 Key policy Outer Circle 16/1 Cambridge Road 2nd Floor announcements L 41 Connaught Circus Ulsoor Sector 17 E New Delhi 110 001 Bengaluru 560 008 Chandigarh 160 017 T +91 11 4278 7070 T +91 80 4243 0700 T +91 172 4338 000 Fiscal and economic review CHENNAI GURGAON HYDERABAD Arihant Nitco Park, 6th floor 21st Floor, DLF Square 7th Floor, Block III No.90, Dr. Radhakrishnan Salai Jacaranda Marg White House Mylapore DLF Phase II Kundan Bagh, Begumpet Chennai 600 004 Gurgaon 122 002 Hyderabad 500 016 Snapshot of tax T +91 44 4294 0000 T +91 124 462 8000 T +91 40 6630 8200 proposals KOLKATA MUMBAI PUNE 10C Hungerford Street 16th floor, Indiabulls Finance Centre 401 Century Arcade Direct tax 5th floor Senapati Bapat Marg Narangi Baug Road proposals Kolkata 700 017 Elphinstone (W) Off Boat Club Road T +91 33 4019 2219 Mumbai 400 013 Pune 411 001 T +91 22 6626 2600 T +91 20 4105 7000 Indirect tax proposals © Grant Thornton India LLP. All rights reserved. Disclaimer: Contact us This document is prepared for information purposes only. No reader should act on the basis of any statement contained herein without seeking professional advice. The firm expressly disclaims all and any liability to any person who has read this, document or otherwise, in respect of any thing, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document.