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1
February 2015
Finance Minister, Arun Jaitely presented the first full-
year Budget of the NDA Government before the
Parl...
2
 Wealth tax to be abolished and the
information regarding assets will be captured
in the income tax returns.
 Proposal...
3
Indirect tax highlights
Service tax:
 Rate of service tax increased to 14% from
12.36%, after subsuming the 3% educatio...
4
vessel subject to non-availment of Cenvat
credit, with effect from April 1, 2015.
 Service tax to be paid at a higher a...
5
 Key changes in the Excise duty rates:
 Increase in Excise duty
Product Old Rate* New Rate
Packaged
Portland cement
ma...
6
o Parts, components and accessories
including goods used in manufacture
thereof have been fully exempted from
excise dut...
7
 Organic LED (OLED) TV panels from 10%
to Nil.
 Evacuated tubes with three layers of solar
selective coating for use i...
8
About us
Mazars is an international, integrated and independent organisation
specialising in audit, consulting, accounti...
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India budget highlights 2015

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Indian Union Budget 2015-16 : Highlights

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India budget highlights 2015

  1. 1. 1 February 2015 Finance Minister, Arun Jaitely presented the first full- year Budget of the NDA Government before the Parliament on Saturday. In many ways this has been one of the better conceived and balanced Union Budget in the recent times, presented amidst better economic and political environment than what has been witnessed in India the past few years. The current overall positive sentiment along with the gradual recovery from economic slowdown has given rise to a fresh set of expectations from the new Government. The extent of emphasis on agriculture, infrastructure and social sector spending along with tackling the menace of black money is rather encouraging. ‘Make in India’ receives the required boost along with thrusts to the tax reforms with a significant push towards the proposed introduction of GST from April 2016. Significant changes for both direct and indirect taxation regime have been proposed. The proposals on the Corporate taxes are likely to bring cheer to the industry. Though the budget may fall short on the populist expectations in the short run, this is clearly a forward looking budget with long-term agenda and its real impact may be witnessed in the years to come. Direct tax highlights  No changes in personal income tax rates.  Deduction on account of contribution to pension fund, new pension scheme, payment for any annuity plan of LIC/ any other insurer is proposed to be raised from INR 1 lakh to INR 1.5 lakh.  Proposal to increase the deduction for health insurance premium from INR 15,000 to INR 25,000. In case of senior citizens, the limit is proposed to be increased from INR 20,000 to INR 30,000. Further, for very senior citizens above the age of 80 years, who are not covered by health insurance, to be allowed deduction of INR 30,000 towards medical expenditures annually.  Corporate tax rate is proposed to be reduced in phased manner from existing 30% to 25% over the next four years.  2% additional surcharge proposed for all assessees excluding foreign companies. INDIA BUDGET 2015-16 | Highlights
  2. 2. 2  Wealth tax to be abolished and the information regarding assets will be captured in the income tax returns.  Proposal to give additional investment allowance equivalent to 15% and additional depreciation of 35%, both on the cost of new assets acquired and installed by manufacturing entities in the notified backward areas of Andhra Pradesh and Telangana.  30% deduction for employment of new workmen is proposed to be extended to all assessees and eligibility threshold to be reduced to 50 employees from existing limit of 100 employees.  Allowance of balance 50% additional deprecation @ 20% on new plant & machinery used for less than 180 days has now been proposed to be allowed in the immediately succeeding year.  Income tax rate on royalty and fees for technical services proposed to be reduced from existing 25% to 10%.  Threshold limit to qualify the applicability domestic transfer pricing provisions has been proposed to increase from INR 5 Crore to INR 20 Crore.  100% deduction for contributions to Swachh Bharat Kosh and Clean Ganga Fund (other than by way of Corporate Social Responsibility contribution) and donation made to National Fund for Control of Drug Abuse (NFCDA) to be eligible u/s 80G of Income Tax Act.  Eligibility period for the benefit of reduced 5% withholding tax on interest on External Commercial Borrowings, Government Securities & Bonds has been extended upto 30th June 2017.  Residential status in case of a company is proposed to be amended to include the “place of effective management” at “any time” during the previous year.  Permanent Establishment (PE) norms to be liberalized to encourage relocation of fund managers to India. Presence of fund managers of offshore funds in India are proposed to be excluded from the PE ambit.  To curb black money generation, provisions relating to acceptance and repayment of cash exceeding INR 20,000 or more are proposed to be extended to immovable property transactions.  Tax evasion in respect of foreign assets to attract non compoundable rigorous imprisonment upto 10 years and a penalty of 300% of tax with no resort to approach the Settlement Commission.  Non filing of return or filing of return with inadequate disclosure of foreign assets will attract prosecution with punishment of rigorous imprisonment upto 7 years.  In the case of a search, seized cash is proposed to be adjusted against the assessee’s tax liability under his settlement application.  Implementation of General Anti Avoidance Rules (GAAR) provisions would be applicable from Assessment Year 2017-18 onwards.  The definition of charitable purpose under section 2(15) of the Income-tax Act, is proposed to be amended to include Yoga in its purview.
  3. 3. 3 Indirect tax highlights Service tax:  Rate of service tax increased to 14% from 12.36%, after subsuming the 3% education cess and secondary and higher education cess. The new rate to apply from a date to be notified after the enactment of the Finance Bill.  Enabling provisions created to empower the Central Government for imposition of ‘Swachh Bharat Cess’ to be recovered as service tax at the rate of 2% on the value of specified taxable services, from a date to be notified by the Government.  Section 67 of the Finance Act is proposed to be amended to specifically prescribe that consideration of a taxable service shall include all reimbursable expenditure or costs incurred and charged by the service provider during the course of provision of taxable services.  Some of the new services brought under the service tax net from a date to be notified after the enactment of the Finance Bill:  Services provided by way of access to amusement facilities such as amusement parks, water parks, theme parks, rides, gaming devices and bowling alleys etc.  Services provided by way of contract manufacturing or job work for alcoholic liquor for human consumption.  All services provided by Government or local authorities to business entities shall be subject to service tax.  Key Service tax exemptions withdrawn with effect from April 1, 2015:  Services provided to Government or a local authority by way of construction, repair, commissioning, installation, completion, fitting out, maintenance, renovation or alteration for: o Civil structure or original works for commercial or other use. o Structure for pre-dominant use as an educational, clinical or art and cultural establishment.  Construction, erection, commissioning or installation for original works pertaining to ports and airports.  Services provided by a mutual fund agent, distributor to mutual funds or asset management companies (AMCs).  Service tax to be paid at a uniform abated value of 30% for transport by rail, road and
  4. 4. 4 vessel subject to non-availment of Cenvat credit, with effect from April 1, 2015.  Service tax to be paid at a higher abated value of 60% for air travel by other than economy class, with effect from April 1, 2015. Air travel by economy class would continue to be taxed at an abated value of 40%.  Following services to be taxed fully under the reverse charge mechanism, with effect from April 1, 2015:  Manpower supply and security services provided by an individual, Hindu unified family (HUF) or a partnership firm to a body corporate.  Services provided by a mutual fund agent, distributor and agent of lottery distributors to the AMC or the distributor of lottery, as the case may be.  Services provided by e-commerce portals (aggregators), owning and managing web- based software applications enabling a potential customer to connect with a service provider under the brand name or trade name of the aggregator shall be subject to service tax with effect from March 1, 2015. In case the aggregator does not have a presence in India, the service tax shall be paid by the agent appointed by the aggregator under the reverse charge mechanism.  The alternate composition rates provided to the specified service providers have been amended as follows from a date to be notified after the enactment of the Finance Bill: Excise duty  Cenvat rate of excise duty increased to 12.50% from 12.36%, after subsuming the 3% education cess and secondary and higher education cess. The new rate to apply with effect from 1 March, 2015. Category of Service provider Earlier rate Revised rate Air travel agent - Domestic bookings 0.6% of the basic fare 0.7% of the basic fare - International bookings 1.2% of the basic fare 1.4% of the basic fare Insurer carrying on life insurance business - In the first year 3% of the premium 3.5% of the premium - In the subsequent year 1.5% of the premium 1.75% of the premium Money changing services - For an amount up to Rs. 100,000 subject to minimum tax of Rs. 35 (earlier Rs. 30) 0.12% of the gross value of currency exchanged 0.14% of the gross value of currency exchanged - For amount between Rs. 100,000 up to Rs. 10,00,000 Rs. 120 and 0.06% of the gross value of currency exchanged Rs. 140 and 0.07% of the gross value of currency exchanged - For amounts exceeding Rs. 10,00,000 subject to maximum tax Rs. 660 and 0.012% of the gross value of currency exchanged Rs. 770 and 0.014% of the gross value of currency exchanged(earlier Rs. 6,000) of Rs. 7,000
  5. 5. 5  Key changes in the Excise duty rates:  Increase in Excise duty Product Old Rate* New Rate Packaged Portland cement manufactured and cleared: - From a mini cement plant 6%+ 120/MT 6%+125/MT - Other than from a cement plant 12%+120/ MT 12.5%+125/MT Clean energy cess on coal, lignite and peat Rs. 100 per tonne Rs. 200 per tonne Sacks and Bags (including cones) of plastics 12% 18% Sacks and bags of polymers of ethylene, other than for industrial use 12% 15% Mobile handsets including cellular phones 1% (if Cenvat credit not availed) 6% (if Cenvat credit availed) 1% (if Cenvat credit not availed) 12.5% (if Cenvat credit availed) Solar water heater and system Nil 12.5% (Nil duty if Cenvat credit not availed) Tablet Computer 10% 12.5% (2% if Cenvat credit not availed)  Reduction in Excise duty Product Old Rate* New Rate Pig iron SG grade and ferro-silicon magnesium for manufacture of cast components of Wind Operated Electricity Generators. 12% Nil Round copper wire and tin alloys for use in manufacture of PV ribbon used in solar PV cells and modules 12% Nil Chassis for ambulances 24% 12.5% Wafers of Integrated Circuit (IC) modules for smart cards 12% 6% LED Drivers and MCPCB for LED lights, fixtures and lamps 12% 6%** * Old rates are subject to levy of education cess and secondary and higher education cess of 3%. ** Subject to MRP abatement of 30%  Other changes in Excise duty regime o Excise duty on petrol and diesel has been restructured to reflect the increase in Cenvat rate of excise duty and increase the funds available for building roads by increasing the additional duties (road cess). However, there is no change in the effective aggregate rate of duties. o Concessional rate of duty of 6% has been extended from March 31, 2015 to March 31, 2016 on specified goods for use in manufacture of electrically operated vehicles and hybrid vehicles. * Old rates are subject to levy of education cess and secondary and higher education cess of 3%.
  6. 6. 6 o Parts, components and accessories including goods used in manufacture thereof have been fully exempted from excise duty. o Excise duty has been increased on cigarettes by 25% (for length not exceeding 65 mm), and by 15% (for others). o Excise duty has also been increased on cigars, cheroots and cigarillos. o Excise duty increased on cut tobacco from Rs. 60 per kg to Rs. 70 per kg. o Compounded levy scheme under section 3A of the Central Excise Act, 1944 applicable for pan masala, gutkha and chewing tobacco has been amended to specify the maximum speed of packing machines for packages of notified goods as a relevant factor for computation of duty. Accordingly, deemed production and duty payable per machine per month have been prescribed for levy of excise duty.  Miscellaneous o Goods manufactured domestically for supply against International Competitive Bidding (ICB) are subject to exemption from excise duty if the same attract nil rate of customs duty. It is prescribed that the exemption from excise duty shall be available only if the conditions prescribed in the customs notification are fulfilled. o Goods supplied to Ultra Mega Power Project (UMPP) and Mega Power Projects (MPP) with provisional status of such projects are eligible for exemption from excise duty subject to the CEO of the project furnishing a bank guarantee or fixed deposit receipt. The period for such bank guarantee or fixed deposit receipt have been increased from 36 months to 42 months for UMPP and 66 months for MPP, respectively. Customs duty  There is no change in the peak rate of basic customs duty (BCD), which remains at 10%.  However, the general rate of countervailing duty (CVD) on imports will change to 12.50% with the change in excise duty rates.  Education cess and secondary and higher education cess on customs duties to continue at the earlier rates of 3%.  Customs duty rates reduced with effect from March 1, 2015 on certain items of industrial use and raw materials for addressing the inverted duty structure and reduce the costs for domestic manufacturers. Some of these include:  ‘Metal parts’ for use in the manufacture of electrical insulators.  Sulphuric acid for use in the manufacture of fertilizers.  High density polyethylene (HDPE) for use in the manufacture of telecommunication grade optical fibre cables from 7.5% to nil.  Black Light Unit Module for use in the manufacture of LCD/LED TV panels from 10% to nil.
  7. 7. 7  Organic LED (OLED) TV panels from 10% to Nil.  Evacuated tubes with three layers of solar selective coating for use in the manufacture of solar water heater systems.  Active Energy Controller (AEC) for use in the manufacture of Renewable Power System (RPS) Inverters, subject to certification by Ministry of New and Renewable Energy (MNRE).  Parts, components and accessories for manufacture of tablet computers and their sub-parts for manufacture thereof.  Special additional duty of customs (SAD) exempted / reduced with effect from March 1, 2015 on certain items for avoiding Cenvat credit accumulation:  All goods (except populated printed circuit boards) for use in the manufacture of ITA bound goods exempted from SAD, subject to actual user conditions.  All inputs for use in manufacture of LED driver and MCPCB for LED lights and fixtures & LED Lamps exempted from SAD, subject to actual user condition  Naphtha, ethylene dichloride (EDC), vinyl chloride monomer (VCM) and styrene monomer (SM) for manufacture of excisable goods from 4% to 2%.  Metal scrap of iron & steel, copper, brass and aluminum from 4% to 2%.  Rate of BCD increased on following items with effect from March 1, 2015:  BCD increased from 2.5% to 5% on metallurgical coke.  BCD increased for commercial vehicles from 10% to 20%.  The validity period of exemption granted to specified goods for use in the manufacture of hybrid and electrically operated vehicles extended by one more year up to March 31, 2016.  Additional duty (road cess) on petrol and diesel has been increased from Rs. 2 per litre to Rs. 6 per litre. Disclaimer The information contained in this newsletter is of a general nature and is not intended to address the circumstances of any particular individual or entity. The document has been prepared with the help of various sources believed to be reliable, but no representation or warranty is made to its accuracy, completeness or correctness. The facts stated in the newsletter are based on data currently available and can change when this data gets updated. The information contained in this newsletter is in no way meant to be a substitute for professional advice. Whilst due care has been taken in the preparation of this newsletter and information contained herein, Mazars takes no ownership of or endorses any findings or views expressed herein or accepts any liability whatsoever, for any direct or consequential loss howsoever arising from any use of this newsletter or its contents or otherwise arising in connection herewith.
  8. 8. 8 About us Mazars is an international, integrated and independent organisation specialising in audit, consulting, accounting, tax and legal services. Directly present in 72 countries, Mazars unites the skills of 14,000 professionals. Through correspondence and the offices of representation agreements, Mazars also serves clients in 21 additional countries, with teams of professionals who are at the forefront of technical and ethical standards. Mazars is a founding member of the international alliance Praxity, comprising over 70 independent organisations of audit and consulting, bringing together over 28,000 professionals. Mazars has the ambition to constantly expand its services for the benefit of its clients - which range from large international organisations, SMEs to public organisations by providing global solutions that are customized to help clients find dynamic solutions for sustainable growth. In India, Mazars has an ambitious growth plan and already has a national presence with a strong team of over 600 professionals with 9 offices located in Bengaluru, Gurgaon, Mumbai, New Delhi and Pune. Our professionals have in-depth experience in sectors like Energy, Telecom, BFSI, Automobiles, Technology, Real Estate, Shipping, Services, Manufacturing and Retail. Mazars Mumbai Army & Navy Building 148 – MG Road Mumbai 400 001 Tel : +91 (22) 6158 6200 Fax : +91 (22) 6158 6275 Pune III Floor, Pro 1 Business Centre Plot no 34+35, Senapati Bapat Road Pune 411 016 Tel : +91 (20) 2565 3365; + 91 (20) 2567 1114 Fax : +91 (20) 2567 6427 Bengaluru #102, Second Floor Gangadhara Chetty Road (Near Ulsoor Lake) Bangalore 560 042 Tel : +91 (80) 2554 9666; +91 (80) 4113 3305 Gurgaon 2nd Floor, Plot No. 421 Udyog Vihar, Phase IV Gurgaon 122016 Tel. +91 (124) 481 4444 Fax +91 (124) 481 4445 Delhi C 37, Connaught Place New Delhi 110001 Tel. +91 (11) 4368 4444 Fax +91 (11) 4368 4445 More information on www.mazars.co.in Email: nicolas.ribollet@mazars.co.in

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