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Union Budget 2012


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Budget 2012 Analysis

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Union Budget 2012

  1. 1. ^Back Suresh & Co., Taxation, Audit, Advisory services Budget 2012 >>> Accounts & Payroll Outsourcing & Compliance Services
  2. 2. ^Back 1 Transfer pricing GDP growth is regulations have been estimated at 7.6% introduced for domestic for 2012-13 & Fiscal transactions > Rs. 5 deficit at 5.1% of GDP crores in total in a year Service Tax & No Tax till Rs. 2 Budget 2012 >>> Excise Duty rates Lacs & 20% Slab hiked from 10% to raised to Rs. 10 12% Lacs Annveshan | Suresh & Co.,
  3. 3. ^Back 2 Sachin hits his 100th 44AB International Century Audit limit raised to a One on Budget Day minimum of Cror e 9.5% Budget 2012 >>> •EPF rate is cut to 8.25% by 1.25% TDS on transfer of Looks like a precursor immovable property and to a tough & a better TCS on gold purchase by budget…Let us see !! specified persons Annveshan | Suresh & Co.,
  4. 4. ^Back • Economic Survey • Budget Economic Highlights • Direct Taxes  Individual Taxes  Wealth Tax  LLP, Firms & Trusts  Corporate  International Taxation  Withholding Taxes  Procedures & Others • Indirect Taxes  Service Tax  Excise  Customs • Sectoral Impact • FEMA • Corporate & Other Laws Budget 2012 >>> • Accounting Standards Annveshan | Suresh & Co.,
  5. 5. ^Back The Economy Survey 2011-12 was tabled by the Finance Minister Pranab 4 Mukherjee in the Parliament on Thursday. Following are the highlights of the report card of the Indian economic scenario for current fiscal: 1. The countrys economic growth pegged at 6.9 per cent in the current fiscal; however brighter outlook for next fiscals with real GDP growth expected to pick up to 7.6 per cent in 2012-13 and 8.6 per cent in 2013-14. 2. With agriculture and services continuing to perform well, the slowdown can be attributed almost entirely to weakening industrial growth. Agro sector estimated to grow at 2.5 %, Services sector 9.4 %.and Industrial growth pegged at 4-5 %. Slowdown in Indian economy largely due to global factors, and also because of domestic factors like tightening of monetary policy, high inflation and slower investment and industrial activities. GDP Growth Estimates & Projections Source- Source- 3. Inflation as measured by the wholesale price index (WPI) was high during most of the current fiscal year but showed clear slow down by the year-end; this is likely to spur investment activities leading to positive impact on growth. Budget 2012 >>> 4. Food inflation has come down significantly as WPI food inflation dropped from 20.2% in February 2010 to 1.6% in January 2012. Monetary policy was tightened by RBI to control inflation and curb inflationary expectations. Annveshan | Suresh & Co.,
  6. 6. ^Back 5 5. The growth rate of investment in the economy is estimated to have declined significantly on account of borrowing costs up due to a sharp increase in interest rates 6. Despite the low growth figure of 6.9%, India remains among the fastest growing economies of the world. Country‘s sovereign credit rating rose by a substantial 2.98 % in 2007-12. 7. Central spending on social services goes up to 18.5% this fiscal from 13.4% in 2006-07. Source- Export Growth & Exchange Rate changes 8. Exports grew @ 40.5% in the first half of this fiscal and imports grew by 30.4%. Foreign trade performance to remain a key driver of growth. Forex reserves enhanced - covering nearly the entire external debt stock. Source- Economic Survey 2011-12. 9. Sustainable development and climate change becoming central areas of global concern and India too is equally concerned and engaged constructively in global negotiations. Budget 2012 >>> 10. FDI in multi-brand retail can come into effect in a "phased" manner, beginning from metropolitan cities. The survey said that allowing foreign direct investment in multi-brand retail is one of the major issues in the services sector, but the move would address problems relating to food inflation. Annveshan | Suresh & Co.,
  7. 7. • Fiscal Deficit for FY 2011-12 at 5.9% and estimated for FY 2012-13 at 5.1%^ • BUDGET ECONOMIC HIGHLIGHTSBackThe economy had to battle near double digit headline inflation. As a result growth moderated and the fiscal balance 6 deteriorated. • Steps taken to bridge gaps in distribution, storage and marketing systems have helped in more effective management of inflation. • Monetary and fiscal policy response for better part of past 2 years aimed at taming domestic inflationary pressure. • Current account deficit which stood at 3.6% of GDP for 2011-12 and reduced net capital inflow in the 2nd and 3rd quarters put pressure on exchange rate. • Concept of ―Effective Revenue Deficit‖ and ―Medium Term Expenditure Framework‖ has been introduced in Foreign Responsibility and Budget Management Act, 2003 as an amendment which has been aimed at effective and efficient utilisation of capital. • Plan to provide for direct transfer of subsidy to retailer and farmers. • Goods and Service Tax Network will be set up as a National Information Utility and will become operational by August 2012. • An amount of Rs. 30,000 crore to be raised through divestment. • Rs. 15,888 crore to be provided as capitalization for protecting the interests of Public Sector Banks and Financial Institutions. • By 2012-13, a central ―Know Your Customer‖ Depository to be developed. • In consultation with the stakeholders and to increase the lendings to priority sector, revised guidelines to be formulated. • 81 out of 82 Regional Rural Banks have been successfully migrated to CBS and joined NEFT system. • Investment in Infrastructure to go up to Rs. 50 lacs crore, out of which 50% of the investment will be from private sector. • To finance infrastructure projects, tax‐free bonds raised from Rs. 30,000 crore to Rs. 60,000 crore. • White paper on Black Money to be introduced in the Parliament. • Agricultural credit to be increased from Rs. 1,00,000 crore to Rs. 5,75,000 crore. Budget 2012 >>> • Foreign airlines to participate up to 49% in equity of an air transport undertaking under active consideration of the government. • No new case of polio has been reported in last one year due to continued effort by Government. • Kisan credit cards to work as ATM cards. • UID to be used for distribution of Subsidy and Pension Schemes. • Public Procurement Bill to be introduced. Annveshan | Suresh & Co.,
  8. 8. ^Back Budget Estimates 7 Revenue Receipts Capital Receipts Revenue Expenditure Grants for creation of Capital Expenditure Revenue Deficit Capital Assets Effective Revenue Deficit Fiscal Deficit Primary Deficit Grants for Budget 2012 >>> Revenue Revenue Capital Effective Capital Receipts creation of Revenue Deficit Fiscal Deficit Primary Deficit Receipts Expenditure Expenditure Revenue Deficit Capital Assets Budget Estimates 2011-12 789,892 467,837 1,097,162 146,853 160,567 307,270 160,417 412,817 144,831 Budget Estimates 2012-13 935,685 555,241 1,286,109 164,672 204,816 350,424 185,752 513,590 193,831 Annveshan | Suresh & Co.,
  9. 9. ^Back DIRECT TAXES 8 Personal Income Tax (PIT) (Individuals & HUF) Proposal to enhance the Basic exemption limits for Individual & HUF: • For Senior Citizens, age between 60 – 79 years being a resident in India the basic exemption remains the same at Rs.2,50,000/‐ • For Senior Citizens, above the age of 80 years being a resident in India the basic exemption remains the same at Rs.5,00,000/‐ • For Resident Woman Assessee aged less than 60 years, the limit is increased from Rs.1,90,000/‐ to Rs.2,00,000/- • For other assesses including HUF, it is increased from Rs.1,80,000/- to Rs.2,00,000/‐ The slabs for computing Personal Income Tax has been amended to give higher tax benefits to Individuals. Comparison of existing and proposed tax slabs are: General – (Man/Woman below 60 years of age) Existing Slabs Proposed Slabs 0 to 1,80,000 : Nil 0 to 2,00,000 : Nil 1,80,001-5,00,000 : 10% 2,00,001-5,00,000 : 10% 5,00,001-8,00,000 : 20% 5,00,001-10,00,000 : 20% 8,00,001 and above : 30% 10,00,001 and above : 30% Education Cess of 2% plus 1% Education Cess of 2% plus 1% Secondary Higher Education Cess Secondary Higher Education Cess Budget 2012 >>> Annveshan | Suresh & Co.,
  10. 10. ^Back Tax Impact before & after Budget is as follows: For Individual Tax Payers For Senior Citizen For Very Senior Citizen 9 Taxable Tax Tax Tax Tax Tax Tax Tax Tax Tax Income Before After Before After Before After Savings Savings Savings Budget Budget Budget Budget Budget Budget 200,000 2,060 - 2,060 - - - - - - 500,000 32,960 30,900 2,060 25,750 25,750 - - - - 1,000,000 156,560 1,33,900 22,660 149,350 1,28,750 20,600 123,600 1,03,000 20,600 Additional Deductions/ Benefits under Personal Income Tax • Individual/ HUF Assessee shall get a deduction of up to Rs.10,000/- for interest from savings bank accounts as per the new section 80TTA . • A deduction of up to Rs.5,000/- for preventive health check up for the assessee or his family or his parents is also included under section 80D. • Senior citizens not having income from business are exempted from payment of advance tax. • 80G Deduction on Donations exceeding Rs. 10,000/- Is available only if it is paid by any mode other than cash. • Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing Small or Medium Enterprise for purchase of new plant and machinery as per the new section 54GB • No exemption u/s 10(10D) is available on maturity of Insurance, if sum received under an insurance policy issued on or after 01.04.2012 for which the premium paid exceeds 10% of the actual capital sum assured. • Deduction in respect of Medical Treatment – Sec 80DDB : In respect of Medical treatment the age of senior citizens has been brought down from 65 years to 60 years. {Modified} Budget 2012 >>> Annveshan | Suresh & Co.,
  11. 11. ^Back Wealth Tax 10 Section 2(ea)(i)(1) • As per the new amendment to Wealth Tax, for considering the house as wealth on allotment of house to a Director if his Gross Annual Salary Exceeds Rupees Ten Lakhs instead of earlier limit of Rs.5 Lakhs. {Modified} Section 17 • Where the net wealth chargeable to tax has escaped assessment for any assessment year, includes any asset (including financial interest in any entity) located outside India chargeable to tax, as the assessment under section 16 (3) or Section 17. {New} Partnership Firms, Limited Liability Partnership (LLP) & Trusts Tax Rates The effective tax rate for partnership firm & LLP will continue to be the same as those specified for Assessment Year 2012-13 i.e., 30.9%. No surcharge will be levied. Amendments relating to trust with regard to Trust covered under section 10(23C): If the receipts from any activities involving carrying on trade , commerce or business or any service for a fee or any other consideration exceeds Rs 10lacs, the specified trusts would not be eligible for exemption u/s 10(23C). Such specified trust are trusts wholly for public religious purposes or wholly for public religious and charitable purposes or any other institution having its importance throughout India or throughout any State or Budget 2012 >>> States. This may have impact on the exemptions currently being enjoyed by renowned temples and other religious institutions. {New} Annveshan | Suresh & Co.,
  12. 12. ^Back 11 For Corporate entitiesTax RatesThe Tax Rate to the companies will continue to be the same i.e., 30% in case of Domestic Companies and 40% in caseof Foreign Companies.Surcharge will continue to be the same i.e., 5% in case of Domestic Companies and 2% in case of ForeignCompanies.No change with respect to Cess.Exemptions:Income of all Venture Capital Funds who have invested in Venture Capital Undertaking as referred to in the SEBI(Venture Capital Funds) Regulations, 1996 made under the SEBI Act, 1992. Earlier it was available only for incomefrom undertakings engaged in specific activities. {Modified}New Clause (48) of Section 10 – any income of a foreign company engaged in the business of sale of crude oil to anyperson in India in accordance with the guidelines is exempt. {New}Direct Taxes DeductionsAdditional Depreciation – Sec 32A further deduction of sum equal to 20% of the Actual Cost of such machinery or plant to the assessees engaged in thebusiness of generation or generation and distribution of power. {Modified}Enhancement in deduction with respect to R&D – Sec-35(2AB)Extended Weighted deduction of 200% of expenditure incurred by a company engaged in the business of bio-technology or in any business of manufacture or production of any article or thing or incurs any expenditure on scientificresearch on in-house research and development facility by 5 years (i.e. up to 31/03/2017). {Modified}Deduction with respect to Expenditure on Specified Business – Sec – 35AD Budget 2012 >>>Enhanced the Weighted Deduction from 100% to 150% on any expenditure incurred by assessees engaged in thebusiness of cold chain facility, warehousing facility for storage of agricultural produce, hospital with at least 100 beds,developing and building under housing project schemes and production of fertilizer and also commenced its operationson or after the 1st day of April, 2012. Annveshan | Suresh & Co.,
  13. 13. ^Back A deduction of a sum equal to 100% (with effect from 1st day of April, 2013) of expenditure incurred on setting up of specified business engaged in : 12 • Setting up and operating an inland container depot or a container freight station notified or approved under the Customs Act, 1962. • Bee-keeping and production of honey and beeswax. • Setting up and operating a warehousing facility for storage of sugar. {Modified} AND {New} Deduction with respect to Expenditure on Agricultural Development Project – Sec 35CCC A deduction of a sum equal to 150% of expenditure incurred on Agricultural Development Project is allowed. {New} Deduction with respect to Expenditure on Skill Development Project – Sec 35CCD Deduction of a sum equal to 150% of expenditure (not being expenditure in the nature of cost of any land or building) incurred on Skill Development Project as per specified guidelines. {New} Income from Other Sources – Sec 56 Where a company, not being a company in which the public are substantially interested, receives, from a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares is treated as income. Provided that this shall not apply where the consideration for issue of shares is received by a venture capital undertaking from a venture capital company or a venture capital fund. {Modified} Tax on certain dividends received from Foreign Companies – Sec 115BBD Extended by one more year lower tax of 15% on dividends received by Indian company from Foreign Companies. {Modified} Special Provision for payment of tax by certain companies – MAT – Sec 115JB Debit to the Profit & Loss Account an amount standing in Revaluation Reserve relating to re-valued asset on the retirement or disposal of such asset should be added back to the Book Profits chargeable under MAT provisions. {Modified} Dividend Distribution Tax – Sec 115-O Budget 2012 >>> Removed the cascading effect of Dividend Distribution Tax on Multi layered companies. {Modified} Tax on Income received from Venture Capital Companies & Funds – Sec 115U Income from VCs to henceforth be recognised on mercantile basis. {Modified} Deduction with Power Projects – Sec 80IA Deduction benefit extended for another year i.e., till 31st March, 2013 (A.Y. 2013-2014) under section 80IA towards | Generation or Annveshan Suresh & Co.,
  14. 14. ^Back 13 INTERNATIONAL TAXATION Situs of Asset/ Capital Asset An amendment has been brought in with retrospective effect from April 1, 1962, in the case of an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India. This is an attempt by the revenue to overcome the ruling of the Supreme Court in the Vodafone Case. This may however not affect the capital gains exemption currently available under the India - Mauritius and similar treaties. {New} Royalties • An amendment has been brought in with retrospective effect from June 1 1976 through which the rights in respect of computer software would be covered under the definition of Royalty. This would mean that any payment made towards acquisition of computer software would now be liable for With Holding Tax at 10%. This would also include online download of software. {New} • An amendment has been brought in with retrospective effect from June 1 1976 which includes under the definition of Royalty, any right, property or information whether or not • The possession /control is with the buyer • Directly used by the payer • The location is in India. This may result in treating software as a service contracts or hosted software services also get covered under the definition of royalty bringing such payments within the purview of with holding tax Budget 2012 >>> of 10%. {New} • Royalty will also now include payments made towards any transmission by satellite , cable , fibre optic, etc. This is with retrospective effect from June 1, 1976. {New} Annveshan | Suresh & Co.,
  15. 15. ^Back 14 DTAA Benefits • A Non Resident claiming any benefits under the Double Taxation Avoidance Agreements (DTAA) will henceforth be eligible to obtain such benefits if and only if such person furnishes a residency certificate containing the prescribed particulars from the foreign country government. {New} Transfer Pricing • Any international transaction whose benchmarked average uncontrolled price is in the range of +/- 3% would be considered as being conducted on arm‘s length price. Prior to this the Central Government had the powers to notify this %age This however does not empower the Assessing Officer to reassess the proceedings which have been completed before 1st October 2009. {Modified} • New section 92CC has been inserted which empowers the CBDT to enter into an Advance Pricing Agreement with the approval of the Central Govt with any person for determining the ALP or specifying the manner in which ALP is to be determined in relation to international transactions. This agreement shall be for a period not exceeding 5 consecutive years. {New} • Failure to report international transactions or maintaining incorrect information or document will also be liable to penalty proceedings and the value of the penalty would be 2% of the value of international transaction. {Modified} With-holding of taxes • As per new section 194LC, withholding taxes on ECB loan interest in respect of companies in power, aircraft, fertilizers, construction of road, bridge, port, shipyard, dams, housing sector has been Budget 2012 >>> reduced from 10% to5 %. {New} • Its has been clarified that even non-residents would be liable to comply with TDS provisions under section 195. {New} Annveshan | Suresh & Co.,
  16. 16. • Tax^Back Deduction at Source u/s in specified 1% on(Delhi, Mumbai,Collection: abovefor50lakhs and other areas property` (other than agricultural land) 194LAA at areas consideration payable to a Resident Withholding Tax/Tax Bangalore etc) ` transfer of immovable above 15 20Lakhs. Proof of deduction and payment of such tax is required to be submitted before the registering officer registering the transaction. The deductor need not obtain any Tax Deduction Account Number for this purpose and no further filings are required {New}• Tax Collection at source by the seller at 1 % on sale value received in CASH on sale of bullion or jewellery in excess of ` 2 Lakh from buyer. Buyer for this purpose does not include a public sector company, the Central Government, a State Government, and a buyer in the retail sale of such goods purchased by him for personal consumption. {New}• Tax Collection at source at 1 percent on trading in coal, lignite and iron ore. {New}• No deduction of tax shall be made in the case of an individual resident in India, who is of the age of sixty year or more, if such individual provides a declaration in writing in the prescribed form that the tax on his estimated total income of the previous year is NIL. Section 197A {Modified}• Person will not be held under default for not deducting tax on a resident payee , if such resident has filed the return taking into account such sum for computing income and furnishes a certificate to this effect from an accountant in prescribed form. In this regard, the interest is computed from the date of deduction to the date of filing of returns. Disallowance of such expense will also not be applicable. {Modified}• Fee of Rs. 200 per day is payable for default in furnishing the statement (e-tds return) within the prescribed time. Section 234E {New}• TDS of 20% is required to be deducted for the payment to a non-resident sportsman (including an athlete) or a non-resident entertainer. {Modified} Budget 2012 >>>• TDS is deductible under section 194J for any remuneration or fees or commission paid to a director of a company, other than those on which tax is deductible under section 192 with effect from 1st day of July, 2012. {Modified}• TDS is not required to be deducted if the payment to a resident in the nature of compensation or the enhanced compensation is less than ` 2,00,000. {Modified} Annveshan | Suresh & Co.,
  17. 17. ^Back Procedures & Others 16 Procedures • Increase in the turnover limit for compulsory tax audit for business assessees from ` 60 Lakhs to ` 1Crore. Similarly, in case of professionals the limit has been increased from ` 15 Lakhs to ` 25Lakhs. {Modified} • Presumptive taxation limit has been raised from ` 60 Lakhs to ` 1Crore. {Modified} Others: • Reduction in securities transaction tax to 0.1% (earlier 0.125%) on cash delivery transactions. {Modified} • Taxation of unexplained money, credits, investments, expenditures etc., would be at the highest rate of 30 percent. {Modified} • Alternate Minimum Tax (AMT) was applicable only to LLP but as per this Amendment, it is applicable to any other person other than a company. There by any person whose income is exempt under specified tax holidays is liable to AMT tax at 18.5% of income. This can be carried forward for 10 assessment years and set of against normal non AMT tax. Further, the provision of AMT applies in case of individual or HUF or an AOP or BOI if the adjusted total income is equal to or more than Rs 25Lakhs. {Modified} • A person being a resident, having any asset located outside India or signing authority in any account located outside India during the previous year, shall furnish a return in prescribed format in respect of his income or loss for the previous year. {New} Budget 2012 >>> • General Anti Avoidance Rules are brought in to avoid cases where an arrangement is made only for the purpose of avoiding taxes and does not have commercial substance. The onus is on the assessee to prove whether such arrangements are made not for the purpose of avoiding taxes but for other purposes. {New} Annveshan | Suresh & Co.,
  18. 18. ^Back 17 • If notice is received for taking up a return for scrutiny, then such returns will not be processed till completion of scrutiny assessment. This will result in delay in processing of refund. {New} • Time limit for re-opening cases for reassessment purpose shall be 16years instead of 4years in case where income from assets located outside India has escaped assessment. {Modified} • In case of transfer of capital asset by an assessee, if the consideration received or accruing is not ascertainable or cannot be determined (for example in kind), then for the purpose of computing income chargeable to tax on capital gains the fair market value of the said asset on the date of transfer is considered as the full value of the consideration. {New} • Proposal to introduce Rajiv Gandhi Equity Savings Scheme. Income tax deduction of 50 percent to new retail investors, investing upto ` 50,000 directly in equities and whose annual income is below ` 10 lakh. The scheme to have lock-in period of 3 years. {New} • The transfer pricing Regulations will be applicable to specified domestic transactions also and any expenditure or income with respect to such specified domestic transactions will be computed having regard to Arm‘s Length Price (ALP).This would be in case where the aggregate value of such transactions exceed Rs 5crores in respect of transactions with related parties. {New} • In respect of certain specified domestic transaction, if the same is at ALP no disallowance of expenditure Budget 2012 >>> shall be done on account of being excessive or unreasonable having regard to fair market value. {New} Annveshan | Suresh & Co.,
  19. 19. ^Back SERVICE TAX 18• Rules pertaining to point of taxation are being rationalized. .• A common simplified unified form introduced for both Excise & Service Tax• For Registration - Form EST Registration• For Returns – Form EST Return• Revision Application Authority and Settlement Commission being introduced in Service Tax for dispute resolution.• Utilization of input tax credit permitted on all input services to reduce cascading of taxes.• Place of Supply Rules for determining the location of service to be put in public domain for stakeholders‘ comments.• New scheme announced for simplification of refunds.• Time period of issuance of invoice increased to 30 days and 45 days for banks and financial institutions.• Advocate who is an individual provides service to business entity, and then the business entity has to pay the service tax on reversal charge and take input credit.• Penalty waiver for renting of immovable property service - Sec 80A has been introduced, which gives waiver of penalty if assessee‘s has relied on Delhi High Courts Case and paid 50% of the arrears within 6 months in 3 equated installments. For balance has to provide a surety to the satisfaction of the CommissionerRate Changed• The Service Tax Rate increased to 12%• Consequent changes have also been made in composition rates as follows:• For works contracts from 4% to 4.8%.• For life insurance: 3% for the first year premiums while retaining the rate @1.5% for the subsequent years (simultaneously restoring full Cenvat credit);• Money changing: raising the existing rates proportionately by 20%;• Distributor or selling agent of lotteries: Raising the specified amounts proportionately and suitably rounded off to Rs 7,000 and 11,000; Budget 2012 >>>• The rate for Cenvat reversal for exempt services has been revised likewise from 5% to 6% in Rule 6(3) of Cenvat Credit Rules (CCR), 2004.• The dual tax structure for air transportation: partly specific, partly ad valorem - is being replaced with a uniform ad- valorem levy at standard rate with an abatement of 60% on all sectors and all classes.The Service Tax Rate at 12% and above changes in rate is effective from 1-Apr-2012 Annveshan | Suresh & Co.,
  20. 20. ^Back Taxation of Service • New System of Taxation based on the “Negative List” 19 • All services will be taxable unless they are in the Negative List or they are otherwise exemp Positive List Negative List Service Means: Service does not include:  Any activity  Any activity that constitutes only a transfer in title of goods or  For consideration immovable property by way of sale, gift or in any other manner.  Carried out by person for another  A transaction only in money or actionable claim.  And includes a declared service  Any service provided by an employee to an employer in the course of the employment.  Fees payable to a court or a tribunal set up under a law for the time being in force. Taxable Service: Non Taxable Service:  Service should be provided or agreed to be provided by a person to  Negative list Service Heads another 1. Services provided by Government or local authority.  Service in the taxable territory 2. Services provided by Reserve Bank of India.  Service should not be specified in the negative list. 3. Services by a foreign diplomatic mission located in India. 4. Services relating to agriculture. 5. Trading of goods. 6. Processes amounting to manufacture or production of goods. 7. Selling of space or time slots for advertisements other than advertisements broadcast by radio or television. 8. Access to a road or a bridge on payment of toll charges. 9. Betting, gambling or lottery. 10. Entry to Entertainment Events and Access to Amusement Facilities. 11. Transmission or distribution of electricity. 12. Specified education service (pre-school to college & vocational training). 13. Services by way of renting of residential dwelling for use as residence. Budget 2012 >>> 14. Financial sector. 15. Service relating to public transportation of passengers. 16. Service relating to transportation of goods. 17. Funeral, burial, crematorium or mortuary services including transportation of the deceased. Annveshan | Suresh & Co.,
  21. 21. ^Back 20 Positive List Negative List Taxable Service: Non Taxable Service:  Declared Services  Exempted Services 1. Renting of immovable property; 1. Service provided to the specified International 2. Construction of a complex, building, civil structure or a Organization. part thereof, including a complex or building intended 2. Health Care Services by clinical establishment, an for sale to a buyer, wholly or partly, except where the authorized medical practitioner or para-medics and entire consideration is received after issuance of veterinary clinic in relation to health care of animals or certificate of completion by a competent authority; birds. 3. Temporary transfer or permitting the use or enjoyment 3. Charitable Entity registered under section 12AA of the of any intellectual property right; Income tax Act, 1961 (43 of 1961) by way of charitable 4. Development, design, programming, customization, activities. adaptation, up gradation, enhancement, 4. Renting of Precincts of religious place meant for implementation of information technology software; general public or conduct of any religious ceremony. 5. Agreeing to the obligation to refrain from an act, or to 5. Advocates who is an Individual or a person tolerate an act or a situation, or to do an act; represented on and as arbitral tribunals. 6. Transfer of goods by way of hiring, leasing, licensing or 6. Sports - Individual or a sports body as a player, referee, any such manner without transfer of right to use such umpire, coach or manager for participation in a goods; tournament or championship organized by a 7. Activities in relation to delivery of goods on hire recognized sports body. purchase or any system of payment by installments; 7. Construction – Services provided to Government or 8. Service portion in execution of a works contract; local authority by way of erection, construction, Budget 2012 >>> 9. Service portion in an activity wherein goods, being maintenance, repairs, alteration, of a civil structure for food or any other article of human consumption or any non commercial purpose, or for historical monument, drink (whether or not intoxicating) is supplied in any or for an educational, clinical, art or culture manner as part of the activity. establishment or for irrigation purpose, or for water pipeline. Annveshan | Suresh & Co., 8. Copyright.
  22. 22. ^Back Sl Service Existing Proposed Remarks 21 1 Convention Center or Mandap with 40% 30% All credits, except on inputs, of chapter 1 to catering 22, will now be available 2 Pandal or Shamiana with catering. 30% 30% 3 Coastal shipping 25% 50% No Credit as at present 4 Accommodation in hotel etc 50% 40% Credits on Input service allowed 5 Railways: goods 70% 70% All credits will be allowed 6 Railways: passengers NA 70% All credits will be allowed Others • Change in abatements for few Services • Export Rules will cease to apply, the required provisions will be incorporated in Service Tax Rules. • Conditions to qualify a transaction as export are - • Service provider is located in taxable territory • Service provided is a service other than in the negative list. • The place of provision of service is outside India • Payment is received in convertible foreign exchange • New Valuation Rule to substitute Works contract (Composition scheme from payment of Service Tax) Rules, 2007 • The value of works contract shall be - • Value of service reduced by value of property • Actual Value of goods if not intimated to Vat authorities‘ • Specified Percentage – Deduction Budget 2012 >>> • Original Works – 40% • Other Contracts – 60% • Construction of complex, building for sale – 25% • In case of supply of foods and drinks in a restaurant or an outdoor catering • Service portion – increased from 30% to 40% Annveshan | Suresh & Co.,
  23. 23. ^Back EXCISE DUTY 22 AMENDMENTS IN CENTRAL EXCISE ACT, 1944: • Effective after enactment of finance bill • The definition of ―inter-connected undertakings‖ has been incorporated under Excise. • Section 9(1)(i)-Value of punishable offences increased from Rs 1 lakh to Rs 30 lakhs • All offences under the Act are non-cognizable, except an offence punishable with imprisonment of three years or more. • For issuance of show cause notice where service of notice is stayed by an order of a court or tribunal shall exclude the period of stay. • To avail the benefit of reduced penalty u/s 11AC, the amount has to be paid within 30 days. • Search and seizure procedures being amended to align the provisions with Customs Act. • Power to arrest is being substituted to align the provisions with Customs Act and also to provide that offences punishable with imprisonment of three years or more under section 9 shall be cognizable. • Bail in case of offences punishable with a term of imprisonment of three years or more shall not be granted by a Court or Magistrate without an opportunity being given to the Public Prosecutor to present his case. • Central Excise Act provides that searches shall be carried out as per the procedure laid down in the Code of Criminal Procedure.AMENDMENT IN CENTRAL EXCISE TARIFF• Rates of Duty take effect from midnight of 16-3-2012/17-3-2012Rate of Duty Type of Goods Earlier Rate Effective Rate of Duty Goods, other than petroleum- 10% 12% Standard Rate Budget 2012 >>> Goods , other than petroleum 5% 6% Excise Duty imposed on 130 items 1% 2% in the last Budget Petroleum goods [ Ad-valorem 14% value] Annveshan | Suresh & Co.,
  24. 24. ^Back 23 Readymade Garments • Excise duty on ready-made garments bearing a brand name or sold under a brand name, increase in abatement from 55% to 70%. • Duty Payable @ 12% on 30% of the Retail sale price Automobiles • Rates of excise duty applicable to motor vehicles falling under heading nos.8702 and 8703 have been enhance which varies from 12% -27% depending upon the engine capacity Tobacco Products : • Cigarettes are being notified under section 4A for RSP based assessment with abatement of 50% from RSP. • enhance the excise duty on cigars, cheroots and cigarillos to ―12% or Rs.1370 per thousand, whichever is higher • enhance the rate of excise duty on cigarettes (both filter and non-filter) of length exceeding 65 millimeters by adding an ad valorem rate of 10% to the existing specific rates of duty. • The basic excise duty on hand-rolled bidis is being increased from Rs.8 to Rs.10 per thousand and on machine-rolled bidis from Rs.19 to Rs.21 per thousand. • The rates of duty per machine applicable to pan masala, guthka, chewing tobacco, zarda scented tobacco and unmanufactured tobacco under the compounded levy scheme are being increased. Footwear • Exemption limit on footwear is being enhanced from Rs.250 per pair to Rs.500 per pair. • Footwear above Rs.500 per pairwould attract excise duty of 12%. Budget 2012 >>> Precious metals: • Unbranded Jewellery bought under Levy of Excise. • Duty on unbranded jewellery would be @ 30% of transaction value declared in the invoice. • Unbranded silver jewellery is already exempt. Annveshan | Suresh & Co.,
  25. 25. ^Back • Branded silver jewellery is being exempted from excise duty. 24 • ED on gold jewellery sold from EOUs into DTA is being increased from 5% to 10%. • Excise duty on refined gold is being increased from 1.5% to 3%. • Excise duty on gold produced from copper smelting is being increased from 2% to 3%. • Excise duty on silver produced from copper smelting is being reduced from 6% to 4%. • Exemption provided on articles of goldsmith and silversmith wares of precious metals or of metals coated with precious metals, not bearing a brand name • Full Exemption - Gold coins of purity 99.5% and above and silver coins of purity 99.9% and above. Environment friendly goods: • Excise duty is being reduced from 10% to 6% on battery packs supplied to manufacturers of electric vehicles for use asspares and OEMs subject to end-use condition. • Excise duty is being reduced from 10% to 6% on specific parts of Hybrid vehicles supplied to manufacturers of hybridvehicles subject to end-use condition. • Excise duty on LED lamps is being reduced to 6%. Exemptions • Full exemption from excise duty has been provided in the following cases: • Specified raw materials viz. stainless steel tube and wire, cobalt chromium tube, Hayness Alloy-25 and polypropylene mesh required for manufacture of Coronary stents/ coronary stent system and artificial heart valve on actual user basis. • Refills and inks in bulk packs (not meant for retail sale) used for manufacture of pens of value not exceeding ` 200 per piece. • The entry ―intraocular lens will be exempted Budget 2012 >>> • Parts, components and specified accessories viz. battery chargers, PC Connectivity Cables, Memory cards and hands-free headphones required for the manufacture of mobile phones are fully exempt. Concessional rate of excise duty of 2% is being provided on a condition that no CENVAT Credit of any inputs or input services is availed of. Annveshan | Suresh & Co.,
  26. 26. ^AMENDMENT IN CENVAT CREDIT RULES, 2004 Back 25 Effective from 1-4-2012 • Refund of CENVAT credit as per Rule 5 shall be determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette: Refund amount = [(Export turnover of goods+ Export turnover of services) x Net CENVAT credit ]/Total turnover • Reversal under Rule 6(3)on value of exempted service is increased from 5% to 6% • ISD shall provide credit attributable on prorate basis if the credit pertaining to more than one unit i.e in the ratio of turnover of unit and total turnover. If it is pertaining to only one unit then it shall be attributable to that unit. • Credit shall be availed based on the tax payment challan, in case of reverse charge. • Rule 10A is being inserted to permit transfer of unutilized credit of SAD lying in balance at the end of each quarter to another factory of the manufacturer. Accordingly Form ER-1 has been amended to include such information refer Notification 12/2012 CE. • Amendment to Capital goods credit – Credit is being allowed on motor vehicles (except those of heading nos. 8702, 8703, 8704, 8711 and their chassis). The credit of tax paid on the supply of such vehicles on rent, insurance and repair shall also be allowed; • Credit of insurance and service station service is being allowed to— o insurance companies in respect of motor vehicles insured and re-insured by them; and o Manufacturers in respect of motor vehicles manufactured by them. • Rule 4(1) and 4(2) are being amended to allow a service provider to take credit of inputs or capital goods whenever the goods are delivered to him, subject to specified conditions. Effective from 17-3-2012 • Rule 3(5) and 3(5A) are being amended to prescribe that in case the capital goods on which Cenvat credit has Budget 2012 >>> been taken are cleared after being used then the amount payable shall be either the amount calculated on the basis of Cenvat credit taken at the time of receipt reduced by a prescribed percentage or the duty on transaction value whichever is higher. • Beneficial piece of legislation has been given in Rule 14. Any credit ‘wrongly taken or utilized’ is being replaced with Annveshan | Suresh & Co.,
  27. 27. ^Back CUSTOMS 26 No change proposed in the peak rate of customs duty of 10 per cent on non agricultural goods. Effective Date All changes Unless specifically stated come into effect from Midnight 16th March 2012 What’s UP The basic customs duty/CVD is being increased on the following items: 1. Items From To Completely Built Units (CBUs) of large cars/ MUVs/ SUVs permitted for import without type approval 60% 75% (value exceeding US$40,000 and engine capacity exceeding 3000cc for petrol and 2500cc for diesel) Boric acid 1. 5% 7.5% Digital Still Cameras of certain specifications. 1. Nil 10% Flat rolled products (HR and CR) of non-alloy steel 1. 5% 7.5% Standard gold bars and platinum bars 1. 2% 4% Non-standard gold 1. 5% 10% Gold ore/concentrate and dore bars for refining 1. 1% 2% Cut and Polished coloured gemstone (Basic Customs Duty) 1. Nil 2% Parts of bicycles 1. 10% 30% Exemption from SAD Brass Scrap, Wood in rough, dredgers & equipments for setting up of Solar Thermal projects are exempt from SAD Budget 2012 >>> Exemption from SAD is now restricted to Prime Quality of Steel instead of CARGO Steel. Annveshan | Suresh & Co.,
  28. 28. ^Back 27 What’s Down •Full exemption from basic customs duty is being provided to certain items as under: 1. Items From To Initial setting up and substantial expansion of fertilizer projects. Exemption would be valid till 31.03.2015 Exempted Steam coal valid upto 31.3.2014 5% 1% Natural gas/Liquified Natural Gas imported for power generation by a power generation company Exempted Uranium concentrate, sintered natural uranium dioxide, sintered uranium dioxide pellets for generation of nuclear power. Exempted Steel tube & wire, cobalt chromium tube, Hayness Alloy-25 and polypropylene mesh for the manufacture of coronary Exempted stents/coronary stent systems and artificial heart valves subject to actual user condition. Equipment imported for road construction projects awarded by Metropolitan Development Authorities (CVD &SAD) Nil Tunnel excavation and specified lining equipment (CVD & SAD) Nil Coal mining projects Exempted New and retreaded aircraft tyres (CVD) Nil Parts of aircraft and testing equipment for maintenance and repair of aircraft imported by third-party Maintenance, Repair and Exempted Overhaul (MRO) units. Tunnel boring machines for hydel and road projects for all infrastructure projects & parts required for assembly of such Exempted machines Tri-band phosphor Waster paper Budget 2012 >>> Lithium ion batteries for the manufacture of battery packs for supply to electric or hybrid vehicle manufacturers Concessional 6% rate of CVD Lithium ion batteries for the manufacture of battery packs for supply to electric or hybrid vehicle manufacturers SAD Nil Annveshan | Suresh & Co.,
  29. 29. ^Back 28 The basic customs duty is being reduced on the following items: 1. Items From To Solated soya protein and soya protein concentrate 1. 30%/15% 1. 10% Probiotics 1. 30%/15% 1. 10% Railway safety (Train Protection and Warning System) equipment and railway track laying machines 1. 10% 1. 7.5% Machinery and instruments for surveying and prospecting of mines 1. 10% 1. 7.5% Titanium Dioxide 1. 10% 1. 7.5% Specified coffee plantation and processing machinery concessional duty would be available upto 31.3.2014 10% / 7.5% 1. 5% Specified soluble fertilizers and liquid fertilizers, other than urea. 10% / 7.5% 1. 5% Raw materials for the manufacture of intermediates, parts and sub-parts of blades for rotors for wind energy 10% / 7.5% 1. 5% generators Six specified life saving drugs/vaccines and their bulk drugs (CVD NIL) 10% 1. 5% Iodine 10% / 7.5% 1. 5% Sugarcane planter, root or tuber crop harvesting machine and rotary tiller & weeder, parts & components for their 7.5% /5% 1. 2.5%, manufacture. Parts required for manufacture of such coffee vending and brewing machines (commercial type). 7.5% /5% 1. 2.5%, Specified raw materials for the manufacture of syringes, needles, catheters, cannulae (SAD-NIL & CVD -6%) 7.5% /5% 1. 2.5%, Parts and components for the manufacture of blood pressure monitors and blood glucose monitoring systems 7.5% /5% 1. 2.5%, (Gluco-meters) (SAD-NIL & CVD -6%) Capital goods, plant and equipment imported for setting up or substantial expansion of iron ore pellet plants or iron 7.5% /5% 1. 2.5%, Budget 2012 >>> ore beneficiation plants Specified soluble fertilizers and liquid fertilizers, other than urea 7.5% /5% 1. 2.5%, Annveshan | Suresh & Co.,
  30. 30. ^Back 29 Baggage allowance • For Passengers of Indian origin Duty free allowance is increased from Rs.25000 to Rs.35000. • For Children up to 10years Duty free Allowance is increased from Rs.12000 to Rs.15000. Project import concession • Concessional rate of basic customs duty of 5% with full exemption from additional duty of customs (CVD) and special additional duty of Customs (SAD). This exemption is being extended to systems installed for handling horticultural produce. • Project imports status with 5% BCD is being granted to the green houses set up for protected cultivation of horticulture and floriculture produce. [Notification No. 17 /2012-Customs and Notification No. 12/2012 –Customs both dated 17th March, 2012 has been issued for this purpose]. Computation of customs duty • Method of computation of Education & Higher Education Cess on Imported Goods is being Simplified The portion of Cesses on CVD is exempted so as to avoid computation of such cesses twice. • Effective Rate of SAD has to be computed as per Notification no.21/2012 dt 17/2/2012 which supersedes earlier notification nos.29/2010 dt 27.2.2010 & 20/2006 dt 1.3.2006 Cenvat credit rule amendment • Transfer of Unutilized Credit of SAD is permitted to other registered premises of the same manufacturer at the end of each quarter w.e.f.1.4.2012 Budget 2012 >>> Annveshan | Suresh & Co.,
  31. 31. ^Back 30 FINANCE BUDGET - SECTORAL IMPACT Retail: The major issue in retail was entry of foreign players in the multi brand retail which flaked opposition not only from the opposition parties but also from the allies to the government. Also the increase in gold prices was another significant event in the last six months. While government was able to address some of the issues, some remain unanswered. • No consensus yet for FDI up to 51% in multi brand retail, however the efforts are on. • Customs duty on standard gold increased from 2% to 4% and that on non standard gold goes up to 10% from current 5%. • Branded Silver Jewellery exempted from customs duty as well as from Excise Duty. • Customs Duty on import of bicycles and parts thereof has been increased to 30%.Aviation:Aviation industry was suffering heavily under the pressure of high operating cost. Alsoheavy cost of maintenance spares also raised questions about the overall safetystandard maintained by the industry. The government has taken some positive steps toboost the sector.• Direct import of Air Turbine fuel is permitted by Aviation companies. It may help to reduce their operating cost.• Allowing External Commercial Borrowing to Aviation Companies upto USD 1 Billion for Working Capital needs. Budget 2012 >>>• Withholding tax payable on the interest on such borrowing was reduced to 5% from existing 20% for a period of 3 years.• Customs duty on import of aircraft spares is exempted for 2 years.• Service Tax on air transportation is being replaced with a uniform ad-valorem levy at standard rate with an abatement of 60% on all sectors and all classes. Annveshan | Suresh & Co.,
  32. 32. ^Back 31Power & Utilities:• With the planned economic growth of 7.6% the demand on Power Sector is going to increase in leaps and bound. As against the targeted capacity addition of 78,700 MW, only 46,669 MW was achieved by January 2012. Need was felt for an immediate capacity expansion in this sectors to support the expected growth.• To boost the investment in Power Sector issue of Tax Free Bonds to the tune of Rs 10 thousand crores was proposed.• To part finance power projects ECB was allowed. Interest on such ECB will attract withholding tax at a lower rate of 5% for the next 3 years.• Sunset clause under sec. 80IA extended for new facilities for one year for claiming 100 per cent deduction of profits for 10 years.• Addl. Depreciation of 20% on newly acquired assets by Power Generation Companies.• Coal India was advised to sign FSA( Fuel Supply agreements) with power plants, having Long term PPAs with DISCOM and getting commissioned on or before 31st March 2015.• Import of Coal is exempted from Basic Customs Duty and levy of CVD was reduced to 1% there by lowering the input cost of the Power Plants.• Full exemption from basic duty provided to certain fuels for power generation.• Thermal Power Companies are exempted from Customs Duty for next 2 years.• Concessions and exemptions proposed for encouraging the consumption of energy-saving devices, plant and equipment needed for solar thermal projects. IT & ITES: Budget 2012 >>> • As the definition of Royalty has been modified to include computer software including software as a service, Withholding of taxes on foreign / domestic royalty payments will be applicable to IT & ITES sector. Hence it will increase costs on import payments and affect cash flow of domestic software companies. Annveshan | Suresh & Co.,
  33. 33. ^The majorFinancial Services financial sector was weak global economy and weakness inBanking,• Back challenge before the and Insurance: 32 international financial market. The funding constraint in the international market could impact both the availability and cost of the foreign funding for banks and corporate. Since Indian financial system is bank oriented banks ability to withstand stress is critical to overall financial stability.• Government proposed to create a Financial Holding Co for meeting capital needs of PSU banks.• Infusion of Rs.15,888 crore in public sector banks, regional rural banks and NABARD in 2012-13.• The government has proposed the recapitalization of Regional Rural Bank for another 2 years.• Micro Finance Institution Bill, National Housing Bank amendment Bill, SIDBI (Amendment) Bill and NABARD (Amendment) Bill was proposed in the budget to move forward the financial reforms agenda.• Government has planned to raise Rs. 60,000 crores through issue of Bonds to facilitate various sectors.• Under the proposed sec. 10(10D), sum received under insurance policies issued on or after 1st April 2012, where premium payable for any of the years during the term of the policy exceeds 10% of the actual capital sum assured will be taxable. This may work as a dampener to the Life Insurance Sector.• Compounding rate for Service Tax for life insurance was increased to 3% for the first year Oil & Natural gas: premiums while retaining the rate of 1.5% for the subsequent years. • Cess on Crude petroleum oil increased to Rs 4500/- per Metric tone. • Any income received in India in foreign currency by a foreign company on account of sale of Crude oil to any Person in INDIA is exempt. This may help cheaper crude oil for our refineries. Budget 2012 >>> Textile • Automated Shuttle loom exempt from Customs Duty. Annveshan | Suresh & Co.,
  34. 34. ^Back 33Agriculture:• Agriculture credit increased to 5.75 lac crore. Plan outlay for Department of Agriculture and Co-operation increased by 18%.• NABARD will be allocated Rs. 10,000 Cr for refinancing RRB.• Minor Irrigation works would be financed by Govt through a newly formed Company.• Custom duty on Fertilizer Plant Equipment was made to zero from present 5%.• Proposal to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services. Basic customs duty reduced for certain agricultural equipment and their parts.• Full exemption from basic customs duty for import of equipment for expansion or setting up of fertiliser projects upto March 31, 2015.• A new centrally sponsored scheme titled ―National Mission on Food Processing‖ to be started in 2012-13 in co-operation with State Governments.• Steps taken to create additional food grain storage capacity in the country. Health Care: • Rural drinking water & sanitation schemes were allocated Rs 14,000 Cr. • NRHM allocation hiked to Rs 20,820 crores. • Proposal to extend concessional basic customs duty of 5 per cent with full exemption from excise duty/CVD to 6 specified life saving drugs/vaccines. • Basic customs duty and excise duty reduced on Soya products to address protein deficiency among women and children. • Basic customs duty and excise duty reduced on Iodine. Budget 2012 >>> • Basic customs duty reduced on Pro-biotics. • Hospitals with more than 100 beds now eligible for 150% deduction of capital and revenue expense for tax purpose. Annveshan | Suresh & Co.,
  35. 35. ^Back 34 Media & Entertainment: • Service tax exempted on advertisement (selling of space or time ) other than Broadcasted by Radio or Television. • Entertainment Events and Amusement facilities exempt from Service tax. • Service tax on transaction between film producers and music companies scrapped. Service tax scrapped on song recordings too. • Entertainment industry exempted from service tax. Film producers, multiplexes, DTH operators to benefit. • Filmmakers to benefit as jumbo rolls of cinematographic film fully exempted from CVDInfrastructure & Real Estate: by providing full exemption from Excise Duty.• Out of the fund raised by Government proposed allocation in infrastructure sector is Rs. 45,000/-• Govt want to encourage more PPP in Infrastructure.• Four thousand residential quarters to be constructed for paramilitary forces with an allocation of Rs.1,185 crore.• Govt. has a target of covering a length of 8,800 kilometre under NHDP next year.• Allocation of the Road Transport and Highways Ministry enhanced by 14 per cent to Rs. 25,360 crore.• Allowed ECB for low cost affordable Housing projects, roads and bridges, ports, construction of Ships and Dams.• Withholding tax on interest on ECB reduced to 5% from existing 20% for 3 years.• TDS on Immovable property sale@1% of consideration > Rs. 50 lacs in a specified Budget 2012 >>> Area and >Rs. 20 lacs for other areas. This may be a dampener particularly in residential sector.• Full exemption from import duty on certain categories of specified equipment needed for road construction, tunnel boring machines and parts of their assembly.• Four thousand residential quarters to be constructed for paramilitary forces with an Annveshan | Suresh & Co., allocation of Rs.1,185 crore.
  36. 36. ^BackTelecommunication : 35• Strengthening of rural economy and financial inclusion to have positive trickle down impact on rural penetration of telecom sector.• Mobile-based system that gives all information on fertilizer and subsidies movements to be rolled out nation-wide this year. This will provide a new demand sector to the industry.• Mobile phones set to get cheaper, custom duty cut on mobile phone parts, LCD screens and memory cards.Manufacturing:• National Manufacturing Policy announced with the objective of raising, within a decade, the share of manufacturing in GDP to 25 per cent and creating of 10 crore jobs. Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector. Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a new manufacturing SME for purchase of new plant and machinery.Iron & Steel:• As the Govt is committed for new railway line construction and modernization of existing lines, it will be a big boost to Steel Industry and also Engineering industry involved in coach building as 30% of Annual Plan (approx Rs 18000 Cr) has been allocated this year.• TCS @1%on purchase of Minerals , being ignite or Iron Ore.• Duty hike on hot rolled coils, a basic grade of steel used in durables, will benefit domestic steel makers and help curb imports.• Duty cut on imported plant and equipment for pellet and beneficiation to encourage processing of low grade iron ore and boost steel industry.• Basic customs duty on coating material for electrical steel down from 7.5% to 2.5%. Budget 2012 >>>• FM lowers duty on plant and machinery imports for pellet plant and iron ore beneficiation from 7.5% to 2.5%.Automobile :• Large cars Excise duty raised from 22 to 24%• Basic customs duty proposed to be enhanced for certain categories of completely built units of large cars/MUVs/SUVs. Annveshan | Suresh & Co.,
  37. 37. ^Back FEMA 36 Liberalized Remittance Scheme for Resident Individuals: RBI/2011-12/430, Circular No. 90, dt 06.03.2012 The RBI has clarified that the facility to Resident individuals to remit USD 200,000 per Financial Year is applicable for Minors also. Release of Foreign Exchange for Imports – Further Liberalization: RBI/2011-12/404, Circular No. 82, dt 21.02.2012 The RBI has enhanced the limit for foreign exchange remittance towards imports without any documentation formalities - from USD 500 or its equivalent to USD 5,000 or its equivalent, with immediate effect. The Authorized Dealer shall obtain a simple letter from the applicant containing the basic information viz., name and address of the applicant, name and address of the beneficiary, amount to be remitted and the purpose of remittance for this purpose. Export of Goods and Services: • Receipt of advance payment for export of goods involving shipment (manufacture and ship) beyond one year: RBI/2011-12/403 Circular No.81 dtd 21.02.2012 Prior approval of RBI was required to receive these advance payments earlier. However, now it has been decided to permit AD Category - I banks to allow exporters to receive advance payment for export of goods which would take more than one year to manufacture and ship, and where the ‗export agreement‘ provides for shipment of goods extending beyond the period of one year - from the date of receipt of advance payment subject to the fulfillment of certain prescribed conditions. Budget 2012 >>> • Simplification and Revision of Softex Procedure: RBI/2011-12/400 Circular No. 80 dt 15.02.2012 The RBI has issued a revised procedure where a software exporter, whose annual turnover is at least Rs. 1,000 crore or who files at least 600 SOFTEX forms annually, will be eligible to submit a statement in excel format as per Annexure A (to the aforesaid circular), giving all particulars along with quadruplicate set of SOFTEX form to Annveshan | Suresh & Co., the nearest STPI. The new procedure will be effective initially from April 01, 2012 in STPI Bangalore, Hyderabad,
  38. 38. ^Back 37 Clarification: Purchase of Immovable Property in India - Reporting requirement: RBI/2011/12/399 Circular No. 79 dt 15.02.2012 It is clarified that for a person resident outside India who is a citizen of India or a Person of Indian Origin (as defined by FEMA 21/2000-RB), there is no reporting requirement in Form IPI for acquiring immovable property in India. However, the reporting requirement in Form IPI is applicable for a branch, office or other place of business, excluding liaison office. External Commercial Borrowing (ECB)-Simplification of procedure: RBI/2011-12/366, Circular No.69 dt 25.01.2012 As a measure of simplification of the existing procedures, it has been decided that the designated AD category-I banks can approve the ECB Borrowers‘ requests such as Cancellation of Loan Registration Number and Change in the end-use of ECB Proceeds subject to fulfillment of certain prescribed conditions. Foreign investment in Single Brand Retail Trading: Amendment to Foreign Direct Investment (FDI) Scheme: RBI/2011-12/348 Circular No. 67 dt 13.01.2012 The RBI has decided that FDI up to 100 % would be permitted in Single Brand product trading under the Government route subject to the terms and conditions stipulated by the Ministry of Commerce. Earlier, FDI up to 51% only was permitted in Single Brand product trading. ECB for Micro Finance Institutions (MFIs) and Non-Government Organizations (NGOs)- engaged in micro finance activities under Automatic Route: RBI/2011-12/304 Circular No. 59 dt 19.12.2011 Budget 2012 >>> MFIs & NGOs may be permitted to raise ECB up to USD 10 million or equivalent during a financial year for permitted end-uses, under the Automatic Route subject to ECB Parameters & certain eligibility criteria. External Commercial Borrowings Policy: RBI/2011-12/273 Circular No. 51 dt 23.11.2011 The RBI in a move to reduce difficulties of borrowers in raising ECBs has revised the all-in-cost ceiling from 300 basis points to 350 basis points for the loans with average maturity period of 3 to 5 years. Annveshan | Suresh & Co.,
  39. 39. ^Back 38 CORPORATE & OTHER LAWS Green Initiative Schemes introduced by Ministry of Corporate Affairs under Companies Act, 1956 under various circulars: The Ministry of Corporate Affairs has taken a ―Green Initiative in the Corporate Governance‖ by allowing paperless compliances by the Companies in order to save trees. Inter alia, some of the significant initiatives are as under:i. Participation of Directors and Shareholders in meetings through video conferencing;ii. Issue of certificates (list mentioned in Circular 39/2011) and standard letters electronically under Digital Signature by Registrar of Companiesiii. Allowing service of Documents including Balance Sheets and Auditors Report etc., through e- mail addresses;iv. Voting in General Meeting of Companies through electronic mode. Director’s Relatives (Office or Place of Profit) Amendment Rules, 2011: As per the above circular for appointment of a person for an office or place of profit in a company, in respect of specified partner/ relative/ firm/ private company, requires approval of Central Government, in case, monthly remuneration exceeds Rs. 2,50,000 p.m. instead of earlier limit of Rs. 50,000 p.m MCA notification – Revised Schedule VI Budget 2012 >>> Presentation of financial statements by companies to be made in Revised Schedule VI format - shall come into force for financial year commencing on or after 01.04.2011. During the Financial Year, in case companies intend to go for Initial Public Offer/ Further Public Offer, they are expected to prepare accounts in the new Schedule VI format. The opening balances shall be presented in the Revised Schedule VI format. Annveshan | Suresh & Co.,
  40. 40. ^Back 39 Allotment of PAN encrypted Director Identification Number (DIN): In order to avoid duplicate DIN, furnishing PAN to MCA made compulsory. Existing DIN holders who have not furnished their PAN earlier at the time of obtaining DIN are required to furnish their PAN by filing e-form DIN-4 by 30.04.2012 failing which DIN will be disabled. Gist of Cost Accounting Rules and Audit with effect from 01.04.2011 Every Company including Foreign Company as defined under Section 591 of the Act, engaged in Production, Processing, Manufacturing & Mining Activities are required to submit Compliance Report to Central Government certified by a Cost Accountant. Further the following companies are required get their cost records audited by a cost Accountant . - Companies whose Turnover in Previous Year is 100 Crores or Listed in Stock Exchange and involved in manufacturing/Production of products such as Cement, Tyres & Tubes, Steel, Paper, Insecticides, Glasses, Paints & Varnishes, Aluminums, Jute, Cotton Silk, Woolen or blended Fibers/ Textiles, Edible Oil Seeds (including Vanaspathi), Packaged Food Products, Organic & Inorganic Chemicals, Coal & Lignite, Mining & Metallurgy of ferrous & Non- Ferrous metals, Tractors & other Motor Vehicles (including Automobile Components), Plantation Products, Engineering Machinery (including Electrical & Electronic Products); or - Companies whose Turnover in Previous Year is 20 Crores or Listed in Stock Exchange and involved in manufacturing/production of products/providing of services such as Bulk Drugs, Formulation, fertilizers, Sugars, Industrial Alcohol, Electricity Industry, Petroleum Industry, Telecommunication - The above to be filed within 180 from closure of Financial year. Unlisted Public Companies (Preferential Allotment) Amendment Rules, 2011 Budget 2012 >>> The MCA vide Notification amended the Unlisted Public Companies (Preferential Allotment) Rules, 2003. The preferential allotment now can also be made to others, other than existing shareholders, Directors and their friends or relatives. The persons to whom such offer is proposed, shall not be more than forty-nine. Issue of such shares is authorized by its articles of association and a special resolution is passed authorizing the Board of Directors to make such issue. No fresh offer or invitation shall be made unless the allotment with respect to any offer or invitation made Annveshan | Suresh & Co., earlier has been completed.
  41. 41. ^Back 40 ACCOUNTING STANDARDS BY ICAI Guidance Note on Accounting for Self- generated Certified Emission Reductions (CERs) (Issued 2012) February 2012 Keeping in view that Carbon Credits is a relatively new area; the Accounting Standards Board has formulated the afore mentioned Guidance Note. The Guidance Note issued by ICAI lays down guidance on matters of applying accounting principles relating to recognition, measurement and disclosures of CERs (which is a type of emission unit or Carbon Credit) generated by the entity under the Clean Development Mechanism. An entity should apply this Guidance Note for accounting periods beginning on or after April 01, 2012. Guidance Note on Accounting for Real Estate Transactions (Revised 2012) February 2012 This Guidance Note covers all forms of transactions in Real Estate. The Guidance Note primarily provides guidance on application of %age of completion method, where it is appropriate to apply this method - i.e., transactions and activities of real estate which have the same economic substance as construction contracts. For this purpose, the Guidance Note draws upon the principles brought out in Accounting Standard 7-Construction Contracts. In respect of transactions of real estate which are in substance similar to delivery of goods, principles enunciated in Accounting Standard 9- Revenue Recognition, are applied. This Guidance Note should be applied to all projects in real estate which are commenced on or after April 1, 2012 and also to projects which have already commenced but where revenue is being recognized for the first time on or after April 1, 2012. An enterprise may choose to apply this Guidance Note from an earlier date provided it applies this Guidance Note to all transactions which commenced or were entered into on or after such earlier date. When this Guidance Note is applied as above, it supersedes the Guidance Note on Recognition of Revenue by Real Budget 2012 >>> Estate Developers-issued by ICAI in 2006. Annveshan | Suresh & Co.,