E booklet Union Budget 2018-19

1Email : info@apmh.in. Website : www.apmh.inAPMH Advisory Pvt Ltd
Budget
Highlights
Rates of Taxes
and TDS
Direct Tax
Proposals
Indirect Tax
Proposals

Budget
Highlights
Rates of Taxes
and TDS
Direct Tax
Proposals
Indirect Tax
Proposals
Preface
Displaying the WILL to transform India from “The Fragile Five” to the “Fastest Growing Economy”, the government has been working on various quantum leap initiatives.
In the past one year, businesses have witnessed various changes like “De-Monetization” and “GST Implementation”. The business community at large is suffering from
a highly volatile compliance environment. However, based on smart communication by our PM, the industry seems to have been facing the change for betterment with
a Smiling Face, with an expectation to discover the dream of “a strong, confident and a New India”.
The Finance Minister Shri. Arun Jaitley presented the Union Budget 2018 with Infrastructure, Agriculture, MSME and Employment as key themes, from a business stand
point. Corporate India shall be majorly benefited by rationalization of corporate Income Tax to 25% whereby 99% of the corporate tax payers who clock turnover below
Rs. 250 Cr in the previous year will be benefited. Retrospective amendments in the Income Tax Act have been proposed to make the roots of ICDS stronger in all facets
of Income Tax Act which were litigation prone, benefiting those who did the compliance. With an idea to generate revenue for the ambitious spending plans on the health
and education of the poor and peasants and thereby redistribution of wealth, Education Cess of 2% and Higher Education Cess of 1% is replaced by “Health and Educa-
tion Cess” of 4%, which shall impact the PAT of the businesses negatively.
The GST being driven by the suggestions of the GST council couldn’t find direct place in the budget. Although indirect benefits of the GSTN by proposing it as a credible
backup to extend the bill discounting facility to the MSME could be seen. The whole discourse on “Ease of Doing Business”, enhanced FDI investments and the amend-
ments in the Customs Act by increasing the customs duty for mobile phones, jewelry, etc displayed governments commitment to protect it’s “Make in India” initiative
and provide encouragement to those who are and shall be producing in India.
With the longterm systems and process improvements like complete transformation into e-assessment in Income Tax and pre-notice consultation proposal in the
Customs Act, one can gauge a clear reduction in type and time tax litigations.
Investors including FPIs in select situation making huge gains in the capital markets shall have to shell out 10% tax on longterm capital gains on STT paid equity shares
and mutual funds, with some transitional relaxations. The 5% leeway allowed on valuation of properties where Agreement value is less than the Fair Market Value as per
rates determined under the stamp Act and restriction of Sec 54EC deductions to the Land and Building transactions shall reduce the hassles and curb litigations.
Shifting the paradigm of the Budget Proposals, being meagerly looked at as a move to new higher slabs of personal Income Tax, category specific relaxations are proposed
in the direct tax by introduction of standard deduction for the salaried, increased deduction for the interest earnings by the senior citizens, increased medical and health
related deductions and so on.
Being in the domain of Tax and Business Advisory, APMH has been tracking and updating itself and the clientele with the dynamic changes from time to time. Team
APMH has been following a very research oriented approach to assimilate the knowledge and connect with the impacts both in short term and long term.
With the above backdrop, keeping the tradition of more than a decade, team APMH presents its detailed analysis and research about the budget 2018 proposals along
with Industry level impact analysis in this document.
From the Chairman’s Desk
CA Amit Doshi

Budget
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Index
Sr. No. Particulars Page No.
Direct Tax Proposals
1 Slab of Income Tax at a Glance 7
2 Taxation of Salary 13
3 Taxation of Income From Business & Profession 14
4 Taxation of Capital Gains 19
5 Allowability of Deduction under Chapter VI-A 21
6 Taxation of Dividends & Dividend Distribution Tax 25
7 Taxation of Trust & Other Institution 26
8 Related to International Taxation & Transfer Pricing 27
9 Alternate Minimum Tax (AMT) Provisions 31
10 Assessments & Penalty Provisions 32
11 Finance Bill, 2018 & Insolvency and Bankruptcy Code, 2016 34

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12 Customs 35
13 Service Tax 45
14 Excise Duty 46
15 Miscellaneous Amendment in Indirect Taxes 47
16 Expectations related to GST missed out in the Budget 47

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Direct Tax
„„ No Changes in slabs of Individuals, HUFs, Firms (including LLPs)
„„ Education Cess of 2% and Higher Education Cess of 1% replaced by
“Health and Education Cess” of 4%
„„ Corporate tax reduced to 25% for companies having Gross Receipt /
Turnover upto Rs 250 Crores in FY 2016-17
„„ Withdrawal of Long Term Capital gain in excess of Rs 1.00 L on sale
of listed securities. Capital Gain accrued on unsold shares as on 31st
January to be replaced as cost of acquisition while calculating Long
Term Capital Gain tax.
„„ Above Long Term Capital Gain where STT is paid on purchase and sale
to be calculated without indexation and would be charged @ special rate
of 10%
„„ Standard Deduction of Rs 40,000 across the board to all employees.
However, other allowances like Transport allowance and Medical allow-
ance removed making this benefit superfluous.
„„ 5% leeway allowed on valuation of properties where Agreement value is
less than the Fair Market Value as per rates determined under the stamp
Act – A relief for property transactions to an extent.
„„ Retrospective Statutory backing given to ICDS by amending certain provi-
sions of The income Tax Act and thereby nullifying the effect of hon’ble
Delhi High Court decision holding many provisions of ICDS unconstitu-
tional. All provisions of ICDS resulting into income / loss recognised by
amendment of applicable provisions under Income Tax Act
„„ Conversion of stock in trade to capital asset to be charged as business
income in the date of conversion.
Budget Highlights
„„ Benefit of Investment (in specified bonds like NABARD, HUDCO etc)
u/s 54EC to be restricted to sale of Land and Building only. Holding
period increased from 3 years to 5 years for investment so made.
„„ Deemed dividend u/s 2(22)(e) to be taxed @ 30% as dividend distribu-
tion tax.
„„ TDS provisions removed in case of interest received from Banks / Finan-
cial Institutions to Senior Citizens.
„„ Senior citizens allowed special deduction of Rs 50,000 for income
from deposits with banks / Post Office. On the same lines, mediclaim
/ expenses on treatment deduction extended from Rs. 30,000 to Rs.
50,000 for senior citizens.
„„ All income tax scrutiny assessment across India to be e-assessment
only.
„„ Prosecution shall lie against companies for non-filing of return irrespec-
tive of the fact that whether any tax is payable or not.
„„ Amendments for companies having approved resolution plan
under Insolvency and Bankruptcy Code 2016
„„ Restriction on shareholding for the purpose of carry forward
loss not to apply in case of change of shareholding
„„ For computation of Minimum Alternative Tax (MAT) the aggre-
gate amount of unabsorbed depreciation and brought forward
loss shall be allowed to be reduced from the book profit.
„„ The receipt of any property by a wholly-owned Indian subsidiary from its
holding company and by an Indian holding company from its subsidiary
shall be exempt from tax under section 56 (2)(x)

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Indirect Tax
„„ In 2017-18, Central Government will be receiving GST revenues only for
11 months, instead of 12 months.
„„ Total Revised Estimates for expenditure in 2017-18 are 21.57 lakh crore
(net of GST compensation transfers to the States) as against the Budget
Estimates of 21.47 lakh crore
„„ GST contributes 23% of Total Revenue to the Government
„„ It is proposed to onboard public sector banks and corporates on Trade
Electronic Receivable Discounting System (TREDS) platform and link
this with GSTN. Online loan sanctioning facility for MSMEs will be
revamped for prompt decision making by the banks.
„„ Central Board of Excise and Customs renamed as Central Board of
Indirect Taxes and Customs
„„ Customs duty on sunglasses, cigarette lighter, toys, bus and truck tyres,
select furniture hiked
„„ Customs duty on imitation jewellery hiked from 15% to 20%; doubled
on all watches to 20%.
Budget Highlights
„„ Import of solar tempered glass for manufacture of solar cells exempted
from customs duty
„„ 3% Cess on imported goods replaced by 10% Social Welfare Surcharge
„„ Seeks to exempt Integrated tax and Goods and Services Tax compen-
sation cess on imported goods from the whole of levy of Social Welfare
Surcharge (13/2018-Customs)
„„ No GST Credit on the Social Welfare Surcharge
„„ 3% Social Welfare Surcharge on Motor Spirit, High Speed Diesel, Gold,
Silver, Platinum, etc (12/2018-Customs)
„„ Proposed changes in customs duty to promote creation of more jobs in
the country and also to incentivise domestic value addition and Make in
India in sectors such as food processing, electronics, auto components,
footwear and furniture.
„„ Introducing an electronic Cash ledger on the lines similar to provisions in
CGST Act [Section 51A of Customs Act ]

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Part – 1
Slab Of Income Tax At A Glance
1.1) In case of Individuals/ HUF / AOP / BOI – No change except for Cess which is increased from 3% to 4%.
The effect of above amendment is given by way of example in different scenarios:
Income Slab Below 60 Years 60 Years & above but
below 80 Years
80 years & above
Upto Rs. 2,50,000 Nil Nil Nil
Rs. 2,50,000 to Rs. 3,00,000 5% Nil Nil
Rs. 3,00,000 to Rs. 5,00,000 5% 5% Nil
Rs. 5,00,000 to Rs. 10,00,000 20% 20% 20%
Above Rs. 10,00,000 30% 30% 30%
Applicability of Surcharge
Individual / HUF
Income upto Rs. 50 Lakhs - Nil
Income between Rs. 50 Lakhs to Rs. 1 Crore – 10%
Income exceeding Rs.1 Crore – 15%
(subject to Marginal Relief)
Applicability of Education Cess / Secondary
and Higher Education Cess
Replaced by Health & Education Cess at 4%.

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1.2) In case of Co-operative Society
1.3) In case of Firms
Where Total Income upto Rs. 10000 Above Rs. 10000 but less
than Rs. 20000
Above 20000
Rate of Tax 10% 20% 30%
Applicability of Surcharge Income exceeding Rs. 1 Crore – 12% (Subject to Marginal Relief)
Applicability of Education Cess / Secondary
and Higher Education Cess
Replaced by Health & Education Cess at 4%.
Where Total Income Tax Rate
Whole of the Amount 30%
Applicability of Surcharge Income exceeding Rs. 1 Crore – 12% (Subject to Marginal Relief)
Implication of Education Cess / Secondary and Higher Education Cess Replaced by Health & Education Cess at 4%.

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1.4) In case of Companies
1.5) The Maximum Marginal Rate (MMR) for AY 2019 - 20 will be 35.88% (30% plus surcharge @ 15% + Health
& Education Cess 4%).
Where Total Income Tax Rate Surcharge
In case of Domestic Companies - where
its total turnover or the gross receipt of the
previous year 2016-17 does not exceed Two
Hundred & Fifty Crore rupees
25% 7% if taxable income exceeds Rs.1 Crore but is less than 10 crores –
(Subject to Marginal Relief)
12% if taxable income exceeds Rs. 10 Crore – (Subject to Marginal Relief)
In case of other Domestic Companies 30%
In case of Foreign Companies – Whole of
the Amount (Including branches of such
companies)
40% 2% if taxable income exceeds Rs.1 Crore but less than Rs. 10 Crore –
(Subject to Marginal Relief)
5% if taxable income exceeds Rs. 10 Crore – (Subject to Marginal Relief)
Implication of Education Cess / Secondary and Higher Education Cess Replaced by Health & Education Cess at 4%.

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1.6) Rates of Deduction of Tax at Source
Provisions as to deduction of tax at source (TDS) applicable for the accounting year 2018-19
Notes:
„„ The deduction of tax depends upon the type of recipients
„„ In case of Resident Assessee,Surcharge and Health & Education Cess not to be effected on the basic rate except in case of Salaries
where Surcharge & Health & Education Cess will have to be effected.
Section Nature of Payment Rates of TDS
192 Salaries
In case Individuals (man and woman) below 60 years and Non-Residents
Up to Rs. 250,000 0%
Above Rs. 250,001 but Below Rs. 500,000 (subject to 87A) 5%
Above Rs. 500,001 but up to Rs.10,00,000 20%
Above Rs. 10,00,000 30%
In case Resident Assessee of 60 years or above
Up to Rs. 3,00,000 0%
Above Rs. 3,00,001 but Above Rs. 5,00,000 (subject to 87A) 5%
Above Rs. 5,00,001 but up to Rs.10,00,000 20%

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Above Rs.10,00,000 30%
In case Resident Assessee of 80 years or above
Up to Rs. 5,00,000 0%
Above Rs.5,00,001 but up to Rs.10,00,000 20%
Above Rs.10,00,000 30%
1.7) Important TDS rates
Section Nature of Payment Rates of TDS
194 Dividend other than the
dividend as referred to in
Section 115O
Before making payment to shareholder, other than dividend
declared U/s. 115O, when amount exceeds Rs. 2500/-
10%
(20% if no Valid PAN)
194A Interest other than “Interest
on securities”
Amount exceeds Rs. 5,000/-. or Rs. 10,000/- in case of banks
including co operative banks to its members.
10%
Incase of Senior Citizen amount exceeding Rs.50000/- 10%
194H Payment of commission
brokerage
Amount exceeds Rs. 15000/- 5% (20% if no Valid PAN)
194IA Payment on transfer of certain
immovable property other
than agriculture land.
Amount exceeds Rs. 50 lacs 1% (20% if no Valid PAN)

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194IB Rent payable by an individual
or HUF not covered u/s. 194I
Tax shall be deducted on such income at the time of credit of
rent, for the last month of the previous year or the last month
of tenancy if the property is vacated during the year to the
account of the payee or at the time of payment thereof in
cash or by issue of a cheque or draft or by any other mode,
whichever is earlier.
Threshold limit Rs. 50,000/- per
month. TDS to be deducted @ 5%
194J Any sum paid by way of
Professional Fees/ Technical
Fees.
Amount exceeds Rs. 30,000/- 10% on Professional Fees
OR
2% in case of payments received or
credited to a payee, being a person
engaged only in the business of
operation of call center (20% if no
Valid PAN)

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Part – 2
Taxation Of Salary
2.1) Re-introduction of Standard Deduction for salaried Tax Payers
(Sec 16-17 w.e.f 01.04.2019 AY 2019-20)
Existing Provisions Amended Provisions APMH Comments
No deduction except, deduction for profession
tax is allowed from salary received from
employer under section 16.
Standard deduction of Rs. 40,000 is sought
to be allowed from computation of Income
from salary irrespective of amount of
salary received by an employee. However,
transport allowance of Rs. 19,200 & medical
reimbursement of Rs. 15,000 available to
employees is sought to be removed.
As such employees are getting meagre benefit
of Rs. 5,800 from taxable income due to the said
amendment. Increase of cess from 3% to 4%
leaves hardly any benefit from tax liability to an
employee.
On the other hand, employers are absolved from
collecting & retaining supporting for allowance of
claim of medical reimbursement.

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Part – 3
Taxation Of Income From Business & Profession
3.1) Taxability of compensation in connection to business / employment contracts.
(Sec 28 w.e.f 01.04.2019 AY 2019-20)
Under the existing provisions of the Act, certain types of compen-
sation receipts are taxable as business income under section 28.
However, the existing provisions are restrictive in its scope as far as
taxation of compensation is concerned.
It is proposed that any compensation received or receivable, whether
in the nature of revenue or capital, in connection with termination or
modification of the terms and conditions of any contract relating to
its employment shall be taxable under the head “Income from other
sources”.
The Government intends to bring into tax net all contracts related to
termination or modification of contracts of any person having business
or salary income. Earlier only key managerial persons of a company
drawing receipts from company as business income were covered
under the purview of section 28. Now, income arising from above
contracts to any person from any entities are proposed to be taxed.
Consequently, all income arising from above contracts will be consid-
ered as revenue receipts and taxed as business income or salary
income, as the case may be, in the year of receipt.
3.2) Introduction of taxation on conversion of stock
in trade into capital asset
(Sec 45 w.e.f 01.04.2019 AY 2019-20)
Existing provisions of the Income Tax Act provides that capital gains
arising from a conversion of capital asset into stock-in-trade are charge-
able to tax. However, there are no provisions in the Act to provide for
taxability of a converse case. Present amendment seeks to address
the said lacuna and cases of conversion of stock in trade into capital
asset is sought to be brought within the tax net.
In nutshell the proposed provisions are as under:
1. Notional profit or gains arising from conversion of inventory into
capital asset shall be charged to tax as business income.
2. For this purpose, fair market value of the inventory on the date of
conversion shall be deemed to be the full value of the consider-
ation received or accruing as a result of such conversion.
3. Business income will arise on the date of conversion of stock in
trade into capital asset.

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4. The fair market value on the date of conversion as derived above
shall be the cost of acquisition of capital asset.
5. The period of holding of such capital asset shall be reckoned from
the date of conversion.
6. At the time of sale of capital asset so created, difference between
sale proceeds and the cost as determined under point no 4. above
shall be subjected to capital gain tax.
The amended provisions would put tax payer to hardship as the
tax liability will have to be discharged on conversion without having
realized any income.
Real estate developers who are already bleeding currently, are likely to
be affected adversely due to above amendment.
3.3) Tax treatment of transactions in respect of
trading in agricultural commodity derivatives
(Sec 43 w.e.f 01.04.2019 AY 2019-20)
Income Tax Act provides that trading in commodity derivatives carried
out in a recognised stock exchange, which is chargeable to commod-
ity transaction tax is a non-speculative transaction.
Commodity transaction tax (CTT) was introduced vide Finance
Act’2013 to bring transactions relating to non-agricultural commodity
derivatives under the tax net while keeping the agricultural commodity
derivatives exempt from CTT.
Since no CTT was chargeable, the benefit of treating such transac-
tions as business transaction was not available and accordingly, such
transactions were held to be speculative transactions.
With current amendment,IncomeTaxActhasrecognizedsuchexempted
transactions of trading in agricultural commodity derivatives in a recog-
nized stock exchanges as eligible transactions and consequently are
eligible to be treated as non speculative business transactions.
With such transactions being treated as business transactions, benefit
of setoff and carry forward of such losses would now be available.
3.4) Benefit on real estate transactions.
(Sec 43AC,50C & 56 w.e.f 01.04.2019 AY 2019-20)
At present, while taxing income from capital gains (section 50C),
business profits (section 43CA) and income from other sources
(section 56) arising out of transactions in immovable property, higher
of
a) actual sale consideration or
b) fair market value as determined under Stamp Act
is adopted as sales consideration.
The difference is taxed as income both in the hands of the purchaser
and the seller.
It has been pointed out that this variation can occur in respect of similar
properties in the same area because of a variety of factors, including
shape of the plot or location.
Quite a few of litigations are underway on the fair market valuation
of properties. Recognizing the difficulties, it is proposed to provide
for variation of five percent of the transaction value. In short, the
difference as stated above upto 5% of the agreed consideration would
be ignored.

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The above change is explained by way of an illustration as under:
3.5) Change in presumptive taxation for Goods
transporters
(Sec 44AE w.e.f 01.04.2019 AY 2019-20)
As per existing provisions under presumptive taxation of transport-
ers, income from all kinds of goods carriages (irrespective of Tonage
capacity) was considered as income at higher of
a) uniform rate of Rs 7500 per vehicle per month or
b) amount claimed to be actually earned,
This scheme had an anomaly whereby, all types of goods carriages
irrespective of tonage capacity was being taxed uniformly.
To rationalize this anomaly, it is proposed to consider the income based
on tonnage of goods carriages above 12 tonnes capacity.
Under the proposed amendment, income derived by goods transport-
er u/s 44AE will be calculated as under :Particulars
Amount
Existing Proposed
Transaction value of sale of property 100,000 100,000
Stamp duty value 105,000 105,000
Full value of consideration. 105,000 100,000
Less : Cost 50,000 50,000
Income 55,000 50,000
Heavy Goods Carriages:
Rs. 1000 per ton (of Gross
vehicle weight) per month
(or part of month)* No
of months that vehicle
owned by assessee OR
Actual income from
that vehicle
Whichever is higher
Otherthanheavygoods
carriages:
Rs 7500 per month (or part
of month) * No of months
owned by assesse
OR
Actual income from
that vehicle,
Whichever is higher
For heavy goods carriages, presumptive income from each goods
carriage will be minimum of Rs 12000 per month against a maximum
of Rs 7500 per month under existing law. This is subject to amount
claimed to have been actually earned from such goods carriage,
whichever is higher.

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3.6) Amendments in relation to notified Income
Computation and Disclosure Standards (ICDS)
W.e.f AY 2017-18 – retrospective amendment
The CBDT had notified certain Income Computation and Disclosure
Standards (ICDS) as mandatory to be followed by certain class of
assesses with ‘Income from Business or Profession’ and ‘Income
from Other Sources’ w.e.f. AY 2017-18. However, Delhi High Court, in
a recent judicial pronouncement held the same to be illegal.
In order to give legitimacy to implementation of ICDS certain amend-
ments are proposed in the Income Tax Act. These are,
i) Marked to market loss or other expected loss as computed in the
manner provided in income computation and disclosure standards
shall be allowed deduction [Section 36 (xviii)]
ii) No deduction or allowance in respect of marked to market loss or
other expected loss shall be allowed except as given in iii) below
[Section 40 A (13)]
iii) Any gain or loss arising on account of effects of changes in foreign
exchange rates in respect of specified foreign currency transac-
tions shall be treated as income or loss, which shall be computed
in the manner provided in ICDS as notified [Section 36 (xviiii)]
iv) To provide that profits arising from a construction contract or a
contract for providing services shall be determined on the basis
of percentage of completion method except for certain service
contracts, and that the contract revenue shall include reten-
tion money, and contract cost shall not be reduced by incidental
interest, dividend and capital gains [Section 43 (B)]
v) To provide that, for the purpose of determining the income charge-
able under the head “Profits and gains of business or profession,—
„„ the valuation of inventory shall be made at lower of actual cost
or net realizable value computed in the manner provided in
income computation and disclosure standards.
„„ the valuation of purchase and sale of goods or services and
of inventory shall be adjusted to include the amount of any
tax, duty, cess or fee actually paid or incurred by the assessee
to bring the goods or services to the place of its location and
condition as on the date of valuation.
„„ inventory being securities not listed, or listed but not quoted,
on a recognised stock exchange, shall be valued at actual cost
initially recognised in the manner provided in income computa-
tion and disclosure standards.
„„ inventory being listed securities, shall be valued at lower of
actual cost or net realisable value in the manner provided in
income computation and disclosure standards and for this
purpose the comparison of actual cost and net realisable value
shall be done category-wise [Section 145 (A)]
vi) Insert a new Section 145B in the Act to provide that
„„ Interest received by an assessee on compensation or on
enhanced compensation, shall be deemed to be the income of
the year in which it is received.
„„ The claim for escalation of price in a contract or export incen-
tives shall be deemed to be the income of the previous year in
which reasonable certainty of its realisation is achieved.

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„„ Assistance in the form of a Subsidy or grant or cash assistance
or duty drawback or waiver of concession or reimbursement
shall be deemed to be the income of the previous year in
which it is received, if not charged to income tax for any earlier
previous year.
It is proposed to bring the amendments retrospectively with effect
from 1st April, 2017 i.e. the date on which the ICDS was made effec-
tive and will, accordingly, apply in relation to assessment year 2017-18
and subsequent assessment years.

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Part – 4
Taxation Of Capital Gains
4.1) Rationalization of the provisions of section 54EC - Capital gain not to be charged on investment in certain bonds
(Sec 54EC w.e.f 01.04.2019 AY 2019-20)
Under the existing provisions of Income Tax Act, gains arising from
transfer of any long term capital asset are exempt from tax provided
the amount of capital gain is invested in specified infrastructure bonds
(Bonds issued by NHAI and REC). Any long term capital asset would
include land,building & other capital assets.
Under the proposed amendment, Other capital assets is proposed to
be removed as eligible assets. Also the period of holding of specified
Infrastructure bonds has proposed to be increased from 3 years to 5
Years w.e.f 01.04.2018.
It is advisable for assesees who have already sold / proposes to sell
capital assets in current year & plans to take benefit of this provision,
They should invest in specified bonds before 31.03.2018 to avail lower
holing period of 3 Years.
4.2) Taxation of Long term Capital Gains on Shares
(Sec 10(38) & 112A w.e.f 01.04.2019 AY 2019-20)
Currently, long term capital gains arising from transfer of long term
capital assets, being equity shares of a company or an unit of equity
oriented fund or an unit of business trusts , is exempt from income-
tax subject to condition that purchases & sales of such shares have
attracted STT.
The said exemption of long term capital gain is sought to be withdrawn
w.e.f 1st April 2018. It is proposed that subject to exemption of
Rs.1,00,000/- in aggregate it would be chargeable to tax at a special
rate of 10% [Section 112B)
This concessional rate of 10 per cent. would be applicable to such long
term capital gains, if—
i) in a case where long term capital asset is in the nature of an equity
share in a company , securities transaction tax has been paid on
both acquisition and transfer of such capital asset; and
ii) in a case where long term capital asset is in the nature of a unit
of an equity oriented fund or a unit of a business trust, securities
transaction tax has been paid on transfer of such capital asset.
Further, the special rate of 10% is to be calculated as under :
i) The long term capital gains will be computed without giving effect
indexation in respect of cost of acquisitions and cost of improve-
ment, if any.
ii) The cost of acquisitions in respect of the long term capital asset
acquired by the assessee before the 1st day of February, 2018 ,
shall be deemed to be the higher of –
„„ the actual cost of acquisition of such asset; and
„„ the lower of –
(I) Market price as on 31st January 2018; and
(II) Actual sale price

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Case I Case II Case III Case IV
a Actual cost of shares 10,000 30,000 10,000 10,000
b Market value as on 31/01/2018* 15,000 20,000 15,000 15,000
c Full value of consideration on sale of shares 20,000 40,000 5000 11,000
d Cost of acquisition for purpose of section 112A 15,000 30,000 10,000 11,000
c-d Capital Gain/(loss) 5000 10,000 (5000) NIL
*Highest price on any recognized stock exchange on 31/01/2018.
The effect of above amendment is given by way of example in different scenarios:
4.3) Taxabiity of Long Term Capital Gain for FII
(Sec 115AD w.e.f 01.04.2019 AY 2019-20)
Existing Provision Amended Provision
Existing provisionsprovide that where the total income of a Foreign
InstitutionalInvestor (FII) includes income by way of long-term capital
gains arising from the transfer of certain securities, such capital gainsshall
be chargeable to tax at the rate of 10%. However, long term capital gains
arising from transfer of long term capital asset being equity shares of a
company or a unit of equity oriented fund or a unit of business trusts, is
exempt fromincome tax under clause (38) of section 10 of the Act.
With deletion of section 10(38) from statue book, the taxation of long
term capital gain for FIIs is brought at par with that of Indian residents.
By adding a proviso, special rate of 10% is prescribed for long term capital
gain on STT paid listed equity shares & equity oriented units of mutual
funds when gain is in excess of Rs. 100,000.

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Part – 5
Deduction Under Chapter Vi-A
5.1) Increase in benefits for Medicliam & Medical Expenses of Senoir Citizen
(Sec 80D & 80DDB w.e.f. 01/04/2019 AY 2019-20)
Section Existing Provisions Proposed Amendment
80D In case of of payments towards annual
premium on health insurance policy, or
preventive health check-up, for senior citizen
or very senior citizen Deduction upto Rs
30,000/- is allowed to any assessee, being an
individual or a Hindu undivided family.
Monetary limit of deduction is raised from Rs
30,000/- to Rs 50,000/- in case of payment for such
expenditure for senior citizen and very senior citizen.
The specified monetary limit in case of a deduction
of single medical premium covering multiple years
is also been increased on the same lines.
80DDB IExisting Section 80DDB provide for
deduction to an individual and Hindu
undivided family with regard to amount paid
for medical treatment of specified diseases in
respect of very senior citizen(Age 80 years &
Above) upto Rs 80,000/- and in case of senior
citizens(Age between 60-80 years) upto Rs
60,000/- subject to specified conditions.
The limit of Rs 60,000 & 80,000 is raised to
Rs 100,000 and difference between senior citizen
and very senior citizen is done away with.

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5.2) Increase in Deduction of Interest income to Senior Citizen
(Sec 80TTA, 80TTB & 194 A w.e.f 01/04/2019 i.e AY 2019-20)
Section Existing Provisions Proposed Amendment
80TTA & 80TTB At present, a deduction upto Rs 10,000/- is
allowed under section 80TTA to an assesse
(Including Senior citizen) in respect of interest
income from savings account.
It is proposed to insert a new section 80TTB so as
to allow a deduction upto Rs 50,000/- in respect
of interest income from deposits with banking
company, Co-operative bank & Post office held by
senior citizens. However, no separate deduction
under section 80TTA shall be allowed to senior
citizens.
194 A Currently, TDS is deductible across the board
to all types of assesee where the payment
of interest other than interest on securities
exceeded limit of Rs. 10,000.
Now said limit of Rs 10,000 is proposed to be raised
to Rs 50,000 for senior citizens.
5.3) Deduction in respect of Certain Incomes not to be allowed unless Return is filed by the Due date
(Sec 80AC w.e.f 01/04/2018 i.e AY 2018-19)
Theasseseesclaiming deductionunderfollowingsectionswouldcome
within the ambit of this provision and thereby would be compelled to
furnish the returns within due date in order to claim the deductions :-
1. Sec 80JJA i.e. deduction in respect of profit and gains from
business of collecting and processing the biodegradable waste;
2. Sec 80JJAA i.e. Deduction in respect of employment of new
workmen;
The Existing Provision denies exemptions u/s 80-IA/80-IAB/80-IB/80-
IC/80-ID/80-IE in case return of income not filed within due date
prescribed.
It is Proposed to Extend the scope this condition to other income
based deductions prescribed under heading “C.—Deductions in
respect of certain incomes” of chapter VIA.
This will encourage timely compliance the return filing the said amend-
ment is proposed.

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3. Sec 80LA i.e. Deduction in respect of certain incomes of offshore
banking units and international financial service centre ;
4. Sec 80P i.e. Deduction in respect of income of co-operative
society;
5. Sec 80PA i.e. Deduction in respect of producer companies;
6. Sec 80QQA i.e. deduction in respect of professional income of
authors of textbook in Indian language;
7. Sec 80QQB i.e. Deduction in respect of royalty income of authors,
8. Sec 80RRB i.e. Deduction in respect of royalty on patents.
5.4) Relaxation in provisions to promote Start-ups
(Sec 80-IAC w.e.f. 01/04/2018 i.e. AY 2018-19)
Existing Provisions Proposed Amendment Comment
Section provides for deduction under this
section to an eligible start-up for three
consecutive assessment years out of seven
years at the option of the assessee, if-
„„ it is incorporated on or after the 1st day of
April, 2016 but before the 1st day of April,
2019;
„„ the total turnover of its business does not
exceed twenty-five crore rupees in any of
the previous years beginning on or after
the 1st day of April, 2016 and ending on
the 31st day of March, 2021; and
„„ it is engaged in the eligible business
which involves innovation, development,
deployment or commercialization of new
products, processes or services driven by
technology or intellectual property.
It is proposed to make following changes in
the taxation regime for the start ups:—
„„ The benefit would also be available to start
ups incorporated on or after the 1st day of
April 2019 but before the1st day of April,
2021;
„„ The requirement of the turnover not
exceeding Rs 25 Crore would apply to
seven previous years commencing from
the date of incorporation;
„„ The definition of eligible business has
been expanded to provide that the benefit
would be available if it is engaged in
innovation, development or improvement
of products or processes or services, or
a scalable business model with a high
potential of employment generation or
wealth creation.
It will help to improve the effectiveness of the
scheme for promoting start ups in India.

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5.5) Incentives for Employment Generation
(Sec 80JJA w.e.f. 01/04/2019 i.e. AY 2019-20)
5.6) Deduction in respect of income of Farm Producer Companies
(Sec 80PA w.e.f. 01/04/2019 i.e. AY 2019-20)
Existing Provisions Proposed Amendment
Currently the deduction u/s 80JJAA is provided in case of emoluments
paid to eligible new employees by the assessee who is engaged in the
business of footwear or leather products was eligible for deduction only if
employee was under employment for minimum period of 240 days.
Now the said provision has been relaxed and the employment period is
reduced to 150 days for assessee engaged in the business of footwear or
leather products in lines with apparel industries.
Currently the deduction is only available if the employee is under the employ-
ment for minimum period of 240 days or 150 days whichever is applicable
in qua assessment year, there was no provision to allow deduction wherein
employee in employment for less than prescribed period in an assess-
ment year but continuous to be employed subsequently
It is proposed to rationalize this deduction of 30% by allowing the benefit
for a new employee who is employed for less than the minimum period
during the first year but continues to remain employed for the minimum
period in subsequent year.
Existing Provisions Proposed Amendment
Section 80P provides for 100 percent deduction in respect of profit of
cooperative society which provide assistance to its members engaged in
primary agricultural activities.
It is proposed to extend similar benefit to Farm Producer Companies
(FPC), having a total turnover upto Rs 100 Crore, whose gross total income
includes any income from-
„„ the marketing of agricultural produce grown by its members, or
„„ the purchase of agricultural implements, seeds, livestock or other
articles intended for agriculture for the purpose of supplying them to
its members, or
„„ the processing of the agricultural produce of its members
The benefit shall be available for a period of five years from the financial
year 2018-19.

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Part – 6
Taxation Of Dividends & Dividend Distribution Tax
6.1) Widening of scope of Accumulated profits for the purposes of Dividend
(Sec 2 (22) (e) & 115-O w.e.f. 01/04/2018 i.e. AY 2018-19)
6.2) Amendment in Dividend Distribution Tax Provision
(Sec 115-R w.e.f 01.04.2019 AY 2019-20)
Existing Provision Amended Provision Analysis
Currently provisions of DDT (dividend
distribution tax) are not applicable to
deemed dividend as defined in section 2
(22)(e).
Deemed dividend under section 2(22)(e)
brought within the purview of DDT. Special
rate of 30% of DDT is prescribed & the
recipient of dividend absolved from liability of
payment of taxes.
Currently the liability of payment of tax on deemed
dividend was placed on recipient of loans or
advances. As a result, many transactions which
were getting covered under this section were either
not getting reported or became time barred when
discovered. The shifting of liability to pay tax thereon
to the company would ensure that proper liability is
discharged.
Exemption for DDT on Dividend distributed
on Units of Equity Oriented Mutual Fund
was available.
Exemption withdrawn & such dividend
brought within the net of dividend distribution
tax at a special rate of 10%.
Additional burden on equity oriented Mutual Funds,
reducing the net funds available for distribution of
dividend to unit holders.

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Part – 7
Taxation Of Trust & Other Institution
7.1) Applicability of default in deduction & payment of TDS & restriction on cash payment for trusts & other
institutions specified in section 10 (23C) & section 11.
(Sec 10 (23C) & 11 w.e.f 01.04.2019 AY 2019-20)
Under the current regime, the failure for deduction & payment of TDS
on the part of trusts & other institutions did not attract disallowance
u/s 40(a)(ia) for the reason that income of these trusts or institutions
were not taxed under the head “income from business or profession”
Under the proposed amendment, the said failure is brought within
the ambit of section 40(a)(ia) by insertion of proviso/explanation in
section 11 & section 10(23c) which governs exemption to these trusts
& institutions. Surprisingly, disallowance u/s 40(a)(i) in respect default
in deduction & payment of TDS in case of payments to non-resident
is left to be covered.
Similar amendments are proposed to include disallowances in respect
of cash payment u/s 40A(3) & 40A(3A) which entails disallowance of
expenditure paid in cash.

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Part – 8
International Taxation & Transfer Pricing
8.1) Measures to promote International Financial Services Centre (IFSC)
(Sec 47 W.e.f 01.04.2019 AY 2019-20)
As per stated policies of the Government, promotion of world class
financial infrastructure in India is on the priority list. One of the way is
to develop International Financial Services Centre ( IFSC ).
An IFSC caters to customers outside the jurisdiction of the domestic
economy. Such centres deal with flows of finance, financial products
and services across borders.
Income of Non residents derived from dealing in bonds, GDR,
Rupee denominated bonds of an Indian company or derivatives from
recognised stock exchanges in such IFSCs will be exempted from
Capital Gains tax.
Global fund houses dealing in such GDRs, Indian and international
bonds and derivatives will be benefited from this amendment by way
of exemption of capital gains tax.
8.2) Aligning the scope of “business connection”
with modified PE Rule as per Multilateral
Instrument (MLI).
(Sec 9 W.e.f 01.04.2019 AY 2019-20)
Under the existing provisions, "business connection" includes business
activities carried on by non-resident through dependent agents. The
scope of "business connection" is similar to the provisions relating to
Dependent Agent Permanent Establishment (DAPE) in India’s Double
Taxation Avoidance Agreements (DTAAs). In terms of the DAPE rules
in tax treaties, if any person acting on behalf of the non-resident, is
habitually authorised to conclude contracts for the non-resident, then
such agent would constitute a PE in the source country.
However, in many cases, with a view to avoid establishing a perma-
nent establishment (PE) under Article 5(5) of the DTAA, the person
acting on the behalf of the non-resident, negotiates the contract but
does not conclude the contract.
Further, under paragraph 4 of Article 5 of the DTAAs, a PE is deemed
not to exist when a place of business is engaged solely in certain
activities such as maintenance of stocks of goods for storage, display,
delivery or processing, purchasing of goods or Merchandise, collec-
tion of information. This exclusion applies only when these activities
are preparatory or auxiliary in relation to the business as a whole.
The OECD under BEPS Action Plan 7 reviewed the definition of 'PE'
with a view to preventing avoidance of payment of tax by circum-
venting the existing PE definition by way of commissionaire arrange-
ments or fragmentation of business activities. In order to tackle such
tax avoidance scheme, the BEPS Action plan 7 recommended modifi-

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cations to paragraph (5) of Article 5 to provide that an agent would
include not only a person who habitually concludes contracts on behalf
of the non-resident, but also a person who habitually plays a princi-
pal role leading to the conclusion of contracts. Similarly Action Plan 7
also recommends the introduction of an anti-fragmentation rule as per
paragraph 4.1 of Article 5 of OECD Model tax conventions, 2017 so as
to prevent the tax payer from resorting to fragmentation of functions
which are otherwise a whole activity in order to avail the benefit of
exemption under paragraph 4 of Article 5 of DTAAs.
Further, with a view to preventing base erosion and profit shifting, the
recommendations under BEPS Action Plan 7 have now been included
in Article 12 of Multilateral Convention to Implement Tax Treaty Related
Measures (herein referred to as ‘MLI’), to which India is also a signa-
tory. Consequently, these provisions will automatically modify India’s
bilateral tax treaties covered by MLI, where treaty partner has also
opted for Article 12. As a result , the DAPE provisions in Article 5(5) of
India’s tax treaties, as modified by MLI, shall become wider in scope
than the current provisions in Explanation 2 to section 9(1)(i). Similarly,
the anti-fragmentation rule introduced as per paragraph 4.1 of Article
5 of the OECD Model Tax Conventions, 2017 has narrowed the scope
of the exception under Article 5(4), thereby expanding the scope of PE
in DTAA vis-a-vis domestic provisions contained in Explanation 2 to
section 9(1)(i). In effect, the relevant provisions in the DTAAs are wider
in scope than the domestic law.
However, sub-section (2) of section 90 of the Act provides that the
provisions of the domestic law would prevail over corresponding provi-
sions in the DTAAs, to the extent they are beneficial. Since, in the
instant situations, the provisions of the domestic law being narrower
in scope are more beneficial than the provisions in the DTAAs, as
modified by MLI, such wider provisions in the DTAAs are inffective.
In view of the above, it is proposed to amend the provision of section
9 of the Act so as to align them with the provisions in the DTAA as
modified by MLI so as to make the provisions in the treaty effective.
Accordingly, clause (i) of sub-section (1) of section
9 is being proposed to be amended to provide that “ business connec-
tion” shall also include any business activities carried through a person
who, acting on behalf of the non-resident, habitually concludes
contracts or habitually plays the principal role leading to conclusion of
contracts by the non-resident . It is further proposed that the contracts
should be-
(i) in the name of the non-resident; or
(ii) for the transfer of the ownership of, or for the granting of the right to
use, property owned by that non-resident or that the non-resident
has the right to use; or
(iii) for the provision of services by that non-resident.
8.3) “Business connection” to include “Significant
Economic presence”
(Sec 9 W.e.f 01.04.2019 AY 2019-20)
Taxation of business profits on the basis of economic allegiance has
always been the underlying basis of existing international taxation
rules. Economists gave primacy to the economic allegiance rather
than physical location and made it clear that physical presence was
important only to the extent it represented the economic location.
Ordinarily, as per the allocation of taxing rules under Article 7 of

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DTAAs, business profit of an enterprise is taxable in the country in
which the taxpayer is a resident. If an enterprise carries on its business
in another country through a 'Permanent Establishment' situated
therein, such other country may also tax the business profits attribut-
able to the 'Permanent Establishment'. For this purpose, ‘Permanent
Establishment’ means a ‘fixed place of business’ through which the
business of an enterprise is wholly or partly carried out provided that
the business activities are not of preparatory or auxiliary in nature and
such business activities are not carried out by a dependent agent.
For a long time, nexus based on physical presence was used as a
proxy to regular economic allegiance of a non-resident.
However, with the advancement in information and communication
technology in the last few decades, new business models operating
remotely through digital medium have emerged. Under these new
business models, the non-resident enterprises interact with custom-
ers in another country without having any physical presence in that
country resulting in avoidance of taxation in the source country. There-
fore, the existing nexus rule based on physical presence do not hold
good anymore for taxation of business profits in source country. As a
result, the rights of the source country to tax business profits that are
derived from its economy is unfairly and unreasonably eroded.
OECD under its BEPS Action Plan 1 addressed the tax challenges in a
digital economy wherein it has discussed several options to tackle the
direct tax challenges arising in digital businesses. One such option is
a new nexus rule based on “significant economic presence”. As per
the Action Plan 1 Report, a non-resident enterprise would create
a taxable presence in a country if it has a significance economic
presence in that country on the basis of factors that have a purposeful
and sustained interaction
9 with the economy by the aid of technology and other automated
tools. It further recommended that revenue factor may be used in
combination with the aforesaid factors to determine 'significance
economic presence'.
The scope of existing provisions of clause (i) of sub-section (1) of
section 9 is restrictive as it essentially provides for physical presence
based nexus rule for taxation of business income of the non-resident
in India. Explanation 2 to the said section which
defines ‘business connection’ is also narrow in its scope since it limits
the taxability of certain activities or transactions of non-resident to
those carried out through a dependent agent. Therefore, emerging
business models such as digitized businesses,
which do not require physical presence of itself or any agent in India, is
not covered within the scope of clause (i) of sub-section (1) of section
9 of the Act.
In view of the above, it is proposed to amend clause (i) of sub-sec-
tion (1) of section 9 of the Act to provide that significant economic
presence' in India shall also constitute 'business connection'. Further,
“significant economic presence” for this purpose, shall mean-
(i) any transaction in respect of any goods, services or property carried
out by a non-resident in India including provision of download of
data or software in India if the aggregate of payments arising from
such transaction or transactions during the previous year exceeds
the amount as may be prescribed; or
(ii) systematic and continuous soliciting of its business activities or

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engaging in interaction with such number of users as may be
prescribed, in India through digital means. It is further proposed
to provide that only so much of income as is attributable to such
transactions or activities shall be deemed to accrue or arise in India.
It is further proposed to provide that the transactions or activities
shall constitute significant economic presence in India, whether or
not the non-resident has a residence or place of business in India
or renders services in India.
The proposed amendment in the domestic law will enable India to
negotiate for inclusion of the new nexus rule in the form of 'significant
AY 2017-18 is the first year of Country by
country reporting by International Groups.
The due date prescribed was due date filing
tax returns as specified in sec 139(1).
The due date is now sought to be amended
to twelve months from the end of reporting
accounting year.
The entities having different reporting period as
compared to resident entities were facing problem
due to inaccurate data of unaudited and ongoing
Reporting period while submitting reports. Hence
by delaying the due date, this issue is adequately
addressed.
economic presence' in the Double Taxation Avoidance Agreements. It
may be clarified that the aforesaid conditions stated above are mutually
exclusive. The threshold of “revenue” and the “users” in India will be
decided after consultation with the stakeholders. Further, it is also
clarified that unless corresponding modifications to PE rules are made
in the DTAAs, the cross border business profits will continue to be
taxed as per the existing treaty rules.
Major impact would be on companies operating through digital media
without physical presence in india.
8.4) Rationalization of Provisions relating to Country-by-Country Reporting
(Sec 286 w.e.f 01.04.2017 AY 17-18)

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Part – 9
Alternate Minimum Tax (AMT) Provisions
(Sec 115JC w.e.f 01.04.2019 AY 19-20)
Section 115JC provides for AMT (alternate
minimum tax) at a rate of 18.5% payable by
non corporate persons in case their regular
income tax payable is less than alternate
minimum tax payable on adjusted total
income calculated as prescribed.
Amendment proposed to provide for special
rate of 9% AMT payable by units located in
IFSC (International financial service centre).
All companies situated in IFSC were entitled to get
away with MAT u/s 115JB at a special rate of 9%. To
bring other entities at par with companies, section
115JC is proposed to be amended making Firm,
LLPs & other entities eligible for the said special rate.

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Part – 10
Assessments & Penalty Provisions
10.1) Widening And Deepening Of Taxbase
(Sec 139A w.e.f 01.04.2018 AY 18-19)
Currently persons are required to obtain PAN for variety of reasons is
prescribed under the Income Tax Act. However few entities are still
not getting covered under the said list for variety of reasons. These
entities are entering large number for financial transactions exceed-
ing Rs. Two Lakh Fifty Thousand which are not getting reported.
Suitable amendment is made in the Act so as to make it mandatory
for these entities to obtain PAN and thereby reporting the said PAN
in financial transactions so entered. It may be possible that they are
otherwise exempted from filing the return of income but obtaining
PAN would be mandatory for them.
Apart from this all office bearers like managing director, director,
partner, trustee, author, founder, Karta, chief executive officer, princi-
pal officer or office bearer or any person competent to act on behalf
of such entities shall also apply to the Assessing Officer for allotment
of PAN.
Most common example would be expat directors of companies where
they are not getting any income in India and thereby getting exemption
from obtaining PAN. They would now be required to obtain PAN.
Kindly note this is effective from 01st April 2018 so even all existing
managing director, director, partner, trustee, author, founder,
Karta, chief executive officer, principal officer or office bearer or
any person competent to act on behalf of such entities shall have
to obtain PAN with immediately effect.
10.2) Rationalisation of prima-facie adjustments
during processing of return of income
(Sec 143 (1) w.e.f 01.04.2018 AY 18-19)
The assessing officer was given powers to make certain adjustments
to income returned by the assessee when it is found that there are
certain credits of Tax deduction appears in Form 26AS / Form 16A /
Form 16 and corresponding income is not reported in the return of
income filed.
The said power was granted effective from 1st April 2017. Having
realized that power so given would cause undue hardship to tax payer.
It is sought to be withdrawn w.e.f. 1st April 2018.
10.3) All Scrutiny Assessment to be e-assessment
(Sec 143 w.e.f 01.04.2018 AY 18-19)
To impart greater transparency and accountability, by eliminating the
interface between the Assessing Officer and the assessee, optimal
utilization of the resources, and introduction of team-based assess-
ment, it is proposed that all scrutiny assessment w.e.f 1st April 2018,
would be e-assessments and it will no longer be necessary and

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possible for assessee and the assessing officer to meet in person for
the purpose of completing the scrutiny assessment.
Necessary powers are sought to be obtained by the central
Government for notifying the procedures for implementation of
the said scheme.
It is a welcome provision and is sure to eliminate the rampant corrup-
tion, though it may cause little hardship in initial stages of its imple-
mentation to tax payer.
10.4) Increase in Penalty for Delay in filing Specified Financial Transaction Return (SFT)
(Sec 271FA w.e.f 01/04/2018 i.e AY 2018-19)
10.5) Change in Powers of Authority for Advance Ruling
(Sec 245O & 245Q w.e.f 01/04/2018 i.e AY 2018-19)
Penalty was levied for delay in furnishing
statement of financial transaction or
reportable Accounts (SFT). The penalty was
levied at the Rate of Rs 100 per day. If the
delay is caused post receipt of Notice from
Income Tax Department the penalty was
levied at Rs 500 Per Day.
Now it is proposed to increase the penalty
from Rs 100 to Rs 500 & Rs 500 to Rs 1000.
This amendment is to make assessee more tax
compliant but may lead to unwarranted hardship in
case of delay caused due to reasons beyond control
of assessee.
Authority for Advance Rulings was
empowered to give advance rulings under-
1. Income Tax Act,1961
2. Customs Act, 1962
3. Central Excise Act, 1944
4. Finance Act, 1994
Now it is proposed to have three separate
Advance Ruling Authorities for Income Tax
Act, GST & Customs.
This is a positive change which would result in faster
disposal of Advance Ruling application.

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11.1) Current provisions in Income Tax specifies the persons respon-
sible for verifying the returns. Thisprovision has been amended so
as to make Insolvency Professionals responsible for verifying the
returns of companies undergoing Corporate Insolvency Resolution
Process under the Insolvency and Bankruptcy Code, 2016.
11.2) Currently, brought forward losses of limited company is not
allowed to setoff & carried forward in case of change in sharehold-
ing of a company by 51% or more. The said is relaxed and given a
go bye where there is a change in the shareholding of a company
pursuant to a Resolution Plan carried on under the Insolvency and
Bankruptcy Code, 2016, the company shall be allowed to carried
forward losses.
Part – 11
Finance Bill, 2018 & Insolvency And Bankruptcy Code, 2016
(Sec 140 & 79 w.e.f 01.04.18 AY 2018-19)
(Sec 115JB w.e.f 01.04.01 AY 2001-02)
11.3) A major relaxation given to a company undergoing Corporate
Insolvency Resolution Process under the Insolvency and Bankrupt-
cy Code, 2016 is in respect of deductions available from book
profits for the purpose of arriving at MAT income u/s 115JB. Under
the existing provisions, for a company having brought forward
business loss and depreciation, lower of the two as per books of
account for deduction from book profit. The said benefit at times
would not be available to company in case one of the two happens
to be nil. Under the proposed amendment, the company undergo-
ing resolution process would be able to claim deduction of both
the components.

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Direct Tax
Proposals
Indirect Tax
Proposals
Part – 12
Customs
12.1) Levy of Social Welfare Surcharge, as a duty of Customs on imported goods
[w.e.f 02.02.2018]
Clause
No. of The
Finance Bill
Heading,
Sub- Heading
Tariff item
Commodity / Particulars Current Proposed
108 Any chapter Levy of Social Welfare Surcharge on imported goods to provide
and finance education, housing and social security.
- 10% of aggregate
duties of custom
106 Any Chapter Abolition of Education Cess and Secondary and Higher Education
Cess on imported goods.
3% of aggregate
duties of customs
[2% + 1%]
Nil
2710 Motor spirit commonly known as petrol and high speed diesel oil - 3% of aggregate
duties of customs
7106 Silver (including silver plated with gold or platinum), unwrought or
in semi-manufactured form, or in powder form.
- - 3% of aggregate
duties of customs
7108 Gold (including gold plated with platinum), unwrought or in
semi-manufactured form, or in powder form.
- 3% of aggregate
duties of customs
Any Chapter Specified goods hitherto exempt from Education Cess and
Secondary and Higher Education Cess on imported goods
- Nil

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12.2) Amendments in Customs Law vis-à-vis GST Law
1. Input tax credit under GST shall not be available for Social Welfare
Surcharge. The same shall be a burden on the importer.
2. As per Notification 13/2018-Customs Social Welfare Surcharge
will not be levied on the IGST and GST Compensation Act for the
goods specified in First Schedule of the Customs Tariff Act.
3. Section 3 of the Customs Tariff Act, 1975 is being amended so as
to:
„„ amend sub-section (7) to include reference to sub-section (8A);
„„ insert a new sub-section (8A) to provide for value of goods
when they are sold within the warehousing period for calcula-
tion of integrated tax;
As per the proposed subsection 8A of section 3:
Where the goods deposited in a warehouse under the provisions of
the Customs Act, 1962 are sold to any person before clearance for
home consumption or export under the said Act, the value of such
goods for the purpose of calculating the integrated tax under sub-sec-
tion (7) shall be,—
(a) where the whole of the goods are sold, the value determined under
sub section (8) or the transaction value of such goods, whichever
is higher; or
(b) where any part of the goods is sold, the proportionate value of
such goods as determined under sub-section (8) or the transaction
value of such goods, whichever is higher:
Provided that where the whole of the warehoused goods or any part
thereof are sold more than once before such clearance for home
consumption or export, the transaction value of the last such trans-
action shall be the transaction value for the purposes of clause (a) or
clause (b):
Provided further that in respect of warehoused goods which remain
unsold, the value or the proportionate value, as the case may be, of
such goods shall be determined in accordance with the provisions of
sub-section (8).
Explanation.–– For the purposes of this sub-section, the expression
“transaction value”, in relation to warehoused goods, means the
amount paid or payable as consideration for the sale of such goods.’;
The a foresaid amendment clarifies that valuation of such goods for
the payment of IGST. However the issue regarding the point of leviabli-
ty of IGST on such transactions still remains ambiguous.

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12.3) Proposal involving changes in custom duty rates:
[w.e.f 02-02-2018]
Sr. No. Heading
Sub-Heading Tariff
Item
Commodity Current Rate Proposed Rate
1 2009 21 00 to
2009 90 00
Fruit juices and vegetable juices including cranberry juice 30% 50%
2 3303 Perfumes and toilet waters 10% 20%
3 3304 Beauty or make-up preparations and preparations for the care of
the skin (other than medicaments), including sunscreen or suntan
preparations; manicure or pedicure preparations
10% 20%
4 3305 Preparations for use on the hair 10% 20%
5 3306 Preparations for oral or dental hygiene, including denture fixative
pastes and powders; yarn used to clean between the teeth (dental
floss), in individual retail packages
10% 20%
6 3307 Pre-shave, shaving or after-shave preparations, personal
deodorants, bath preparations, depilatories and other perfum-
ery, cosmetic or toilet preparations, not elsewhere specified or
included, prepared room deodorizers, whether or not perfumed
or having disinfectant properties
10% 20%
7 4011 20 10 Truck and Bus radial tyres 10% 15%

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8 8407, 8408,
8409, 84831091,
84831092, 8511,
8708, 8714 10
Specified parts/accessories of motor vehicles, motor cars, motor
Cycles
7.5%/10% 15%
9 6401, 6402,
6403, 6404, 6405
Footwear 10% 20%
10 6406 Parts of footwear 10% 15%
11 7117 Imitation Jewellery 15% 20%
12 8517 12 Cellular mobile phones 15% 20%
13 39199090, 39209999,
39269091, 39269099,
40169990, 73181500,
73269099, 8504,
8506, 8507,
85177090, 8518,
85389000, 854419,
854442, 854449
Specified parts and accessories including lithium ion battery of
cellular mobile phones
7.5%/10% 15%
14 8517 62 90 Smart watches / wearable devices 10% 20%
15
85291099,
85299090
LCD/LED/OLED panels and other parts of LCD/LED/OLED TVs 7.5%/10% 15%
16 9401 Seats and parts of seats [other than aircraft seats and their parts] 10% 20%

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17 9403 Other furniture and parts 10% 20%
18 9404 Mattresses supports; articles of bedding and similar furnishing 10% 20%
19 9405 Lamps and lighting fitting, illuminated signs, illuminated name
plates and the like [except solar lanterns or solar lamps]
10% 20%
20 9101, 9102 Wrist watches, pocket watches and other watches, including
stop Watches
10% 20%
21 9103 Clocks with watch movements 10% 20%
22 9105 Other clocks, including alarm clocks 10% 20%
23 9503 Tricycles, scooters, pedal cars and similar wheeled toys; dolls’
carriages; dolls; other toys; puzzles of all kinds
10% 20%
24 9504 Video game consoles and machines, articles for funfair, table or
parlor games and automatic bowling alley equipment
10% 20%
25 9505 Festive, carnival or other entertainment articles 10% 20%
26 9506 [except 9506 91] Articles and equipment for sports or outdoor games, swimming
pools and paddling pools [other than articles and equipment for
general physical exercise, gymnastics or athletics]
10% 20%
27 9507 Fishing rods, fishing-hooks and other line fishing tackle; fish
landing nets, butter fly nets and similar nets; decoy birds and
similar hunting or shooting requisites
10% 20%

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28 9508 Roundabouts, swings, shooting galleries and other fairground
amusements; travelling circuses, traveling menageries and travel-
ling theatres
10% 20%
29 3406 Candles, tapers and the like 10% 25%
30 48239090 Kites 10% 20%
31 9004 10 Sunglasses 10% 20%
32 9611 Date, sealing or numbering stamps, and the like 10% 20%
33 9613 Cigarette lighters and other lighters, whether or not mechanical or
electrical, and parts thereof other than flints and wicks.
10% 20%
34 9616 Scent sprays and similar toilet sprays, and mounts and heads
therefor; powder-puffs and pads for the application of cosmetic or
toilet preparations.
10% 20%

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12.4) Other proposal involving changes in basic Customs Duty Rates.
[w.e.f 02-02-2018]
Sr. No. Heading,
sub-heading
tariff item
Commodity Current Rate Proposed Rate
1 0801 31 00 Cashew nuts in shell [Raw cashew] 5% 2.5%
2 20091100, 20091200,
20091900
Orange fruit juice 30% 35%
3 20098100, 20099000 Cranberry Juice 10% 50%
4 210690 Miscellaneous Food preparations (other than soya protein) 30% 50%
5 5007 Silk Fabrics 10% 20%
6 85049090/
39269099
Printed Circuit Board Assembly (PCBA) of charger/adapter and
moulded plastics of charger/adapter of cellular mobile phones
NIL 10%
7 Any Chapter Inputs or parts for manufacture of:
a) PCBA, or
b) moulded plastics
of charger/adapter of cellular mobile phones of cellular mobile
phones
Applicable NIL
8 84834000, 84669390,
85371000
Ball screws, linear motion guides, CNC systems for manufacture
of all types of CNC machine tools falling under headings 8456 to
8463
7.5% 2.5%

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9 70 Solar tempered glass or solar tempered [anti-reflective coated]
glass for manufacture of solar cells /panels/modules
5% NIL
10 70 Preform of silica for use in the manufacture of telecommunication
grade optical fibres or optical fibre cables
NIL 5%
11 8529/4016 12 specified parts for manufacture of LCD/LED TV panels NIL 10%
12 8702, 8703,
8704, 8711
CKD imports of motor vehicles, motor cars, motor cycles 10% 15%
13 8702, 8704 CBU imports of motor vehicles 20% 25%
14 71 Cut and polished colored gemstones; 2.5% 5%
15 71 Diamonds including lab grown diamonds-semi processed, half-cut
or broken; non-industrial diamonds including lab grown diamonds
(other than rough diamonds), including cut and polished diamonds
2.5% 5%
16 Any Chapter Raw materials, parts or accessories for the manufacture of
Cochlear Implants
2.5% Nil
17 1508, 1509,
1510, 1512,
1513, 1515
Crude edible vegetable oils like Ground nut oil, Olive oil, Cotton
seed oil, Safflower seed oil, Saffola oil, Coconut oil, Palm Kernel/
Babassu oil, Linseed oil, Maize corn oil, Castor oil, Sesame oil,
other fixed vegetable fats and oils
12.5% 30%

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18 1508, 1509, 1510,
1512, 1513, 1515,
151620, 15171021,
15179010, 15180011,
15180021, 15180031
Refined edible vegetable oils, like Ground nut oil, Olive oil, Cotton
seed oil, Safflower seed oil, Saffola oil, Coconut oil, Palm Kernel/
Babassu oil, Linseed oil, Maize corn oil, Castor oil, Sesame oil,
other fixed vegetable fats and oils, edible margarine of vegetable
origin, Sal fat; specified goods of heading 1518
20% 35%
19 68159100 Other articles of stone containing magnesite, dolomite or chromite 10% 7.5%
20 6901 Bricks, blocks, tiles and other ceramic goods of siliceous fossil
meals or of similar siliceous earths
10% 7.5%
21 6902 Refractory bricks, blocks, tiles and similar refractory ceramic
constructional goods, other than those of siliceous fossil meals or
similar siliceous earths
5% 7.5%
22 6903 Other refractory ceramic goods 5% 7.5%

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12.5) Road & Infrastructure Cess
Levy of the Road and Infrastructure Cess onimported motor spirit
commonly known as petrol and high speed diesel oil has been intro-
duced in place of Additional Duty of Customs [Road Cess] on such
goods
Sr No Heading sub –
heading tariff item
Description Current Proposed
1 2710 Levy of Road and Infrastructure Cess on imported motor spirit
commonly known as petrol and high speed diesel oil [clause 109
of Finance Bill, 2018]
- Rs. 8 per litre
2 2710 Exemption from additional duty of customs leviable undersection
3(1) of the Customs Tariff Act, 1975 in lieu of theproposed Road
and Infrastructure cess on domestically produced motor spirit
commonly known as petrol and high speed diesel oil
- Nil
3 2710 Abolition of Additional Duty of Customs [Road Cess] onimported
motor spirit commonly known as petrol and high speed diesel oil
[Clause 106 of Finance Bill, 2018]
Rs.6 per litre Nil
4 Additional duty of customs under sections 3(1) of the Customs
Tariff Act, 1975 inlieu of basic excise duty
2710 (i) Motor spirit commonly known as petrol
(ii) High speed diesel oil
Rs.6.48 per litre
Rs.8.33 per litre
Rs.4.48 per litre
Rs.6.33 per litre

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Part – 13
Service Tax
Retrospective exemptions
1) Services provided or agreed to be provided by the Naval Group
Insurance Fund by way of life insurance to personnel of Coast
Guard, under the Group Insurance Schemes of the Central Govern-
ment, are proposed to be exempted from service tax for the period
commencing from the 10th September, 2004 and ending with the
30th June, 2017.
2) Services provided or agreed to be provided by the Goods and
Services Tax Network (GSTN) to the Central Government or State
Governments or Union territories administration, are proposed to
be exempted from service tax for the period commencing from
28th March, 2013 and ending with the 30th June, 2017.
3) It is proposed to provide retrospective exemption from service tax
to consideration paid to Consideration paid to the Government in
the form of Government’s share of profit petroleum in respect of
services provided or agreed to be provided by the Government by
way of grant of license or lease to explore or mine petroleum crude
or natural gas or both during the period from the 1st April 2016 to
30th June 2017.

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Part – 14
Excise Duty
Proposals Involving Change In Excise Duty Rates:
[W.E.F 02-02-2018]
Sr. No. Commodity Current Proposed
1. Levy of Road and Infrastructure Cess on motor spirit commonly known as petrol
and high speed diesel oil [clause 110 of Finance Bill, 2018]
- Rs. 8 Per Litre
2 Abolition of Additional Duty of Excise [Road Cess] on motor spirit commonly
known as petrol and high speed diesel oil [clause 106 of Finance Bill, 2018]
- Rs. 6 Per Litre
3 Basic excise duty on:
(i) Unbranded Petrol Rs. 6.48 Per Litre Rs. 4.48 Per Litre
(ii) Branded petrol Rs. 7.66 Per Litre Rs. 5.66 Per Litre
(iii) Unbranded diesel Rs. 8.33 Per Litre Rs. 6.33 Per Litre
(iv) Branded diesel Rs. 10.69 Per Litre Rs. 8.69 Per Litre

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Part – 15
Miscellaneous Amendment In Indirect Taxes
Part – 16
Expectations Related To GST Missed Out In The Budget
2. Electronic Cash ledger to be introduced under the Customs Act on
the lines similar to provisions in CGST Act [Section 51A of Customs
Act].
„„ Valuation issues in case of inter-state supply of services within
same legal entity,
„„ Increase in threshold limit for composition dealers.
„„ Composition Scheme for Real Estate / Developers.
„„ Procedures and Norms for faster refund of GST in case of
Export with Payment of IGST.
„„ Relief from Reverse Charge Mechanism beyond 31-03-2018
1. The name of Central Board of Excise and Customs(CBEC) is being
changed to Central Board of Indirect Taxes and Customs(CBIC)
with consequential amendments in the following Acts: -
„„ The Central Boards of Revenue Act, 1963 (54 of 1963)
„„ The Customs Act, 1962 (52 of 1962)
„„ The Central Goods and Services Tax Act, 2017 (12 of 2017)
„„ Simplification in GST rates from the current levels.
„„ Simplification in GST Returns filing and matching concept.
„„ Extension of GST Tran-1 Revision.
„„ Anti-profiteering compliance mechanism.
„„ Administrative relief in cases of non-compliance due to techni-
cal glitches.
„„ Seamless Input tax credit.
„„ Clarity on Registration requirements for services provided from
multiple states

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Contributors
CA Amit Doshi
Partner - Direct Tax
CA Charvik Momaya
Leader - Audit and
Attestation
CA Ravi Jain
Leader - Compliance
and Outsourcing
CA Hemant Mehta
Partner - Audit and
Business Restructuring
CA Amlesh Gupta
Leader - Compliance
Management and
Internal Audit
CA Atul Mehta
Partner - Compliance
and Outsourcing
CA Manan Trivedi
Assistant Manager
Business Restructuring
CA Pranav Kapadia
Partner - GST
CS Shruti Bhanushali
Leader - Secretarial
and Legal
CA Mitesh Katira
Partner - Business
Advisory and IT
Jay Parekh
Leader - Litigation
and Representation

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