Union Budget 2015

Union Budget - 2015
A Roadmap towards growth

Preface
With world eyes set on Indian economy, the economic survey for Financial Year 2014-15 and the
Union Budget 2015 have carved out a roadmap to 'India Shining yet again'. In the first year of
governance, the new government has layed the foundation stone of investments which if
implemented and administered well would lead to a long term sustainable growth and
development for the nation. The budget 2015 have been a reflection of such strategies of the
government where the emphasis has been on commitment to fiscal consolidation, achieving
ambitious growth rate and curtailing inflation. The moto of 'maximum governance' has been the
backbone while announcing major policy changes including a detail address on the issue of Black
Money. While a larger amount has been allocated to public investments in employment creation and
skill development to back the initiative of 'Make in India', a certainty of taxes have been brought in by
clarifying many open tax positions including clarity on retrospective tax regime. A strong commitment
towards implementation of GST by 1 April 2016 has been exhibited which could bring in a revolution
in the Indirect-tax framework.
A Union budget is often looked from a taxation perspective that could provide us an insight in to the
impact that such tax proposals may have on an individual or body corporate. However, such tax
proposals are an outcome of the state of economy which needs detailed analysis of past performance
and implementation of future strategies for development of sustainable economy.
Through this document we have analysed the economic results and decoded the impact of budget
proposals on industry sectors as well as summarised the direct and indirect tax proposal implications
on you and your business.
Trust you will find the publication useful. Happy reading!!
In case you need any further clarification please feel free to e-mail me at akshaykenkre@transprice.in.
Thanks a lot.
Best Regards,
Akshay Kenkre
Founder and Managing Partner
TransPrice
2

3
Table of Content
Indian Economic Highlights 4
- Economy Overview
- Fiscal Overview
- Inflation
Key Initiatives, Outlook and Challenges 8
Sectoral Impact 11
- Agriculture
- Infrastructure & Energy
- Mining & Metals
- BFSI
- Telecommunication & IT
- Real Estate & Housing
- Service Sector
Taxation Proposals 19
- Direct Tax proposals
- Indirect Tax proposals
- Make in India
- Economic Outlook and Challenges
Glossary 26

Economic Indicators
Performance
FY 2014-15
Targets
FY 2015-16
% %
GDP Growth 7.40 8.0 - 8.5
Fiscal Deficit to GDP 4.10 3.90
Inflation CPI terms 5.10 5.00
0
2
4
6
8
10
12
Growth rate Inflation (CPI) Fiscal Deficit
Interplay - Economic Indicators
Economy Overview
Indian economy has picked up pace in FY 2014-15 despite the global slowdown, especially in the
European and Japanese economy. This is reflected in positive GDP growth, reduction in inflation
and fiscal deficit and near stability of rupee. This is mainly on account of steep decline in
international oil prices, increase in foreign inflow of funds and strengthening of domestic
demand.
The economic estimates present an optimistic growth outlook for the year 2015 and beyond. In
FY 2015-16, the economy is expected to grow at 8.0% to 8.5%. The fiscal consolidation target of
3% of GDP by FY 2017-18 is expected to be met by following greater financial discipline. Further,
reforms and policy initiatives of the new government are set to boost investments and investor
confidence, business sentiments, accelerated inflow of foreign funds and overall optimism in the
economy. There are, however, certain challenges that lie ahead, both on the domestic and
international front that need to be addressed in a structured manner.
A snapshot of current performance and targets for the Indian economy is as follows:
5
%
FY

The Government stays committed to fiscal consolidation targets. Despite large subsidy bill and
moderate increase in indirect taxes, the fiscal consolidation target in FY 2014-15 was achieved due
to lower prices of crude oil in the international market. Desired fiscal target in the previous 2 years
was achieved by counter balancing shortfall of tax revenue by higher or equivalent cut in the
expenditure. Therefore, it is important that the revenues pick up sufficiently or there would be a
need to persist with some compression in expenditure to meet the deficit target. However, growth
in Gross Tax Revenue of 7% is way below 17.7% as envisaged in budget estimates for FY 2014-15.
Fiscal Overview
Fiscal consolidation roadmap Fiscal deficit of 3% in FY 2017-18 (medium-term)
0
2
4
6
8
10
12
14
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Direct Tax Indirect Tax Total Tax
Tax to GDP Ratio%
6
Key to achieving medium term fiscal target : Mobilization of savings towards investments through:
 Control of expenditure via subsidy rationalization and covering up leakages
 Improvement in expenditure quality by shifting focus to investment from public consumption
 Borrowing mainly for public investments
 Drive higher disinvestment proceeds and subsidy savings towards public investments
FY

Inflation
 WPI food inflation moderated to 4.8% during April-December 2014 from a high of 9.4% during
FY 2013-14
 Like the WPI inflation, CPI inflation moderated considerably since the second quarter of FY
2014-15, with moderation observed across all three major sub-groups, viz. food and beverages,
and tobacco; fuel and light; and others. However, as fuel has larger weight in the WPI, the
decline in fuel prices led to a sharper reduction in the WPI as compared to CPI
 Latest CPI inflation declined to a low of 5.1% and the WPI inflation has become negative
 Important factors that helped moderate inflation include:
 persistent decline in crude prices;
 soft global prices of tradables, particularly edible oils and coal;
 tight monetary policy;
 stability of rupee vis-à-vis major currencies
7
9.5 9.7
10.4
8.1
7.4
5
0
2
4
6
8
10
12
Q1 Q2 Q3
CPI Inflation
FY 2013-14 FY 2014-15
%

8
Key Initiatives, Outlook
and Challenges

Economic Outlook and Challenges
 Government aiming towards Big Bang reforms through decisive shifts in policies
 Private investment to remain main engine for long run growth. However, in the interim, to revive
growth and to deepen connectivity, public investment especially in railways to have an important
role
 India ranks well above the mean for its investment grade category and is amongst the most
attractive investment destinations, well above other countries
 In short run, growth will receive a boost from low oil prices, easing of monetary policy facilitated
by lower inflation and forecasts of a normal monsoon
 The persistence of moderated oil prices seems highly probable for at least three reasons: (i)
weaker global demand; (ii) increased supplies; and (iii) the global monetary and liquidity
environment
 The power of growth to lift all boats would depend critically on employment creation potential of
the economy
 The outlook is favorable for the current account and its financing. Risks from a shift in US
monetary policy and turmoil in the Eurozone need to be watched
 Mobilization of funds through cash based transfers using the JAM number trinity could offer
exciting possibilities for allocation of public resources for the needy
 Banking sector: 4D solution i.e. deregulation (addressing SLR and priority sector lending);
differentiation (within the public sector banks in relation to recapitalization, shrinking balance
sheets and ownerships); diversification of funds and disinterring (by improving exit mechanism)
 Structuring transformation from traditional sectors to ‘registered’ manufacturing or services.
Building skilled infrastructure in an economy to be the success factors for such transformation
 Challenge on international trade due to buoyancy of Indian exports with respect to world growth
 Higher taxation on petroleum products to act as a carbon tax and an initiative taken as a part of
green action
 Stalling rate of projects increased at an alarming rate in last five years. Stalled projects accounted
to about 7% of the GDP by 3rd quarter of FY 2014-15
 Manufacturing and infrastructure dominate in total value of stalled projects in turn affecting
balance sheets of corporate sector and public sector banks
 Challenges as identified in the Budget 2015:
 Stress on Agriculture income
 Need to step in public investments
 Decline in share of manufacturing sector in GDP
 To have a tight rope walk to ensure fiscal consolidation targets
 Keeping in mind the true spirit of co-operative federalism, 62% share of taxes transferred
to states
9

Make in India
 ‘Make in India’, a flagship initiative on the idea of structural transformation (shifting resources from
agricultural/traditional sector to manufacturing/non-traditional sector)
 The growth in manufacturing sector declined and its contribution to the country’s GDP also fell
from 18% to 17%
 The initiative focuses on ‘registered manufacturing’ which is relatively a skilled labour intensive
sector and where the productivity could be higher than 7 times as compared to ‘unregistered
manufacturing’ sector
 ‘Make in India’ campaign aims at job creation and investment promotion in key sectors such as
automobiles, electronics, mining and pharma which has created ripples in the Indian
manufacturing sector
 Proposal to launch National Skills Mission through Skill Development and Entrepreneurship Ministry
 Separate policy on ‘Make in India’ to stress on providing equal opportunities for all the stakeholders
 Custom duty on certain inputs, raw material and intermediaries in 22 items reduced to minimize the
impact of duty inversion
 Excise duty cut on items such as solar water heaters, tablet PCs and leather footwear to help
domestic production
 Deen Dayal Upadhaya Gramin Kaushal Yojna with a corpus of Rs 1,500 crore to enhance
employability of rural youth
 Growing interest in start-ups needs to be encouraged for sustainable growth. Concerns on access
to global capital, funding for seed capital and ease of doing business needs to be addressed to
create employment opportunities. Rs. 1,000 crore allocated towards self employment and talent
utilization
 Increased investment in infrastructure as well as higher allocation for defence to provide a boost to
domestic manufacturing industry
 CVD and SAD on specified raw materials for use in the manufacture of pacemakers are being fully
exempted
 SAD on inputs for use in the manufacture of LED drivers and MCPCB for LED lights, fixtures and
lamps is being fully exempted
 Basic customs duty on specified inputs for use in the manufacture of Renewable Power System
Inverters is being reduced to 5%
10

Agriculture
 Agricultural sector comprises 18% share in GDP in FY 2013-14. The growth rate in the sector
slowed down to 1.1% in FY 2014-15 as compared to 3.7% in FY 2013-14
 Despite deficiency of rainfall by 12% in FY 2014-15, the loss in production is restricted to around
3%
 The policy focus to be on enhancing the resilience of the agriculture sector and eliminating
leakages, inclusions and exclusion errors and various distortions created by the present food
policy
 Growth in agriculture to come from non-price factors
 Improvement of yield and productivity are the key focus for agriculture sector
 Agriculture research and education, agriculture extension, irrigation, quality of seeds, fertilizers
and agricultural credit along with mechanization identified as growth drivers and investment
avenues for the sector
Budget Highlights:
 Soil and water to be the major focus factors
 In order to improve soil health, it was proposed to support Agriculture Ministry’s organic
farming scheme i.e. Paramparagat Krishi Vikas Yojana
 Pradhanmantri Gram Sinchai Yojana aimed at irrigating the field of every farmer and improving
water use efficiently to provide ‘Per Drop More Crop’
 Alllocation of Rs. 5,300 crore to support micro-irrigation, watershed development and the
Pradhan Mantri Krishi Sinchai Yojana
 Extended credit facilities to farmers with a target of Rs. 8.5 lakh crore for FY 2015-16. As a result,
a cumulative allocation of about Rs. 1 lakh crore extended to various credit and infrastructural
funds
 Initial allocation to MGNREGA at Rs. 34,699 crore to improve the quality an effectiveness of
activities and if additional resources could be available due to tax buoyancy the same could be
enhanced by another Rs. 5,000 crore
 The motive of the new government for the upcoming year is to create a national agriculture
market for the benefit of both, farmers and customers and further by moderating price rise
12

Infrastructure & Energy
 Focus has been on resolving long- pending issues like pricing of gas, establishing processes and
procedures for transparent auction of coal and minerals and improving power generation and
distribution
 100% FDI allowed in building variety of rail infrastructure and new initiatives like bullet and
related trains and modernization of stations and timely completion of major projects
 In road sector efforts have been taken to mobilize stalled projects and set up of National
Highways and Infrastructure Development Corporation Limited for speedy implementation of
highway projects in north-east
 Stress on reforms in power sector to promote competition and efficiency in operation and
improve quality of supply of electricity
 The domestic production of petroleum has been stagnant in last 4 years
 The government has undertaken recent policy initiatives including gas pricing, reforms in
production- sharing contracts etc. to get a boost to the sector
 Focus in the coal sector by addressing quantity, quality and time-bound transportation issues so
that the fuel needs of growing economy are met
Budget Highlights:
 Infrastructure sector to need public investments to match growth ambition. Increased
investment allocation in the sector by Rs. 70,000 crore
 Diversion of excise duty on petrol and diesel to the extent of Rs. 4 per liter to fund investment
 Focus on green India through revision of renewable energy capacity for solar, wind, biomass
and small hydro
 Clean energy cess increased from Rs. 100 to Rs. 200 per metric tonne of coal to finance clean
environmental initiatives
 Tax free infrastructure bonds for rail roads and irrigation sectors
 National Investment and Infrastructure Fund to be established with annual flow of Rs. 20,000
crore
 PPP mode of infrastructure development to be stressed upon
 Corporatization of Public sector ports to be encouraged to attract investments
 Multiple prior permissions (up to14 nos. in setting up of projects) to be replaced by pre-existing
regulatory mechanism
 5 new ultra mega power projects each of 4000 MW in the ‘plug and play’ mode
13

Mining & Metals
 Share of mining in the GDP declined to 2.1% in FY 2013-14 as compared to 2.8% in FY 2012-13
 Changes made in the MMDR Act for improving transparency in allocation of mineral resources,
encourage investment in mining sector and promote sustainable mining practices
 BCD on bituminous coal is being reduced from 55% to 10%
 BCD on antimony metals and waste and scrap reduced from 5% to 2.5%, metallurgical coke
increased from 2.5% to 5%, SAD on melting scrap of iron and steel reduced from 4% to 2% and
BCD on iron and steel increased from 10% to 15%
 Sovereign gold bonds to be introduced as an alternative to purchasing gold scheme
 Metal accounts to bring in gold monetization and access to loan for jewelers on gold account
14

BFSI
 It is surprising to note that growing economy like India has seen consecutive years of decline in
the growth of bank credit. Deceleration in credit could be attributed to economic slowdown,
availability of alternative sources of funds, deterioration in asset quality of banks, especially PSBs,
and selling of stressed loans by a few banks to asset reconstruction companies
 Several reform initiatives were taken in the banking and insurance sector in FY 2014-15
including allowing banks to raise capital from the market to meet capital adequacy norms by
diluting the government’s stake up to 52%
 As a part of financial inclusion initiative 12.50 crore bank accounts have been opened by
launching of the PM Jan Dhan Yojana to provide universal access to banking facilities with at
least one basic banking account for every household
 Asset quality of banks has shown increasing signs of stress during the year. Gross NPA of
scheduled commercial banks as a percentage of total advances showed an increase during the
year (increased to 4.5% in September 2014 from 4.1% in March 2014)
 An ordinance was notified to enhance the foreign equity cap in the insurance sector from 26%
to 49%
Budget Highlights:
 To extend credit to micro enterprises and start-ups, MUDRA Bank, with a corpus of Rs. 20,000
crore and credit guarantee corpus of Rs. 3,000 crore to be created. It will be responsible for
refinancing all Micro-finance Institutions
 Trade Receivables Discounting System to be established which will serve as an electronic
platform for facilitating financing of trade receivables of MSMEs
 NBFCs registered with RBI and having asset size of Rs. 500 crore and above may be considered
for notifications as ‘Financial Institution’ in terms of the SARFAESI Act
 PM Suraksha Bima Yojna to cover accidental death risk of Rs. 2 lakh for a premium of just Rs. 12
per year
 PM Jeevan Jyoti Bima Yojana to cover both natural and accidental death risk of Rs. 2 lakh at
premium of Rs. 330 per year for the age group of 18-50 years
 FMC to be merged with SEBI to strengthen regulation of commodity forward markets and
reduce wild speculation
 Foreign investments in AIFs to be allowed and distinction between different types of foreign
investments, especially between FPI and FDI to be done away with
 Debit card transactions to be encouraged and cash transactions to be disincentivized
 Thrust is to establish a public debt management agency with a view to bring both India’s
external borrowings and domestic debt under one roof
15

Telecommunication & IT
 Software development and ITES including BPM, R&D services is one of the single largest
contributors to service exports
 India ranks first and remains the pre-eminent destination for offshore services, with excellence
in IT, BPO and voice services
 India shows robust growth in technology start-up and software product landscape and ranks
fourth largest start-up hub in the world with over 3,100 start-ups in the country
 ‘Digital India’ has been envisioned as ambitious umbrella programme to prepare India for
knowledge based information
 Further, the ‘Make in India’ mission has included IT and BPM among 25 focus sectors
 DoT plans to conduct auction in ‘Spectrum’ in all bands to achieve overall objective of reliable
communication services
Budget Highlights:
 ‘National Optical Fibre Network Project’ of 7.5 kms networking 2.5 lakh villages is being
further speeded up by allowing willing states to undertake its execution, on reimbursement of
cost as determined by DoT
 Andhra Pradesh is first state to have opted for manner of implementation
 In case of HDPE which is required for the use in manufacture of telecommunication grade
optical fiber cables, basic custom duty reduces from 7.5% to Nil
 Excise duty structure for mobile handsets where CENVAT is being taken is changed from 6%
to 12.5%
 Excise duty structure of 2% without CENVAT credit or 12.5% with CENVAT is now being
prescribed for tablet computers
16

Real Estate & Housing
 Real estate and ownership of dwelling constitutes 7.8% of GDP in FY 2013-14
 Widening gap between demand and supply of housing units and affordable housing finance
solutions is a major policy concern
 RBI relaxed norms for issue of long term bonds by banks for financing affordable housing
 Amrut Mahotsav year 2022, 75th year of independence, to aim at housing for all (2 crore houses in
urban areas and 4 crore houses in rural areas) including basic facilities like power, clean drinking
water, a toilet and road connectivity
 Proposal made for easier listing of REITs, allowing pass through on rental income and doing away
with capital gains issue for the sponsors on transfer of units of REIT through listing
 Capital gain tax to be applicable for direct transfer of real estate to the trust
 REITs to perform as a vehicle for real estate companies to sell down income producing assets in
the market to investors and use the cash to invest in other projects
 Clarification on rental income taxability in the hands of unit holder instead of REIT to boost
confidence on investment through REIT. Further, no DDT on distribution of income
 The sponsor of Business Trust to get benefit of tax concessions/ treatment at time of off-loading
of units under an initial offer in same manner as if he offloaded through IPO. Easy exit to
investor to boost up liquidity in the real estate sector
17

Service Sector
 India’s service sector has high share in income (57% in 2013) and relatively low share in
employment (28.1% in 2013)
 The overall growth rate of Service Sector (10.6% in FY 2014-15) is mainly from real estate,
financial and professional services (13.7%) and public administration, defense and other
services (9%)
Share and Growth of India Service Sector (Provisional Estimate for FY 2013-14)
 Tourism sector promoted by proposing resource allocation towards restoration and amenity
build up of cultural world heritage sites. Further visa on arrival benefit increased for up to 150
countries
 Emphasis on setting up of Medical and Pharmaceutical institutes to provide a boost to
healthcare education
 The first phase of GIFT in Gujarat to be in process soon and appropriate regulations to be
issued in March 2015. This will give impetus to financial centers and further give opportunity
to financial minds to exhibit and exploit their strength at par with international levels
Top Sectors % Share
Trade, hotels & restaurants 18.70
Financing, insurance, real estate & business services 20.90
Community, social and personal services 13.40
Constructions 8.00
Total Services GDP 61.00
Total GDP 100.00
Services
Others
India GDP composition FY 2013-14
18

Direct Tax proposals
General
 No change in the basic rate of individual income taxes; corporate income tax rate proposed
to be reduced to 25% over the period of 4 years; however, no change in FY 2015-16
 Surcharge increased by 2% over existing limit for all taxpayers except for foreign companies
 Due to increase in the surcharge, the effective rate of DDT on dividend distributed to be
19.76% {i.e. arithmetically [15/85*100]*112%}
 Additional investment allowance and depreciation (For notified backward area of Andhra
Pradesh and Telangana):
 Deduction @ 15% of cost of new plant and machinery acquired and installed for
manufacture is allowed under section 32AD of the Act
 Further deduction of 15% allowed if the total investment exceeds Rs. 25 crore
 Additional depreciation limit proposed to be increased to 35% (currently 20%)
 Tax incentives to manufacturing and power
 Additional depreciation on assets acquired and installed for less than 180 days to enjoy
carry forward of balance 50% unclaimed additional depreciation to next financial year
 Benefit of new workman provided to all taxpayers (which was earlier enjoyed only by a
company) and the limit of new workman reduced from 100 to 50 [Section 80 JJA]
 A special tax regime to rationalize the taxability of Category 1 and II AIFs to distribute the
taxability of different heads of income amongst the fund and the investor
 Merger of similar scheme of mutual funds proposed to be exempt from capital gains in the
hands of the unit holder (Section 47 (xviii))
 Revenue department to prefer an appeal only if ‘no identical question of law’ is pending
before the Apex Court (w.e.f 1 June 2015)
 Specified Domestic Transactions to fall under the computation mechanism of transfer pricing
if the aggregate of such transactions exceeds Rs. 20 crore (earlier Rs. 5 crore)
 Wealth tax abolished. Replaced by 2% surcharge on super rich on income above Rs. 1 crore,
which is likely to affect the taxpayers not otherwise covered under Wealth Tax Act
 Donation to Swachh Bharat Kosh, Clean Ganga Fund and National Fund for Control of Drug
Abuse eligible for 100% deduction for all taxpayers
 Criteria defined for the applicability of revision powers of CIT or Principal CIT
 Procedures for application to settlement commission rationalized
 MAT rationalized for members of AOP
20

Measures to Curb Black Money
 Measures to curb generation of black money and its concealment to be dealt with effectively
and forcefully
 Major breakthrough with Swiss Authorities by agreement to share banking and non-banking
information in time-bound manner
 Prohibition on acceptance and repayment of any sums exceeding Rs. 20,000 other than by
account payee cheque/ bank draft/ electronic clearing system in relation to immovable
property
 Comprehensive code on ‘black money parked abroad’ to be introduced. Key features of the
proposed code are as under:
21
Situation Implication
Evasion of tax in relation to foreign assets  Rigorous imprisonment up to 10 years, being
non compoundable
 Penalty @ 300% of tax sought to be evaded
 No right to approach settlement commission
Non-filing of return/ filing return with
inadequate disclosures
OR
Non-filing of return in respect of foreign
assets, irrespective of income by beneficial
owner
 Rigorous imprisonment up to 7 years
 Under Prevention of Money Laundering Act,
either (a) attach and confiscate unaccounted
assets held abroad or (b) otherwise,
confiscate equivalent asset in India
Undisclosed income from any foreign
assets
 Taxable at Maximum Marginal Rate of tax
without benefit of deduction/ exemption
Holding foreign exchange, foreign security
or any immovable property outside India
held in contravention of FEMA
 Rigorous imprisonment up to 5 years
 Seizure and confiscation of equivalent value
of asset in India
 Further, for curbing domestic black money, Benami Transactions (Prohibition) Bill to be
introduced
 Penalty provisions may be imposed on furnishing inaccurate particulars or concealment
under both normal provisions and MAT
 Seized cash to be adjusted towards tax liability under settlement application in search cases
 PAN to be mandatory for transaction involving any purchase/ sale exceeding Rs. 1 lakh

Specific benefits for Individual taxpayers
Sukanya Samriddhi Account for girl child
 In accordance with the Sukanya Samriddhi Account Rules 2014, the investments made in
the scheme will be eligible for deduction under section 80C of the Act
 The interest accruing on deposits and withdrawals from the said scheme to be exempt
from Income - tax
Healthcare and Retirement benefits
22
Section In respect of whom? Existing Limit Proposed Limit
Section 80D* Health Insurance Premium
Individual and his
family
Rs.15,000 Rs.25,000
Senior citizens Rs.20,000 Rs.30,000
Medical Expenditure
Very senior citizens
(above 80 years of
age)
0 Rs.30,000
Section 80DDB
(Individual suffering
from specified
disease)
Very senior citizens
(above 80 years of
age)
Rs.60,000 Rs.80,000
Section 80DD and
80U
Person with disability Rs.50,000 Rs.75,000
Person with severe
disability
Rs.1,00,000 Rs.1,25,000
Section 80CCC
(Pension Funds)
Individuals Rs.1,00,000 Rs.1,50,000
Section 80CCD
(National Pension
Scheme)
Individuals 10% of salary up to
Rs.1,00,000
10% of salary plus
Rs.50,000^
*Aggregate deduction for Health Insurance Premium and Medical Expenditure incurred will
be limited to Rs. 30,000
^Benefit of Rs. 50,000 is over and above overall ceiling of Rs. 1,50,000 under section 80CCE

International taxation
 Deferral of GAAR by two years i.e. AY 2017-18 for its implementation as a part of a
comprehensive regime to deal with Base Erosion and Profit Shifting and aggressive tax
avoidance
 In case of NR engaged in the business of banking, any interest paid by the PE in India, of such
NR, to the head office or any PE or any other party of NR outside India shall be deemed to
accrue or arise in India and shall be eligible for tax deduction at source
 Payment of royalty to attract a lower withholding tax @ 10% w.e.f AY 2016-17 instead of earlier
25%
 Lower withholding tax @ 5% on interest on ECB to be extended till 30 June 2017
 Clarification on “Indirect Transfer” in relation to share or interest in a company registered
outside India:
 Presently, an asset being share or interest in a company registered outside India is deemed
to be situated in India only if, the share or interest derives, directly or indirectly, its value
substantially from assets located in India
 “Substantially”, in the above context, means FMV of assets -
 Being more than Rs. 10 crore; and
 Representing at least 50% of the value of assets owned by the Company
 Capital gain arising as aforesaid will be taxed proportionately
 No taxation to investor if he directly or indirectly holds voting rights of not more than of 5%
for preceding 12 months before date of transfer
 Provision of PE not applicable for NR offshore trust due to mere presence of fund manager in
India
 Rationalization of MAT provisions for FIIs/FPIs by not subjecting capital gains on transaction in
securities which are liable to tax at the lower rate
 Power to CBDT for capturing transaction information about prescribed foreign remittances
which are claimed to be not chargeable to tax
23

Indirect Tax proposals
Goods and Service Tax (GST)
 GST to be applicable from 1 April 2016, government to work towards game changing reforms
and implementation of the same
Service Tax
 Online Service Tax registration can be done within two working days
 Rate of service tax increased from existing 12.36% (inclusive of cess) to consolidated rate of
14%
 Consequent to the revision of service tax rate, the services qualifying for alternate rate to be
revised upwards proportionately
 Swachh Bharat Cess at a rate of 2% to be levied on all or any of the taxable services (applicable
date to be notified)
 Service tax applicability widened and clarified by incorporating additional services in the
taxable service category
 Service Tax exemption on Varishtha Bima Yojana, certain pre cold storage services in relation
to fruit and vegetables and transport of goods for export by road from factory to land custom
station
 A uniform abatement prescribed for transport by rail, road and vessel, and service tax shall
now be payable on 30% of value of their services w.e.f 1 April 2015
 Reverse charge mechanism @ 100% now applicable to manpower supply and security services
provided by an individual, HUF or a partnership firm to a body corporate w.e.f 1 April 2015
 Clarification on allowability of CENVAT credit for service tax payment made under reverse
charge mechanism irrespective of payment to service provider
 Clarification on applicability of Service tax on reimbursements
 Taxpayers will be allowed to issue digitally signed invoices and maintain other records
electronically
 Waiver of penalty on reasonable cause for failure to pay service tax is proposed to be
withdrawn. However, several measures proposed in rationalizing penal provisions with a view
to provide a choice to taxpayers to opt for such routes to avoid protracted tax litigations
24

Indirect Tax proposals
Excise and Customs
 Online Excise registration can be done within two working days
 Education cess and Secondary and Higher Education cess leviable on excisable goods to be
fully exempt
 Ad valorem rate of duty is being increased from 12% to 12.5%
 Excise duty on aerated drinks including mineral water increased from 12% to 18%
 Excise duty on sacks and bags of polymer increased from 12% to 15%
 Tariff rate on iron and steel and articles of iron and steel increased from 10% to 15%
 Extension of concessions on custom and excise duty available to electronically operated
vehicles and hybrid vehicles
 Taxpayers will be allowed to issue digitally signed invoices and maintain other records
electronically
 Facility provided to a manufacturer and registered dealer to directly dispatch goods from
vendor to job worker/customer's premises
 Capital goods sent at the job worker premises could be now kept until 2 years as against
existing time period of 6 months without CENVAT being reversed
 Conversion of existing excise duty on petrol and diesel to the extent of Rs. 4 per litre converted
into road cess to fund the investment
 Any order referred back by the appellate authority to the assessing authority for fresh
adjudication not entitled for settlement
CENVAT Credit Rules
 To ensure that there are no leakages on account of timelines, time limit for taking CENVAT
credit on inputs and input services increased from 6 months to 1 year
 CENVAT credit specifically allowed in respect of inputs and capital goods received directly in
the premises of job worker
 Requirement of reversal of CENVAT credit made applicable to non-excisable goods apart from
the exempted goods and exempted services under rule 6 of CENVAT Credit Rules
25

Glossary
26
AIFs - Alternative Investment Funds IPO - Initial Public Offer
AOP - Association of Persons IT – Information Technology
BCD - Basic Custom Duty ITES - Information Technology Enabled Services
BE – Budget Estimate JAM - Jan Dhan Yojana, Aadhar and Mobile
BFSI – Banking, Financial Services and Insurance MAT - Minimum Alternate Tax
BPM - Business Process Management
MGNREGA – Mahatma Gandhi National Rural
Employment Guarantee Act
BPO - Business Process Outsourcing
MMDR – Mines and Minerals (Development and
Regulation) Act, 1957
CBDT - Central Board of Direct Taxes MSME – Micro Small and Medium Enterprises
CENVAT - Central Value Added Tax
MUDRA - Micro Units Development Refinance
Agency
CIT - Commissioner of Income Tax MW - Mega Watt
CPI – Consumer Price Index NBFC – Non Banking Financial Corporation
CVD – Counter Veiling Duty NPA – Non Performing Asset
DDT - Dividend Distribution Tax NR - Non Resident
DoT - Department of Telecommunications PAN - Permanent Account Number
ECB – External Commercial Borrowing PE - Permanent Establishment
FDI – Foreign Direct Investment PPP – Public Private Partnership
FEMA - Foreign Exchange Management Act,
1999
PSB – Public Sector Bank
FII – Foreign Institutional Investor R&D - Research and Development
FMC - Forward Markets Commission RBI – Reserve Bank of India
FMV - Fair Market Value REITS – Real Estate Investment Trusts
FPI - Foreign Portfolio Investment SAD – Special Additional Duty
FY – Financial Year
SARFAESI Act - The Securitization and
Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
GAAR - General Anti Avoidance Rules SEBI - Securities and Exchange Board of India
GDP – Gross Domestic Product SLR – Statutory Liquidity Ratio
GIFT - Gujarat International Finance Tec-city WPI - Wholesale Price Index
HDPE - High Density Polyethylene The Act – Income Tax Act, 1961
HUF - Hindu Undivided Family

About us:
At Synthesis group, we provide integrated professional solutions to all your financial needs.
Synthesis acts as a common platform that host associated professional firms that specialize in
Advisory, Funding and Education, covering all aspects of Taxation, Accounting, Finance and
Legal. Our professionals combine strong capabilities with domain expertise, in-depth knowledge
of fiscal laws and regulations and understanding of complex technical issues. The group provides
solutions through the following associate firms:
TransPrice, dedicated to complex cross-border transactions, specialized advisory, representation
and compliance solution in the field of transfer pricing and international taxation: inbound and
outbound foreign investments.
Manish Modi & Associates with core focus on domestic tax advisory, management consultancy,
regulatory compliance and transaction support for allied laws including exchange control and
company law matters. The assurance team provides services of audits and management
accounting.
Intellivate Capital, a boutique investment bank, arranges equity funds for various projects and
new ventures. Offers consolidated M&A solutions, due diligence, structuring strategy advice and
implementation.
Aurum Capital, syndicates Debt funding, enables borrower to bank funds at best possible terms.
Credit rating appraisals, preparation of project report, active negotiations that would value add to
the sanctioning of the loan. Professional relationships with all nationalized and private banks.
Brianna Knowledge Resources, helps up skill employees in varied organisations through its
customized learning programs in the domain of business acumen and financial leadership.
Pinnacle Education, caters to hundreds of CA aspirants every year. At Pinnacle Education, we not
only prepare the students to clear their Chartered Accountancy course, but also help them to
have enough practical domain knowledge to face industry challenges once they qualify.
27

Union Budget 2015

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