Union budget 2016

Union Budget
2016-17
- a Glimpse

 Introduction
 Indirect Taxes
 Service tax
 CENVAT
 Central Excise
 Customs
 Direct Taxes
INDEX

INTRODUCTION
“The Hon’ble Finance Minister presented the Union Budget for the FY 2016-
17 with positive note on the growth achieved so far. The budget was presented with an
optimistic outlook for the years to come.
The budget revolves around various reforms planned including in the area of
taxation with an intent to rationalize taxes by restricting exemptions in some sectors
and providing incentives to promote start-ups and boost manufacturing under the
Make In India, Start Up India and Digital India Schemes.
Various proposals include schemes to resolve tax disputes demonstrating the
positive intent of the Government towards tax payers.”
Union Budget 2016-17 - a Glimpse
3

SERVICE TAX
Krishi Kalyan Cess
(Effective from June 01, 2016)
 Krishi Kalyan Cess (“KKC”) to levied with effect from June 01, 2016 on all taxable
services at the rate of 0.5% on the value of Service. Further the CENVAT Credit of
KKC to be utilized towards payment of KKC only.
Exclusion from Negative List
(Effective from enactment of Finance Bill 2016)
 Specified Education Services – Primary and Secondary Education, Education as part
of degree recognized by law & Approved Vocational Course (Simultaneously the
definition of Approved Vocational Course in Section 65B stands omitted). But the
same has been included in the exemption list.
 Transportation of Passengers by Stage Carriage (Effective from June 01, 2016).
However, exemption has been provided to Transportation of Passengers by non air-
conditioned Stage Carriage. Accordingly Service tax has been made applicable on
Transportation of Passengers services by air-conditioned Stage Carriage.
5

SERVICE TAX
Exclusion from Negative List
 Transportation of goods by aircraft or vessel from a place outside India up to
customs station (Effective from June 01, 2016). However, exemption has been
provided to Transportation of goods by aircraft from a place outside India up to
customs station. Accordingly, tax is applicable on Transportation of goods by vessel
from a place outside India up to customs station.
Addition to Declared List
 Right to use the radio-frequency spectrum and subsequent transfers thereof
assigned by the Government has been included in the list of declared services.
Accordingly, the same would be taxable. Further the CENVAT Credit availed on such
service is to be apportioned over the years of right to use.
6

SERVICE TAX
New Services under Exemption List
(Effective from April 01, 2016)
 Legal Services by a Senior Advocate to a person other than a person ordinarily
carrying out any activity relating to industry, commerce or any other business or
profession. Accordingly, service tax would be applicable on services provide by a
Senior Advocate for services provided in relation to business or profession.
 Prescribed Educational Services provided by Indian Institute of Management
(Effective from March 01, 2016).
 Assessment services by bodies appointed under Skill Development Initiative (SDI)
Scheme.
 Services provided by trainers under Deen Dayal Upadhyaya Grameena Kaushalya
Yojana providing Skill or Vocational Training.
 Construction and related services provided for rehabilitation of existing slum
dwellers under scheme notified (Effective from March 01, 2016).
7

SERVICE TAX
 Notified services provided to Government or Local Authority relating to
construction & related services for contracts entered prior to March 01, 2015 only.
Accordingly, construction and related services provided to Government or Local
Authority for contracts entered into after March 1, 2015 would be liable to service
tax. (Effective from March 01, 2016).
 Construction / enhancement of house under notified schemes (Effective from March
01, 2016).
 Construction of low cost houses up to a carpet area of 60 Sq. Mtrs under Notified
Schemes.
 Construction & related services provided in relation to Airports or Ports for
contracts entered prior to March 01, 2015 (Effective from March 01, 2016).
 Services provided by the artist in relation to folk or classical art where the amount
charged is not more than “one lakh and fifty thousand rupees”.
8

SERVICE TAX
 Transportation of passengers by a non air conditioned stage carriage (Effective from
June 01, 2016).
 General Insurance services under “Niramaya Health Insurance Scheme”.
 Services of Life Insurance Business by the way of annuity under National Pension
Scheme.
 Services by EPFO to the persons governed under Employees Provident Funds and
Miscellaneous Provisions Act, 1952 .
 Services by IRDA to the insurers under Insurance Regulatory and Development
Authority of India Act, 1999.
 Services provided by SEBI by way of protecting the interest of investors in securities
and to promote the development and regulation of securities market.
9

SERVICE TAX
 Services by National Centre for Cold Chain Development under Ministry of
Agriculture, Cooperation and Farmer’s Welfare by way of cold chain knowledge
dissemination.
 Transportation of goods by an aircraft from a place outside India up to the customs
station of in India (Effective from June 01, 2016).
 Services by way of Information Technology Software recorded on Media under
Chapter 85 of Central Excise Tariff Act and also requires declaration of MRP under
Legal Metrology regulations subject to conditions prescribed.
10

SERVICE TAX
Services removed from Exemption List
 Construction or related services relating to Monorail or Metro (Effective from March
01, 2016). However the exemption from Service Tax is still applicable for contracts
entered prior to March 01, 2016.
 Transportation of passengers by Ropeway, Cable Car or Aerial Tramway.
11

SERVICE TAX
Abatements
 Below are the changes in the abatement rates applicable for the notified services:
Sl. No. Description of Service
Value of Service
chargeable after
abatement
1 Transport of goods in containers by rail by any
person other than Indian Railways 40%
2 Household goods transported by GTA 40%
3 Goods transported by GTA other than household
goods.
30%
4 Service provided in relation to chit fund foremen 70%
5 Transportation of passengers by Air-Conditioned
Stage Carriage (Effective from June 01, 2016)
40%
12

SERVICE TAX
Abatements
 Below are the changes in the abatement rates applicable for the notified services:
 The condition of non-availment of CENVAT Credit on Input Services stands
removed for “Transportation of passengers by Rail” and “Transportation of Goods
by Vessel” if abatement is availed.
Sl. No. Description of Service
Value of Service
chargeable after
abatement
1
Services of Tour Operator with respect to
“arranging and booking of accommodation
10%
2
Services of Tour Operator with respect to Services
other than “arranging and booking of
Accommodation”
30%
3 Construction of Civil Structures 70%
13

SERVICE TAX
Point of Taxation Rules
(Effective from March 01, 2016)
 Rule 5 – Point of Taxation with respect to levy of Service Tax on new services shall
also apply in cases of new Service Tax rate or introduction of Cess, if any.
Reverse Charge Mechanism (“RCM”)
Following Services are removed from the list of Services taxable under RCM:
 Services provided by a Mutual Fund agent or Distributor to a Mutual Fund or Asset
Management Company.
 Legal Services by Senior Advocates.
14

SERVICE TAX
Reverse Charge Mechanism (“RCM”)
Following Services are amended in the list of Services taxable under RCM:
 Any Services provided by a Government or Local Authority to any business entity
liable to tax. Earlier only Support Services was taxable.
 Services of Lottery Agent under the provisions of the Lottery (Regulations) Act,
1998.
15

SERVICE TAX
Service Tax Rules
 Quarterly payment of Service Tax is now extended to One Person Company whose
aggregate value of Taxable Turnover from all premises does not exceed Rs. 50
Lakhs.
 Payment of Service Tax on “Receipt Basis” is now extended to One Person Company
with other condition remaining intact.
 A new composition rate for life insurance business at 1.4% of the single premium
charged from policy holder in case of single premium annuity policies.
 Submission of “Annual Returns” apart from the periodical returns for notified
persons in notified form within 30th November of the succeeding Financial Year.
Further revision of “Annual Returns” within a period of one month of submission
shall be allowed. Penalty for failure to file “Annual Returns” shall be Rs. 100 for
every day of delay subject to Maximum of Rs. 20,000.
16

SERVICE TAX
Offences, Penalty and Prosecution
 Penalty provisions against the Director’s or Officers of the Company rationalized
with the penalty provisions with respect to non-payment of Service Tax.
 The Threshold limit for imprisonment increased to “Two Crore rupees” from “Fifty
Lakh Rupees” for all the offences mentioned in Section 89.
 Power to arrest is proposed to be restricted only to situation where the tax payer
has collected the tax but not deposited (Section 90 and 91).
17

SERVICE TAX
Other Changes
 Time Limit to issue Show Cause Notice under normal period of limitation increased
to “Thirty Months” from “Eighteen Months”.
 New provisions introduced to provide for refund of Service Tax with respect to the
following:
 Relating to construction of canal, dam or irrigation works provided between July 01, 2012
to January 29, 2014 (both days inclusive)
 Relating to construction of Government Buildings provided between April 01, 2015 to
February 29, 2016 (both days inclusive)
 Relating to construction of Airport or Port provided between April 01, 2015 to February
29, 2016 (both days inclusive).
 Certain amendments were made to principle Notification 49/2012-ST by
Notification 01/2016-ST which provided for refund of Service Tax paid on notified
services in case of export of goods. The amendments are now made effective
retrospectively with effect from June 01, 2012.
18

SERVICE TAX
Circumstances Simple Interest
Rate
- Delay in payment of Service Tax collected but not paid within
due date prescribed
24% p.a
- Any case other than above 15% p.a
- Delay in payment of Service Tax collected in excess or not
required to be collected
15% p.a
Other Changes
 Certain amendments affected to exemption Notification in relation to services
provided by TBI or STEP.
 Indirect Tax Dispute Resolution Scheme, 2016 notified to settle the litigations
pending before the First Appellate Authority upon filing of declaration and
payment of prescribed amount.
 Interest Rates for delay in payment of Service Tax (Effective from enactment Finance
Bill, 2016)
19

CENVAT
The Amendments to the CENVAT Credit Rules, 2004 are envisaged below which are
effective from April 01, 2016.
 Wagons falling under Chapter 8606 92 is included in the definition of “Capital
Goods”.
 Capital Goods used outside the premises of manufacturer for “pumping of water” is
included within the definition of “Capital Goods”.
 The Services of “Transportation of goods by a vessel from customs station to a place
outside India” is specifically excluded from the definition of “Exempt Service” along
with Export of Services (Effective from March 01, 2016)
 Goods used for “pumping of water” and “Capital Goods less than value of Rs. 10,000
per unit” is included within the definition of “Inputs”.
 CENVAT Credit availed cannot be utilized for payment of Infrastructure Cess (Effective
from March 01, 2016)
20

CENVAT
 Availment of full CENVAT Credit in respect to Capital Goods in the same financial
year was allowed for a Small Scale Industry. The same is now extended to
manufacturer of jewel falling under Chapter 7113 (Effective from March 01, 2016).
 The orders of jurisdictional Central Excise officers allowing to remove the final
products directly from premises of job worker will have a validity of three years.
 New mechanism for reversal of CENVAT Credit in respect of manufacture of exempt
goods and provision of exempt services.
 New mechanism for distribution of CENVAT Credit by Input Service Distributor.
 New Provisions inserted relating to distribution of CENVAT Credit of Inputs for
manufacturers having multiple factories and a common warehouse distributing the
Inputs.
 Submission of Annual Return by a manufacturer or output service provider within
30th November of the succeeding year in the form to be notified.
21

CENVAT
 The provisions of sub-rule 2 of Rule 14 has been omitted. Accordingly, the whether a
particular credit has been utilised or not shall be ascertained by examining whether
during the period under consideration, the minimum balance of credit in the account
of the assessee was equal to or more than the disputed amount of credit.
 Credit of duties under Rule 3 other than NCCD shall not be available to be utilised
for payment of NCCD levied under Section 136 of Finance Act, 2001.
 Time limit of 1 Year for claiming refund under Notification 27/2012 –CE(NT) has been
specifically provided in case of export of service which shall be as follows:
 Date of receipt of Convertible Foreign Exchange where service has been
provided prior to the date of receipt of such payment; or
 The date of issue of invoice, where payment has been received in advance.
22

CENTRAL EXCISE
Legislative Changes
 MRP based valuation for all soaps, smart watches, accessories of motor vehicles and
aluminum foil not exceeding 0. 2 mm thickness.
 Infrastructure Cess introduced on specified motor vehicles.
 Changes in the tariff value and Excise duty rates for Readymade garments.
 Excise Duty of 1% (without CENVAT Credit) or 12.5% (with CENVAT Credit) on articles
of jewellery excluding silver jewellery, other than studded with diamonds or other
precious stones.
 Jewellery manufacturer eligible for exemption under the SSI Notification for
clearances upto Rs.6 Crore provided the value of clearance in the immediately
preceding year is less than Rs.12 Crore.
 Increase in rate of Clean Energy Cess in respect of Coal, Lignite, & Peat, is increased
from Rs.300 per tonne to Rs.400 per tonne.
23

Legislative Changes
 Exemption from the whole of Excise Duty in respect of Ready Mix Concrete
manufactured at the site of construction for use in construction work at such site.
 Increase in rate of abatement from RSP in respect all categories of footwear is being
increased from 25% to 30%.
 Fork-lift trucks; other works trucks fitted with lifting or handling equipment's, Self
propelled bulldozers, angledozers, graders, levellers, scrapers, mechanical shovels,
excavators, shovel loaders, tamping machines and road rollers, pile drivers and pile
extractors made liable for RSP based assessment of excise duty.
 Excise Duty at the rate of 4% without CENVAT Credit/12.5% with CENVAT Credit is
being prescribed for Routers, Broadband Modems, Set top Boxes for gaining access
to internet, Reception apparatus for TV but not designed to incorporate a video
display, Digital Video Recorder or network video Recorder.
CENTRAL EXCISE
24

CENTRAL EXCISE
Legislative Changes
 Exemption in respect of parts, components and accessories for use in the
manufacture of Routers, Broadband Modems, Set top Boxes for gaining access to
internet, Reception apparatus for TV but not designed to incorporate a video display,
Digital Video Recorder or network video Recorder.
 Exemption in respect of inputs & parts for use in manufacture of charger/adapter,
battery and wired headsets/speakers of mobile handsets including cellular phone.
 ED Exempted on parts, components and accessories for use in manufacture of above
items.
 Exemption is being provided in respect of capital goods & Spare thereof , raw
materials, parts, Material Handling Equipment & Consumables for repairs of Ocean-
going vessels by a ship repair unit, subject to fulfilment of actual user condition.
 Exemption is being provided in respect of tools and tool kits for maintenance, repair,
and overhauling of aircraft. Further, the procedures for availing the benefits is also
being simplified.
25

CENTRAL EXCISE
Legislative Changes
 Exemption from duty of excise in respect of Disposable sterilized dialyzer and micro
barrier of artificial kidney.
 Excise duty exemption on remnant kerosene, presently available for manufacture of
Linear alkyl Benzene [LAB] and heavy alkylate [HA] is being extended to N-paraffin
arising in the course of manufacture of LAB and HA also.
 Unconditional Exemption in respect of Improved Cook Stoves including Smokeless
Chulhas for burning wood, agrowaste, cowdung, briquettes, and coal.
 Area based exemptions in respect of production of gold & Silver from Gold dore,
silver dore, or any other raw materials is being withdrawn prospectively.
26

Procedural Changes
 Reduction of number of returns to be filed by Central Excise Assessee to 13 from
existing 27 returns.
 The facility for revision of returns has also been extended to Central Excise Assessees.
 In cases where the invoices are digitally signed by the Central Excise Assessee,
manual attestation of invoices meant for transporter not required any more.
 In case of finalization of provisional assessment, the interest will be applicable from
the original date of payment of duty.
 Instructions issued to the Chief Commissioners of Central Excise to withdraw cases
involving duty of less than Rs.5 lakh and pending for more than fifteen years before
courts.
CENTRAL EXCISE
27

Procedural Changes
 The existing Central Excise (Removal of Goods at Concessional Rate of Duty for
Manufacture of Excisable Goods) Rules, 2001 are being substituted with the Central
Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable
and Other Goods)Rules, 2016, so as to simplify the rules, including allowing duty
exemptions to importer/manufacturer based on self-declaration instead of obtaining
permissions from the Central Excise Authorities.
 Rationalization of Interest Rates to 15% for delayed payment of duty
CENTRAL EXCISE
28

Clarifications Issued
 Switchboards, switchgears, electrical motors, automation products are covered within
the ambit of Exemption Notification granting exemption in respect of supplies made
to institutions registered with Department of Scientific and Industrial Research
(DSIR).
 Availability of exemption to sub-contractors making supplies to projects financed by
the UN or an International Organisation subject to other conditions mentioned in the
Notification.
 Benefit under Notification 12/2012 exempting duty on specified goods intended to
be used for installation of a cold storage, cold storage room or refrigerated vehicles,
for the preservation, storage, transport or processing of agricultural, apiary,
horticultural, diary, poultry, etc. should not be denied solely on the ground that the
person receiving the specified goods is not a manufacturer of excisable goods.
CENTRAL EXCISE
29

CENTRAL EXCISE
Changes in Excise Duty Rates
Description of Goods New Rate Old Rate
Basic Excise Duty on Pan Masala 19% 16%
Waters, including mineral waters and aerated waters, containing added
sugar or other sweetening matter or flavoured
21% 18%
Cigar and cheroots
12.5% or Rs.3,755/-
per 1000, Whichever
is Higher
12.5% or Rs.3375
per 1000, Whichever
is Higher
Cigarillos
12.5% or Rs.3755 per
1000, Whichever is
Higher
12.5% or Rs.3375
per 1000, Whichever
is Higher
Cigarettes of tobacco substitutes Rs.3,755/- per 1000 Rs.3,375/- per 1000
Cigarillos of tobacco substitutes
12.5% or Rs.3755 per
1000, Whichever is
Higher
12.5% or Rs.3375
per 1000, Whichever
is Higher
30

CENTRAL EXCISE
Others of tobacco substitutes
12.5% or Rs.3755 per
1000, Whichever is
Higher
12.5% or Rs.3375 per
1000, Whichever is
Higher
Paper rolled Biris (Whether Hand made or Machine made) and other
biris
Rs. 80 per 1000 Rs. 30 per 1000
Gutkha 81% 70%
Unmanufactured Tobacco 64% 55%
Chewing Tobacco (including filter khaini) 81% 70%
Zarda Scented Tobacco 81% 70%
Aviation Turbine Fuel (ATF Supplied to Schedule Commuters Airlines
from Regional Connectivity Scheme airports shall attract 8% Excise by
virtue of Notification
14% 8%
Micro Nutrients covered under the Fertilizer Control Order 6% 12.5%
Sacks & Bags of polymers of any plastics 15% 18%
31

CENTRAL EXCISE
Rubber Sheets & Resin Rubber Sheets for Soles & Heels 6% 12.5%
PSF/PFY manufactured from plastic scrap or Plastic waste including
waste PET Bottles
2% without CENVAT
Credit or 12.5% with
CENVAT Credit
2% without CENVAT
Credit or 6% with
CENVAT Credit
Articles of Jewellery [excluding articles of silver jewellery, other than
those studded with diamonds, ruby, emerald or sapphire]
1% (without Cenvat
Credit) and 12.5%
(with Cenvat Credit)
12.5%
Gold Bars manufactured from Gold ore or concentrate, gold dore bar
and silver dore bar
9.5% 9%
Gold Bars & Gold Coins of Purity not below 99.5% produced during
process of Copper smelting
9.5% 9%
Silver manufactured from silver ore or concentrate: silver dore bar
gold dore bar
8.5% 8%
Silver in any form except silver coins of purity below 99.9%, produced
during the process of copper smelting
8.5% 8%
Rubber Sheets & Resin Rubber Sheets for Soles & Heels 6% 12.5%
32

CENTRAL EXCISE
Silver produced during process of Zinc or Lead smelting 8.5% 8%
Disposable Aluminium Foil Containers
2% without CENVAT
Credit, and 12.5%
with CENVAT Credit
2% without CENVAT
Credit, and 6% with
CENVAT Credit
Shafts, Sleeve, Chamber, Impeller, Washer, Electric Motor 6% 12.5%
Charger/adaptor, battery and wired Headsets/Speakers used in
manufacture of cellular phones
2% without CENVAT
credit / 12.5% with
CENVAT credit
Exempt
Parts of railway or tramway locomotives or rolling stock & Railway or
Tramway track fixtures and fitting
6% 12.5%
Refrigerated containers 6% 12.5%
Silver produced during process of Zinc or Lead smelting 8.5% 8%
Disposable Aluminium Foil Containers
2% without CENVAT
Credit, and 12.5%
with CENVAT Credit
2% without CENVAT
Credit, and 6% with
CENVAT Credit
33

CENTRAL EXCISE
Solar Lamps or Lanterns Exempt 12.5%
Rotor blades and intermediates, parts and sub-parts of rotor blades
for wind operated electricity generators
6% * Exempt
Epoxy Resin, Vinyl ester adhesives, Hardener for adhesives
ResinHardeners, Polyester based Infusion Resin, Carbon Pultrusion
6% 12.5%
* Subject to actual user condition
34

CENTRAL EXCISE
Changes in Additional Duties of Excise
Description of Goods
New Rate (Rs. Per
1000 Sticks)
Old Rate (Rs. Per 1000
Sticks)
Non filter cigarettes not exceeding 65mm 215 70
Non-filter cigarettes exceeding 65mm but not exceeding 70mm 370 110
Filter cigarettes not exceeding 65mm 215 70
Filter cigarettes exceeding 65mm but not exceeding 70mm 260 70
Filter cigarettes exceeding 70mm but not exceeding 75mm 370 110
Other than above 560 180
35

CUSTOMS
Legislative Changes
 Exemption in respect of media with recorded Information Technology Software
classifiable under Chapter 85 of the First Schedule to the customs Tariff Act, 1975 ,
provided that the importer files a declaration in the prescribed format and that such
Information Technology software is leviable to Service tax under 66B read with
Section 66E of the Finance Act.
 The period of limitation in case of matters not involving fraud, suppression of facts ,
willful mis-statement has been increased to two years from the existing period of
one year.
 Proposal for deferred payment of Customs Duty for certain class of importers and
exporters.
 Proposal for amendment of warehousing provisions i.e. section 57 and 58 with
regard to licensing, surveillance and cancellation of warehousing licenses. The
authority is being proposed to be given to the Principal Commissioner as against
Assistant Commissioner / Deputy Commissioner earlier.
36

CUSTOMS
Legislative Changes
 Introduction of Baggage Rules, 2016 providing multiple slabs of duty free allowance
for various categories of passengers.
 Rationalisation of Interest Rates to 15% for delayed payment of duty.
 The Duty Free Allowance for bonafide gifts is being increased from Rs.10,000/- to
Rs.20,000/-.
 Import of phosphoric acid and anhydrous ammonia at concessional rates subject to
fulfilment of actual user condition.
 Exemption from Basic Customs Duty (“BCD”) to the extent of 1% of the FOB value of
exports done in the previous FY on import of specified fabrics for manufacturing
goods meant for export.
 Withdrawal of exemption from Countervailing Duty (“CVD”) in respect of specified
machinery required for construction of road.
37

CUSTOMS
Legislative Changes
 Exemption from BCD on import of specified raw materials and capital goods for use
in manufacture of Micro fuses, Sub-miniature fuses, Resettable fuses, and Thermal
fuses.
 Exemption from the levy of BCD and Special Additional Duty (“SAD”) on import of
machinery, electrical equipment's, other instruments and their parts [except
populated Printed Circuit Boards] for fabrication of semiconductor wafer and Liquid
Crystal Display (LCD), subject to actual user condition.
 Exemption from levy of BCD and SAD on import of machinery, electrical equipment's,
other instruments and their parts [except populated PCBs] falling under chapter 84,
85, 90 for assembly, testing, marking and packaging of semiconductor chips (ATMP),
subject to actual user condition.
 Exemption from BCD, CVD & SAD withdrawn with respect to charger/Adopter,
Battery and Wired Headsets/Speakers procured for the purpose of manufacture of
mobile handsets including cellular phones.
38

CUSTOMS
Legislative Changes
 However, exemption is provided in respect of inputs imported for the purpose of
manufacturing of charger/adopter, battery and wired headsets/speakers of mobiles
handsets including cellular phones.
 Exemption provided in respect of BCD, CVD and SAD on parts, components and
accessories for use in manufacture of routers, broadband modems, set top boxes for
gaining access to internet, set of boxes for TV, Digital Video Recorder (DVR)/
Network video Recorder (NVR), CCTV Camera.
 Withdrawal of exemption on notified telecommunication equipment.
 Exemption from BCD on Liquid Crystal Display, Light Emitting Diode or Organic
Emitting Diode for manufacture of TVs, subject to fulfilment of actual user condition.
 Exemption from BCD in respect of magnetron of capacity up to 1.5KW for use in
manufacture of domestic micro ovens.
39

CUSTOMS
Legislative Changes
 Extension of Notification granting exemption in respect of specified goods for the
use in the manufacture of electrically operated vehicles and hybrid vehicles is being
extended for indefinite period.
40

CUSTOMS
Changes in Duty Rate-Basics Customs Duty
Cashew nuts in shell 5% Nil
Denatured Ethyl Alcohol (ethanol) 2.5% 5%
Silica Sand 2.5% 5%
Coal; briquettes, ovoids and similar soli fuels manufactured from coal.
Lignite, whether or not agglomerated, excluding jet.
Peat (including peat litter), whether or not agglomerated are rationalized to
2.5% 10%
Coke and semi coke of coal , of lignite or peat, whether or not agglomerated; retort
carbon.
Coal gas, water gas, producer gas and similar gases other than petroleum gases and
other gaseous hydrocarbons .
Tar distilled from coal, from lignite or from peat and other mineral tars, whether or
not dehydrated or partially distilled, including reconstituted tars .
5% 10%
Oils and other products of the distillation of high temperature coal tar similar
products in which the weight of the aromatic constituents exceeds that of the non-
aromatic constituents
2.5% 10%
41

CUSTOMS
Pitch and pitch coke, obtained from coal tar or from other mineral tars 5% 10%
Aluminum oxide for use in the manufacture of Wash Coat, for catalytic converters 5%* 7.5%
Medical Use Fission Molybdenum (On Import by Board of Radiation & Isotope
Technology
Nil 7.5%
Acyclic hydrocarbons and all cyclic hydrocarbons ( except para-xylene and Styrene ) 2.5% 10%
Polypropylene granules/resins for the manufacture of capacitor grade plastic films. Nil* 7.5%
Super Absorbent Polymer for the manufacture of goods of Sanitary towels,
tampons, napkins, diapers etc.
5%* 7.5%
Natural latex rubber made balloons 20% 10%
Wood in chips or particles for manufacture of paper, paperboard and news print Nil* 5%
Pulp of wood for manufacture of sanitary towels, tampons, napkins, diapers etc.. 2.5%* 5%
*Subject to actual user condition
42

CUSTOMS
Braille paper Nil 10%
Plans, drawings and designs 10% Exempt
Specified fibres, filaments/yarns 2.5% 5%
Solar tempered glass or solar tempered (anti-reflective coated) glass for use in
manufacture of solar cells/panels/modules.
5% * Exempt
Preform of silica for use in manufacture of telecommunication grade optical
fibre/cables.
10% Exempt
Imitation jewellery 15% 10%
Brass scrap 2.5% 5%
Primary aluminium products 7.5% 5%
Other aluminium products 10% 7.5%
Zinc alloys 7.5% 5%
43

CUSTOMS
E-Readers 7.5% Exempt
Parts and raw material for manufacture of E-readers 5% 7.5%
Foreign Satellite data on storage media imported by National Remote Sensing
Centre (NRSC), Hyderabad.
Nil 10%
Electrolysers, membranes and their parts required by caustic soda / potash unit
based on membrane cell technology.
Nil 2.5%
Refrigerated containers 5% 10%
Golf Cars 60% 10%
Natural latex rubber made balloons 20% 10%
44

CUSTOMS
Changes in Duty Rate- Countervailing Duty (“CVD”)
Gold dore bar 8.75% 8%
Silver dore bar 7.75% 7%
45

CUSTOMS
Changes in Duty Rate- Special Additional Duty (“SAD”)
Orthoxylene for use in manufacture of phthalic anhydride 2% 4%
Populated printed circuit boards [PCBs] for manufacture of personal computers
(laptop or desktop) including tablet computer.
4% Exempt
Ppopulated PCBs for use in manufacture of mobile phone or tablet computer 2% Nil
46

CUSTOMS
Changes in Duty Rate- Export Duty
Iron ore lumps (below 58% Fe content) Nil 30%
Export Duty on Iron ore fines (below 58% Fe content) Nil 10%
Export Duty on chromium ores and concentrates , all sorts Nil 30%
Export Duty on bauxite (natural), not calcined
bauxite (natural) calcined
15% 20%
47

Individual Income Tax
 No change in income tax slabs.
 Dividend received in excess of Rs 10 Lakhs proposed to be taxed at 10%.
 Rate of Surcharge for those having income more than Rs. 1 Crore is increased to
12%.
 Rebate under Sec 87A for assesses having income less than Rs. 5Lakhs enhanced to
Rs.5,000/-.
 Deduction under Sec 80GG for house rent paid has been increased from Rs 24,000/-
to Rs 60,000/-.
 Limit for tax audit for professionals has been increased to Rs 50 lakhs.
 Presumptive taxation scheme has been extended to professionals with gross
receipts up to Rs 50 lakh with a presumption of profit being 50% of the gross
receipts.
DIRECT TAXES
49

Individual Income Tax
 Limit has been increased to Rs 2 Crore for presumptive taxation of businesses
under Sec 44AD.
 The limit under Sec 17(2)(vii) in relation to employer’s contribution towards
superannuation fund is increased to Rs 150,000/-.
 Withdrawal of Corpus from National Pension Scheme up to 40% at the time of
retirement is exempted from tax.
 Additional deduction of interest for “First Home Buyers” upto Rs 50,000/- p.a. for
loans up to Rs 35 lakhs sanctioned during the FY 2016-17 has been proposed,
provided the value of the house does not exceed Rs 50 lakhs.
 Time limit for construction / acquisition of house under Sec 24(b) has been
extended from 3 years to 5 years for claiming deduction of interest on housing loan.
DIRECT TAXES
50

DIRECT TAXES
Corporate Taxes Rates
 Proposal for reduction in rate of income tax for the companies having turnover less
of than Rs 5 Crore from 30% to 29%.
 Surcharge on domestic companies having income exceeding Rs 1 Crore and not
exceeding Rs 10 Crore has been proposed to be increased to 7% and for Companies
having income exceeding Rs 10 Crore surcharge has been proposed to be increased
to 12%.
Other Tax Rates
 Rate of Securities transaction tax in case of options has been increased to 0.05%.
Equalisation Cess
 Introduction of Equalisation levy on specified services (i.e., online advertising under
Sec 161) to be with held before making payment to non-residents.
51

DIRECT TAXES
Restriction of Exemptions / Incentives
 Exemption for SEZ Developer and SEZ Unit under Section 10AA proposed to be
restricted to only units commencing their operation before April 1, 2021.
 Proposal to withdrawal of deduction of profits and gains of industrial undertakings
engaged in infrastructure development.
 Withdrawal of deduction of profits and gains of industrial undertakings or
enterprises engaged in development of SEZ.
 Reduction in weighted deduction in case of research and development expenditure
under Sec 35.
Place of Effective Management (POEM)
 The applicability of POEM based residence test has been deferred by one year.
52

DIRECT TAXES
Base Erosion and Profit Shifting (BEPS)
 The OECD report on Action 13 of BEPS Action plan provides for revised standards for
transfer pricing documentation and a template for country-by-country reporting of
income, earnings, taxes paid and certain measure of economic activity.
 India has been one of the active members of BEPS initiative and part of international
consensus. It is recommended in the BEPS report that the countries should adopt a
standardised approach to transfer pricing documentation. A three-tiered structure
has been mandated consisting of:-
 a master file containing standardised information relevant for all multinational
enterprises (MNE) group members;
 a local file referring specifically to material transactions of the local taxpayer;
and
 a country-by-country report containing certain information relating to the
global allocation of the MNE's income and taxes paid together with certain
indicators of the location of economic activity within the MNE group.
53

DIRECT TAXES
Income Declaration Scheme
 An opportunity is proposed to be provided to persons who have not paid full taxes
in the past to come forward and declare the undisclosed income and pay tax,
surcharge and penalty totalling in all to forty-five per cent of such undisclosed
income declared.
 The scheme is proposed to be brought into effect from 1st June 2016 and will
remain open up to the date to be notified by the Central Government in the official
gazette.
 The scheme is proposed to be made applicable in respect of undisclosed income of
any financial year upto 2015-16
 Tax is proposed to be charged at the rate of thirty per cent on the declared income
as increased by surcharge at the rate of twenty five per cent of tax payable (to be
called the Krishi Kalyan cess).
 A penalty at the rate of 25% of tax payable is also proposed to be levied on
undisclosed income declared under the scheme.
54

DIRECT TAXES
New Incentives
 New manufacturing companies incorporated after March 1, 2016 provided an option
to be taxed at 25%.
 Proposal to allow deductions of 100% profits for a period of 3 to 5 years for the
start-ups setup during April 2016 to March 2019.
 Insertion of Section 80 IBA providing for deductions of profits and gains from
developing and building housing projects as approved.
 Gains arising on transfer of house property qualifies for deduction if invested in
eligible start-ups under Sec 54GB.
 Deduction under Sec 32(1)(ii)(a) proposed to be extended to business of distribution
or transmission of power.
 Deduction for employment of manpower with emoluments less than Rs. 25,000/-
extended to all assessee covered under Section 44AB earlier available only for
manufacturing units.
55

DIRECT TAXES
Other Proposals
 Indexation Benefit extended to Sovereign Gold Bond’s issued under Sovereign Gold
Bond Scheme, 2015.
 Income earned in lieu of shares by Individuals / HUF as a consequence of Demerger
/ Amalgamation of a Company exempt under “Other Sources”.
 Following shall not be regarded as transfers for the purposes of “Capital Gains”:
 Redemption of bonds under Sovereign Gold Bond Scheme, 2015 by Individual.
 Value of Total Assets (not exceeding 5 Crore) in books of Company in any 3
Previous Years preceding the Previous Year in which conversion into LLP takes
place.
 Units transferred by Mutual Fund on account of consolidating plan of Mutual
Fund scheme.
 Benefit of Set off and carried forward of loss denied for specified business under
Section 35AD.
56

DIRECT TAXES
Other Proposals
 Benefit of set off of any loss denied in respect of unexplained and undisclosed
incomes under Section 115BBE.
 Non-Applicability of Tax on distributed income in respect of any income distributed
by the securitization trust to its investors on or after the June 1, 2016.
 Power of Assessing Officer extended under Section 133C to utilize the outcome
obtained from processing of information and documents under said Section.
 Authentication of Notices and other documents through electronic form.
 E-Sahyog to be expanded to minimize cost of compliance, mainly for small tax
payers.
 Expansion of scope of e-assessments to all assessee in 7 mega metro cities in the
near future.
 Dispute Resolution Scheme has been proposed for disposal of pending litigations.
57

This material and the information contained herein has been prepared by ValuFocus Corporate Services Private Limited
(ValuFocus) is intended for its clients to provide general information on a particular subject or subjects and is not an
exhaustive treatment of such subject(s). The information is not intended to be relied upon as the sole basis for any decision
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Union budget 2016

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Union budget 2016