Revision as of 08:33, 4 March 2015

2014

TIMES GUIDE TO INDIRECT TAX

The Times of India Jul 11 2014

Proposal: With all inputs/components used in the manufacture of personal computers fully exempted from payment of 4% special additional duty, branded laptops, fully assembled with imported parts, worth Rs 35,000 could get cheaper by Rs. 950-1000

Advance ruling application to obtain surety on customs, excise and service tax matters on a future transaction can now be made by companies in India.

Impact: The facility of a ruling on tax implications on proposed transaction in advance is now extended to all companies in India (earlier it was available only to PSUs). Going forward, this should reduce the risk of tax litigation, especially on big ticket projects like setting up of a power plant.

P: Services providers and manufacturers are required to avail CENVAT credit on inputs, capital goods and input services within 6 months from the date of the invoice.

I: Earlier, there was no restriction prescribed under the CENVAT credit law for the time limit in availing credit.

P: Rate of interest on late payment of service tax has now been increased from 18% to a) 18% for the first six months, b) 24% for the next six months and c) 30% for period exceeding 1 year.

I: Now, delay in payment of service tax will cost more as the cost of non-compliance has increased significantly.

P: The Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 are amended to provide that in cases where excisable goods are sold at a price below the manufacturing cost and there is no additional consideration flowing from the buyer to the seller directly or from a third person on behalf of the buyer, this price shall be subject to excise duty.

I: The Supreme Court judgment in case of FIAT India Private Limited, which held that excise duty should be payable on value which is at least equal to the cost of goods, has been reversed. This will benefit manufacturers, especially those who sell goods at steeply discounted prices to attract customers.

P: While filing an appeal with the Commissioner (Appeals) or with the Tribunal, a certain percentage of the duty demanded has to be first paid.

I: Any person desiring to file appeal against order of customs, excise or service tax officer may now have to mandatorily deposit 7.5% of tax or penalty or both for first stage of appeal and 10% of tax or penalty or both for second stage of appeal to Tribunals. This may positively reduce the time with Commissioner Appeals or Tribunal and may boost early disposal of final hearing. P: All inputs/components used in the manufacture of personal computers have been fully exempted from payment of 4% special additional duty.

I: Branded laptops, fully assembled with imported parts, worth Rs 35,000 could get cheaper by Rs. 950-1000.

P: Additional excise duty at 5% has been imposed on aerated water containing added sugar.

I: A 300ml cola can priced at Rs 25 may now cost more by Rs 1.5 to Rs 2. However, non-aerated energy drinks may not undergo any change.

P: Basic customs duty on semi-proc essed, half cut or broken diamonds, cut and polished diamonds and coloured gemstones is being rationalized at 2.5%.

I: Incremental impact on price of diamond & colour stone jewellery depending upon the specification and cost of diamond/colour stone, as the case may be, used. Industrial cutting tools to also get dearer.

P: With effect from 11 July 2014, dutyfree baggage allowance carried by an international passenger, when coming to India, is increased from Rs 35,000 to Rs 45,000 per person. Limits for importing cigarettes reduced from 200 to 100, cigars 50 to 25 and tobacco from 250 grams to 125 grams.

I: This incremental allowance would result in customs duty saving of approximately Rs 3,600 for international passengers. However, allowance for importing cigarettes, cigars and tobacco reduced.

P: Basic excise duty on footwear of retail price exceeding Rs 500 per pair but not exceeding Rs 1,000 per pair reduced from 12% to 6%.

I: Pair of footwear priced at Rs 900 could get cheaper by Rs 35-40.

P: Sale of space or time for advertisements in segments like online, mobile, out of home, on film screens in theatres, aerial advertising, etc brought within service tax net; however, advertisement space in print media continues to be out of tax net.

I: Proposal will result in additional burden of 12.36% on costs of advertisement on such non-print medium. There could be possible dual taxation in those cases where state governments are already levying state specific advertisement tax.

P: Service tax is proposed to be levied on services provided by radio taxis.

I: Hailing a radio taxi such as Meru cab costing Rs 500 may now cost Rs 525.

P: Service tax exemption granted on services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India.

I: A tour package booked by a British tourist through an Indian tour operator for a tour to nearby Thailand costing Rs 1,00,000 for two may now cost up to Rs 3,000 less.

P: Basic customs duty on e-book readers reduced from 7.5% to NIL.

I: Amazon Kindle, Paperwhite 3G 6“ Ereader costing Rs 13,999 could get cheaper by Rs 1050-1100.

P: Basic Excise Duty on sin goods is being increased -from 12% to 16% on pan masala, from 50% to 55% on unmanufactured tobacco and from 60% to 70% on zarda-scented tobacco, gutkha etc.

I: 100gm pack of pan masala previously costing Rs 185 could, going forward, cost approximately Rs 190. Similarly, 50gm pack of chewing tobacco previously costing Rs 120 could, going forward, cost approximately Rs 127-128.

P: Basic customs duty on product-specific inputs reduced.

I: Goods such as non-flat television sets, small LCDs/ LEDs, soaps, water filters, vegetable oils (used in varied industries such as edible oils, pharma, pesticides, etc), LED lights, fixtures and LED lamps, mobile phones, readymade garments, etc to get cheaper pursuant to the reduction in customs duty on inputs used in their manufacture.

P: Service tax to apply on travel by airconditioned contract carriages with immediate effect.

I: Hiring an air-conditioned bus for transport of employees between office and home may cost more by nearly 5%.

P: Service tax exemption accorded to Employees' State Insurance Corporation for past period to settle existing dispute. I: Overarching effect of service tax litigation in hands of the Corporation settled thus, absolving the contingency of service liability of approximately Rs 7,300 crore (as per media reports) that could have impacted the fund value benefitting several low-income employees.

P: The concept of “auxiliary educational services“ is omitted and a new list of exempted services received by eligible educational institutions is introduced.

I: Some services exempted by earlier law such as renting service provided to educational institutions may not be available now and hence, cost of operating an educational institute may rise.

P: SEZ units shall obtain Form A-2 containing list of exempted services from excise officers within 15 days from submission of A-1 and if it is not issued within 15 days, authorization shall be deemed to be valid from date of application in A-1.

I: Procedure for claiming exemption to services received by SEZ units has been simplified. However, if authorization is not given to service providers within three months by SEZ unit, service tax shall become payable.

P: In certain cases, the benefit of waiver of penalty which was earlier available for bona fide cases is now removed.

I: This amendment removes the power to waive the 50% penalty imposed in cases where service tax was not charged and paid by the supplier of services on bona fide grounds. Now, even if the supplier proves that he had not charged and paid service tax on bona fide grounds, the penalty will be payable.

P: CENVAT allowance is now available to car and tour operators, who in turn are obtaining such renting cars with drivers from third parties.

I: Allowance of such tax credits (to the extent of a determined amount) should be a huge impetus to the industry and it would reduce the price paid by the ultimate customer.

COMPILED AND POWERED BY EY

2015

The Times of India Mar 01 2015

TIMES GUIDE TO INDIRECT TAXES

Proposal

Service tax is proposed to be increased from 12.36% to 14%. Similarly rates for composition schemes (combing goods and services such as restaurant) as available to air travel agents, money changers, life insurance and lottery distributor selling agent, shall also be proportionately increased.

Impact

All services shall now become costlier. For example, monthly telephone bill of Rs 1,000 may now cost Rs 1,015, Cost of meal for two in an air conditioned restaurant costing Rs 1,500 may now be costlier by Rs 10, Renewal of life insurance premium of Rs 10,000 may increase to Rs 10,025, Even buying a flat will be costlier, let us assume a current price tag of Rs 1.25 crores for a flat having a carpet area of 750 square feet in Gurgaon (under construction), this will be pricier by another Rs 50,000.

P:

New Swachh Bharat Cess (`SBC') shall be introduced up to 2% on value of any or all taxable services from a date to be notified. Thus, the total service tax charge would be 16%

I:

Certain services, (to be notified) shall become costlier. It is not yet clear whether the SBC will apply to all services or only the specified services.Thus, for example, if SBC is levied at 2% on construction services, the same flat admeasuring a carpet area of 750 square feet in Gurgaon (under construction) shall cost higher by Rs 75,000 in addition to the hike on account of service tax.

P:

Effective median rate of central excise duty, levied on goods manufactured in India,be increased from 12.36 to 12.5%

I:

Combined impact of abolition of education cesses and increase in excise duty rate may lead to a minor increase in cost of daily use articles. For example, new Honda city vx automatic costing Rs 13.6 lacs (on-road Mumbai) could now be costlier by Rs 1,400.

P:

Tickets purchased for admission to entertainment or amusement facilities fell under the negative list and was exempt from service tax. This negative list is now replaced by a notified exemption which is much narrower. However, entertainments such as films, e circus, recognized sporting event, dance performances, continue to enjoy exemption.

I:

A one day unlimited access pass of Imagica Theme Park near Mumbai (over weekend) presently costing Rs 1,900 could get dearer by approximately Rs 250 (without SBC) and by Rs 300 (if SBC applied).

P:

Registration of factories under central excise and single premise under service tax, through an online process, shall be processed within 2 days.

I:

Reduction in the lead time for processing registration applications to enable businesses to go live faster.

P:

Cenvat credit on inputs and input services was allowed only within six months from date of supplier invoice.The time limit for availment of credit has been extended to one year.

I:

Manufacturers and service providers shall now be eligible to claim credit of inputs and input services up to 1 year from suppliers invoice thereby provid ing ease in doing business.

P:

Digitally signed invoices shall be recognized at par with physically signed invoices.Similarly, provisions also made for allowing electronic mode of preservation of financial records which are digitally signed.

I:

The proposal is in line with technological dependence by businesses.It would reduce the paper physical records substantially thus making the incidental handling a lot easier.However, costs associated with digital signature may be an additional burden.

P:

Penalty on account of non-payment short payment of duty tax (service tax, excise and customs) will depend on the stage of proceeding. It will increase as the delay progresses and also will depend on the gravity of the evasion..The stages that will be considered are: a) before issuance of notice; (b) within 30 days of issuance of notice; (c) within 30 days of issuance of order and (d) any other case. The penalty at different stages shall range from 0-100 % of the duty tax amount involved. Further, the provision for waiver of penalty in certain cases where the taxpayer could rely on grounds of having a reasonable cause (bonafide belief) for failure to comply with laws is now deleted.

I:

With staggered penal provisions, the Government encourages timely tax compliance and discourages authorities to impose highest penalties on all type of non-payments.

P:

The Finance Minister commits to introduce a Goods and Services Tax or GST regime in India wef April 1, 2016.

I:

GST is one of the advanced indirect tax regime and followed in many developed and developing countries in the world (Malaysia is introducing GST from 1 April 2015). It shall play a transformative role in developing India as a common market place and remove cascading effect of indirect taxes.

P:

Service tax exemption to services of mutual fund distribution has been withdrawn

I:

Administrative cost of managing mutual fund is likely to go higher implying marginal decrease in returns for the investors.

P:

Basic excise duty on cigarettes, cigars, cheroots and cigarillos increased 25% from existing duty rates.

I:

One pack of 20 Classic Mild cigarettes currently costing Rs 190 may now cost Rs 202.

P:

Basic customs duty on digital still video camera shall be reduced to NIL, which shall consequently reduce the effective customs duty incidence from 23.90 % to 12.88 %.

I:

The current retail sale price of a Nikon Coolpix point and shoot 12 megapixel camera with retail price of Rs 5,450 could become cheaper by Rs 475­500.

P:

An option has been given to tablet manufacturers in India to pay excise duty at with cenvat credit or 2% without cenvat credit benefit. Impact shall be consequently be extended in case of imported tablets also.

I:

Price of Micromax Canvas Tab P470 (a 7 inch tablet) currently retailing at Rs 7,499 could get cheaper by Rs 180.

P:

Effective excise duty rate on leather footwear having retail price of more than Rs 1,000 shall be reduced from 8.03 % to 4.50%.

I:

A Bata leather footwear presently priced at Rs 1,490 could get cheaper by Rs 50.

P:

Life insurance service provided by way of Varishtra Pension Bima Yojna is exempted from service tax.

I:

Senior citizen investing Rs 25,000 per year under the said scheme shall save approx. Rs 385.

P:

Effective service tax rate for transport of goods by road shall increase from 3.09% to 4.2% (without SBC) and 4.8% (with SBC).

I:

Cost for transportation of goods by road from Mumbai to Delhi with a 10 tonne truck load costing Rs 27,000 shall now cost Rs 27,300 (without SBC) and Rs 27,450 (with SBC).Methodology: We have taken the MRP of popular brands across each item in this table, factored in a tentative distributor's margin and then computed the indicative impact of budget announcements.

POWERED BY ERNST & YOUNG