Revenue Department :India
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INDIA 2012
A REFERENCE ANNUAL
Compiled by
RESEARCH, REFERENCE AND TRAINING DIVISION
PUBLICATIONS DIVISION
MINISTRY OF INFORMATION AND BROADCASTING
GOVERNMENT OF INDIA
Revenue Department :India
The Department of Revenue exercises control in respect of revenue matters relating to direct and indirect Union taxes, through two statutory Boards, namely, the Central Board of Direct Taxes and the Central Board of Excise and Customs. The Department is also entrusted with administration and enforcement of controls and regulatory measures provided in the enactments concerning central sales tax, stamp duties, forfeiture of properties of smugglers and foreign exchange manipulators, and other fiscal statutes. Control over production and disposal of opium and its products is also vested with this Department.
DIRECT TAXES
The Central Board of Direct Taxes (CBDT) is the apex body entrusted with the responsibility of administering direct tax laws in India. The CBDT consists of a Chairman and six members. Various Chief Commissioners of Income tax stationed all over the country supervise collection of direct taxes and provide taxpayer services. With modern information technology as a key driver, the CBDT is implementing a comprehensive computerization programme in the Income Tax Department. The Programme aims to establish a taxpayer friendly regime, increase the tax base, improve supervision and generate more revenue for the Government. Revenue collection from Direct Taxes has been growing consistently for the last five years.
The Direct Tax collections as a percentage of GDP has grown from 2.68 per cent in 1998-99 to 6.27 per cent in 2008-09. As a result of improved tax administration and better tax compliance direct taxes collection is displaying positive trends. During 2003-04, the direct taxes collection was Rs 1,05,088 crore and for the year 2008-09, it reached to Rs 3,33,818 crore (provisional). The collection from TDS till 31 March 2009 was Rs 1,30,172 crore which is very healthy growth rate of around 25 per cent over corresponding figure last year. The Department has collected Rs 10, 016 crore from arrear demand during 2008-09 at a growth rate of 10.42 per cent against a corresponding collection of Rs 9071 crore last year.
Direct Taxes Slabs for 2010-11
A. Individual, Hindu unindivided family, association of persons, body of individuals, artifical juridical pension
The rates of income-tax in the case of every individual or Hindu undivided family or every association of persons or body of individuals, whether incorporated or not, or every artifical juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the income-tax Act (not being a case to which any other Paragraph of Part III applies) have been specified in Paragraph A of Part III. The basic exemption limits and the rates of income-tax will continue to be the same as those specified for assessment year 2011-11. However the tax stabs are revised as under:- Upto Rs. 1,60,000 Nil
Rs 1,60,001 to Rs 5,00,000 10 per cent
Rs 5,00,001 to Rs 8.00,000 20 per cent
Above Rs 8,00,000 30 per cent
In the case of every individual, being a woman resident in India, and below the age of sixty-five years at any time during the previous year:-
Upto Rs 1,90,000 Nil
Rs 1,90,001 to Rs 5,00,000 10 per cent
Rs 5,00,001 to Rs 8.00,000 20 per cent
Above Rs 8,00,000 30 per cent
In the case of every individual, being a resident in India, who is of the age of sixty-five years or more at any time during the previous year:-
Upto a 2,40,000 Nil
a 2,40,001 to a 5,00,000 10 per cent
a 5,00,001 to a 8,00,000 20 per cent
Above a 8,00,000 30 per cent
No surcharge shall be levied in the cases of persons covered under paragraph-
A of part-III of the First Schedule.
B. Co-operative Societies
In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part-III of the First Schedule to the Bill. These rates will continue to be the same as those specified for assessment year 2010-11, No surcharge will be levied.
Education Cess
Education Cess on 'Income tax' and 'Secondary and Higher Education Cess' shall be continued by a surcharge at the rate of two and one account, respectively, of income tax including surcharge wherever applicable, in the cases of persons not resident in India including companies other than domestic company.
New Initiatives
Various steps have been taken to maintain the momentum of tax collection. Some of them are:
l Tax machinery is being made more taxpayer friendly by expeditious issue of refunds, response to the grievance of the tax payers etc.
l Monitoring of advance tax payments of top taxpayers by the senior officers of the Department.
l Further computerization of the Departmental business processes and database for linking information and reporting of high value transactions to the tax authorities.
l Quoting of PAN being made mandatory in most of the financial transactions.
l Operation Sampark was launched in August-September, 2009 to make contact with the Government DDOs, to sensitize them about TDS matters.
l Tax benefits for New Pension System: The New Pension System has become operational since 1st January 2004 and is mandatory for new recruits to the Central Government Service from 1 January 2004, A new clause (44) has been inserted in Section 10 of the Income tax Act so as to provide that any income received by any person on behalf of the New Pension System Trust established on 27 February, 2008 under the provisions of the Indian Trust Act, 1882 shall be exempt from income tax.
INDIRECT TAXES
Customs, Union Excise and Service Tax duties are the major sources of indirect tax revenue. The revenue for the year 2008-09 (Actual) in respect of Customs, Union Excise duties and Service tax is a 99,850- crore, *a 1, 09,343 crore and Rs 60,702 crore, respectively. (*inclusive of revenue of a 1,246 crore from Cesses administered by other than Department of Revenue. The Provisional revenue collections between April-November 2009 in respect of Custom, Central Taxes and Service tax are a 52,011 crore, 61,020 crores and 32,793 crore.
CHANGES IN BUDGET 2009-10
CUSTOMS
The peak rate of Customs Duty on non-agricultural products, which was reduced to 10 per cent in 2007-08 and continued in 2008-09, was retained at 10 per cent in the Budget 2009-10 announced on 8 July 2009. The other major ad valorem rates of 5 per cent and 7.5 per cent were also retained. However, some sector specific changes in the rates of duty were made as follows:
Capital Goods
The concessional rate of basic customs duty of 5 per cent on specified machinery for tea, coffee and rubber plantations which was earlier available upto 30.04.2009, was restored for one more year, i.e., upto 06.07.2010. Basic Customs Duty on 'mechanical harvesters for coffee plantation was reduced from 7.5 per cent to 5 per cent. Such harvesters were also exempted from CVD by way of Excise Duty exemption. On permanent magnets for manufacture of PM synchronous generators of more then 500 KW for use in wind operated electricity generators, the basic customs duty was reduced from 7.5 per cent to 5 per cent.
Export Promotion
Full exemption from Customs Duty available to specified raw materials/inputs imported by manufacturer-exporters of sports goods was extended to five more items. Similarly, full exemption from Customs Duty available to specified raw materials and equipment imported by manufacturer-exporters of leather goods, textile products and footwear industry was extended to some additional items. The basic customs duty on unworked corals was also reduced from 5 per cent to nil.
Electronics Hardware
Full exemption from Basic Customs Duty available to set-top boxes was withdrawn and basic customs duty of 5 per cent was reimposed. Basic Customs Duty on LCD panels for manufacture of LCD televisions was reduced from 10 per cent to 5 per cent. Full exemption from 4 per cent special CVD on parts for manufacture of mobile phones and accessories was reintroduced for one year, i.e., upto 6.7.2010.
Health Care
Basic Customs Duty on nine specified drugs and bulk drugs for their manufacture, and one vaccine was reduced from 10 per cent to 5 per cent. CVD on these items was also exempted by virtue of full exemption from Excise Duty. Also, the Basic Customs Duty on Patent Ductus Arteriosus/Atrial Septal Defect occlusion devices was reduced from 7.5 per cent to 5 per cent with Nil CVD by way of Excise Duty exemption. Similarly, Basic Customs Duty on Artificial Heart (left ventricular assist device) was reduced from 7.5 per cent to 5 per cent. This device attracts nil excise duty/CVD.
Textiles
Basic Customs Duty on cotton waste and wool waste was reduced from 15 per cent to 10 per cent.
Information Technology Software
On packaged or canned software, CVD exemption has been provided on the portion of the value which represents the consideration for transfer of the right to use such software, subject to specified conditions. The portion of the value is leviable to service Tax as 'Information Technology Software Service'.
Precious Metals
Customs Duty on serially numbered gold bars (other than tola bars) and gold coins was increased from Rs 100/- per 10 gm to Rs 200/- per 10 gm. On other forms of gold, the Customs Duty was increased from Rs 250/- per 10 gm to Rs 500/- per 10 gm. Customs Duty on silver was increased from Rs 500/- per Kg to Rs 1,000/- per Kg.
Miscellaneous
l Basic Customs Duty on rock phosphate was reduced from 5 per cent to 2 per cent.
l CVD exemption on Aerial Passenger Ropeway Projects was withdrawn. Consequently, such projects attract applicable CVD.
l Basic Customs Duty exemption for concrete batching plants of capacity 50 cu.m per hour or more has been withdrawn. Such plants will now attract 7.5 per cent basic duty.
l Basic Customs Duty on inflatable rafts, snowskis, water skis, surfboats and sail boards and other water sports equipment was fully exempted.
l Basic Customs Duty on bio-diesel was reduced from 7.5 per cent to 2.5 per cent.
Customs Act, 1962
These Regulations have been framed by the Development in pursuance of the recommendations of the Public Accounts Committee (PAC), and consequent to the amendment of the customs Act, 1962 (sub-section (2) to section 141 of the Customs Act, 1962). The salient features of the regulations are given below.
(i) The regulations are applicable to all Customs Cargo Service Providers' (CCSPs) that is to say all persons operating in a customs area and engaged in the handling of import/export goods. These include the Custodians holding custody of import/export goods and handling such goods and all persons working on behalf of such custodians such as fork lift or material handing equipment operators, etc. It also covers consolidators/break bulk agents and other persons handling imported/export goods in any capacity in a customs area.
(ii) The regulations provide for various responsibilities and conditions for different kinds of CCSPs. One set of conditions prescribed would apply to the CCSPs to be approved as custodians of imported/export cargo and thus handle goods in customs areas. The other set of conditions apply to those persons who only provide certain services on their own or on behalf of the custodians referred to above.
(iii) These regulations also provide for safety and security, responsibility for pilferage of goods under custody of CCSP, disposal of uncleared, unclaimed or abandoned goods within the prescribed time limit, requirement for publishing or display of the schedule of charges for the activities undertaken in respect of imported/export goods. These requirement and responsibilities on CCSPs have been specified with the overall objective of expeditious clearance of goods, reduction of dwell time, transaction cost to the import/ export trade and to safeguard Government revenue.
Amendments in the Customs Tariff Act, 1975
1) Section 3 of the Customs Tariff Act, 1975 is being amended so as to provide that where the Central Government has fixed tariff value for collection of central excise duty on an article produced or manufactured in India, the value of a like imported article shall be such tariff value.
2) Section 8B and 8C of the Customs Tariff Act, 1975 are being amended retrospectively so as to extend the machinery provisions of the Customs Act, 1962 to safeguard duties levied under these sections.
3) Section 9 of the Customs Tariff Act, 1975 is being amended retrospectively so as to extend the machinery provisions of the Customs Act, 1962 to countervailing duty levied under this section.
4) Section 9A of the Customs Tariff Act, 1975 is being amended to-
(a) provide that the margin of dumping in relation to an article exported by an exporter or producer shall be determined on the basis of records maintained by such exporter or producer and on the basis of information available in the case of non-cooperating exporter or producer.
(b) extend retrospectively the machinery provisions of the Customs Act, 1962 to anti-dumping duties levied under this section.
5) Para (A) in Note 2 of Section XI of the Customs Tariff Act, 1975 is being substituted by a new para so as to align it with the parallel provision in the Central Excise Tariff Act,1985.
6) Notification No. 40/2006-Customs dated 01.05.2006 is being amended retrospectively from its date of issue so as to,
(a) allow facility of rebate under rule 18 or rule 19 of Central Excise rules, 2002 in respect of materials which have been locally procured and have been used in the manufacture of goods exported under the Duty Free Import Authorisation Scheme.
(b) provide that goods procured under duty free replenishment in respect of which the facility under rule 18 or 19 has been availed shall be used in the manufacture of dutiable goods in the factory of the exporter or in the factory of his supporting manufacturer even after discharge of export obligation.
(c) provide that the importer shall pay an amount equal to additional duty of customs together with interest @ 15 per cent per annum from the date of clearances of the said materials in case the materials are imported against an authorisation transferred by the regional authority or such materials are transferred with the permission of the regional authority. However, no such amount shall be payable in respect of authorisation issued from 01.05.2006 to 31.03.2007.
(d) define dutiable goods for the purpose of the notification.
7) Notification No. 27/2009-Customs (NT) dated 17.03.2009 provides for officers of DGCEI to act as officers of customs with all India jurisdiction. This notification has been given retrospective effect from 09.05.2000.
(i) In order to property implement the duty exemption benefit on import of edible oils, the Board clarified that the term 'crude' used in the Serial No. 33A of the Notification No. 21/2002 dated 1.3.2002 is intended to cover all edible oils which have not been subjected to any process of refining. It has also been clarified that the condition of edible grade of oil has to be certified by testing it in terms of the standards of quality specified for such goods in terms of Appendix B to the Prevention of Food Adulteration Rules, 1955.
(ii) On the issue of classification of line and mobile/cellular phones and for the assessment of addition duty of customs, it was clarified by the Board that subsequent to changes made in the Harmonzied System of Nomenclature (HSN) in 2007, the First Schedule to the Customs Tariff Act, 1975 was also revised for consequential changes and accordingly, the present entry 'telephone sets' under heading 8517 covers both 'line telephones' as well as 'cellular/mobile phones'.
Central Excise
The robust growth momentum of the Indian economy since 2003-04 could be ascribed in great measure to the resurgence of the manufacturing sector and this was facilitated to a large extent by the rationalization of excise duties. As a consequence of changes in the ad valorem rates of Central Excise Duty for nonpetroleum products on 24th February, 2009, a dual rate structure with rates of 4 per cent and 8 per cent ad valorem was put in place. This rate structure for nonpetroleum products has been retained in Budget 2009-10. However, the rate of duty on several items attracting 4 per cent was restored to 8 per cent. Among the important sectors/ items where such increase has occurred are ceramic tiles, plywood, flush doors and articles of wood, writing ink and other ink used in writing instruments, zip fasteners, MP3/MP4 or MPEG4 players etc. Consequent upon increase in Excise Duty rate from 4 per cent to 8 per cent, abatement rates were revised suitably on items covered under retail sale price (RSP) based assessment. On the other hand, the 4 per cent rate was retained on mass consumption and essential items, such as:
l Sugar confectionary biscuits with retail price exceeding Rs 100Kg, cakes and pastries, sherbets, scented supari, etc.
l Paraxylene
l Drugs and pharmaceutical products
l Certain varieties of paper, paperboard and articles therefrom
l Footwear of RSP exceeding Rs 250 but not exceeding Rs 750 per pair
l Pressure cookers
l Power driven pumps for handling water
l Water filtration/purification equipment
l Specified textile machinery
l Compact Fluorescent Lamps and vaccum and gas filled bulbs of retail price not exceeding Rs 20 per bulb, and
l Medical equipment.
The sector specific duty changes are as under :
Textiles
l The scheme of optional Excise Duty of 4 per cent for pure cotton has been restored. The rate of duty on manmade fibre and yarn was enhanced from 4 per cent to 8 per cent on mandatory basis. Beyond the fibre/yarn stage, the optional levy of 8 per cent ad valorem was restored (instead of pre-budget rate of 4 per cent). Similarly, textile items manufactured from natural fibre other than cotton such as silk, wool, flax etc. was to bear an optional levy of 8 per cent ad valorem instead of 4 per cent beyond the fiber stage. The enhanced rate of 8 per cent also apply to blended fabrics and products.
l Corresponding changes in the rates of duty applicable to Export Oriented Units (EOU) using only indigenous raw materials when they make clearances of textiles items into the Domestic Tariff Area (DTA) were also made.
l Excise duty on some important textiles Intermediates viz, Polyester chips, Di-Methyl Terephthalate (DMT), Pure Terephthalic Acid (PTA), and Acrylonitrile was also enhanced from 4 per cent to 8 per cent ad valorem.
Petroleum
l The ad valorem component of Excise Duty on petrol, intended for sale with a brand name, was converted into a specific rate. Consequently, such petrol now attracts total Excise Duty of Rs 14.50 per litre instead of '6 per cent +Rs 13 per litre'.
l Similarly, the ad valorem component of Excise Duty on diesel, intended for sale with a brand name, was converted into a specific rate. Consequently, such diesel now attracts total Excise Duty of Rs 4.75 per litre instead of '6 per cent + Rs 3.25 per litre'.
l Exemption from Basic Excise Duty, Additional Duty of Excise and special additional Duty of Excise was provided to High speed diesel oil blended with bio-diesels, up to 20 per cent by volume, provided both HSD and biodiesel have paid the appropriate duty of excise.
l Excise Duty rate on special boiling point spirits and Naphtha was reduced to 14 per cent.
Automobiles
l Excise duty on large cars/utility vehicles, having engine capacity exceeding 1999, was reduced from '20 per cent + Rs 20,000' per unit to '20 per cent + Rs 15,000 per unit'.
l Excise duty on petrol driven trucks/lorries was reduced from '20 per cent + Rs 10,000' per chassis to '8 per cent + Rs 10,000' per chassis. Small Scale Industries (SSI) exemption
l There was no change either in the exemption limit or the eligibility limit for the small scale exemption. The brand name restriction was relased in respect of printed laminated rolls. As a consequence, manufacturers of printed laminated rolls bearing the brand name of another person and fulfilling the conditions of the notification was made entitled to full exemption from Excise Duty for their first clearances of this item (for home consumption) not exceeding Rs 150 lakh during the remaining part of this financial year, i.e., 2009-10.
Other changes/reliefs
l Full exemption from Excise Duty has been provided to goods falling under Chapter 68 manufactured at the site of construction for use in construction work at such site.
l Full exemption from Excise Duty has been provided to tops manufactured from duty paid tow of man-made fibre using the tow-to-top process under specified conditions.
l Articles of jewellery on which brand name or trade name is indelibly affixed or embossed (branded jewellery), have been fully exempted from Excise Duty.
l Full exemption has also been provided to EVA compound manufactured on job-work basis for further manufacture of footwear.
l Partial exemption from Excise Duty has been provided to packaged or canned software so that the duty payable on that portion of the value which represents the consideration for the transfer of the right to use such software is exempted.
l Recorded smart card and tags were exempted from Excise Duty. A condition has been added to this exemption so as to make it available only if the manufacturer has not availed of Cenvat credit of the duty paid on inputs for these goods.
Amendments in Central Excise Act, 1944
1) Section 9A of the Central Excise Act is being amended so as to provide for the manner of compounding of offences and to provide that certain offences and circumstances shall not be compoundable. Consequential amendment is also being made in section 37 of the Central Excise Act.
2) Sections 14A and 14AA of the Central Excise Act are being amended so as to empower the Chief Commissioner of Central Excise to nominate a Chartered Accountant for conducting special audit under these provisions.
3) Section 23A of the Central Excise Act is being amended so as to substitute the definition of the ‘Authority for Advance Rulings’ to include therein the authority authorized under section 28F of the Customs Act.
4) Section 35G of the Central Excise Act is being amended retrospectively with effect from 01.07.2003 so as to make an express provision to empower High Courts to condone delay in filing of appeals beyond the prescribed period.
5) Section 35H of the Central Excise Act is being amended retrospectively with effect from 01.07.1999 so as to make an express provision to empower High Courts to condone delay in filing of applications or memorandum of cross objections beyond the prescribed period.
Amendments in the First Schedule to the Central Excise Tariff Act, 1985
1) Note 1 to Chapter 8 in the First Schedule to the Central Excise Tariff Act, 1985 has been substituted so as to exclude ‘betel nut product known as supari’ of tariff item 2106 9030 from its purview.
2) A Note (No. 6) has been inserted in Chapter 21 so as to provide that in relation to product of tariff item 2106 90 30 the process of adding or mixing cardamom, copra, menthol, spices, sweetening agents or any such ingredients, other than lime, katha (catechu) or tobacco to betel nut in any form shall amount to ‘manufacture’.
3) In Chapter 58, against tariff item 5801 22 10, in column (3) and (4), the entries ‘m2’ and ‘8 per cent’ respectively are being inserted.
Amendments in Central Excise Rules and CENVAT Credit Rules
1) A new rule is being inserted in Central Excise Rules, 2002 to provide that records seized by the department during an investigation but not relied upon in the Show Cause Notice should be returned to the party within 30 days of issue of Show Cause Notice.
2) An explanation is being inserted in Rule 2 of Cenvat Credit rules, 2004 so as to clarify that ‘inputs’ shall not include cement, angles, channels, CTD or TMT bars and other items used for construction of shed, building or structure for support of capital goods.
3) Notification Nos. 33/97-CE (NT) dated 01.08.1997, 44/97-CE (NT) dated 30.08.1997 and 7/98-CE (NT) dated 10.03.1998 are being amended with retrospective effect from the date of issue of respective notifications so as to provide the Central Government with the power to notify rates of excise duty under these notifications by virtue of powers conferred on it by the erstwhile section 3A of the Central Excise Act [These changes to come into effect on enactment of the Finance (No.2) Bill 2009] .
4) Rule 6 (3) of the Cenvat Credit Rules, 2004 is being amended to prescribe that a manufacturer of both dutiable and exempted goods, who does not maintain separate accounts of inputs, shall pay an amount equal to 5 per cent of the total price of the exempted goods instead of 10 per cent.
Service tax
The rate of Service Tax at 10% reduced from 12% on 24 February 2009 was retained.
Broadening the Tax Base
The following four new services were brought under the Service Tax net:
l Service provided in relation to transport of goods and goods through National Waterways and Inland Water.
l Service provided in relation to transport of goods by rail (for the time being, Service Tax on this service has been kept in abeyance).
l Cosmetic and plastic surgery service undertaken to preserve or enhance physical appearance or beauty.
l Legal consultancy service provided by a business entity to another business entity.
Relief to Exporters
l Two taxable services, namely, 'Transport of goods by road' and 'Commission paid to foreign agents' are exempted from the levy of service tax as/if the exporter is liable to pay Service Tax on reverse charge basis.
l In respect of other taxable services, a new revamped and trust-based refund scheme was notified w.e.f. 07.07.2009. Under the new scheme, refund is granted to the exporters within one month without any pre-audit based on self-certification or certification by the chartered accountant. A simplified format has been prescribed to file the refund claims. The condition for filling the refund claims once in a quarter has been dispensed with and the time period for filing the refund claim has been increased to one year from the date export.
l Terminal Handling changes is added to the list of services eligible for refund.
l Services provided for transport of export goods through national waterway, inland water and coastal shipping were included in the list of services eligible for refund of Service Tax.
Other relief measures
l Exemption from Service 'Tax has been provided to inter-State or intra-State transportation of passengers in a vehicle bearing 'Contract carriage permit', with specified conditions.
l Federation of Indian Export Promotion Organization (FIEO) and other specified export promotion councils have been exempted from the levy of Service Tax under the 'Club or association service'. The exemption is valid till 31.03.2010.
l Exemption from Service Tax leviable under 'Banking and other financial services' or under 'Foreign exchange broking service' has been provided to Inter-bank purchase and sale of foreign currency between scheduled banks.
l Service provided in relation to transport of goods by call has been exempted from Service Tax.
l Service Tax exemption has been provided on taxable service provided in relation to transport of specified good through national waterway, Inland water and coastal shipping.
l Sub-brokers have been excluded from the definition of 'Stock-broker'. As a consequence, sub-brokers will be outside the purview of Service Tax.
Amendments in the Finance Act,1994
1) Finance Act, 1994 is being amended to:-
(a) abolish revision procedure prescribed under section 84 and to prescribe the procedure of filing departmental appeals before the Commissioner (Appeal) in Service Tax cases similar to the central excise procedure. Accordingly, section 84 pertaining to revision by Commissioner is being modified and consequential changes are being made in section 86. A saving clause is being provided to protect the pending cases.
(b) empower the Central Government to frame rules with respect to the place of provision of taxable services; and with respect to the relevant date for determination of the rate of Service Tax.
Amendments in existing Rules and Notifications
1) The scope of notification No. 1/2002–ST dated 01.03.2002 is being enlarged by extending the applicability of Service Tax provisions to installations, structures and vessels in the entire Continental Shelf of India and Exclusive Economic Zones of India.
2) Rule 6 (3) of the Cenvat Credit Rules, 2004 is being amended to prescribe that a provider of both taxable and exempted services, who does not maintain separate accounts of inputs, shall pay an amount equal to 6 per cent of the value of exempted services instead of 8 per cent.
3) Rule 3 (5B) of the Cenvat Credit Rules, 2004 is being amended so as to provide that a service provider shall pay back the amount of credit taken on inputs/ capital goods fully written off.
4) Explanation provided in the Works Contract Rules, 2007 is being modified so as to allow the benefit of optional composition scheme only to such works contracts where the taxpayer declares the entire value of goods (whether supplied under any other contract for a consideration or otherwise) and services used in the execution of the works contract as the ‘gross value’charged for the works contract. This restriction would not apply to current works contracts on or before 07.07.2009.
Exemptions
1) Exemption from service tax is being provided to inter-state or intra-state transportation of passengers in a vehicle bearing ‘Contract Carriage Permit’ with specified conditions.
2) Exemption from service tax (leviable under Club or Association Service) is being provided to the Federation of Indian Export Organizations (FIEO) and specified Export Promotions Councils. The exemption is valid till 31.03.2010. 3) Exemption from service tax (leviable under banking and other financial services or under foreign exchange broking service) is being provided to interbank purchase and sale of foreign currency between scheduled banks.
Refund Scheme for Exporters
Notification No. 41/2007-ST dated 06.10.2007 provides for refund of service tax paid on services, which though not in the nature of input services, are relatable to export of goods. The scheme is being revamped to ensure speedier grant of refunds to the exporters. The salient features of the new scheme, being notified under two notifications, both dated 07.07.2009, are as follows:
(a) Two taxable services, namely, ‘Transport of goods by road’ and ‘Commission paid to foreign agents’ have been exempted from the levy of service tax, if the exporter is liable to pay Service Tax on reverse charge basis. However, as the present cap of 10 per cent on commission agency charges has been retained, the exporter will have to pay Service Tax on the amount of commission which is in excess of 10 per cent.
(b) Following are some of the salient features of the revamped refund scheme, notified in supersession of notification No.41/2007-ST dated 06.10.2007:
l ‘Terminal Handling Charges’ is being added to the list of eligible services.
l The time period for filing a refund claim is being increased to one year from the date of export. The condition for filing refund claims once in a quarter is being dispensed with. Now the exporter can file a refund claim anytime after each export shipment.
l A simplified format is being prescribed for filing refund claims.
l Self-certification is being introduced to ensure faster sanction and disbursement of refunds. In a case, where total amount of refund claim does not exceed 0.25 per cent of the total f.o.b. value of exports under a claim, a self-certification by the exporter on the relevant documents to the effect that: (a) the eligible services have been received by him; (ii) the service tax payable thereon has been reimbursed; and (iii) such services have been used for the export, would be sufficient. The refunds shall be granted within one month without any pre-audit.
l In a case where amount of refund claim exceeds 0.25 per cent of the f.o.b. value of exports, the documents submitted by the exporter should be certified by the chartered accountant, who audits his annual accounts. On the basis of such certification, the refund claim shall be sanctioned within one month without any pre-audit.
CENTRAL SALES TAX (CST)
The Central Sales Tax is levied under the provisions of the Central Sales Tax Act, 1956 on the sale of goods of the course of inter-State trade or commerce. The Central Sales Tax is levied by the Central Government by virtue of Entry 92 A of the Union List, but the same is assigned to the States within which the tax is leviable, by virtue of provisions of Article 269 of the Constitution of India. It is an accepted fact that the CST, being an origin-based tax, is inconsistent with VAT (which is a destination based tax). Moreover, CST is a cascading-type tax since it is not rebatable against VAT. Hence, it is agreed that CST should be phased out.
In fact, after extensive consultations between the Centre and the States, the roadmap for phasing out the CST by 31.3.2010 (i.e. before the date appointed for introduction of GST) has been finalized. The package of compensation to the States for revenue loss on this account has also been finalized. Accordingly, the process of phasing out of the CST has been started with reduction in CST from 4 per cent to 3 per cent w.e.f. 01.04.2007 and further from 3 per cent to 2 per cent w.e.f. 1st June, 2008.
For the residual losses thereafter, the Central Government has further released Rs. 5979.65 crore to States till 31st December, 2009 as budgetary support component of compensation for the loss due to phasing out of CST in Financial Year 2009-10.
ANTI-SMUGGLING DRIVE
The following measures have been introduced with a view to help detect and curb evasion of Customs duty and frauds:
India has signed Customs Mutual Assistance Agreement, Memorandum of Understanding with various countries to promote sharing of intelligence and provide investigative assistance to curb duty evasion.
Customs Overseas Intelligence Network (COIN) provides actionable intelligence for facilitating seizures of offending goods and to detect evasion of Customs duty.
Use of National Import Database (NIDB) helps in detecting under-valuation of imported goods, which has been reported to be the oft-used route for Customs commercial frauds.
Intelligence Support System (ISS) providers for development of intelligence and for analyzing macro level inputs into macro level workable intelligence. This system has resulted in detection of commercial fraud and evasion of customs duty. In order to disseminate information about new modus operandi, DRI shares details of important cases booked by it through issuance of alert circular. These alert circulars act as useful tools for the field formations in the detection of Customs duty evasion. These alert circulars are also used for targeting in the Risk Management framework.
The department has installed one Mobile Gama Ray Container Scanner, one fixed X-ray scanner at Mumbai Sea Port. The department also proposed to install 7 additional Mobile and fixed container scanner during 2009-10 for effectively curbing the misdeclaration of goods etc. The speed Boats are being procured for effective patrolling of the coastal area. The department also approved procurement of 87 XBIS for installation at airport for scanning of baggage.
STATE VALUE ADDED TAX (VAT)
Under Entry 54 of List II (State List) of the Seventh Schedule of the Constitution of India, 'tax on sale or purchase of goods within a State' is a State subject. Introduction of State VAT to replace the earlier Sales Tax systems of the States has been one of the important tax reform measure taken on indrect tax side. The decision to implement State VAT was taken in the meeting of the Empowered Committee held on 18.06.2004, where a broad consensus was arrived at amongst the States to introduce VAT w.e.f. 01.04.2005, Accordingly, VAT has been introduced by all the States/UTs, except for the UTs of Andaman and Nicobar Islands and Lakshadweep. Since Sales Tax/VAT is a State subject, the Central Government has been playing the role of a facilitator for successful implementation of VAT. Some of the steps taken by the Central Government are listed below :
a) A package for payment of compensation to States for any revenue loss on account of introduction of VAT has been implemented. The rate of revenue loss compensation under this was 100 per cent during 2005-06, 75 per cent during 2006-07 and 50 per cent during 2007-08. An amount of Rs 2558.67 crore has already been released by Central Government to States till 31st December, 2009 in the Financial Year 2009-10.
b) Technical and financial support on 100 per cent basis is being provided to North Eastern/Special-category States to enable them to take up VAT related computerization. An amount of Rs 6, 06 crore has been spent on the project by 31st December 2009 in the Financial Year 2009-10. Another project for computerization of VAT administration in Himachal Pradesh and Jammu and Kashmir with overall cost of Rs 40.49 crore has been sanctioned in this financial Year. A Mission Mode project for computerization of State VAT administrations has also been formulated.
c) 50 per cent funding is being provided to the Empowered Committee of State Finance Ministers for Implementation of the TINXSYS project for tracking of inter-State transaction.
d) The project for upgradation of Centre for Taxation Studies, Kerala to a national level institute of Public Finance, named Gulati Institute of Finance and Taxation (GIFT), has been sanctioned. This involves commitment financial assistance of Rs 23.63 crores out of the total project cost of Rs 33.13 crore.
e) Financial support had been provided to the Empowered Committee as well the States for undertaking. VAT related publicity and awareness campaigns. The experience with implementation of VAT has been very encouraging so far. The new system has been received well by all the Stake-holders and the transition to the VAT system has been quite smooth. The tax revenues of VAT Implementing States had registered an increase of 13.8 per cent during 2005- 2006 and about 21 per cent during 2006-2007. During 2007-08, the gross revenue growth in State VAT and Sates Taxes for all the States/UTs had been 15.7 per cent, which had included a growth of about 24 per cent in the revenue from VAT-items.
Rationalization of Instruments under Indian Stamp Act, 1899
A High level Expert Committee on Corporate Bonds and Securitisation (under Chairmanship of Dr. R.H. Patil, Chairman, UTI) was constituted. The Committee has recommended rationalization of certain instruments under Indian Stamp Act, 1899 namely Debentures (Article 27), Bonds in the nature of Promissory Notes (Article 49) and Assignment etc. The recommendations of the Committee have been accepted by the State Government in the meeting of Standing Committee of State Secretaries on Stamps and Registration held on 11.05.2007 at NIPFP. It was decided to reduce/to make rates of stamp duty uniform in respect of two instruments, viz., Debenture and Promissory Notes, being the Central Instruments and notifying them under Section 9 (1)(a) of the Indian Stamp Act. Necessary Stamp Order notifying the rates of Stamp Duty in respect of Debentures and Promissory Notes has since been issued vide S.O. 2189 (E) dated 12.09.2008.
Empowered Committee of State Finance Ministers (EC) has been requested to work with the Central Government to create a truly pan Indian market for securities that will expand the market base and enhance the revenues of the State Government.
Goods and Services Tax (GST)
Introduction of GST is the logical extension of reforms in Central and States' indirect taxation aimed at avoiding double taxation and tax-cascading and thereby ensuring level field and market competitiveness of our products in national and international markets. The process of introduction of GST has been commenced with the cooperation of the Empowered Committee of State Finance Ministers, whose Terms of Reference have been expanded to the original Resolution, to enable the EC "To work with the Central Government to prepare a roadmap for introducing Goods and Services Tax (GST) in the country with effect from April 1, 2010 and to deal with related matters." The EC had set up a Joint Working Group (JWG) dated 10th May 2007, comprising officials of the Central Government and State Governments.
The Working Group studied various models of GST existing globally and other relevant material available on the subject, including through field visits. The Group also undertook identification of alternative models and assessment of their suitability for introduction of GST in India's fiscal federal context. The JWG presented its report to the EC on November 19, 2007. This was examined by EC and their views on "a Modal and Roadmap for GST in India" were communicated to the Ministry of Finance on 30.04.2008.
The views of EC had been examined in depth at the Ministry, in consultations involving the Tax. Research Unit, Central Board of Excise and Customs, Commissioner Service Tax and Commissioner Central Excise also. The consolidated preliminary comments of the Department of Revenue, Ministry of Finance had been conveyed to the Empowered Committee of State Finance Ministers. EC has released First discussion Paper on GST on 10th November, 2009 to obtain feedback from the stakeholders. The comments of the Department of Revenue have been furnished to the Empowered Committee. A Joint Working Group of officers of State and Central Government has been constituted to prepare draft Constitutional amendment bills and draft Central and State legislations for GST. The GST once implemented is likely to reduce cascading of tax and bring down compliance cast. The removal of cascading effect will make the products more competitive and thus is likely to lead to increased sales. The economy in general is therefore likely to see higher growth than would have been achieved otherwise.
OPIUM CULTIVATION
India is the sole licit producer and exporter of opium gum in the world market. Other countries which grow opium follow the Concentrate of Poppy Straw (CPS) method. Cultivation of opium poppy through licences issued by the Central Bureau of Narcotics (CBN), and export of opium are under the exclusive control of the Central Government. The Central Bureau of Narcotics, headed by the Narcotics Commissioner, is the designated agency to supervise the licit production of opium in the notified tracts of the three States namely Madhya Pradesh, Rajasthan and Uttar Pradesh.
During the crop year 2008-09, 509 Metric Tonnes (provisional) of opium at 70 degree consistence was procured. The average yield at 70 degree consistence on basis of provisional results received from MP, Rajasthan and UP for the crop year 2008-09 was 56.66, 58.71 and 59.08 kgs/hectare (provisional), respectively. The All India average yield during 2008-09 was 57.50 kgs/hectare at 70 degree consistency (provisional). The figures related to opium cultivation are provisional as final reports from factories for the crop year 2008-09 are awaited.
DIRECTORATE OF ENFORCEMENT
The Directorate of Enforcement is mainly concerned with the Enforcement of the provisions of the Foreign Exchange Management Act (FEMA), 1999, beside implementation of Prevention of Money Laundering Act (PMLA), 2002, w.e.f. 1.7.2005. The Directorate is also responsible for adjudication of the Foreign Exchange Regulation Act, 1973 (FERA) cases (repealed Act) and follow-up of prosecutions filed under the erstwhile FERA. Consequent to the amendment of PMLA, which has been notified on 1.6.2009, the work of the Directorate, with regard to implementation of PMLA, has increased manifold.
The intelligence is collected by the Directorate from different sources, which is collated and investigated upon resulting in filing of the complaint by the Investigating Officers before the Adjudicating Authority, who on consideration of the same issues Show Cause Notices in the deserving cases, which SCNs on Adjudication result in imposition of penalty besides confiscation of the amount involved in the contraventions.
Under FEMA, the Directorate, during the period 1.4.2009 – 31.3.2010, conducted 86 searches which resulted in the seizure of Rs 1989.10 lakh foreign and Indian currencies.
Under Prevention of Money Laundering Act (PMLA) 2002, the Directorate has taken up investigations in 65 ECIRs (Enforcement Case Information Report) cases under the provisions PMLA, relating to Scheduled Offences such as (a) waging war against the country/state, (b) drug offences under NDPS Act, (c) IPC offences like forgery of valuation security (d) Fake Indian currency notes, etc (e) offences under the Arms Act (f) Wild Life (Protection) Act (g) Immoral Traffic (Prevention) Act etc. Provisional Attachment of Properties under PMLA valued at Rs 46.76 crores had been ordered.
Provisional Attachment Orders (PAO) have been issued in 10 cases, whereby proceeds of crime to the tune of Rs 1077.88 lakhs have been provisionally attached; out of these, 34 (PAO) involving a sum of Rs 7,307 lakhs, stand already confirmed by the Adjudicating Authority.
FORFEITURE OF ILLEGALLY ACQUIRED PROPERTY
The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEM(FOP)A), provides for forfeiture of illegally acquired property of the persons convicted under the Sea Customs Act, 1878, the Customs Act, 1962 and the Foreign Exchange Regulation Act, 1947 and Foreign Exchange Regulation Act, 1974 and the persons detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974. The Narcotics Drugs and Psychotropic Substances Act, 1985 [NDPS Act] provides for tracing, freezing, seizure and forfeiture of illegally acquired property of the persons convicted under that Act or any corresponding law of any foreign country, and those who are detained under the Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act, 1988 and Jammu and Kashmir Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act, 1988.
SAFEM(FOP) Act and NDPS Acts provide for appointment of Competent Authorities for carrying out forfeiture of illegally acquired properties. At present, the Offices of Competent Authorities are located at Kolkata, Chennai, Delhi, Mumbai and one unit is at Ahmedabad. During the year 2009-2010 (upto 31/11/ 09), the Competent Authorities have forfeited property worth of Rs 2153.70 lakhs in 20 cases.
See also
Revenue Department :India
