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INDIA BUDGET 2014-2015

Development, prosperity and growth are not available at the


shiny end of a magic wand. It takes a lot of effort to bring an
economy thats been on life support for a couple of years,
out of the woods and on the road to recovery.

The most fiercely fought elections in the history of India, were
also the greatest ever sales pitch for hope. And hope has a
number now 282.

With a resounding mandate, the people have voted in hope
of better days. Its the first time since 1984 that any one
political party has an absolute majority in parliament. Its a
relief to know that policy decisions can now break free from
the shackles of alliance compulsions and coalition politics.

The seizure that seemed to have gripped the operating
bureaucracy no longer swings like a proverbial sword on
anybodys head.

But lets put those rose tinted glasses away and hold off
that celebratory bubbly for now. We might be on the brink
of greatness in theory, but in reality were a very unwell
economy in need of immediate surgery.

Tough decisions need to be taken. Swift action needs
to be seen.

Were burdened with subsidies that add to our deficit.
Were stuck with policies and laws that are too old to be
relevant. Were struggling with poor infrastructure and an
even poorer industrial growth. And corruption has put
Indian governance on a world map nobody is proud of.

After all the histrionics and highs of Election 2014, we have
reached the business end of the proceedings. Budget 2014
is what every vote and voter had pinned their hopes on.

Lets hope some wishes come true.
The Economic Survey
2013-14
Policy Pronouncement
Direct Tax
Indirect Tax
Special Notes
the
economic
survey
2013-14
The Economic Survey is a report card of the
economys performance over the previous twelve
months. While doing so it also looks out for signals,
which could either indicate a turnaround in the
economy or identify pitfalls, which require
governmental interference lest they turn into
economic bottlenecks. While the economic survey
guides, it is by no means an indicator of what the
Union Budget will hold forth.
In terms of utility, it may be argued that the
Economic Survey being a representation of the past
has little value for the present or for the future. But, it
can equally be countered by saying that the
economic survey helps in identifying where the
previous policies have failed and usher corrective
measures.
But, when governments change or rather when the
political climate changes, an economic survey
comes into its element.
The Economic Survey 2013-14 represents the state
of the economy as it responded to the policies of the
United Progressive Alliance led by the Congress. We
now have different political masters, with the
National Democratic Alliance led by the Bharatiya
Janata Party coming to power. Its observations are,
in a sense, a pointer to the policies that were, but did
not work. It seeks to identify the causes for slow
downs, failures and to recommend remedies. But,
whether these will be addressed is another story.
The prcis below is a summary of a long-winded
document focussing on the germane and visualising
the future though the Surveys eyes.
No economic story will be complete without a
thorough analysis of the growth in Gross Domestic
Product (GDP). This is primarily because the GDP
growth is a singular representation of the health of an
economy. On its own, the GDP growth rate can talk
paeans about an economy or be a sharp indictment
about its failure. Closer home, the GDP growth has
had a chequered history but what is alarming is a
The Economic Survey
2013-14
T
h
e

E
c
o
n
o
m
i
c

S
u
r
v
e
y

2
0
1
3
-
1
4
distinct slowdown in the growth for two consecutive
years, a phenomenon seen only once before since
Independence.
While the slow down was definitely impacted by
external factors such as persistent uncertainty in the
global outlook and a slowdown in the global
economy, domestic structural constraints and
inflationary pressures took centre stage too.
Structural constraints have for long been a bane of
our economy. For reasons, quite unfathomable to a
reasonable person, consecutive governments only
seem to have fostered the growth of these
constraints rather than trying to get rid of them. But,
what are these constraints. While there a plethora of
constraints, there seems to be widespread
acceptance that the following constraints play a
major role:
Decision making paralysis
Poorly targeted subsidies
Low manufacturing base coupled
with low value addition
Low agricultural productivity
High food inflation
The troika of deficits i.e. fiscal, revenue and primary
deficit are meant to be an indicator of the financial
health of the government. They represent the deficit
between the governments income and expenditure.
With the Fiscal Responsibility and Budget
Management (FRBM) Act disciplining the
government into reducing its deficits, much jugglery
has taken place. While the initial years represented
an earnest attempt to rein in the deficit, the global
financial crisis forced a temporary abandoning of the
self-restraint. But, sadly rather than doubling its
efforts to rein in the deficit post the aftermath of the
crisis, financial wizardry has been used to project
rosy pictures without any tangible reduction in the
deficits. Unless, the FRBM Act is beefed up and
followed in letter and in spirit, it is unlikely that
Government profligacy will wane. And then these
key indicators will also lose their value in judging
the economy.
But, then the key question or questions are what
should be done? The Survey does give a few
pointers:
Job creation: Job creation happens when
firms invest and grow. Which neatly brings
us to the next action
Revive investment: Revival of investment
happens only when the growth rate of the
economy can be revived. This happens when
o A platform for low and stable inflation is
created
o Reforms are initiated in tax and expenditure
o A well though throught legal and regulatory
framework is created
Reining in inflation requires a nominal anchor around
which a monetary policy framework can then be put.
India faces its biggest risk from food inflation, which
very often spills over to non-food and results in an
overall inflatory situation. Deregulation of the food
market will be critical in curbing food inflation.
A revised FRBM Act, which will enforce discipline
and impose penalties for non-adherence will be
critical in managing public finance. Alongside, the
Government will also have to move from a cash
based accounting system to an accrual based
system. Introduction of GST and DTC has become
critical if the Government is keen on simplifying the
taxation structure in India.
Retrospective amendment of laws, frequent
amendments in tax laws, arbitrary tax claims,
especially in transfer pricing have wreaked havoc on
investor sentiment and have to go.
The subsidy programme followed in India is a classic
example of profligacy. Never having reached its
targeted recipients or having achieved its targeted
objects, the subsidy programme makes a mockery
of the common man. India needs to move away from
an expenditure based subsidy programme to an
income based subsidy programme for it to work.
Perhaps the only good thing that can be said about
State education in India is that the expenditure has
been increasing at a steady pace. The results are
however nothing to write home about. Unless, the
expenditure on education is pegged to a
result-based matrix and the entire programme
rewritten, there is little hope.
Infrastructure is another area where the Survey
emphasises strong government support and
intervention. While it recommends leaving the
implementation to private players, it does call for
government action in the planning and initial stages
of an infrastructure project to provide stability and
reinforce viability.
There are other areas of focus in the Survey, but
which have not been touched upon in this prcis.
Action in the areas specified will in itself lead to
several kick-starts. But, one needs to wait for the
budget to see how many of these will become
realities.
The Economic Survey is a report card of the
economys performance over the previous twelve
months. While doing so it also looks out for signals,
which could either indicate a turnaround in the
economy or identify pitfalls, which require
governmental interference lest they turn into
economic bottlenecks. While the economic survey
guides, it is by no means an indicator of what the
Union Budget will hold forth.
In terms of utility, it may be argued that the
Economic Survey being a representation of the past
has little value for the present or for the future. But, it
can equally be countered by saying that the
economic survey helps in identifying where the
previous policies have failed and usher corrective
measures.
But, when governments change or rather when the
political climate changes, an economic survey
comes into its element.
The Economic Survey 2013-14 represents the state
of the economy as it responded to the policies of the
United Progressive Alliance led by the Congress. We
now have different political masters, with the
National Democratic Alliance led by the Bharatiya
Janata Party coming to power. Its observations are,
in a sense, a pointer to the policies that were, but did
not work. It seeks to identify the causes for slow
downs, failures and to recommend remedies. But,
whether these will be addressed is another story.
The prcis below is a summary of a long-winded
document focussing on the germane and visualising
the future though the Surveys eyes.
No economic story will be complete without a
thorough analysis of the growth in Gross Domestic
Product (GDP). This is primarily because the GDP
growth is a singular representation of the health of an
economy. On its own, the GDP growth rate can talk
paeans about an economy or be a sharp indictment
about its failure. Closer home, the GDP growth has
had a chequered history but what is alarming is a
T
h
e

E
c
o
n
o
m
i
c

S
u
r
v
e
y

2
0
1
3
-
1
4
distinct slowdown in the growth for two consecutive
years, a phenomenon seen only once before since
Independence.
While the slow down was definitely impacted by
external factors such as persistent uncertainty in the
global outlook and a slowdown in the global
economy, domestic structural constraints and
inflationary pressures took centre stage too.
Structural constraints have for long been a bane of
our economy. For reasons, quite unfathomable to a
reasonable person, consecutive governments only
seem to have fostered the growth of these
constraints rather than trying to get rid of them. But,
what are these constraints. While there a plethora of
constraints, there seems to be widespread
acceptance that the following constraints play a
major role:
Decision making paralysis
Poorly targeted subsidies
Low manufacturing base coupled
with low value addition
Low agricultural productivity
High food inflation
The troika of deficits i.e. fiscal, revenue and primary
deficit are meant to be an indicator of the financial
health of the government. They represent the deficit
between the governments income and expenditure.
With the Fiscal Responsibility and Budget
Management (FRBM) Act disciplining the
government into reducing its deficits, much jugglery
has taken place. While the initial years represented
an earnest attempt to rein in the deficit, the global
financial crisis forced a temporary abandoning of the
self-restraint. But, sadly rather than doubling its
efforts to rein in the deficit post the aftermath of the
crisis, financial wizardry has been used to project
rosy pictures without any tangible reduction in the
deficits. Unless, the FRBM Act is beefed up and
followed in letter and in spirit, it is unlikely that
Government profligacy will wane. And then these
key indicators will also lose their value in judging
the economy.
But, then the key question or questions are what
should be done? The Survey does give a few
pointers:
Job creation: Job creation happens when
firms invest and grow. Which neatly brings
us to the next action
Revive investment: Revival of investment
happens only when the growth rate of the
economy can be revived. This happens when
o A platform for low and stable inflation is
created
o Reforms are initiated in tax and expenditure
o A well though throught legal and regulatory
framework is created
Reining in inflation requires a nominal anchor around
which a monetary policy framework can then be put.
India faces its biggest risk from food inflation, which
very often spills over to non-food and results in an
overall inflatory situation. Deregulation of the food
market will be critical in curbing food inflation.
A revised FRBM Act, which will enforce discipline
and impose penalties for non-adherence will be
critical in managing public finance. Alongside, the
Government will also have to move from a cash
based accounting system to an accrual based
system. Introduction of GST and DTC has become
critical if the Government is keen on simplifying the
taxation structure in India.
Retrospective amendment of laws, frequent
amendments in tax laws, arbitrary tax claims,
especially in transfer pricing have wreaked havoc on
investor sentiment and have to go.
The subsidy programme followed in India is a classic
example of profligacy. Never having reached its
targeted recipients or having achieved its targeted
objects, the subsidy programme makes a mockery
of the common man. India needs to move away from
an expenditure based subsidy programme to an
income based subsidy programme for it to work.
Perhaps the only good thing that can be said about
State education in India is that the expenditure has
been increasing at a steady pace. The results are
however nothing to write home about. Unless, the
expenditure on education is pegged to a
result-based matrix and the entire programme
rewritten, there is little hope.
Infrastructure is another area where the Survey
emphasises strong government support and
intervention. While it recommends leaving the
implementation to private players, it does call for
government action in the planning and initial stages
of an infrastructure project to provide stability and
reinforce viability.
There are other areas of focus in the Survey, but
which have not been touched upon in this prcis.
Action in the areas specified will in itself lead to
several kick-starts. But, one needs to wait for the
budget to see how many of these will become
realities.
The Economic Survey is a report card of the
economys performance over the previous twelve
months. While doing so it also looks out for signals,
which could either indicate a turnaround in the
economy or identify pitfalls, which require
governmental interference lest they turn into
economic bottlenecks. While the economic survey
guides, it is by no means an indicator of what the
Union Budget will hold forth.
In terms of utility, it may be argued that the
Economic Survey being a representation of the past
has little value for the present or for the future. But, it
can equally be countered by saying that the
economic survey helps in identifying where the
previous policies have failed and usher corrective
measures.
But, when governments change or rather when the
political climate changes, an economic survey
comes into its element.
The Economic Survey 2013-14 represents the state
of the economy as it responded to the policies of the
United Progressive Alliance led by the Congress. We
now have different political masters, with the
National Democratic Alliance led by the Bharatiya
Janata Party coming to power. Its observations are,
in a sense, a pointer to the policies that were, but did
not work. It seeks to identify the causes for slow
downs, failures and to recommend remedies. But,
whether these will be addressed is another story.
The prcis below is a summary of a long-winded
document focussing on the germane and visualising
the future though the Surveys eyes.
No economic story will be complete without a
thorough analysis of the growth in Gross Domestic
Product (GDP). This is primarily because the GDP
growth is a singular representation of the health of an
economy. On its own, the GDP growth rate can talk
paeans about an economy or be a sharp indictment
about its failure. Closer home, the GDP growth has
had a chequered history but what is alarming is a
T
h
e

E
c
o
n
o
m
i
c

S
u
r
v
e
y

2
0
1
3
-
1
4
distinct slowdown in the growth for two consecutive
years, a phenomenon seen only once before since
Independence.
While the slow down was definitely impacted by
external factors such as persistent uncertainty in the
global outlook and a slowdown in the global
economy, domestic structural constraints and
inflationary pressures took centre stage too.
Structural constraints have for long been a bane of
our economy. For reasons, quite unfathomable to a
reasonable person, consecutive governments only
seem to have fostered the growth of these
constraints rather than trying to get rid of them. But,
what are these constraints. While there a plethora of
constraints, there seems to be widespread
acceptance that the following constraints play a
major role:
Decision making paralysis
Poorly targeted subsidies
Low manufacturing base coupled
with low value addition
Low agricultural productivity
High food inflation
The troika of deficits i.e. fiscal, revenue and primary
deficit are meant to be an indicator of the financial
health of the government. They represent the deficit
between the governments income and expenditure.
With the Fiscal Responsibility and Budget
Management (FRBM) Act disciplining the
government into reducing its deficits, much jugglery
has taken place. While the initial years represented
an earnest attempt to rein in the deficit, the global
financial crisis forced a temporary abandoning of the
self-restraint. But, sadly rather than doubling its
efforts to rein in the deficit post the aftermath of the
crisis, financial wizardry has been used to project
rosy pictures without any tangible reduction in the
deficits. Unless, the FRBM Act is beefed up and
followed in letter and in spirit, it is unlikely that
Government profligacy will wane. And then these
key indicators will also lose their value in judging
the economy.
But, then the key question or questions are what
should be done? The Survey does give a few
pointers:
Job creation: Job creation happens when
firms invest and grow. Which neatly brings
us to the next action
Revive investment: Revival of investment
happens only when the growth rate of the
economy can be revived. This happens when
o A platform for low and stable inflation is
created
o Reforms are initiated in tax and expenditure
o A well though throught legal and regulatory
framework is created
Reining in inflation requires a nominal anchor around
which a monetary policy framework can then be put.
India faces its biggest risk from food inflation, which
very often spills over to non-food and results in an
overall inflatory situation. Deregulation of the food
market will be critical in curbing food inflation.
A revised FRBM Act, which will enforce discipline
and impose penalties for non-adherence will be
critical in managing public finance. Alongside, the
Government will also have to move from a cash
based accounting system to an accrual based
system. Introduction of GST and DTC has become
critical if the Government is keen on simplifying the
taxation structure in India.
Retrospective amendment of laws, frequent
amendments in tax laws, arbitrary tax claims,
especially in transfer pricing have wreaked havoc on
investor sentiment and have to go.
The subsidy programme followed in India is a classic
example of profligacy. Never having reached its
targeted recipients or having achieved its targeted
objects, the subsidy programme makes a mockery
of the common man. India needs to move away from
an expenditure based subsidy programme to an
income based subsidy programme for it to work.
Perhaps the only good thing that can be said about
State education in India is that the expenditure has
been increasing at a steady pace. The results are
however nothing to write home about. Unless, the
expenditure on education is pegged to a
result-based matrix and the entire programme
rewritten, there is little hope.
Infrastructure is another area where the Survey
emphasises strong government support and
intervention. While it recommends leaving the
implementation to private players, it does call for
government action in the planning and initial stages
of an infrastructure project to provide stability and
reinforce viability.
There are other areas of focus in the Survey, but
which have not been touched upon in this prcis.
Action in the areas specified will in itself lead to
several kick-starts. But, one needs to wait for the
budget to see how many of these will become
realities.
policy
announcement
A budget short on words, but long on effects
characterises the first budget of the new
Government. While quite a few pages have been
devoted to policy reforms and allocations, the tax
measures are relatively short. But, what is lacking in
words is made up in the effects of these measures.
Neither does this budget bely our expectations of
hope. It teases us just enough to make us hope for
more in the forthcoming years. Our budget prcis is
split into three portions viz. policy announcements,
direct taxes and indirect taxes.
As is our wont, we have winnowed the budget to
separate the grain from the chaff so that you have to
spend little time in going through voluminous
documents. We believe that after going through our
prcis, you will be fairly conversant with the budget
pronouncements. Of course, this is not to suggest
that the prcis is an exact representation of the
myriad announcements. It is, but, our opinion. We
urge you to seek professional assistance rather than
relying solely on our prcis when taking business
decisions.
Policy Announcements
The Finance Minister appeared to be in a hurry to
reassure investors within and without the country
that his Government is set to reverse the negativity
prevailing in the country. Thus, the first three topics
were devoted to
Reining in the fiscal and revenue deficit the
target set for fiscal deficit are 3.6% of GDP for
2015-16 and 3% of GDP for 2016-17
Tax administration
o Legislation to introduce GST will be tabled in
the coming year
o Retrospective amendments will no longer be
a Damocles sword
o Facility of advance ruling will now be available
Policy Announcement
P
o
l
i
c
y

A
n
n
o
u
n
c
e
m
e
n
t
to residents
o Scope of settlement commission will be
enlarged to reduce tax disputes
o A high level committee will interact with
industry on a regular basis to provide clarity
in tax laws and
o Rationalisation of transfer pricing provisions
FDI
o Insurance FDI increase from 26% to 49%
o Defence FDI increase from 26% to 49%
Both investments will need prior approval of
the Central Government and will have full
Indian management and control
o Real estate built up area conditions reduced
to 20,000 square metres and capital
conditions reduced to USD 5 million with a
three year post completion lock-in.
The key issues having been dealt with, the Finance
Minister then turned towards other policy matters
and budgetary allocations. A few key allocations are
listed below:
` 70.60 billion has been allocated for
developing 100 Smart Cities as satellite
towns of larger cities
` 10 billion has been allocated to provide
improved access to irrigation
` 829.35 billion has been set aside for welfare
of Scheduled Castes and Scheduled Tribes
` 0.5 billion has been set aside for a pilot
scheme on Safety for Women on Public Transport
` 143.89 billion has been set aside for
improving roads in rural areas
` 80 billion has been allocated to the National
Housing Bank to expand and support
rural housing
` 21.42 billion has been set aside for
watershed development
` 35 billion is being allocated for providing
safe drinking water in rural areas
` 5 billion is allocated for setting up All India
Institute of Medical Sciences in six cities
` 336.01 billion is being set aside for education
and a new fund of ` 5 billion is being
created to infuse new training tools and
motivate teachers
` 5 billion is set aside to set up 5 new Indian
Institutes of Management and Indian
Institutes of Technology
` 500 billion towards Pooled Municipal Debt
Obligation to promote and finance
infrastructure projects in urban areas.
On the policy front there have been a few pleasant
surprises -
Real estate and infrastructure
In order to attract long-term foreign investment in
real estate and infrastructure tax benefits are being
announced for Real Estate Investment Trusts (REITS)
and Infrastructure Investment Trusts (InvITs).
Banking
In order to be in line with Basel III norms, banks will
need an additional capitalisation of ` 2,400 billion.
The government proposes to this by publicly issuing
shares of Banks.
Social security
On the social security front, the Government is
notifying ` 1,000 as the minimum monthly pension to
all Employee Pension Scheme subscribers. In
parallel, the mandatory wage ceiling of subscription
to the Provident Fund and Pension Fund scheme is
being increase from ` 6,500 to ` 15,000. To facilitate
portability in Provident Fund accounts, subscribers
will be allotted Uniform Account Numbers.
Visually challenged
15 new Braille presses and modernisation of 10
existing presses is on the cards to meet the needs of
visually challenged people. Henceforth, currency
notes will also bear Braille like signs.
Industry
All Central Government departments and ministries
will integrate their services with the eBiz platform.
This platform aims to create an industry friendly
ecosystem by making available all business and
investment related clearances and compliances on a
single portal.
A National Industrial Corridor Authority
headquartered in Pune will be set up to coordinate
development of industrial corridors with smart cities
linked to transport connectivity. This is expected to
be the lynchpin of the Governments strategy to
drive Indias growth in manufacturing and
urbanisation.
The Amritsar Kolkata Industrial master planning will
be completed soon for establishment of industrial
smart cities in seven States of India. Similarly the
Chennai Bangalore industrial corridor with industrial
clusters in Ponneri, Krishnapatnam and Tumkur will
also be completed this year.
Kakinada port and adjoining areas will be developed
as key drivers of economic growth in the region with
focus on hardware manufacturing.
Special Economic Zones
The government will be coming up with a game plan
to revive investor interest in SEZ and to develop
better infrastructure and use the available land
effectively and efficiently.
Micro, Small and Medium Enterprises (MSME)
The MSME sector forms the backbone of the
countrys economy. Yet, finance to this sector has for
long been neglected. The Budget will set up a
committee to examine and suggest reforms in the
financial architecture for this structure within a
three-month period.
In order to create a conducive ecosystem for venture
capital in the MSME sector, a ` 100 billion fund will
be established to act as a catalyst by providing
equity, quasi equity, soft loans and other risk capital
for start up companies.
The definition of MSME will be reviewed to provide
for a higher capital ceiling.
To facilitate exits, an entrepreneur friendly legal
bankruptcy framework will also be set up.
Infrastructure
India is a leader as far as Public Private Partnership
(PPP) projects go. Despite this, the PPP model is not
without its share of rigidities and inflexibilities. Yet,
this remains the most viable option for infrastructure
projects in a capital starved country like India. To
streamline PPPs an institution will be setup with a
corpus of ` 5 billion.
16 new ports will be awarded this year. ` 116.35
billion will be allocated for development of the Outer
Harbour Project in Tuticorin.
SEZ will be developed in Kandla and JNPT.
A comprehensive policy to promote the Indian ship
building industry will be announced in this financial
year.
A project on the river Ganga will be developed
between Allahabad and Haldia to cover a distance
of 1620 kms to enable commercial navigation of at
least 1,500 tonne vessels. This project will be
completed over 6 years at an estimated cost of ` 42
billion.
` 378.80 billion will be invested in the National
Highways Authority of India and State Roads for
development of roads. This year a target of 8,500 km of
highway construction will be achieved.
Ultra Mega Solar Power Projects will be taken up in
Rajasthan, Gujarat, Tamilnadu and Ladakh with an
allocation of ` 5 billion.
Financial Sector
The Indian Financial Code is imperative for better
governance and accountability of Capital Markets.
This coupled with a modern monetary framework will
be essential to meet the challenges of an
increasingly complex economy. The Government
and the Reserve bank of India will be working
together to put in such a framework.
In addition, the following steps are being taken:
Liberalised facility of 5% withholding tax on
all bonds issued by Indian corporates
abroad for all sectors; this scheme will be
extended till 30 June 2017
Liberalisation of ADR/GDR regime to allow
issuance on all permissible securities
Permit international settlement of Indian
debt securities
Revamp the Indian Depository Receipt and issue
a much more liberal and ambitious Bharat
Depository Receipt
Clarify tax treatment on income of foreign funds
whose fund managers are located in India
Introduction of uniform KYC requirements and
inter-usability of KYC records across the entire
financial sector
Recognising the need to converge Indian
Accounting Standards with IFRS, companies will
have to adopt the new Indian Accounting Standards
from 2015-16, voluntarily and from 2016-17
mandatorily. Separate standards for computation of
tax will also be notified.
A budget short on words, but long on effects
characterises the first budget of the new
Government. While quite a few pages have been
devoted to policy reforms and allocations, the tax
measures are relatively short. But, what is lacking in
words is made up in the effects of these measures.
Neither does this budget bely our expectations of
hope. It teases us just enough to make us hope for
more in the forthcoming years. Our budget prcis is
split into three portions viz. policy announcements,
direct taxes and indirect taxes.
As is our wont, we have winnowed the budget to
separate the grain from the chaff so that you have to
spend little time in going through voluminous
documents. We believe that after going through our
prcis, you will be fairly conversant with the budget
pronouncements. Of course, this is not to suggest
that the prcis is an exact representation of the
myriad announcements. It is, but, our opinion. We
urge you to seek professional assistance rather than
relying solely on our prcis when taking business
decisions.
Policy Announcements
The Finance Minister appeared to be in a hurry to
reassure investors within and without the country
that his Government is set to reverse the negativity
prevailing in the country. Thus, the first three topics
were devoted to
Reining in the fiscal and revenue deficit the
target set for fiscal deficit are 3.6% of GDP for
2015-16 and 3% of GDP for 2016-17
Tax administration
o Legislation to introduce GST will be tabled in
the coming year
o Retrospective amendments will no longer be
a Damocles sword
o Facility of advance ruling will now be available
P
o
l
i
c
y

A
n
n
o
u
n
c
e
m
e
n
t
to residents
o Scope of settlement commission will be
enlarged to reduce tax disputes
o A high level committee will interact with
industry on a regular basis to provide clarity
in tax laws and
o Rationalisation of transfer pricing provisions
FDI
o Insurance FDI increase from 26% to 49%
o Defence FDI increase from 26% to 49%
Both investments will need prior approval of
the Central Government and will have full
Indian management and control
o Real estate built up area conditions reduced
to 20,000 square metres and capital
conditions reduced to USD 5 million with a
three year post completion lock-in.
The key issues having been dealt with, the Finance
Minister then turned towards other policy matters
and budgetary allocations. A few key allocations are
listed below:
` 70.60 billion has been allocated for
developing 100 Smart Cities as satellite
towns of larger cities
` 10 billion has been allocated to provide
improved access to irrigation
` 829.35 billion has been set aside for welfare
of Scheduled Castes and Scheduled Tribes
` 0.5 billion has been set aside for a pilot
scheme on Safety for Women on Public Transport
` 143.89 billion has been set aside for
improving roads in rural areas
` 80 billion has been allocated to the National
Housing Bank to expand and support
rural housing
` 21.42 billion has been set aside for
watershed development
` 35 billion is being allocated for providing
safe drinking water in rural areas
` 5 billion is allocated for setting up All India
Institute of Medical Sciences in six cities
` 336.01 billion is being set aside for education
and a new fund of ` 5 billion is being
created to infuse new training tools and
motivate teachers
` 5 billion is set aside to set up 5 new Indian
Institutes of Management and Indian
Institutes of Technology
` 500 billion towards Pooled Municipal Debt
Obligation to promote and finance
infrastructure projects in urban areas.
On the policy front there have been a few pleasant
surprises -
Real estate and infrastructure
In order to attract long-term foreign investment in
real estate and infrastructure tax benefits are being
announced for Real Estate Investment Trusts (REITS)
and Infrastructure Investment Trusts (InvITs).
Banking
In order to be in line with Basel III norms, banks will
need an additional capitalisation of ` 2,400 billion.
The government proposes to this by publicly issuing
shares of Banks.
Social security
On the social security front, the Government is
notifying ` 1,000 as the minimum monthly pension to
all Employee Pension Scheme subscribers. In
parallel, the mandatory wage ceiling of subscription
to the Provident Fund and Pension Fund scheme is
being increase from ` 6,500 to ` 15,000. To facilitate
portability in Provident Fund accounts, subscribers
will be allotted Uniform Account Numbers.
Visually challenged
15 new Braille presses and modernisation of 10
existing presses is on the cards to meet the needs of
visually challenged people. Henceforth, currency
notes will also bear Braille like signs.
Industry
All Central Government departments and ministries
will integrate their services with the eBiz platform.
This platform aims to create an industry friendly
ecosystem by making available all business and
investment related clearances and compliances on a
single portal.
A National Industrial Corridor Authority
headquartered in Pune will be set up to coordinate
development of industrial corridors with smart cities
linked to transport connectivity. This is expected to
be the lynchpin of the Governments strategy to
drive Indias growth in manufacturing and
urbanisation.
The Amritsar Kolkata Industrial master planning will
be completed soon for establishment of industrial
smart cities in seven States of India. Similarly the
Chennai Bangalore industrial corridor with industrial
clusters in Ponneri, Krishnapatnam and Tumkur will
also be completed this year.
Kakinada port and adjoining areas will be developed
as key drivers of economic growth in the region with
focus on hardware manufacturing.
Special Economic Zones
The government will be coming up with a game plan
to revive investor interest in SEZ and to develop
better infrastructure and use the available land
effectively and efficiently.
Micro, Small and Medium Enterprises (MSME)
The MSME sector forms the backbone of the
countrys economy. Yet, finance to this sector has for
long been neglected. The Budget will set up a
committee to examine and suggest reforms in the
financial architecture for this structure within a
three-month period.
In order to create a conducive ecosystem for venture
capital in the MSME sector, a ` 100 billion fund will
be established to act as a catalyst by providing
equity, quasi equity, soft loans and other risk capital
for start up companies.
The definition of MSME will be reviewed to provide
for a higher capital ceiling.
To facilitate exits, an entrepreneur friendly legal
bankruptcy framework will also be set up.
Infrastructure
India is a leader as far as Public Private Partnership
(PPP) projects go. Despite this, the PPP model is not
without its share of rigidities and inflexibilities. Yet,
this remains the most viable option for infrastructure
projects in a capital starved country like India. To
streamline PPPs an institution will be setup with a
corpus of ` 5 billion.
16 new ports will be awarded this year. ` 116.35
billion will be allocated for development of the Outer
Harbour Project in Tuticorin.
SEZ will be developed in Kandla and JNPT.
A comprehensive policy to promote the Indian ship
building industry will be announced in this financial
year.
A project on the river Ganga will be developed
between Allahabad and Haldia to cover a distance
of 1620 kms to enable commercial navigation of at
least 1,500 tonne vessels. This project will be
completed over 6 years at an estimated cost of ` 42
billion.
` 378.80 billion will be invested in the National
Highways Authority of India and State Roads for
development of roads. This year a target of 8,500 km of
highway construction will be achieved.
Ultra Mega Solar Power Projects will be taken up in
Rajasthan, Gujarat, Tamilnadu and Ladakh with an
allocation of ` 5 billion.
Financial Sector
The Indian Financial Code is imperative for better
governance and accountability of Capital Markets.
This coupled with a modern monetary framework will
be essential to meet the challenges of an
increasingly complex economy. The Government
and the Reserve bank of India will be working
together to put in such a framework.
In addition, the following steps are being taken:
Liberalised facility of 5% withholding tax on
all bonds issued by Indian corporates
abroad for all sectors; this scheme will be
extended till 30 June 2017
Liberalisation of ADR/GDR regime to allow
issuance on all permissible securities
Permit international settlement of Indian
debt securities
Revamp the Indian Depository Receipt and issue
a much more liberal and ambitious Bharat
Depository Receipt
Clarify tax treatment on income of foreign funds
whose fund managers are located in India
Introduction of uniform KYC requirements and
inter-usability of KYC records across the entire
financial sector
Recognising the need to converge Indian
Accounting Standards with IFRS, companies will
have to adopt the new Indian Accounting Standards
from 2015-16, voluntarily and from 2016-17
mandatorily. Separate standards for computation of
tax will also be notified.
A budget short on words, but long on effects
characterises the first budget of the new
Government. While quite a few pages have been
devoted to policy reforms and allocations, the tax
measures are relatively short. But, what is lacking in
words is made up in the effects of these measures.
Neither does this budget bely our expectations of
hope. It teases us just enough to make us hope for
more in the forthcoming years. Our budget prcis is
split into three portions viz. policy announcements,
direct taxes and indirect taxes.
As is our wont, we have winnowed the budget to
separate the grain from the chaff so that you have to
spend little time in going through voluminous
documents. We believe that after going through our
prcis, you will be fairly conversant with the budget
pronouncements. Of course, this is not to suggest
that the prcis is an exact representation of the
myriad announcements. It is, but, our opinion. We
urge you to seek professional assistance rather than
relying solely on our prcis when taking business
decisions.
Policy Announcements
The Finance Minister appeared to be in a hurry to
reassure investors within and without the country
that his Government is set to reverse the negativity
prevailing in the country. Thus, the first three topics
were devoted to
Reining in the fiscal and revenue deficit the
target set for fiscal deficit are 3.6% of GDP for
2015-16 and 3% of GDP for 2016-17
Tax administration
o Legislation to introduce GST will be tabled in
the coming year
o Retrospective amendments will no longer be
a Damocles sword
o Facility of advance ruling will now be available
P
o
l
i
c
y

A
n
n
o
u
n
c
e
m
e
n
t
to residents
o Scope of settlement commission will be
enlarged to reduce tax disputes
o A high level committee will interact with
industry on a regular basis to provide clarity
in tax laws and
o Rationalisation of transfer pricing provisions
FDI
o Insurance FDI increase from 26% to 49%
o Defence FDI increase from 26% to 49%
Both investments will need prior approval of
the Central Government and will have full
Indian management and control
o Real estate built up area conditions reduced
to 20,000 square metres and capital
conditions reduced to USD 5 million with a
three year post completion lock-in.
The key issues having been dealt with, the Finance
Minister then turned towards other policy matters
and budgetary allocations. A few key allocations are
listed below:
` 70.60 billion has been allocated for
developing 100 Smart Cities as satellite
towns of larger cities
` 10 billion has been allocated to provide
improved access to irrigation
` 829.35 billion has been set aside for welfare
of Scheduled Castes and Scheduled Tribes
` 0.5 billion has been set aside for a pilot
scheme on Safety for Women on Public Transport
` 143.89 billion has been set aside for
improving roads in rural areas
` 80 billion has been allocated to the National
Housing Bank to expand and support
rural housing
` 21.42 billion has been set aside for
watershed development
` 35 billion is being allocated for providing
safe drinking water in rural areas
` 5 billion is allocated for setting up All India
Institute of Medical Sciences in six cities
` 336.01 billion is being set aside for education
and a new fund of ` 5 billion is being
created to infuse new training tools and
motivate teachers
` 5 billion is set aside to set up 5 new Indian
Institutes of Management and Indian
Institutes of Technology
` 500 billion towards Pooled Municipal Debt
Obligation to promote and finance
infrastructure projects in urban areas.
On the policy front there have been a few pleasant
surprises -
Real estate and infrastructure
In order to attract long-term foreign investment in
real estate and infrastructure tax benefits are being
announced for Real Estate Investment Trusts (REITS)
and Infrastructure Investment Trusts (InvITs).
Banking
In order to be in line with Basel III norms, banks will
need an additional capitalisation of ` 2,400 billion.
The government proposes to this by publicly issuing
shares of Banks.
Social security
On the social security front, the Government is
notifying ` 1,000 as the minimum monthly pension to
all Employee Pension Scheme subscribers. In
parallel, the mandatory wage ceiling of subscription
to the Provident Fund and Pension Fund scheme is
being increase from ` 6,500 to ` 15,000. To facilitate
portability in Provident Fund accounts, subscribers
will be allotted Uniform Account Numbers.
Visually challenged
15 new Braille presses and modernisation of 10
existing presses is on the cards to meet the needs of
visually challenged people. Henceforth, currency
notes will also bear Braille like signs.
Industry
All Central Government departments and ministries
will integrate their services with the eBiz platform.
This platform aims to create an industry friendly
ecosystem by making available all business and
investment related clearances and compliances on a
single portal.
A National Industrial Corridor Authority
headquartered in Pune will be set up to coordinate
development of industrial corridors with smart cities
linked to transport connectivity. This is expected to
be the lynchpin of the Governments strategy to
drive Indias growth in manufacturing and
urbanisation.
The Amritsar Kolkata Industrial master planning will
be completed soon for establishment of industrial
smart cities in seven States of India. Similarly the
Chennai Bangalore industrial corridor with industrial
clusters in Ponneri, Krishnapatnam and Tumkur will
also be completed this year.
Kakinada port and adjoining areas will be developed
as key drivers of economic growth in the region with
focus on hardware manufacturing.
Special Economic Zones
The government will be coming up with a game plan
to revive investor interest in SEZ and to develop
better infrastructure and use the available land
effectively and efficiently.
Micro, Small and Medium Enterprises (MSME)
The MSME sector forms the backbone of the
countrys economy. Yet, finance to this sector has for
long been neglected. The Budget will set up a
committee to examine and suggest reforms in the
financial architecture for this structure within a
three-month period.
In order to create a conducive ecosystem for venture
capital in the MSME sector, a ` 100 billion fund will
be established to act as a catalyst by providing
equity, quasi equity, soft loans and other risk capital
for start up companies.
The definition of MSME will be reviewed to provide
for a higher capital ceiling.
To facilitate exits, an entrepreneur friendly legal
bankruptcy framework will also be set up.
Infrastructure
India is a leader as far as Public Private Partnership
(PPP) projects go. Despite this, the PPP model is not
without its share of rigidities and inflexibilities. Yet,
this remains the most viable option for infrastructure
projects in a capital starved country like India. To
streamline PPPs an institution will be setup with a
corpus of ` 5 billion.
16 new ports will be awarded this year. ` 116.35
billion will be allocated for development of the Outer
Harbour Project in Tuticorin.
SEZ will be developed in Kandla and JNPT.
A comprehensive policy to promote the Indian ship
building industry will be announced in this financial
year.
A project on the river Ganga will be developed
between Allahabad and Haldia to cover a distance
of 1620 kms to enable commercial navigation of at
least 1,500 tonne vessels. This project will be
completed over 6 years at an estimated cost of ` 42
billion.
` 378.80 billion will be invested in the National
Highways Authority of India and State Roads for
development of roads. This year a target of 8,500 km of
highway construction will be achieved.
Ultra Mega Solar Power Projects will be taken up in
Rajasthan, Gujarat, Tamilnadu and Ladakh with an
allocation of ` 5 billion.
Financial Sector
The Indian Financial Code is imperative for better
governance and accountability of Capital Markets.
This coupled with a modern monetary framework will
be essential to meet the challenges of an
increasingly complex economy. The Government
and the Reserve bank of India will be working
together to put in such a framework.
In addition, the following steps are being taken:
Liberalised facility of 5% withholding tax on
all bonds issued by Indian corporates
abroad for all sectors; this scheme will be
extended till 30 June 2017
Liberalisation of ADR/GDR regime to allow
issuance on all permissible securities
Permit international settlement of Indian
debt securities
Revamp the Indian Depository Receipt and issue
a much more liberal and ambitious Bharat
Depository Receipt
Clarify tax treatment on income of foreign funds
whose fund managers are located in India
Introduction of uniform KYC requirements and
inter-usability of KYC records across the entire
financial sector
Recognising the need to converge Indian
Accounting Standards with IFRS, companies will
have to adopt the new Indian Accounting Standards
from 2015-16, voluntarily and from 2016-17
mandatorily. Separate standards for computation of
tax will also be notified.
A budget short on words, but long on effects
characterises the first budget of the new
Government. While quite a few pages have been
devoted to policy reforms and allocations, the tax
measures are relatively short. But, what is lacking in
words is made up in the effects of these measures.
Neither does this budget bely our expectations of
hope. It teases us just enough to make us hope for
more in the forthcoming years. Our budget prcis is
split into three portions viz. policy announcements,
direct taxes and indirect taxes.
As is our wont, we have winnowed the budget to
separate the grain from the chaff so that you have to
spend little time in going through voluminous
documents. We believe that after going through our
prcis, you will be fairly conversant with the budget
pronouncements. Of course, this is not to suggest
that the prcis is an exact representation of the
myriad announcements. It is, but, our opinion. We
urge you to seek professional assistance rather than
relying solely on our prcis when taking business
decisions.
Policy Announcements
The Finance Minister appeared to be in a hurry to
reassure investors within and without the country
that his Government is set to reverse the negativity
prevailing in the country. Thus, the first three topics
were devoted to
Reining in the fiscal and revenue deficit the
target set for fiscal deficit are 3.6% of GDP for
2015-16 and 3% of GDP for 2016-17
Tax administration
o Legislation to introduce GST will be tabled in
the coming year
o Retrospective amendments will no longer be
a Damocles sword
o Facility of advance ruling will now be available
P
o
l
i
c
y

A
n
n
o
u
n
c
e
m
e
n
t
to residents
o Scope of settlement commission will be
enlarged to reduce tax disputes
o A high level committee will interact with
industry on a regular basis to provide clarity
in tax laws and
o Rationalisation of transfer pricing provisions
FDI
o Insurance FDI increase from 26% to 49%
o Defence FDI increase from 26% to 49%
Both investments will need prior approval of
the Central Government and will have full
Indian management and control
o Real estate built up area conditions reduced
to 20,000 square metres and capital
conditions reduced to USD 5 million with a
three year post completion lock-in.
The key issues having been dealt with, the Finance
Minister then turned towards other policy matters
and budgetary allocations. A few key allocations are
listed below:
` 70.60 billion has been allocated for
developing 100 Smart Cities as satellite
towns of larger cities
` 10 billion has been allocated to provide
improved access to irrigation
` 829.35 billion has been set aside for welfare
of Scheduled Castes and Scheduled Tribes
` 0.5 billion has been set aside for a pilot
scheme on Safety for Women on Public Transport
` 143.89 billion has been set aside for
improving roads in rural areas
` 80 billion has been allocated to the National
Housing Bank to expand and support
rural housing
` 21.42 billion has been set aside for
watershed development
` 35 billion is being allocated for providing
safe drinking water in rural areas
` 5 billion is allocated for setting up All India
Institute of Medical Sciences in six cities
` 336.01 billion is being set aside for education
and a new fund of ` 5 billion is being
created to infuse new training tools and
motivate teachers
` 5 billion is set aside to set up 5 new Indian
Institutes of Management and Indian
Institutes of Technology
` 500 billion towards Pooled Municipal Debt
Obligation to promote and finance
infrastructure projects in urban areas.
On the policy front there have been a few pleasant
surprises -
Real estate and infrastructure
In order to attract long-term foreign investment in
real estate and infrastructure tax benefits are being
announced for Real Estate Investment Trusts (REITS)
and Infrastructure Investment Trusts (InvITs).
Banking
In order to be in line with Basel III norms, banks will
need an additional capitalisation of ` 2,400 billion.
The government proposes to this by publicly issuing
shares of Banks.
Social security
On the social security front, the Government is
notifying ` 1,000 as the minimum monthly pension to
all Employee Pension Scheme subscribers. In
parallel, the mandatory wage ceiling of subscription
to the Provident Fund and Pension Fund scheme is
being increase from ` 6,500 to ` 15,000. To facilitate
portability in Provident Fund accounts, subscribers
will be allotted Uniform Account Numbers.
Visually challenged
15 new Braille presses and modernisation of 10
existing presses is on the cards to meet the needs of
visually challenged people. Henceforth, currency
notes will also bear Braille like signs.
Industry
All Central Government departments and ministries
will integrate their services with the eBiz platform.
This platform aims to create an industry friendly
ecosystem by making available all business and
investment related clearances and compliances on a
single portal.
A National Industrial Corridor Authority
headquartered in Pune will be set up to coordinate
development of industrial corridors with smart cities
linked to transport connectivity. This is expected to
be the lynchpin of the Governments strategy to
drive Indias growth in manufacturing and
urbanisation.
The Amritsar Kolkata Industrial master planning will
be completed soon for establishment of industrial
smart cities in seven States of India. Similarly the
Chennai Bangalore industrial corridor with industrial
clusters in Ponneri, Krishnapatnam and Tumkur will
also be completed this year.
Kakinada port and adjoining areas will be developed
as key drivers of economic growth in the region with
focus on hardware manufacturing.
Special Economic Zones
The government will be coming up with a game plan
to revive investor interest in SEZ and to develop
better infrastructure and use the available land
effectively and efficiently.
Micro, Small and Medium Enterprises (MSME)
The MSME sector forms the backbone of the
countrys economy. Yet, finance to this sector has for
long been neglected. The Budget will set up a
committee to examine and suggest reforms in the
financial architecture for this structure within a
three-month period.
In order to create a conducive ecosystem for venture
capital in the MSME sector, a ` 100 billion fund will
be established to act as a catalyst by providing
equity, quasi equity, soft loans and other risk capital
for start up companies.
The definition of MSME will be reviewed to provide
for a higher capital ceiling.
To facilitate exits, an entrepreneur friendly legal
bankruptcy framework will also be set up.
Infrastructure
India is a leader as far as Public Private Partnership
(PPP) projects go. Despite this, the PPP model is not
without its share of rigidities and inflexibilities. Yet,
this remains the most viable option for infrastructure
projects in a capital starved country like India. To
streamline PPPs an institution will be setup with a
corpus of ` 5 billion.
16 new ports will be awarded this year. ` 116.35
billion will be allocated for development of the Outer
Harbour Project in Tuticorin.
SEZ will be developed in Kandla and JNPT.
A comprehensive policy to promote the Indian ship
building industry will be announced in this financial
year.
A project on the river Ganga will be developed
between Allahabad and Haldia to cover a distance
of 1620 kms to enable commercial navigation of at
least 1,500 tonne vessels. This project will be
completed over 6 years at an estimated cost of ` 42
billion.
` 378.80 billion will be invested in the National
Highways Authority of India and State Roads for
development of roads. This year a target of 8,500 km of
highway construction will be achieved.
Ultra Mega Solar Power Projects will be taken up in
Rajasthan, Gujarat, Tamilnadu and Ladakh with an
allocation of ` 5 billion.
Financial Sector
The Indian Financial Code is imperative for better
governance and accountability of Capital Markets.
This coupled with a modern monetary framework will
be essential to meet the challenges of an
increasingly complex economy. The Government
and the Reserve bank of India will be working
together to put in such a framework.
In addition, the following steps are being taken:
Liberalised facility of 5% withholding tax on
all bonds issued by Indian corporates
abroad for all sectors; this scheme will be
extended till 30 June 2017
Liberalisation of ADR/GDR regime to allow
issuance on all permissible securities
Permit international settlement of Indian
debt securities
Revamp the Indian Depository Receipt and issue
a much more liberal and ambitious Bharat
Depository Receipt
Clarify tax treatment on income of foreign funds
whose fund managers are located in India
Introduction of uniform KYC requirements and
inter-usability of KYC records across the entire
financial sector
Recognising the need to converge Indian
Accounting Standards with IFRS, companies will
have to adopt the new Indian Accounting Standards
from 2015-16, voluntarily and from 2016-17
mandatorily. Separate standards for computation of
tax will also be notified.
A budget short on words, but long on effects
characterises the first budget of the new
Government. While quite a few pages have been
devoted to policy reforms and allocations, the tax
measures are relatively short. But, what is lacking in
words is made up in the effects of these measures.
Neither does this budget bely our expectations of
hope. It teases us just enough to make us hope for
more in the forthcoming years. Our budget prcis is
split into three portions viz. policy announcements,
direct taxes and indirect taxes.
As is our wont, we have winnowed the budget to
separate the grain from the chaff so that you have to
spend little time in going through voluminous
documents. We believe that after going through our
prcis, you will be fairly conversant with the budget
pronouncements. Of course, this is not to suggest
that the prcis is an exact representation of the
myriad announcements. It is, but, our opinion. We
urge you to seek professional assistance rather than
relying solely on our prcis when taking business
decisions.
Policy Announcements
The Finance Minister appeared to be in a hurry to
reassure investors within and without the country
that his Government is set to reverse the negativity
prevailing in the country. Thus, the first three topics
were devoted to
Reining in the fiscal and revenue deficit the
target set for fiscal deficit are 3.6% of GDP for
2015-16 and 3% of GDP for 2016-17
Tax administration
o Legislation to introduce GST will be tabled in
the coming year
o Retrospective amendments will no longer be
a Damocles sword
o Facility of advance ruling will now be available
P
o
l
i
c
y

A
n
n
o
u
n
c
e
m
e
n
t
to residents
o Scope of settlement commission will be
enlarged to reduce tax disputes
o A high level committee will interact with
industry on a regular basis to provide clarity
in tax laws and
o Rationalisation of transfer pricing provisions
FDI
o Insurance FDI increase from 26% to 49%
o Defence FDI increase from 26% to 49%
Both investments will need prior approval of
the Central Government and will have full
Indian management and control
o Real estate built up area conditions reduced
to 20,000 square metres and capital
conditions reduced to USD 5 million with a
three year post completion lock-in.
The key issues having been dealt with, the Finance
Minister then turned towards other policy matters
and budgetary allocations. A few key allocations are
listed below:
` 70.60 billion has been allocated for
developing 100 Smart Cities as satellite
towns of larger cities
` 10 billion has been allocated to provide
improved access to irrigation
` 829.35 billion has been set aside for welfare
of Scheduled Castes and Scheduled Tribes
` 0.5 billion has been set aside for a pilot
scheme on Safety for Women on Public Transport
` 143.89 billion has been set aside for
improving roads in rural areas
` 80 billion has been allocated to the National
Housing Bank to expand and support
rural housing
` 21.42 billion has been set aside for
watershed development
` 35 billion is being allocated for providing
safe drinking water in rural areas
` 5 billion is allocated for setting up All India
Institute of Medical Sciences in six cities
` 336.01 billion is being set aside for education
and a new fund of ` 5 billion is being
created to infuse new training tools and
motivate teachers
` 5 billion is set aside to set up 5 new Indian
Institutes of Management and Indian
Institutes of Technology
` 500 billion towards Pooled Municipal Debt
Obligation to promote and finance
infrastructure projects in urban areas.
On the policy front there have been a few pleasant
surprises -
Real estate and infrastructure
In order to attract long-term foreign investment in
real estate and infrastructure tax benefits are being
announced for Real Estate Investment Trusts (REITS)
and Infrastructure Investment Trusts (InvITs).
Banking
In order to be in line with Basel III norms, banks will
need an additional capitalisation of ` 2,400 billion.
The government proposes to this by publicly issuing
shares of Banks.
Social security
On the social security front, the Government is
notifying ` 1,000 as the minimum monthly pension to
all Employee Pension Scheme subscribers. In
parallel, the mandatory wage ceiling of subscription
to the Provident Fund and Pension Fund scheme is
being increase from ` 6,500 to ` 15,000. To facilitate
portability in Provident Fund accounts, subscribers
will be allotted Uniform Account Numbers.
Visually challenged
15 new Braille presses and modernisation of 10
existing presses is on the cards to meet the needs of
visually challenged people. Henceforth, currency
notes will also bear Braille like signs.
Industry
All Central Government departments and ministries
will integrate their services with the eBiz platform.
This platform aims to create an industry friendly
ecosystem by making available all business and
investment related clearances and compliances on a
single portal.
A National Industrial Corridor Authority
headquartered in Pune will be set up to coordinate
development of industrial corridors with smart cities
linked to transport connectivity. This is expected to
be the lynchpin of the Governments strategy to
drive Indias growth in manufacturing and
urbanisation.
The Amritsar Kolkata Industrial master planning will
be completed soon for establishment of industrial
smart cities in seven States of India. Similarly the
Chennai Bangalore industrial corridor with industrial
clusters in Ponneri, Krishnapatnam and Tumkur will
also be completed this year.
Kakinada port and adjoining areas will be developed
as key drivers of economic growth in the region with
focus on hardware manufacturing.
Special Economic Zones
The government will be coming up with a game plan
to revive investor interest in SEZ and to develop
better infrastructure and use the available land
effectively and efficiently.
Micro, Small and Medium Enterprises (MSME)
The MSME sector forms the backbone of the
countrys economy. Yet, finance to this sector has for
long been neglected. The Budget will set up a
committee to examine and suggest reforms in the
financial architecture for this structure within a
three-month period.
In order to create a conducive ecosystem for venture
capital in the MSME sector, a ` 100 billion fund will
be established to act as a catalyst by providing
equity, quasi equity, soft loans and other risk capital
for start up companies.
The definition of MSME will be reviewed to provide
for a higher capital ceiling.
To facilitate exits, an entrepreneur friendly legal
bankruptcy framework will also be set up.
Infrastructure
India is a leader as far as Public Private Partnership
(PPP) projects go. Despite this, the PPP model is not
without its share of rigidities and inflexibilities. Yet,
this remains the most viable option for infrastructure
projects in a capital starved country like India. To
streamline PPPs an institution will be setup with a
corpus of ` 5 billion.
16 new ports will be awarded this year. ` 116.35
billion will be allocated for development of the Outer
Harbour Project in Tuticorin.
SEZ will be developed in Kandla and JNPT.
A comprehensive policy to promote the Indian ship
building industry will be announced in this financial
year.
A project on the river Ganga will be developed
between Allahabad and Haldia to cover a distance
of 1620 kms to enable commercial navigation of at
least 1,500 tonne vessels. This project will be
completed over 6 years at an estimated cost of ` 42
billion.
` 378.80 billion will be invested in the National
Highways Authority of India and State Roads for
development of roads. This year a target of 8,500 km of
highway construction will be achieved.
Ultra Mega Solar Power Projects will be taken up in
Rajasthan, Gujarat, Tamilnadu and Ladakh with an
allocation of ` 5 billion.
Financial Sector
The Indian Financial Code is imperative for better
governance and accountability of Capital Markets.
This coupled with a modern monetary framework will
be essential to meet the challenges of an
increasingly complex economy. The Government
and the Reserve bank of India will be working
together to put in such a framework.
In addition, the following steps are being taken:
Liberalised facility of 5% withholding tax on
all bonds issued by Indian corporates
abroad for all sectors; this scheme will be
extended till 30 June 2017
Liberalisation of ADR/GDR regime to allow
issuance on all permissible securities
Permit international settlement of Indian
debt securities
Revamp the Indian Depository Receipt and issue
a much more liberal and ambitious Bharat
Depository Receipt
Clarify tax treatment on income of foreign funds
whose fund managers are located in India
Introduction of uniform KYC requirements and
inter-usability of KYC records across the entire
financial sector
Recognising the need to converge Indian
Accounting Standards with IFRS, companies will
have to adopt the new Indian Accounting Standards
from 2015-16, voluntarily and from 2016-17
mandatorily. Separate standards for computation of
tax will also be notified.
direct tax
Business or Profession
From 1 April 2014, expenses incurred on
Corporate Social Responsibility will not be allowed
as business expenditure. Consequently, no tax
break will be available on such expenditure.
An investment-linked deduction of 15% is
available to corporate manufacturers for investment
in plant and machinery. The minimum investment
has been reduced to ` 25 crores (` 0.25 billion) and
will be available in the year(s) of investment from
1 April 2014 to 31 March 2017.
From 1 April 2014, deduction of certain
capital expenditure incurred on
o laying and operating a slurry pipeline
for transportation of iron ore and
o setting up and operating a
semiconductor wafer fabrication
manufacturing unit notified by
the CBDT.
will be available. This is however subject to a
condition that the asset on which such deduction is
claimed is used in the said business for 8 years
beginning with the previous year in which the asset
is acquired or capitalised. This deduction is not
Direct Tax
D
i
r
e
c
t

T
a
x
available to the SEZ units, which are eligible and
have opted for tax holidays and vice versa.
Payments to non-residents which are liable to
withholding tax are allowed as a deduction only if the
withholding taxes are discharged strictly within the
prescribed due dates. From 1 April 2014, it is
proposed to allow such expenses provided, the
withholding taxes are discharged before the due
date of filing the return.
From 1 April 2014, where taxes are not
withheld or not remitted on any payments (including
salary) to residents liable to withholding,
disallowance will be restricted to 30% of such
payment.
Retrospectively from 1 April 2013, trading in
commodity derivatives in a recognized association
and chargeable to commodities transaction tax will
not be a speculative transaction.
From 1 April 2014, income of a taxpayer
engaged in the business of hiring, plying or leasing
goods carriage, will be higher of ` 7,500 for every
month or part of month during which the goods
carriage is owned by the taxpayer or the actual
income.
Capital Gains
As an industry friendly measure, the definition
of capital assets is being changed from 1 April 2014.
Capital assets will include any securities held by FII
in accordance with the regulations under SEBI Act.
Thus, income arising on transfer of such securities
will be taxable as Capital Gains/Loss.
From 1 April 2014, unlisted securities and
units of debt oriented mutual fund will be a long term
capital asset only if it is held for more than 36 months
as against the existing 12 months.
From 1 April 2014, beneficial tax rate of 10 per
cent on long-term capital gains computed before
giving effect to indexation adjustment will not be
available to mutual funds. Thus, these will now be
taxable at the regular rate of 20%.
From 1 April 2014, where an advance
received for transfer of a capital asset is forfeited, it
will be taxed as income from other sources. The
existing facility of deducting such amount from the
cost of acquisition has been dispensed with.
To overrule various judicial precedents and to
avoid continuing litigation, rollover exemption
derived by making an investment in a residential
house out of gains from sale of residential house or
other long term capital assets is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that exemption is available for
investment made in only one residential house
situated in India.
A few judgements overruled are:
o Gita Duggal case (2013) 257 CTR
208 (Del)
o CIT v. Syed Ali Adil (AP)(HC) (2013) 260
CTR 219,
o CIT vs. D. Ananda Basappa 309 ITR
329 (Kar.),
o Mr. Vinay Mishra vs ACIT (ITAT) ITA
195/Bang/ 2012 & 124/Bang/2012
o Mrs. Prema P. Shah and Sanjiv P Shah
Vs. ITO Mumbai ITAT
Similarly, exemption derived by making an
investment in certain bonds out of gains arising from
transfer of long term capital asset is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that a maximum exemption of
` 5 million will be available per transfer.
A few judgments overruled are:
o Ms. Shantabai V. Kamat vs CIT (Panaji
ITAT) ITA NO. 10/PNJ/2013
o Shri Aspi Ginwala Vs ACIT -
ITANo.3226/ Ahd/2011 &
ITA No.3227/Ahd/2011
o Shri Vivek Jairazbhoy vs DCIT,
(International Taxation) -
I.T.A. No.236/Bang/2012
From 1 April 2014, amount of compensation
received in pursuance of an interim order of the
court, tribunal or other authority will be taxed under
the head capital gains in the previous year in which
the final order of such court is passed.
From 1 April 2014, transfer of Government
securities outside India by one non-resident to
another will not be a transfer for capital gains and
hence, will not be taxable.
Transfer Pricing
Deeming fiction provisions in transfer pricing
regulations covers transactions with unrelated
parties too. It is clarified that such an unrelated party
need not be a non-resident.
Finance Minister, in his speech, has proposed
to align transfer-pricing regulations with the global
practices by introducing the concept of range (may
be inter quartile range) and usage of multiple year
data for computation of arms length price.
However, arithmetic mean will continue where
comparables are inadequate. These proposals may
be implemented by way of Rules.
A rollback provision has been introduced
wherein taxpayer has an option to adopt the price
agreed in the Advance Pricing Agreement scheme to
similar transactions for past 4 years. This will help to
resolve the litigations of past years.
From 1 October 2014, a transfer-pricing
officer will be empowered to levy penalty for
non-furnishing of the prescribed transfer pricing
documents.
Withholding Tax
Tax at 2% will be withheld on payouts
(including bonus) under life insurance policies not
entitled to exemption. However, such withholding
will be applicable only when total payment in
financial year to the taxpayer is ` 100,000 or more.
Currently interest on foreign currency loans
availed and long term infrastructure bonds issued by
an Indian company is subject to a lower withholding
of 5%. This benefit is now extended to all long-term
bonds. Further, this will be applicable to borrowings
before 1 July 2017 and the recipient need not furnish
its PAN in case of infrastructure bonds.
Hitherto, the rectification of e-TDS return and
its processing was as per the notification issued by
the CBDT. With effect from 1 October 2014, a
specific provision has been brought in to formalize
the same.
From 1 October 2014, the time limit for
passing an order treating a taxpayer as assessee in
default, for failure to withhold or pay the taxes
withheld, has been increased to seven years from
the end of financial year to which default relates.
From 1 October 2014, an assessing officer
will be empowered to levy penalty for failure to
furnish or for furnishing incorrect statement of taxes
withheld or collected.
Dividends
From 1 April 2014, concessional tax on gross
dividends received by an Indian company from
specified foreign company will not have any sunset
date. The amendment is made with a view to
encourage the repatriation of income earned by
Indian companies from investments made abroad.
From 1 October 2014, the amount of dividend
available for distribution by domestic companies to
its shareholders will have to be grossed up for the
purpose of computing the tax on distributed profits.
This will marginally increase the outflow of tax on
distributed profits.
From 1 October 2014, the amount of income
available for distribution by the mutual fund to the
unit holders will have to be grossed up for the
purpose of computing the additional income tax.
This will marginally increase the outflow of tax on
distributed income.
Alternative Minimum Tax
Alternative minimum tax being levied on
certain persons other than a company has been now
extended to taxpayers claiming deduction of capital
expenditure in respect of specified business such as
cold chain facility, warehousing facility, building and
operating hotels/hospitals etc. From 1 April 2014, in
computing adjusted total income for alternative
minimum tax, such deductions have to be added
back to the total income.
Charitable Trust And Other Institutions
Under Section 10(23C)
Following amendments are proposed with effect
from 1 April 2014:
Any charitable and religious trust approved by
the Commissioner of Income Tax and availing
exemption of its income cannot claim any other
exemption except agricultural income or exemption
specified pertaining to university, hospital,
educational institution or institution established for
charitable or public religious purposes.
In computing the application/accumulation of
income of charitable trusts or other specified
institutions, depreciation allowance in respect of
asset, acquisition of which has been claimed as
application of income in the year of acquisition or
any other year, should not be considered.
Income received on behalf of any university or
other educational institution or hospital is exempt
provided it is not operating for profit and is wholly or
substantially financed by the Government. The
absence of an appropriate definition of substantially
financed by the Government led to a lot of
litigations. From 1 April 2014 a threshold percentage
of total receipts from the Government will be
specified.
Following amendments are proposed with effect
from 1 October 2014:
If trusts or institutions are approved by a
Commissioner of Income Tax for exemption of its
income, the said benefit of this exemption will be
available for the assessment years for which
proceedings are ongoing as on the date of
registration, provided the objects and activities of
the trusts or institution remains the same. Further,
the Assessing Officer cannot reopen any
assessment for escapement of income only for the
reason that registration is not obtained.
Commissioner of Income Tax can cancel the
registration of the trust or institution on the following
additional grounds:
o its income does not inure to the
benefit of general public;
o it is for benefit of any particular
religious community or caste;
o any income or property of the trust is
applied for benefit of specified persons
like author of trust, trustees etc.; or
o its funds are invested in
prohibited modes,
However, the trust or institution proves that there
was a reasonable cause for the activities to be
carried out in the above manner then its registration
will not be cancelled.
Business Trusts From 1 October 2014
Business Trusts includes new categories of
investment vehicles viz., the Real Estate Investment
Trusts (REIT) and Infrastructure Investment Trust
(InvIT). These investment vehicles require creation of
trust, recognition from SEBI and compulsory listing
on a recognized stock exchange in India. These
trusts will have to raise capital through issue of units
or through debt and acquire a controlling stake in
Special Purpose Vehicles (SPV) having income
bearing assets, which mainly focus on infrastructure
projects awarded through Public Private Partnership
(PPP) model.
It is proposed to give these business trusts a
formal recognition and confer benefits on them. The
following key proposals have been mooted:
(a) Transfer of shares of SPV to business
trust in exchange of units by sponsors will not
be taxable capital gain transfer.
(b) The period of holding of units in
business trust will also include the holding
period of shares held in the SPV for the unit
holder and the cost of the units will be the
cost incurred for acquiring the shares in the
SPV for the purpose of capital gain taxation.
(c) The units of the business trust are
subject to Securities Transaction Tax (STT);
hence, the resultant long-term capital gain on
transfer of units will be exempt from tax and
short-term capital gain will be at a
concessional tax rate of 15%. Such benefit
will not be available to units sold by sponsors
who have acquired such units in exchange of
shares in SPV.
(d) The interest and dividend received by a
business trust from an SPV will be exempt
from tax; capital gains in the hands of a
business trust will be taxed at the
concessional rate for capital gain transactions
and other income will be charged to tax at the
maximum marginal rate.
(e) SPV will be subjected to Dividend
Distribution Tax (DDT) on distribution of
dividend to business trust.
(f) The SPV is not obligated to withhold
tax on such payment of interest to the
business trust.
(g) Interest income received by the
business trust from SPV and distributed to the
unit holders will be subject to withholding tax
at 10% for resident unit holders and 5% for
non-resident unit holders.
(h) Income other than interest received
from SPV and distributed to unit holders will
be exempt from tax.
(i) Interest paid to non-residents in
relation to External Commercial Borrowings
(ECB) by the business trust will be subjected
to withholding tax at 5%.
(j) Business trusts will have to file income
tax returns and periodic statements of income
distributed to unit holders.
Search, Survey And Power To Call
For Information:
From 1 October 2014, tax authorities will be
empowered to conduct surveys to ensure proper
compliance of withholding tax regulations. They will
have the power to verify books of accounts,
documents, check cash, stock and other required
information. Books of accounts may also be
impounded and seized for a certain period.
In the course of search proceedings, if an
assessing officer seizes documents, valuables etc.
belonging to another taxpayer, the assessing officer
is duty bound to handover the seized material to the
assessing officer having jurisdiction over such other
taxpayer. The assessing officer receiving the seized
material shall, before initiating the assessment
proceedings, record his belief that the seized
material has a bearing to enhance the income of the
other taxpayer.
From 1 October 2014, when tax authorities
receive information from any source relating to any
taxpayer, they can issue notice to such taxpayer and
call for prescribed details for their verification.
Reference To Valuation Officer
Assessing officers can make reference to
valuation officer even if the books of a taxpayer are
correct and complete. The Valuation Officer will have
to complete valuation within six months and will be
empowered to do the best judgment valuation.
On receipt of a report from the valuation
officer, the assessing officer shall give an opportunity
of being heard to the taxpayer before completing the
assessment based on said valuation report.
Time period for valuation will be excluded
from time limit for completion of assessment.
Recovery Of Demand
In cases where notice of demand is served
and the same is disputed, the demand will be
continued to be treated as valid till the disposal of
appeal. This will be effective from 1 October 2014.
When a demand raised is reduced as a result
of an order of higher authorities and due to the
subsequent order the demand is increased then the
interest payable for non-payment of the demand
within the time period mentioned in the demand
notice would be computed from the day immediately
following the period mentioned in first demand
notice to the day on which demand is paid. This will
be effective from 1 October 2014.
Statement Of Financial Transaction
Or Reportable Account
Currently, certain specified persons are
required to furnish an annual information return in
respect of specified financial transactions registered
or recorded by them. Following changes are
proposed with effect from 1 April 2015:
o It is proposed to replace the annual
information return by a statement of
financial transaction or reportable
account.
o Further, it is proposed to include
prescribed reporting financial
institution under the list of specified
persons.
o The time line for rectifying a defect in
the statement furnished on receipt of
intimation from tax authority and for
furnishing the statement in response to
a notice is proposed to be reduced to
thirty days.
o On discovering any inaccuracy in the
statement furnished, the specified
person shall within a period of ten days
inform the authority and furnish the
correct information.
O If the prescribed reporting financial
institution provides inaccurate
information either deliberately or due
to non-compliance with the prescribed
due diligence or does not inform about
the inaccuracies within the specified
time, a penalty of ` 50,000 would be
levied.
Deduction
From 1 April 2014, with the intention of
encouraging the household savings, the deduction
available for sum paid by an Individual or Hindu
Undivided Family towards certain specified
instruments viz., life insurance premia, contribution
to public provident fund, scheme for deferred
annuities etc. has been increased from ` 100,000 to
` 150,000
Sunset date for claiming profit-linked
deduction by power companies extended from 31
March 2014 to 31 March 2017.
From 1 April 2014, the limit for deduction of
interest payment on housing loan in respect of
self-occupied property will be increased from
` 150,000 to ` 200,000
DIRECT TAX COLLECTION CHART
Financial Year
`

i
n

0
0
0

m
i
l
l
i
o
n
s
Corporate Tax
Other Tax
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
2
0
0
7
-
0
8

(A
)
2
0
0
8
-
0
9

(A
)
2
0
0
9
-
1
0

(A
)
2
0
1
0
-
1
1

(A
)
2
0
1
1
-
1
2

(A
)
2
0
1
2
-
1
3

(A
)
2
0
1
3
-
1
4

(P
)
2
0
1
4
-
1
5

(B
)
1,929
1,026
1,060
1,225 1,391 1,645
1,965
2,362
3,005
2,134
2,447
2,987
3,228
3,563
3,937
4,510
Business or Profession
From 1 April 2014, expenses incurred on
Corporate Social Responsibility will not be allowed
as business expenditure. Consequently, no tax
break will be available on such expenditure.
An investment-linked deduction of 15% is
available to corporate manufacturers for investment
in plant and machinery. The minimum investment
has been reduced to ` 25 crores (` 0.25 billion) and
will be available in the year(s) of investment from
1 April 2014 to 31 March 2017.
From 1 April 2014, deduction of certain
capital expenditure incurred on
o laying and operating a slurry pipeline
for transportation of iron ore and
o setting up and operating a
semiconductor wafer fabrication
manufacturing unit notified by
the CBDT.
will be available. This is however subject to a
condition that the asset on which such deduction is
claimed is used in the said business for 8 years
beginning with the previous year in which the asset
is acquired or capitalised. This deduction is not
D
i
r
e
c
t

T
a
x
available to the SEZ units, which are eligible and
have opted for tax holidays and vice versa.
Payments to non-residents which are liable to
withholding tax are allowed as a deduction only if the
withholding taxes are discharged strictly within the
prescribed due dates. From 1 April 2014, it is
proposed to allow such expenses provided, the
withholding taxes are discharged before the due
date of filing the return.
From 1 April 2014, where taxes are not
withheld or not remitted on any payments (including
salary) to residents liable to withholding,
disallowance will be restricted to 30% of such
payment.
Retrospectively from 1 April 2013, trading in
commodity derivatives in a recognized association
and chargeable to commodities transaction tax will
not be a speculative transaction.
From 1 April 2014, income of a taxpayer
engaged in the business of hiring, plying or leasing
goods carriage, will be higher of ` 7,500 for every
month or part of month during which the goods
carriage is owned by the taxpayer or the actual
income.
Capital Gains
As an industry friendly measure, the definition
of capital assets is being changed from 1 April 2014.
Capital assets will include any securities held by FII
in accordance with the regulations under SEBI Act.
Thus, income arising on transfer of such securities
will be taxable as Capital Gains/Loss.
From 1 April 2014, unlisted securities and
units of debt oriented mutual fund will be a long term
capital asset only if it is held for more than 36 months
as against the existing 12 months.
From 1 April 2014, beneficial tax rate of 10 per
cent on long-term capital gains computed before
giving effect to indexation adjustment will not be
available to mutual funds. Thus, these will now be
taxable at the regular rate of 20%.
From 1 April 2014, where an advance
received for transfer of a capital asset is forfeited, it
will be taxed as income from other sources. The
existing facility of deducting such amount from the
cost of acquisition has been dispensed with.
To overrule various judicial precedents and to
avoid continuing litigation, rollover exemption
derived by making an investment in a residential
house out of gains from sale of residential house or
other long term capital assets is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that exemption is available for
investment made in only one residential house
situated in India.
A few judgements overruled are:
o Gita Duggal case (2013) 257 CTR
208 (Del)
o CIT v. Syed Ali Adil (AP)(HC) (2013) 260
CTR 219,
o CIT vs. D. Ananda Basappa 309 ITR
329 (Kar.),
o Mr. Vinay Mishra vs ACIT (ITAT) ITA
195/Bang/ 2012 & 124/Bang/2012
o Mrs. Prema P. Shah and Sanjiv P Shah
Vs. ITO Mumbai ITAT
Similarly, exemption derived by making an
investment in certain bonds out of gains arising from
transfer of long term capital asset is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that a maximum exemption of
` 5 million will be available per transfer.
A few judgments overruled are:
o Ms. Shantabai V. Kamat vs CIT (Panaji
ITAT) ITA NO. 10/PNJ/2013
o Shri Aspi Ginwala Vs ACIT -
ITANo.3226/ Ahd/2011 &
ITA No.3227/Ahd/2011
o Shri Vivek Jairazbhoy vs DCIT,
(International Taxation) -
I.T.A. No.236/Bang/2012
From 1 April 2014, amount of compensation
received in pursuance of an interim order of the
court, tribunal or other authority will be taxed under
the head capital gains in the previous year in which
the final order of such court is passed.
From 1 April 2014, transfer of Government
securities outside India by one non-resident to
another will not be a transfer for capital gains and
hence, will not be taxable.
Transfer Pricing
Deeming fiction provisions in transfer pricing
regulations covers transactions with unrelated
parties too. It is clarified that such an unrelated party
need not be a non-resident.
Finance Minister, in his speech, has proposed
to align transfer-pricing regulations with the global
practices by introducing the concept of range (may
be inter quartile range) and usage of multiple year
data for computation of arms length price.
However, arithmetic mean will continue where
comparables are inadequate. These proposals may
be implemented by way of Rules.
A rollback provision has been introduced
wherein taxpayer has an option to adopt the price
agreed in the Advance Pricing Agreement scheme to
similar transactions for past 4 years. This will help to
resolve the litigations of past years.
From 1 October 2014, a transfer-pricing
officer will be empowered to levy penalty for
non-furnishing of the prescribed transfer pricing
documents.
Withholding Tax
Tax at 2% will be withheld on payouts
(including bonus) under life insurance policies not
entitled to exemption. However, such withholding
will be applicable only when total payment in
financial year to the taxpayer is ` 100,000 or more.
Currently interest on foreign currency loans
availed and long term infrastructure bonds issued by
an Indian company is subject to a lower withholding
of 5%. This benefit is now extended to all long-term
bonds. Further, this will be applicable to borrowings
before 1 July 2017 and the recipient need not furnish
its PAN in case of infrastructure bonds.
Hitherto, the rectification of e-TDS return and
its processing was as per the notification issued by
the CBDT. With effect from 1 October 2014, a
specific provision has been brought in to formalize
the same.
From 1 October 2014, the time limit for
passing an order treating a taxpayer as assessee in
default, for failure to withhold or pay the taxes
withheld, has been increased to seven years from
the end of financial year to which default relates.
From 1 October 2014, an assessing officer
will be empowered to levy penalty for failure to
furnish or for furnishing incorrect statement of taxes
withheld or collected.
Dividends
From 1 April 2014, concessional tax on gross
dividends received by an Indian company from
specified foreign company will not have any sunset
date. The amendment is made with a view to
encourage the repatriation of income earned by
Indian companies from investments made abroad.
From 1 October 2014, the amount of dividend
available for distribution by domestic companies to
its shareholders will have to be grossed up for the
purpose of computing the tax on distributed profits.
This will marginally increase the outflow of tax on
distributed profits.
From 1 October 2014, the amount of income
available for distribution by the mutual fund to the
unit holders will have to be grossed up for the
purpose of computing the additional income tax.
This will marginally increase the outflow of tax on
distributed income.
Alternative Minimum Tax
Alternative minimum tax being levied on
certain persons other than a company has been now
extended to taxpayers claiming deduction of capital
expenditure in respect of specified business such as
cold chain facility, warehousing facility, building and
operating hotels/hospitals etc. From 1 April 2014, in
computing adjusted total income for alternative
minimum tax, such deductions have to be added
back to the total income.
Charitable Trust And Other Institutions
Under Section 10(23C)
Following amendments are proposed with effect
from 1 April 2014:
Any charitable and religious trust approved by
the Commissioner of Income Tax and availing
exemption of its income cannot claim any other
exemption except agricultural income or exemption
specified pertaining to university, hospital,
educational institution or institution established for
charitable or public religious purposes.
In computing the application/accumulation of
income of charitable trusts or other specified
institutions, depreciation allowance in respect of
asset, acquisition of which has been claimed as
application of income in the year of acquisition or
any other year, should not be considered.
Income received on behalf of any university or
other educational institution or hospital is exempt
provided it is not operating for profit and is wholly or
substantially financed by the Government. The
absence of an appropriate definition of substantially
financed by the Government led to a lot of
litigations. From 1 April 2014 a threshold percentage
of total receipts from the Government will be
specified.
Following amendments are proposed with effect
from 1 October 2014:
If trusts or institutions are approved by a
Commissioner of Income Tax for exemption of its
income, the said benefit of this exemption will be
available for the assessment years for which
proceedings are ongoing as on the date of
registration, provided the objects and activities of
the trusts or institution remains the same. Further,
the Assessing Officer cannot reopen any
assessment for escapement of income only for the
reason that registration is not obtained.
Commissioner of Income Tax can cancel the
registration of the trust or institution on the following
additional grounds:
o its income does not inure to the
benefit of general public;
o it is for benefit of any particular
religious community or caste;
o any income or property of the trust is
applied for benefit of specified persons
like author of trust, trustees etc.; or
o its funds are invested in
prohibited modes,
However, the trust or institution proves that there
was a reasonable cause for the activities to be
carried out in the above manner then its registration
will not be cancelled.
Business Trusts From 1 October 2014
Business Trusts includes new categories of
investment vehicles viz., the Real Estate Investment
Trusts (REIT) and Infrastructure Investment Trust
(InvIT). These investment vehicles require creation of
trust, recognition from SEBI and compulsory listing
on a recognized stock exchange in India. These
trusts will have to raise capital through issue of units
or through debt and acquire a controlling stake in
Special Purpose Vehicles (SPV) having income
bearing assets, which mainly focus on infrastructure
projects awarded through Public Private Partnership
(PPP) model.
It is proposed to give these business trusts a
formal recognition and confer benefits on them. The
following key proposals have been mooted:
(a) Transfer of shares of SPV to business
trust in exchange of units by sponsors will not
be taxable capital gain transfer.
(b) The period of holding of units in
business trust will also include the holding
period of shares held in the SPV for the unit
holder and the cost of the units will be the
cost incurred for acquiring the shares in the
SPV for the purpose of capital gain taxation.
(c) The units of the business trust are
subject to Securities Transaction Tax (STT);
hence, the resultant long-term capital gain on
transfer of units will be exempt from tax and
short-term capital gain will be at a
concessional tax rate of 15%. Such benefit
will not be available to units sold by sponsors
who have acquired such units in exchange of
shares in SPV.
(d) The interest and dividend received by a
business trust from an SPV will be exempt
from tax; capital gains in the hands of a
business trust will be taxed at the
concessional rate for capital gain transactions
and other income will be charged to tax at the
maximum marginal rate.
(e) SPV will be subjected to Dividend
Distribution Tax (DDT) on distribution of
dividend to business trust.
(f) The SPV is not obligated to withhold
tax on such payment of interest to the
business trust.
(g) Interest income received by the
business trust from SPV and distributed to the
unit holders will be subject to withholding tax
at 10% for resident unit holders and 5% for
non-resident unit holders.
(h) Income other than interest received
from SPV and distributed to unit holders will
be exempt from tax.
(i) Interest paid to non-residents in
relation to External Commercial Borrowings
(ECB) by the business trust will be subjected
to withholding tax at 5%.
(j) Business trusts will have to file income
tax returns and periodic statements of income
distributed to unit holders.
Search, Survey And Power To Call
For Information:
From 1 October 2014, tax authorities will be
empowered to conduct surveys to ensure proper
compliance of withholding tax regulations. They will
have the power to verify books of accounts,
documents, check cash, stock and other required
information. Books of accounts may also be
impounded and seized for a certain period.
In the course of search proceedings, if an
assessing officer seizes documents, valuables etc.
belonging to another taxpayer, the assessing officer
is duty bound to handover the seized material to the
assessing officer having jurisdiction over such other
taxpayer. The assessing officer receiving the seized
material shall, before initiating the assessment
proceedings, record his belief that the seized
material has a bearing to enhance the income of the
other taxpayer.
From 1 October 2014, when tax authorities
receive information from any source relating to any
taxpayer, they can issue notice to such taxpayer and
call for prescribed details for their verification.
Reference To Valuation Officer
Assessing officers can make reference to
valuation officer even if the books of a taxpayer are
correct and complete. The Valuation Officer will have
to complete valuation within six months and will be
empowered to do the best judgment valuation.
On receipt of a report from the valuation
officer, the assessing officer shall give an opportunity
of being heard to the taxpayer before completing the
assessment based on said valuation report.
Time period for valuation will be excluded
from time limit for completion of assessment.
Recovery Of Demand
In cases where notice of demand is served
and the same is disputed, the demand will be
continued to be treated as valid till the disposal of
appeal. This will be effective from 1 October 2014.
When a demand raised is reduced as a result
of an order of higher authorities and due to the
subsequent order the demand is increased then the
interest payable for non-payment of the demand
within the time period mentioned in the demand
notice would be computed from the day immediately
following the period mentioned in first demand
notice to the day on which demand is paid. This will
be effective from 1 October 2014.
Statement Of Financial Transaction
Or Reportable Account
Currently, certain specified persons are
required to furnish an annual information return in
respect of specified financial transactions registered
or recorded by them. Following changes are
proposed with effect from 1 April 2015:
o It is proposed to replace the annual
information return by a statement of
financial transaction or reportable
account.
o Further, it is proposed to include
prescribed reporting financial
institution under the list of specified
persons.
o The time line for rectifying a defect in
the statement furnished on receipt of
intimation from tax authority and for
furnishing the statement in response to
a notice is proposed to be reduced to
thirty days.
o On discovering any inaccuracy in the
statement furnished, the specified
person shall within a period of ten days
inform the authority and furnish the
correct information.
O If the prescribed reporting financial
institution provides inaccurate
information either deliberately or due
to non-compliance with the prescribed
due diligence or does not inform about
the inaccuracies within the specified
time, a penalty of ` 50,000 would be
levied.
Deduction
From 1 April 2014, with the intention of
encouraging the household savings, the deduction
available for sum paid by an Individual or Hindu
Undivided Family towards certain specified
instruments viz., life insurance premia, contribution
to public provident fund, scheme for deferred
annuities etc. has been increased from ` 100,000 to
` 150,000
Sunset date for claiming profit-linked
deduction by power companies extended from 31
March 2014 to 31 March 2017.
From 1 April 2014, the limit for deduction of
interest payment on housing loan in respect of
self-occupied property will be increased from
` 150,000 to ` 200,000
Business or Profession
From 1 April 2014, expenses incurred on
Corporate Social Responsibility will not be allowed
as business expenditure. Consequently, no tax
break will be available on such expenditure.
An investment-linked deduction of 15% is
available to corporate manufacturers for investment
in plant and machinery. The minimum investment
has been reduced to ` 25 crores (` 0.25 billion) and
will be available in the year(s) of investment from
1 April 2014 to 31 March 2017.
From 1 April 2014, deduction of certain
capital expenditure incurred on
o laying and operating a slurry pipeline
for transportation of iron ore and
o setting up and operating a
semiconductor wafer fabrication
manufacturing unit notified by
the CBDT.
will be available. This is however subject to a
condition that the asset on which such deduction is
claimed is used in the said business for 8 years
beginning with the previous year in which the asset
is acquired or capitalised. This deduction is not
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T
a
x
available to the SEZ units, which are eligible and
have opted for tax holidays and vice versa.
Payments to non-residents which are liable to
withholding tax are allowed as a deduction only if the
withholding taxes are discharged strictly within the
prescribed due dates. From 1 April 2014, it is
proposed to allow such expenses provided, the
withholding taxes are discharged before the due
date of filing the return.
From 1 April 2014, where taxes are not
withheld or not remitted on any payments (including
salary) to residents liable to withholding,
disallowance will be restricted to 30% of such
payment.
Retrospectively from 1 April 2013, trading in
commodity derivatives in a recognized association
and chargeable to commodities transaction tax will
not be a speculative transaction.
From 1 April 2014, income of a taxpayer
engaged in the business of hiring, plying or leasing
goods carriage, will be higher of ` 7,500 for every
month or part of month during which the goods
carriage is owned by the taxpayer or the actual
income.
Capital Gains
As an industry friendly measure, the definition
of capital assets is being changed from 1 April 2014.
Capital assets will include any securities held by FII
in accordance with the regulations under SEBI Act.
Thus, income arising on transfer of such securities
will be taxable as Capital Gains/Loss.
From 1 April 2014, unlisted securities and
units of debt oriented mutual fund will be a long term
capital asset only if it is held for more than 36 months
as against the existing 12 months.
From 1 April 2014, beneficial tax rate of 10 per
cent on long-term capital gains computed before
giving effect to indexation adjustment will not be
available to mutual funds. Thus, these will now be
taxable at the regular rate of 20%.
From 1 April 2014, where an advance
received for transfer of a capital asset is forfeited, it
will be taxed as income from other sources. The
existing facility of deducting such amount from the
cost of acquisition has been dispensed with.
To overrule various judicial precedents and to
avoid continuing litigation, rollover exemption
derived by making an investment in a residential
house out of gains from sale of residential house or
other long term capital assets is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that exemption is available for
investment made in only one residential house
situated in India.
A few judgements overruled are:
o Gita Duggal case (2013) 257 CTR
208 (Del)
o CIT v. Syed Ali Adil (AP)(HC) (2013) 260
CTR 219,
o CIT vs. D. Ananda Basappa 309 ITR
329 (Kar.),
o Mr. Vinay Mishra vs ACIT (ITAT) ITA
195/Bang/ 2012 & 124/Bang/2012
o Mrs. Prema P. Shah and Sanjiv P Shah
Vs. ITO Mumbai ITAT
Similarly, exemption derived by making an
investment in certain bonds out of gains arising from
transfer of long term capital asset is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that a maximum exemption of
` 5 million will be available per transfer.
A few judgments overruled are:
o Ms. Shantabai V. Kamat vs CIT (Panaji
ITAT) ITA NO. 10/PNJ/2013
o Shri Aspi Ginwala Vs ACIT -
ITANo.3226/ Ahd/2011 &
ITA No.3227/Ahd/2011
o Shri Vivek Jairazbhoy vs DCIT,
(International Taxation) -
I.T.A. No.236/Bang/2012
From 1 April 2014, amount of compensation
received in pursuance of an interim order of the
court, tribunal or other authority will be taxed under
the head capital gains in the previous year in which
the final order of such court is passed.
From 1 April 2014, transfer of Government
securities outside India by one non-resident to
another will not be a transfer for capital gains and
hence, will not be taxable.
Transfer Pricing
Deeming fiction provisions in transfer pricing
regulations covers transactions with unrelated
parties too. It is clarified that such an unrelated party
need not be a non-resident.
Finance Minister, in his speech, has proposed
to align transfer-pricing regulations with the global
practices by introducing the concept of range (may
be inter quartile range) and usage of multiple year
data for computation of arms length price.
However, arithmetic mean will continue where
comparables are inadequate. These proposals may
be implemented by way of Rules.
A rollback provision has been introduced
wherein taxpayer has an option to adopt the price
agreed in the Advance Pricing Agreement scheme to
similar transactions for past 4 years. This will help to
resolve the litigations of past years.
From 1 October 2014, a transfer-pricing
officer will be empowered to levy penalty for
non-furnishing of the prescribed transfer pricing
documents.
Withholding Tax
Tax at 2% will be withheld on payouts
(including bonus) under life insurance policies not
entitled to exemption. However, such withholding
will be applicable only when total payment in
financial year to the taxpayer is ` 100,000 or more.
Currently interest on foreign currency loans
availed and long term infrastructure bonds issued by
an Indian company is subject to a lower withholding
of 5%. This benefit is now extended to all long-term
bonds. Further, this will be applicable to borrowings
before 1 July 2017 and the recipient need not furnish
its PAN in case of infrastructure bonds.
Hitherto, the rectification of e-TDS return and
its processing was as per the notification issued by
the CBDT. With effect from 1 October 2014, a
specific provision has been brought in to formalize
the same.
From 1 October 2014, the time limit for
passing an order treating a taxpayer as assessee in
default, for failure to withhold or pay the taxes
withheld, has been increased to seven years from
the end of financial year to which default relates.
From 1 October 2014, an assessing officer
will be empowered to levy penalty for failure to
furnish or for furnishing incorrect statement of taxes
withheld or collected.
Dividends
From 1 April 2014, concessional tax on gross
dividends received by an Indian company from
specified foreign company will not have any sunset
date. The amendment is made with a view to
encourage the repatriation of income earned by
Indian companies from investments made abroad.
From 1 October 2014, the amount of dividend
available for distribution by domestic companies to
its shareholders will have to be grossed up for the
purpose of computing the tax on distributed profits.
This will marginally increase the outflow of tax on
distributed profits.
From 1 October 2014, the amount of income
available for distribution by the mutual fund to the
unit holders will have to be grossed up for the
purpose of computing the additional income tax.
This will marginally increase the outflow of tax on
distributed income.
Alternative Minimum Tax
Alternative minimum tax being levied on
certain persons other than a company has been now
extended to taxpayers claiming deduction of capital
expenditure in respect of specified business such as
cold chain facility, warehousing facility, building and
operating hotels/hospitals etc. From 1 April 2014, in
computing adjusted total income for alternative
minimum tax, such deductions have to be added
back to the total income.
Charitable Trust And Other Institutions
Under Section 10(23C)
Following amendments are proposed with effect
from 1 April 2014:
Any charitable and religious trust approved by
the Commissioner of Income Tax and availing
exemption of its income cannot claim any other
exemption except agricultural income or exemption
specified pertaining to university, hospital,
educational institution or institution established for
charitable or public religious purposes.
In computing the application/accumulation of
income of charitable trusts or other specified
institutions, depreciation allowance in respect of
asset, acquisition of which has been claimed as
application of income in the year of acquisition or
any other year, should not be considered.
Income received on behalf of any university or
other educational institution or hospital is exempt
provided it is not operating for profit and is wholly or
substantially financed by the Government. The
absence of an appropriate definition of substantially
financed by the Government led to a lot of
litigations. From 1 April 2014 a threshold percentage
of total receipts from the Government will be
specified.
Following amendments are proposed with effect
from 1 October 2014:
If trusts or institutions are approved by a
Commissioner of Income Tax for exemption of its
income, the said benefit of this exemption will be
available for the assessment years for which
proceedings are ongoing as on the date of
registration, provided the objects and activities of
the trusts or institution remains the same. Further,
the Assessing Officer cannot reopen any
assessment for escapement of income only for the
reason that registration is not obtained.
Commissioner of Income Tax can cancel the
registration of the trust or institution on the following
additional grounds:
o its income does not inure to the
benefit of general public;
o it is for benefit of any particular
religious community or caste;
o any income or property of the trust is
applied for benefit of specified persons
like author of trust, trustees etc.; or
o its funds are invested in
prohibited modes,
However, the trust or institution proves that there
was a reasonable cause for the activities to be
carried out in the above manner then its registration
will not be cancelled.
Business Trusts From 1 October 2014
Business Trusts includes new categories of
investment vehicles viz., the Real Estate Investment
Trusts (REIT) and Infrastructure Investment Trust
(InvIT). These investment vehicles require creation of
trust, recognition from SEBI and compulsory listing
on a recognized stock exchange in India. These
trusts will have to raise capital through issue of units
or through debt and acquire a controlling stake in
Special Purpose Vehicles (SPV) having income
bearing assets, which mainly focus on infrastructure
projects awarded through Public Private Partnership
(PPP) model.
It is proposed to give these business trusts a
formal recognition and confer benefits on them. The
following key proposals have been mooted:
(a) Transfer of shares of SPV to business
trust in exchange of units by sponsors will not
be taxable capital gain transfer.
(b) The period of holding of units in
business trust will also include the holding
period of shares held in the SPV for the unit
holder and the cost of the units will be the
cost incurred for acquiring the shares in the
SPV for the purpose of capital gain taxation.
(c) The units of the business trust are
subject to Securities Transaction Tax (STT);
hence, the resultant long-term capital gain on
transfer of units will be exempt from tax and
short-term capital gain will be at a
concessional tax rate of 15%. Such benefit
will not be available to units sold by sponsors
who have acquired such units in exchange of
shares in SPV.
(d) The interest and dividend received by a
business trust from an SPV will be exempt
from tax; capital gains in the hands of a
business trust will be taxed at the
concessional rate for capital gain transactions
and other income will be charged to tax at the
maximum marginal rate.
(e) SPV will be subjected to Dividend
Distribution Tax (DDT) on distribution of
dividend to business trust.
(f) The SPV is not obligated to withhold
tax on such payment of interest to the
business trust.
(g) Interest income received by the
business trust from SPV and distributed to the
unit holders will be subject to withholding tax
at 10% for resident unit holders and 5% for
non-resident unit holders.
(h) Income other than interest received
from SPV and distributed to unit holders will
be exempt from tax.
(i) Interest paid to non-residents in
relation to External Commercial Borrowings
(ECB) by the business trust will be subjected
to withholding tax at 5%.
(j) Business trusts will have to file income
tax returns and periodic statements of income
distributed to unit holders.
Search, Survey And Power To Call
For Information:
From 1 October 2014, tax authorities will be
empowered to conduct surveys to ensure proper
compliance of withholding tax regulations. They will
have the power to verify books of accounts,
documents, check cash, stock and other required
information. Books of accounts may also be
impounded and seized for a certain period.
In the course of search proceedings, if an
assessing officer seizes documents, valuables etc.
belonging to another taxpayer, the assessing officer
is duty bound to handover the seized material to the
assessing officer having jurisdiction over such other
taxpayer. The assessing officer receiving the seized
material shall, before initiating the assessment
proceedings, record his belief that the seized
material has a bearing to enhance the income of the
other taxpayer.
From 1 October 2014, when tax authorities
receive information from any source relating to any
taxpayer, they can issue notice to such taxpayer and
call for prescribed details for their verification.
Reference To Valuation Officer
Assessing officers can make reference to
valuation officer even if the books of a taxpayer are
correct and complete. The Valuation Officer will have
to complete valuation within six months and will be
empowered to do the best judgment valuation.
On receipt of a report from the valuation
officer, the assessing officer shall give an opportunity
of being heard to the taxpayer before completing the
assessment based on said valuation report.
Time period for valuation will be excluded
from time limit for completion of assessment.
Recovery Of Demand
In cases where notice of demand is served
and the same is disputed, the demand will be
continued to be treated as valid till the disposal of
appeal. This will be effective from 1 October 2014.
When a demand raised is reduced as a result
of an order of higher authorities and due to the
subsequent order the demand is increased then the
interest payable for non-payment of the demand
within the time period mentioned in the demand
notice would be computed from the day immediately
following the period mentioned in first demand
notice to the day on which demand is paid. This will
be effective from 1 October 2014.
Statement Of Financial Transaction
Or Reportable Account
Currently, certain specified persons are
required to furnish an annual information return in
respect of specified financial transactions registered
or recorded by them. Following changes are
proposed with effect from 1 April 2015:
o It is proposed to replace the annual
information return by a statement of
financial transaction or reportable
account.
o Further, it is proposed to include
prescribed reporting financial
institution under the list of specified
persons.
o The time line for rectifying a defect in
the statement furnished on receipt of
intimation from tax authority and for
furnishing the statement in response to
a notice is proposed to be reduced to
thirty days.
o On discovering any inaccuracy in the
statement furnished, the specified
person shall within a period of ten days
inform the authority and furnish the
correct information.
O If the prescribed reporting financial
institution provides inaccurate
information either deliberately or due
to non-compliance with the prescribed
due diligence or does not inform about
the inaccuracies within the specified
time, a penalty of ` 50,000 would be
levied.
Deduction
From 1 April 2014, with the intention of
encouraging the household savings, the deduction
available for sum paid by an Individual or Hindu
Undivided Family towards certain specified
instruments viz., life insurance premia, contribution
to public provident fund, scheme for deferred
annuities etc. has been increased from ` 100,000 to
` 150,000
Sunset date for claiming profit-linked
deduction by power companies extended from 31
March 2014 to 31 March 2017.
From 1 April 2014, the limit for deduction of
interest payment on housing loan in respect of
self-occupied property will be increased from
` 150,000 to ` 200,000
Business or Profession
From 1 April 2014, expenses incurred on
Corporate Social Responsibility will not be allowed
as business expenditure. Consequently, no tax
break will be available on such expenditure.
An investment-linked deduction of 15% is
available to corporate manufacturers for investment
in plant and machinery. The minimum investment
has been reduced to ` 25 crores (` 0.25 billion) and
will be available in the year(s) of investment from
1 April 2014 to 31 March 2017.
From 1 April 2014, deduction of certain
capital expenditure incurred on
o laying and operating a slurry pipeline
for transportation of iron ore and
o setting up and operating a
semiconductor wafer fabrication
manufacturing unit notified by
the CBDT.
will be available. This is however subject to a
condition that the asset on which such deduction is
claimed is used in the said business for 8 years
beginning with the previous year in which the asset
is acquired or capitalised. This deduction is not
D
i
r
e
c
t

T
a
x
available to the SEZ units, which are eligible and
have opted for tax holidays and vice versa.
Payments to non-residents which are liable to
withholding tax are allowed as a deduction only if the
withholding taxes are discharged strictly within the
prescribed due dates. From 1 April 2014, it is
proposed to allow such expenses provided, the
withholding taxes are discharged before the due
date of filing the return.
From 1 April 2014, where taxes are not
withheld or not remitted on any payments (including
salary) to residents liable to withholding,
disallowance will be restricted to 30% of such
payment.
Retrospectively from 1 April 2013, trading in
commodity derivatives in a recognized association
and chargeable to commodities transaction tax will
not be a speculative transaction.
From 1 April 2014, income of a taxpayer
engaged in the business of hiring, plying or leasing
goods carriage, will be higher of ` 7,500 for every
month or part of month during which the goods
carriage is owned by the taxpayer or the actual
income.
Capital Gains
As an industry friendly measure, the definition
of capital assets is being changed from 1 April 2014.
Capital assets will include any securities held by FII
in accordance with the regulations under SEBI Act.
Thus, income arising on transfer of such securities
will be taxable as Capital Gains/Loss.
From 1 April 2014, unlisted securities and
units of debt oriented mutual fund will be a long term
capital asset only if it is held for more than 36 months
as against the existing 12 months.
From 1 April 2014, beneficial tax rate of 10 per
cent on long-term capital gains computed before
giving effect to indexation adjustment will not be
available to mutual funds. Thus, these will now be
taxable at the regular rate of 20%.
From 1 April 2014, where an advance
received for transfer of a capital asset is forfeited, it
will be taxed as income from other sources. The
existing facility of deducting such amount from the
cost of acquisition has been dispensed with.
To overrule various judicial precedents and to
avoid continuing litigation, rollover exemption
derived by making an investment in a residential
house out of gains from sale of residential house or
other long term capital assets is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that exemption is available for
investment made in only one residential house
situated in India.
A few judgements overruled are:
o Gita Duggal case (2013) 257 CTR
208 (Del)
o CIT v. Syed Ali Adil (AP)(HC) (2013) 260
CTR 219,
o CIT vs. D. Ananda Basappa 309 ITR
329 (Kar.),
o Mr. Vinay Mishra vs ACIT (ITAT) ITA
195/Bang/ 2012 & 124/Bang/2012
o Mrs. Prema P. Shah and Sanjiv P Shah
Vs. ITO Mumbai ITAT
Similarly, exemption derived by making an
investment in certain bonds out of gains arising from
transfer of long term capital asset is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that a maximum exemption of
` 5 million will be available per transfer.
A few judgments overruled are:
o Ms. Shantabai V. Kamat vs CIT (Panaji
ITAT) ITA NO. 10/PNJ/2013
o Shri Aspi Ginwala Vs ACIT -
ITANo.3226/ Ahd/2011 &
ITA No.3227/Ahd/2011
o Shri Vivek Jairazbhoy vs DCIT,
(International Taxation) -
I.T.A. No.236/Bang/2012
From 1 April 2014, amount of compensation
received in pursuance of an interim order of the
court, tribunal or other authority will be taxed under
the head capital gains in the previous year in which
the final order of such court is passed.
From 1 April 2014, transfer of Government
securities outside India by one non-resident to
another will not be a transfer for capital gains and
hence, will not be taxable.
Transfer Pricing
Deeming fiction provisions in transfer pricing
regulations covers transactions with unrelated
parties too. It is clarified that such an unrelated party
need not be a non-resident.
Finance Minister, in his speech, has proposed
to align transfer-pricing regulations with the global
practices by introducing the concept of range (may
be inter quartile range) and usage of multiple year
data for computation of arms length price.
However, arithmetic mean will continue where
comparables are inadequate. These proposals may
be implemented by way of Rules.
A rollback provision has been introduced
wherein taxpayer has an option to adopt the price
agreed in the Advance Pricing Agreement scheme to
similar transactions for past 4 years. This will help to
resolve the litigations of past years.
From 1 October 2014, a transfer-pricing
officer will be empowered to levy penalty for
non-furnishing of the prescribed transfer pricing
documents.
Withholding Tax
Tax at 2% will be withheld on payouts
(including bonus) under life insurance policies not
entitled to exemption. However, such withholding
will be applicable only when total payment in
financial year to the taxpayer is ` 100,000 or more.
Currently interest on foreign currency loans
availed and long term infrastructure bonds issued by
an Indian company is subject to a lower withholding
of 5%. This benefit is now extended to all long-term
bonds. Further, this will be applicable to borrowings
before 1 July 2017 and the recipient need not furnish
its PAN in case of infrastructure bonds.
Hitherto, the rectification of e-TDS return and
its processing was as per the notification issued by
the CBDT. With effect from 1 October 2014, a
specific provision has been brought in to formalize
the same.
From 1 October 2014, the time limit for
passing an order treating a taxpayer as assessee in
default, for failure to withhold or pay the taxes
withheld, has been increased to seven years from
the end of financial year to which default relates.
From 1 October 2014, an assessing officer
will be empowered to levy penalty for failure to
furnish or for furnishing incorrect statement of taxes
withheld or collected.
Dividends
From 1 April 2014, concessional tax on gross
dividends received by an Indian company from
specified foreign company will not have any sunset
date. The amendment is made with a view to
encourage the repatriation of income earned by
Indian companies from investments made abroad.
From 1 October 2014, the amount of dividend
available for distribution by domestic companies to
its shareholders will have to be grossed up for the
purpose of computing the tax on distributed profits.
This will marginally increase the outflow of tax on
distributed profits.
From 1 October 2014, the amount of income
available for distribution by the mutual fund to the
unit holders will have to be grossed up for the
purpose of computing the additional income tax.
This will marginally increase the outflow of tax on
distributed income.
Alternative Minimum Tax
Alternative minimum tax being levied on
certain persons other than a company has been now
extended to taxpayers claiming deduction of capital
expenditure in respect of specified business such as
cold chain facility, warehousing facility, building and
operating hotels/hospitals etc. From 1 April 2014, in
computing adjusted total income for alternative
minimum tax, such deductions have to be added
back to the total income.
Charitable Trust And Other Institutions
Under Section 10(23C)
Following amendments are proposed with effect
from 1 April 2014:
Any charitable and religious trust approved by
the Commissioner of Income Tax and availing
exemption of its income cannot claim any other
exemption except agricultural income or exemption
specified pertaining to university, hospital,
educational institution or institution established for
charitable or public religious purposes.
In computing the application/accumulation of
income of charitable trusts or other specified
institutions, depreciation allowance in respect of
asset, acquisition of which has been claimed as
application of income in the year of acquisition or
any other year, should not be considered.
Income received on behalf of any university or
other educational institution or hospital is exempt
provided it is not operating for profit and is wholly or
substantially financed by the Government. The
absence of an appropriate definition of substantially
financed by the Government led to a lot of
litigations. From 1 April 2014 a threshold percentage
of total receipts from the Government will be
specified.
Following amendments are proposed with effect
from 1 October 2014:
If trusts or institutions are approved by a
Commissioner of Income Tax for exemption of its
income, the said benefit of this exemption will be
available for the assessment years for which
proceedings are ongoing as on the date of
registration, provided the objects and activities of
the trusts or institution remains the same. Further,
the Assessing Officer cannot reopen any
assessment for escapement of income only for the
reason that registration is not obtained.
Commissioner of Income Tax can cancel the
registration of the trust or institution on the following
additional grounds:
o its income does not inure to the
benefit of general public;
o it is for benefit of any particular
religious community or caste;
o any income or property of the trust is
applied for benefit of specified persons
like author of trust, trustees etc.; or
o its funds are invested in
prohibited modes,
However, the trust or institution proves that there
was a reasonable cause for the activities to be
carried out in the above manner then its registration
will not be cancelled.
Business Trusts From 1 October 2014
Business Trusts includes new categories of
investment vehicles viz., the Real Estate Investment
Trusts (REIT) and Infrastructure Investment Trust
(InvIT). These investment vehicles require creation of
trust, recognition from SEBI and compulsory listing
on a recognized stock exchange in India. These
trusts will have to raise capital through issue of units
or through debt and acquire a controlling stake in
Special Purpose Vehicles (SPV) having income
bearing assets, which mainly focus on infrastructure
projects awarded through Public Private Partnership
(PPP) model.
It is proposed to give these business trusts a
formal recognition and confer benefits on them. The
following key proposals have been mooted:
(a) Transfer of shares of SPV to business
trust in exchange of units by sponsors will not
be taxable capital gain transfer.
(b) The period of holding of units in
business trust will also include the holding
period of shares held in the SPV for the unit
holder and the cost of the units will be the
cost incurred for acquiring the shares in the
SPV for the purpose of capital gain taxation.
(c) The units of the business trust are
subject to Securities Transaction Tax (STT);
hence, the resultant long-term capital gain on
transfer of units will be exempt from tax and
short-term capital gain will be at a
concessional tax rate of 15%. Such benefit
will not be available to units sold by sponsors
who have acquired such units in exchange of
shares in SPV.
(d) The interest and dividend received by a
business trust from an SPV will be exempt
from tax; capital gains in the hands of a
business trust will be taxed at the
concessional rate for capital gain transactions
and other income will be charged to tax at the
maximum marginal rate.
(e) SPV will be subjected to Dividend
Distribution Tax (DDT) on distribution of
dividend to business trust.
(f) The SPV is not obligated to withhold
tax on such payment of interest to the
business trust.
(g) Interest income received by the
business trust from SPV and distributed to the
unit holders will be subject to withholding tax
at 10% for resident unit holders and 5% for
non-resident unit holders.
(h) Income other than interest received
from SPV and distributed to unit holders will
be exempt from tax.
(i) Interest paid to non-residents in
relation to External Commercial Borrowings
(ECB) by the business trust will be subjected
to withholding tax at 5%.
(j) Business trusts will have to file income
tax returns and periodic statements of income
distributed to unit holders.
Search, Survey And Power To Call
For Information:
From 1 October 2014, tax authorities will be
empowered to conduct surveys to ensure proper
compliance of withholding tax regulations. They will
have the power to verify books of accounts,
documents, check cash, stock and other required
information. Books of accounts may also be
impounded and seized for a certain period.
In the course of search proceedings, if an
assessing officer seizes documents, valuables etc.
belonging to another taxpayer, the assessing officer
is duty bound to handover the seized material to the
assessing officer having jurisdiction over such other
taxpayer. The assessing officer receiving the seized
material shall, before initiating the assessment
proceedings, record his belief that the seized
material has a bearing to enhance the income of the
other taxpayer.
From 1 October 2014, when tax authorities
receive information from any source relating to any
taxpayer, they can issue notice to such taxpayer and
call for prescribed details for their verification.
Reference To Valuation Officer
Assessing officers can make reference to
valuation officer even if the books of a taxpayer are
correct and complete. The Valuation Officer will have
to complete valuation within six months and will be
empowered to do the best judgment valuation.
On receipt of a report from the valuation
officer, the assessing officer shall give an opportunity
of being heard to the taxpayer before completing the
assessment based on said valuation report.
Time period for valuation will be excluded
from time limit for completion of assessment.
Recovery Of Demand
In cases where notice of demand is served
and the same is disputed, the demand will be
continued to be treated as valid till the disposal of
appeal. This will be effective from 1 October 2014.
When a demand raised is reduced as a result
of an order of higher authorities and due to the
subsequent order the demand is increased then the
interest payable for non-payment of the demand
within the time period mentioned in the demand
notice would be computed from the day immediately
following the period mentioned in first demand
notice to the day on which demand is paid. This will
be effective from 1 October 2014.
Statement Of Financial Transaction
Or Reportable Account
Currently, certain specified persons are
required to furnish an annual information return in
respect of specified financial transactions registered
or recorded by them. Following changes are
proposed with effect from 1 April 2015:
o It is proposed to replace the annual
information return by a statement of
financial transaction or reportable
account.
o Further, it is proposed to include
prescribed reporting financial
institution under the list of specified
persons.
o The time line for rectifying a defect in
the statement furnished on receipt of
intimation from tax authority and for
furnishing the statement in response to
a notice is proposed to be reduced to
thirty days.
o On discovering any inaccuracy in the
statement furnished, the specified
person shall within a period of ten days
inform the authority and furnish the
correct information.
O If the prescribed reporting financial
institution provides inaccurate
information either deliberately or due
to non-compliance with the prescribed
due diligence or does not inform about
the inaccuracies within the specified
time, a penalty of ` 50,000 would be
levied.
Deduction
From 1 April 2014, with the intention of
encouraging the household savings, the deduction
available for sum paid by an Individual or Hindu
Undivided Family towards certain specified
instruments viz., life insurance premia, contribution
to public provident fund, scheme for deferred
annuities etc. has been increased from ` 100,000 to
` 150,000
Sunset date for claiming profit-linked
deduction by power companies extended from 31
March 2014 to 31 March 2017.
From 1 April 2014, the limit for deduction of
interest payment on housing loan in respect of
self-occupied property will be increased from
` 150,000 to ` 200,000
Business or Profession
From 1 April 2014, expenses incurred on
Corporate Social Responsibility will not be allowed
as business expenditure. Consequently, no tax
break will be available on such expenditure.
An investment-linked deduction of 15% is
available to corporate manufacturers for investment
in plant and machinery. The minimum investment
has been reduced to ` 25 crores (` 0.25 billion) and
will be available in the year(s) of investment from
1 April 2014 to 31 March 2017.
From 1 April 2014, deduction of certain
capital expenditure incurred on
o laying and operating a slurry pipeline
for transportation of iron ore and
o setting up and operating a
semiconductor wafer fabrication
manufacturing unit notified by
the CBDT.
will be available. This is however subject to a
condition that the asset on which such deduction is
claimed is used in the said business for 8 years
beginning with the previous year in which the asset
is acquired or capitalised. This deduction is not
D
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e
c
t

T
a
x
available to the SEZ units, which are eligible and
have opted for tax holidays and vice versa.
Payments to non-residents which are liable to
withholding tax are allowed as a deduction only if the
withholding taxes are discharged strictly within the
prescribed due dates. From 1 April 2014, it is
proposed to allow such expenses provided, the
withholding taxes are discharged before the due
date of filing the return.
From 1 April 2014, where taxes are not
withheld or not remitted on any payments (including
salary) to residents liable to withholding,
disallowance will be restricted to 30% of such
payment.
Retrospectively from 1 April 2013, trading in
commodity derivatives in a recognized association
and chargeable to commodities transaction tax will
not be a speculative transaction.
From 1 April 2014, income of a taxpayer
engaged in the business of hiring, plying or leasing
goods carriage, will be higher of ` 7,500 for every
month or part of month during which the goods
carriage is owned by the taxpayer or the actual
income.
Capital Gains
As an industry friendly measure, the definition
of capital assets is being changed from 1 April 2014.
Capital assets will include any securities held by FII
in accordance with the regulations under SEBI Act.
Thus, income arising on transfer of such securities
will be taxable as Capital Gains/Loss.
From 1 April 2014, unlisted securities and
units of debt oriented mutual fund will be a long term
capital asset only if it is held for more than 36 months
as against the existing 12 months.
From 1 April 2014, beneficial tax rate of 10 per
cent on long-term capital gains computed before
giving effect to indexation adjustment will not be
available to mutual funds. Thus, these will now be
taxable at the regular rate of 20%.
From 1 April 2014, where an advance
received for transfer of a capital asset is forfeited, it
will be taxed as income from other sources. The
existing facility of deducting such amount from the
cost of acquisition has been dispensed with.
To overrule various judicial precedents and to
avoid continuing litigation, rollover exemption
derived by making an investment in a residential
house out of gains from sale of residential house or
other long term capital assets is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that exemption is available for
investment made in only one residential house
situated in India.
A few judgements overruled are:
o Gita Duggal case (2013) 257 CTR
208 (Del)
o CIT v. Syed Ali Adil (AP)(HC) (2013) 260
CTR 219,
o CIT vs. D. Ananda Basappa 309 ITR
329 (Kar.),
o Mr. Vinay Mishra vs ACIT (ITAT) ITA
195/Bang/ 2012 & 124/Bang/2012
o Mrs. Prema P. Shah and Sanjiv P Shah
Vs. ITO Mumbai ITAT
Similarly, exemption derived by making an
investment in certain bonds out of gains arising from
transfer of long term capital asset is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that a maximum exemption of
` 5 million will be available per transfer.
A few judgments overruled are:
o Ms. Shantabai V. Kamat vs CIT (Panaji
ITAT) ITA NO. 10/PNJ/2013
o Shri Aspi Ginwala Vs ACIT -
ITANo.3226/ Ahd/2011 &
ITA No.3227/Ahd/2011
o Shri Vivek Jairazbhoy vs DCIT,
(International Taxation) -
I.T.A. No.236/Bang/2012
From 1 April 2014, amount of compensation
received in pursuance of an interim order of the
court, tribunal or other authority will be taxed under
the head capital gains in the previous year in which
the final order of such court is passed.
From 1 April 2014, transfer of Government
securities outside India by one non-resident to
another will not be a transfer for capital gains and
hence, will not be taxable.
Transfer Pricing
Deeming fiction provisions in transfer pricing
regulations covers transactions with unrelated
parties too. It is clarified that such an unrelated party
need not be a non-resident.
Finance Minister, in his speech, has proposed
to align transfer-pricing regulations with the global
practices by introducing the concept of range (may
be inter quartile range) and usage of multiple year
data for computation of arms length price.
However, arithmetic mean will continue where
comparables are inadequate. These proposals may
be implemented by way of Rules.
A rollback provision has been introduced
wherein taxpayer has an option to adopt the price
agreed in the Advance Pricing Agreement scheme to
similar transactions for past 4 years. This will help to
resolve the litigations of past years.
From 1 October 2014, a transfer-pricing
officer will be empowered to levy penalty for
non-furnishing of the prescribed transfer pricing
documents.
Withholding Tax
Tax at 2% will be withheld on payouts
(including bonus) under life insurance policies not
entitled to exemption. However, such withholding
will be applicable only when total payment in
financial year to the taxpayer is ` 100,000 or more.
Currently interest on foreign currency loans
availed and long term infrastructure bonds issued by
an Indian company is subject to a lower withholding
of 5%. This benefit is now extended to all long-term
bonds. Further, this will be applicable to borrowings
before 1 July 2017 and the recipient need not furnish
its PAN in case of infrastructure bonds.
Hitherto, the rectification of e-TDS return and
its processing was as per the notification issued by
the CBDT. With effect from 1 October 2014, a
specific provision has been brought in to formalize
the same.
From 1 October 2014, the time limit for
passing an order treating a taxpayer as assessee in
default, for failure to withhold or pay the taxes
withheld, has been increased to seven years from
the end of financial year to which default relates.
From 1 October 2014, an assessing officer
will be empowered to levy penalty for failure to
furnish or for furnishing incorrect statement of taxes
withheld or collected.
Dividends
From 1 April 2014, concessional tax on gross
dividends received by an Indian company from
specified foreign company will not have any sunset
date. The amendment is made with a view to
encourage the repatriation of income earned by
Indian companies from investments made abroad.
From 1 October 2014, the amount of dividend
available for distribution by domestic companies to
its shareholders will have to be grossed up for the
purpose of computing the tax on distributed profits.
This will marginally increase the outflow of tax on
distributed profits.
From 1 October 2014, the amount of income
available for distribution by the mutual fund to the
unit holders will have to be grossed up for the
purpose of computing the additional income tax.
This will marginally increase the outflow of tax on
distributed income.
Alternative Minimum Tax
Alternative minimum tax being levied on
certain persons other than a company has been now
extended to taxpayers claiming deduction of capital
expenditure in respect of specified business such as
cold chain facility, warehousing facility, building and
operating hotels/hospitals etc. From 1 April 2014, in
computing adjusted total income for alternative
minimum tax, such deductions have to be added
back to the total income.
Charitable Trust And Other Institutions
Under Section 10(23C)
Following amendments are proposed with effect
from 1 April 2014:
Any charitable and religious trust approved by
the Commissioner of Income Tax and availing
exemption of its income cannot claim any other
exemption except agricultural income or exemption
specified pertaining to university, hospital,
educational institution or institution established for
charitable or public religious purposes.
In computing the application/accumulation of
income of charitable trusts or other specified
institutions, depreciation allowance in respect of
asset, acquisition of which has been claimed as
application of income in the year of acquisition or
any other year, should not be considered.
Income received on behalf of any university or
other educational institution or hospital is exempt
provided it is not operating for profit and is wholly or
substantially financed by the Government. The
absence of an appropriate definition of substantially
financed by the Government led to a lot of
litigations. From 1 April 2014 a threshold percentage
of total receipts from the Government will be
specified.
Following amendments are proposed with effect
from 1 October 2014:
If trusts or institutions are approved by a
Commissioner of Income Tax for exemption of its
income, the said benefit of this exemption will be
available for the assessment years for which
proceedings are ongoing as on the date of
registration, provided the objects and activities of
the trusts or institution remains the same. Further,
the Assessing Officer cannot reopen any
assessment for escapement of income only for the
reason that registration is not obtained.
Commissioner of Income Tax can cancel the
registration of the trust or institution on the following
additional grounds:
o its income does not inure to the
benefit of general public;
o it is for benefit of any particular
religious community or caste;
o any income or property of the trust is
applied for benefit of specified persons
like author of trust, trustees etc.; or
o its funds are invested in
prohibited modes,
However, the trust or institution proves that there
was a reasonable cause for the activities to be
carried out in the above manner then its registration
will not be cancelled.
Business Trusts From 1 October 2014
Business Trusts includes new categories of
investment vehicles viz., the Real Estate Investment
Trusts (REIT) and Infrastructure Investment Trust
(InvIT). These investment vehicles require creation of
trust, recognition from SEBI and compulsory listing
on a recognized stock exchange in India. These
trusts will have to raise capital through issue of units
or through debt and acquire a controlling stake in
Special Purpose Vehicles (SPV) having income
bearing assets, which mainly focus on infrastructure
projects awarded through Public Private Partnership
(PPP) model.
It is proposed to give these business trusts a
formal recognition and confer benefits on them. The
following key proposals have been mooted:
(a) Transfer of shares of SPV to business
trust in exchange of units by sponsors will not
be taxable capital gain transfer.
(b) The period of holding of units in
business trust will also include the holding
period of shares held in the SPV for the unit
holder and the cost of the units will be the
cost incurred for acquiring the shares in the
SPV for the purpose of capital gain taxation.
(c) The units of the business trust are
subject to Securities Transaction Tax (STT);
hence, the resultant long-term capital gain on
transfer of units will be exempt from tax and
short-term capital gain will be at a
concessional tax rate of 15%. Such benefit
will not be available to units sold by sponsors
who have acquired such units in exchange of
shares in SPV.
(d) The interest and dividend received by a
business trust from an SPV will be exempt
from tax; capital gains in the hands of a
business trust will be taxed at the
concessional rate for capital gain transactions
and other income will be charged to tax at the
maximum marginal rate.
(e) SPV will be subjected to Dividend
Distribution Tax (DDT) on distribution of
dividend to business trust.
(f) The SPV is not obligated to withhold
tax on such payment of interest to the
business trust.
(g) Interest income received by the
business trust from SPV and distributed to the
unit holders will be subject to withholding tax
at 10% for resident unit holders and 5% for
non-resident unit holders.
(h) Income other than interest received
from SPV and distributed to unit holders will
be exempt from tax.
(i) Interest paid to non-residents in
relation to External Commercial Borrowings
(ECB) by the business trust will be subjected
to withholding tax at 5%.
(j) Business trusts will have to file income
tax returns and periodic statements of income
distributed to unit holders.
Search, Survey And Power To Call
For Information:
From 1 October 2014, tax authorities will be
empowered to conduct surveys to ensure proper
compliance of withholding tax regulations. They will
have the power to verify books of accounts,
documents, check cash, stock and other required
information. Books of accounts may also be
impounded and seized for a certain period.
In the course of search proceedings, if an
assessing officer seizes documents, valuables etc.
belonging to another taxpayer, the assessing officer
is duty bound to handover the seized material to the
assessing officer having jurisdiction over such other
taxpayer. The assessing officer receiving the seized
material shall, before initiating the assessment
proceedings, record his belief that the seized
material has a bearing to enhance the income of the
other taxpayer.
From 1 October 2014, when tax authorities
receive information from any source relating to any
taxpayer, they can issue notice to such taxpayer and
call for prescribed details for their verification.
Reference To Valuation Officer
Assessing officers can make reference to
valuation officer even if the books of a taxpayer are
correct and complete. The Valuation Officer will have
to complete valuation within six months and will be
empowered to do the best judgment valuation.
On receipt of a report from the valuation
officer, the assessing officer shall give an opportunity
of being heard to the taxpayer before completing the
assessment based on said valuation report.
Time period for valuation will be excluded
from time limit for completion of assessment.
Recovery Of Demand
In cases where notice of demand is served
and the same is disputed, the demand will be
continued to be treated as valid till the disposal of
appeal. This will be effective from 1 October 2014.
When a demand raised is reduced as a result
of an order of higher authorities and due to the
subsequent order the demand is increased then the
interest payable for non-payment of the demand
within the time period mentioned in the demand
notice would be computed from the day immediately
following the period mentioned in first demand
notice to the day on which demand is paid. This will
be effective from 1 October 2014.
Statement Of Financial Transaction
Or Reportable Account
Currently, certain specified persons are
required to furnish an annual information return in
respect of specified financial transactions registered
or recorded by them. Following changes are
proposed with effect from 1 April 2015:
o It is proposed to replace the annual
information return by a statement of
financial transaction or reportable
account.
o Further, it is proposed to include
prescribed reporting financial
institution under the list of specified
persons.
o The time line for rectifying a defect in
the statement furnished on receipt of
intimation from tax authority and for
furnishing the statement in response to
a notice is proposed to be reduced to
thirty days.
o On discovering any inaccuracy in the
statement furnished, the specified
person shall within a period of ten days
inform the authority and furnish the
correct information.
O If the prescribed reporting financial
institution provides inaccurate
information either deliberately or due
to non-compliance with the prescribed
due diligence or does not inform about
the inaccuracies within the specified
time, a penalty of ` 50,000 would be
levied.
Deduction
From 1 April 2014, with the intention of
encouraging the household savings, the deduction
available for sum paid by an Individual or Hindu
Undivided Family towards certain specified
instruments viz., life insurance premia, contribution
to public provident fund, scheme for deferred
annuities etc. has been increased from ` 100,000 to
` 150,000
Sunset date for claiming profit-linked
deduction by power companies extended from 31
March 2014 to 31 March 2017.
From 1 April 2014, the limit for deduction of
interest payment on housing loan in respect of
self-occupied property will be increased from
` 150,000 to ` 200,000
Business or Profession
From 1 April 2014, expenses incurred on
Corporate Social Responsibility will not be allowed
as business expenditure. Consequently, no tax
break will be available on such expenditure.
An investment-linked deduction of 15% is
available to corporate manufacturers for investment
in plant and machinery. The minimum investment
has been reduced to ` 25 crores (` 0.25 billion) and
will be available in the year(s) of investment from
1 April 2014 to 31 March 2017.
From 1 April 2014, deduction of certain
capital expenditure incurred on
o laying and operating a slurry pipeline
for transportation of iron ore and
o setting up and operating a
semiconductor wafer fabrication
manufacturing unit notified by
the CBDT.
will be available. This is however subject to a
condition that the asset on which such deduction is
claimed is used in the said business for 8 years
beginning with the previous year in which the asset
is acquired or capitalised. This deduction is not
D
i
r
e
c
t

T
a
x
available to the SEZ units, which are eligible and
have opted for tax holidays and vice versa.
Payments to non-residents which are liable to
withholding tax are allowed as a deduction only if the
withholding taxes are discharged strictly within the
prescribed due dates. From 1 April 2014, it is
proposed to allow such expenses provided, the
withholding taxes are discharged before the due
date of filing the return.
From 1 April 2014, where taxes are not
withheld or not remitted on any payments (including
salary) to residents liable to withholding,
disallowance will be restricted to 30% of such
payment.
Retrospectively from 1 April 2013, trading in
commodity derivatives in a recognized association
and chargeable to commodities transaction tax will
not be a speculative transaction.
From 1 April 2014, income of a taxpayer
engaged in the business of hiring, plying or leasing
goods carriage, will be higher of ` 7,500 for every
month or part of month during which the goods
carriage is owned by the taxpayer or the actual
income.
Capital Gains
As an industry friendly measure, the definition
of capital assets is being changed from 1 April 2014.
Capital assets will include any securities held by FII
in accordance with the regulations under SEBI Act.
Thus, income arising on transfer of such securities
will be taxable as Capital Gains/Loss.
From 1 April 2014, unlisted securities and
units of debt oriented mutual fund will be a long term
capital asset only if it is held for more than 36 months
as against the existing 12 months.
From 1 April 2014, beneficial tax rate of 10 per
cent on long-term capital gains computed before
giving effect to indexation adjustment will not be
available to mutual funds. Thus, these will now be
taxable at the regular rate of 20%.
From 1 April 2014, where an advance
received for transfer of a capital asset is forfeited, it
will be taxed as income from other sources. The
existing facility of deducting such amount from the
cost of acquisition has been dispensed with.
To overrule various judicial precedents and to
avoid continuing litigation, rollover exemption
derived by making an investment in a residential
house out of gains from sale of residential house or
other long term capital assets is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that exemption is available for
investment made in only one residential house
situated in India.
A few judgements overruled are:
o Gita Duggal case (2013) 257 CTR
208 (Del)
o CIT v. Syed Ali Adil (AP)(HC) (2013) 260
CTR 219,
o CIT vs. D. Ananda Basappa 309 ITR
329 (Kar.),
o Mr. Vinay Mishra vs ACIT (ITAT) ITA
195/Bang/ 2012 & 124/Bang/2012
o Mrs. Prema P. Shah and Sanjiv P Shah
Vs. ITO Mumbai ITAT
Similarly, exemption derived by making an
investment in certain bonds out of gains arising from
transfer of long term capital asset is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that a maximum exemption of
` 5 million will be available per transfer.
A few judgments overruled are:
o Ms. Shantabai V. Kamat vs CIT (Panaji
ITAT) ITA NO. 10/PNJ/2013
o Shri Aspi Ginwala Vs ACIT -
ITANo.3226/ Ahd/2011 &
ITA No.3227/Ahd/2011
o Shri Vivek Jairazbhoy vs DCIT,
(International Taxation) -
I.T.A. No.236/Bang/2012
From 1 April 2014, amount of compensation
received in pursuance of an interim order of the
court, tribunal or other authority will be taxed under
the head capital gains in the previous year in which
the final order of such court is passed.
From 1 April 2014, transfer of Government
securities outside India by one non-resident to
another will not be a transfer for capital gains and
hence, will not be taxable.
Transfer Pricing
Deeming fiction provisions in transfer pricing
regulations covers transactions with unrelated
parties too. It is clarified that such an unrelated party
need not be a non-resident.
Finance Minister, in his speech, has proposed
to align transfer-pricing regulations with the global
practices by introducing the concept of range (may
be inter quartile range) and usage of multiple year
data for computation of arms length price.
However, arithmetic mean will continue where
comparables are inadequate. These proposals may
be implemented by way of Rules.
A rollback provision has been introduced
wherein taxpayer has an option to adopt the price
agreed in the Advance Pricing Agreement scheme to
similar transactions for past 4 years. This will help to
resolve the litigations of past years.
From 1 October 2014, a transfer-pricing
officer will be empowered to levy penalty for
non-furnishing of the prescribed transfer pricing
documents.
Withholding Tax
Tax at 2% will be withheld on payouts
(including bonus) under life insurance policies not
entitled to exemption. However, such withholding
will be applicable only when total payment in
financial year to the taxpayer is ` 100,000 or more.
Currently interest on foreign currency loans
availed and long term infrastructure bonds issued by
an Indian company is subject to a lower withholding
of 5%. This benefit is now extended to all long-term
bonds. Further, this will be applicable to borrowings
before 1 July 2017 and the recipient need not furnish
its PAN in case of infrastructure bonds.
Hitherto, the rectification of e-TDS return and
its processing was as per the notification issued by
the CBDT. With effect from 1 October 2014, a
specific provision has been brought in to formalize
the same.
From 1 October 2014, the time limit for
passing an order treating a taxpayer as assessee in
default, for failure to withhold or pay the taxes
withheld, has been increased to seven years from
the end of financial year to which default relates.
From 1 October 2014, an assessing officer
will be empowered to levy penalty for failure to
furnish or for furnishing incorrect statement of taxes
withheld or collected.
Dividends
From 1 April 2014, concessional tax on gross
dividends received by an Indian company from
specified foreign company will not have any sunset
date. The amendment is made with a view to
encourage the repatriation of income earned by
Indian companies from investments made abroad.
From 1 October 2014, the amount of dividend
available for distribution by domestic companies to
its shareholders will have to be grossed up for the
purpose of computing the tax on distributed profits.
This will marginally increase the outflow of tax on
distributed profits.
From 1 October 2014, the amount of income
available for distribution by the mutual fund to the
unit holders will have to be grossed up for the
purpose of computing the additional income tax.
This will marginally increase the outflow of tax on
distributed income.
Alternative Minimum Tax
Alternative minimum tax being levied on
certain persons other than a company has been now
extended to taxpayers claiming deduction of capital
expenditure in respect of specified business such as
cold chain facility, warehousing facility, building and
operating hotels/hospitals etc. From 1 April 2014, in
computing adjusted total income for alternative
minimum tax, such deductions have to be added
back to the total income.
Charitable Trust And Other Institutions
Under Section 10(23C)
Following amendments are proposed with effect
from 1 April 2014:
Any charitable and religious trust approved by
the Commissioner of Income Tax and availing
exemption of its income cannot claim any other
exemption except agricultural income or exemption
specified pertaining to university, hospital,
educational institution or institution established for
charitable or public religious purposes.
In computing the application/accumulation of
income of charitable trusts or other specified
institutions, depreciation allowance in respect of
asset, acquisition of which has been claimed as
application of income in the year of acquisition or
any other year, should not be considered.
Income received on behalf of any university or
other educational institution or hospital is exempt
provided it is not operating for profit and is wholly or
substantially financed by the Government. The
absence of an appropriate definition of substantially
financed by the Government led to a lot of
litigations. From 1 April 2014 a threshold percentage
of total receipts from the Government will be
specified.
Following amendments are proposed with effect
from 1 October 2014:
If trusts or institutions are approved by a
Commissioner of Income Tax for exemption of its
income, the said benefit of this exemption will be
available for the assessment years for which
proceedings are ongoing as on the date of
registration, provided the objects and activities of
the trusts or institution remains the same. Further,
the Assessing Officer cannot reopen any
assessment for escapement of income only for the
reason that registration is not obtained.
Commissioner of Income Tax can cancel the
registration of the trust or institution on the following
additional grounds:
o its income does not inure to the
benefit of general public;
o it is for benefit of any particular
religious community or caste;
o any income or property of the trust is
applied for benefit of specified persons
like author of trust, trustees etc.; or
o its funds are invested in
prohibited modes,
However, the trust or institution proves that there
was a reasonable cause for the activities to be
carried out in the above manner then its registration
will not be cancelled.
Business Trusts From 1 October 2014
Business Trusts includes new categories of
investment vehicles viz., the Real Estate Investment
Trusts (REIT) and Infrastructure Investment Trust
(InvIT). These investment vehicles require creation of
trust, recognition from SEBI and compulsory listing
on a recognized stock exchange in India. These
trusts will have to raise capital through issue of units
or through debt and acquire a controlling stake in
Special Purpose Vehicles (SPV) having income
bearing assets, which mainly focus on infrastructure
projects awarded through Public Private Partnership
(PPP) model.
It is proposed to give these business trusts a
formal recognition and confer benefits on them. The
following key proposals have been mooted:
(a) Transfer of shares of SPV to business
trust in exchange of units by sponsors will not
be taxable capital gain transfer.
(b) The period of holding of units in
business trust will also include the holding
period of shares held in the SPV for the unit
holder and the cost of the units will be the
cost incurred for acquiring the shares in the
SPV for the purpose of capital gain taxation.
(c) The units of the business trust are
subject to Securities Transaction Tax (STT);
hence, the resultant long-term capital gain on
transfer of units will be exempt from tax and
short-term capital gain will be at a
concessional tax rate of 15%. Such benefit
will not be available to units sold by sponsors
who have acquired such units in exchange of
shares in SPV.
(d) The interest and dividend received by a
business trust from an SPV will be exempt
from tax; capital gains in the hands of a
business trust will be taxed at the
concessional rate for capital gain transactions
and other income will be charged to tax at the
maximum marginal rate.
(e) SPV will be subjected to Dividend
Distribution Tax (DDT) on distribution of
dividend to business trust.
(f) The SPV is not obligated to withhold
tax on such payment of interest to the
business trust.
(g) Interest income received by the
business trust from SPV and distributed to the
unit holders will be subject to withholding tax
at 10% for resident unit holders and 5% for
non-resident unit holders.
(h) Income other than interest received
from SPV and distributed to unit holders will
be exempt from tax.
(i) Interest paid to non-residents in
relation to External Commercial Borrowings
(ECB) by the business trust will be subjected
to withholding tax at 5%.
(j) Business trusts will have to file income
tax returns and periodic statements of income
distributed to unit holders.
Search, Survey And Power To Call
For Information:
From 1 October 2014, tax authorities will be
empowered to conduct surveys to ensure proper
compliance of withholding tax regulations. They will
have the power to verify books of accounts,
documents, check cash, stock and other required
information. Books of accounts may also be
impounded and seized for a certain period.
In the course of search proceedings, if an
assessing officer seizes documents, valuables etc.
belonging to another taxpayer, the assessing officer
is duty bound to handover the seized material to the
assessing officer having jurisdiction over such other
taxpayer. The assessing officer receiving the seized
material shall, before initiating the assessment
proceedings, record his belief that the seized
material has a bearing to enhance the income of the
other taxpayer.
From 1 October 2014, when tax authorities
receive information from any source relating to any
taxpayer, they can issue notice to such taxpayer and
call for prescribed details for their verification.
Reference To Valuation Officer
Assessing officers can make reference to
valuation officer even if the books of a taxpayer are
correct and complete. The Valuation Officer will have
to complete valuation within six months and will be
empowered to do the best judgment valuation.
On receipt of a report from the valuation
officer, the assessing officer shall give an opportunity
of being heard to the taxpayer before completing the
assessment based on said valuation report.
Time period for valuation will be excluded
from time limit for completion of assessment.
Recovery Of Demand
In cases where notice of demand is served
and the same is disputed, the demand will be
continued to be treated as valid till the disposal of
appeal. This will be effective from 1 October 2014.
When a demand raised is reduced as a result
of an order of higher authorities and due to the
subsequent order the demand is increased then the
interest payable for non-payment of the demand
within the time period mentioned in the demand
notice would be computed from the day immediately
following the period mentioned in first demand
notice to the day on which demand is paid. This will
be effective from 1 October 2014.
Statement Of Financial Transaction
Or Reportable Account
Currently, certain specified persons are
required to furnish an annual information return in
respect of specified financial transactions registered
or recorded by them. Following changes are
proposed with effect from 1 April 2015:
o It is proposed to replace the annual
information return by a statement of
financial transaction or reportable
account.
o Further, it is proposed to include
prescribed reporting financial
institution under the list of specified
persons.
o The time line for rectifying a defect in
the statement furnished on receipt of
intimation from tax authority and for
furnishing the statement in response to
a notice is proposed to be reduced to
thirty days.
o On discovering any inaccuracy in the
statement furnished, the specified
person shall within a period of ten days
inform the authority and furnish the
correct information.
O If the prescribed reporting financial
institution provides inaccurate
information either deliberately or due
to non-compliance with the prescribed
due diligence or does not inform about
the inaccuracies within the specified
time, a penalty of ` 50,000 would be
levied.
Deduction
From 1 April 2014, with the intention of
encouraging the household savings, the deduction
available for sum paid by an Individual or Hindu
Undivided Family towards certain specified
instruments viz., life insurance premia, contribution
to public provident fund, scheme for deferred
annuities etc. has been increased from ` 100,000 to
` 150,000
Sunset date for claiming profit-linked
deduction by power companies extended from 31
March 2014 to 31 March 2017.
From 1 April 2014, the limit for deduction of
interest payment on housing loan in respect of
self-occupied property will be increased from
` 150,000 to ` 200,000
Business or Profession
From 1 April 2014, expenses incurred on
Corporate Social Responsibility will not be allowed
as business expenditure. Consequently, no tax
break will be available on such expenditure.
An investment-linked deduction of 15% is
available to corporate manufacturers for investment
in plant and machinery. The minimum investment
has been reduced to ` 25 crores (` 0.25 billion) and
will be available in the year(s) of investment from
1 April 2014 to 31 March 2017.
From 1 April 2014, deduction of certain
capital expenditure incurred on
o laying and operating a slurry pipeline
for transportation of iron ore and
o setting up and operating a
semiconductor wafer fabrication
manufacturing unit notified by
the CBDT.
will be available. This is however subject to a
condition that the asset on which such deduction is
claimed is used in the said business for 8 years
beginning with the previous year in which the asset
is acquired or capitalised. This deduction is not
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T
a
x
available to the SEZ units, which are eligible and
have opted for tax holidays and vice versa.
Payments to non-residents which are liable to
withholding tax are allowed as a deduction only if the
withholding taxes are discharged strictly within the
prescribed due dates. From 1 April 2014, it is
proposed to allow such expenses provided, the
withholding taxes are discharged before the due
date of filing the return.
From 1 April 2014, where taxes are not
withheld or not remitted on any payments (including
salary) to residents liable to withholding,
disallowance will be restricted to 30% of such
payment.
Retrospectively from 1 April 2013, trading in
commodity derivatives in a recognized association
and chargeable to commodities transaction tax will
not be a speculative transaction.
From 1 April 2014, income of a taxpayer
engaged in the business of hiring, plying or leasing
goods carriage, will be higher of ` 7,500 for every
month or part of month during which the goods
carriage is owned by the taxpayer or the actual
income.
Capital Gains
As an industry friendly measure, the definition
of capital assets is being changed from 1 April 2014.
Capital assets will include any securities held by FII
in accordance with the regulations under SEBI Act.
Thus, income arising on transfer of such securities
will be taxable as Capital Gains/Loss.
From 1 April 2014, unlisted securities and
units of debt oriented mutual fund will be a long term
capital asset only if it is held for more than 36 months
as against the existing 12 months.
From 1 April 2014, beneficial tax rate of 10 per
cent on long-term capital gains computed before
giving effect to indexation adjustment will not be
available to mutual funds. Thus, these will now be
taxable at the regular rate of 20%.
From 1 April 2014, where an advance
received for transfer of a capital asset is forfeited, it
will be taxed as income from other sources. The
existing facility of deducting such amount from the
cost of acquisition has been dispensed with.
To overrule various judicial precedents and to
avoid continuing litigation, rollover exemption
derived by making an investment in a residential
house out of gains from sale of residential house or
other long term capital assets is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that exemption is available for
investment made in only one residential house
situated in India.
A few judgements overruled are:
o Gita Duggal case (2013) 257 CTR
208 (Del)
o CIT v. Syed Ali Adil (AP)(HC) (2013) 260
CTR 219,
o CIT vs. D. Ananda Basappa 309 ITR
329 (Kar.),
o Mr. Vinay Mishra vs ACIT (ITAT) ITA
195/Bang/ 2012 & 124/Bang/2012
o Mrs. Prema P. Shah and Sanjiv P Shah
Vs. ITO Mumbai ITAT
Similarly, exemption derived by making an
investment in certain bonds out of gains arising from
transfer of long term capital asset is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that a maximum exemption of
` 5 million will be available per transfer.
A few judgments overruled are:
o Ms. Shantabai V. Kamat vs CIT (Panaji
ITAT) ITA NO. 10/PNJ/2013
o Shri Aspi Ginwala Vs ACIT -
ITANo.3226/ Ahd/2011 &
ITA No.3227/Ahd/2011
o Shri Vivek Jairazbhoy vs DCIT,
(International Taxation) -
I.T.A. No.236/Bang/2012
From 1 April 2014, amount of compensation
received in pursuance of an interim order of the
court, tribunal or other authority will be taxed under
the head capital gains in the previous year in which
the final order of such court is passed.
From 1 April 2014, transfer of Government
securities outside India by one non-resident to
another will not be a transfer for capital gains and
hence, will not be taxable.
Transfer Pricing
Deeming fiction provisions in transfer pricing
regulations covers transactions with unrelated
parties too. It is clarified that such an unrelated party
need not be a non-resident.
Finance Minister, in his speech, has proposed
to align transfer-pricing regulations with the global
practices by introducing the concept of range (may
be inter quartile range) and usage of multiple year
data for computation of arms length price.
However, arithmetic mean will continue where
comparables are inadequate. These proposals may
be implemented by way of Rules.
A rollback provision has been introduced
wherein taxpayer has an option to adopt the price
agreed in the Advance Pricing Agreement scheme to
similar transactions for past 4 years. This will help to
resolve the litigations of past years.
From 1 October 2014, a transfer-pricing
officer will be empowered to levy penalty for
non-furnishing of the prescribed transfer pricing
documents.
Withholding Tax
Tax at 2% will be withheld on payouts
(including bonus) under life insurance policies not
entitled to exemption. However, such withholding
will be applicable only when total payment in
financial year to the taxpayer is ` 100,000 or more.
Currently interest on foreign currency loans
availed and long term infrastructure bonds issued by
an Indian company is subject to a lower withholding
of 5%. This benefit is now extended to all long-term
bonds. Further, this will be applicable to borrowings
before 1 July 2017 and the recipient need not furnish
its PAN in case of infrastructure bonds.
Hitherto, the rectification of e-TDS return and
its processing was as per the notification issued by
the CBDT. With effect from 1 October 2014, a
specific provision has been brought in to formalize
the same.
From 1 October 2014, the time limit for
passing an order treating a taxpayer as assessee in
default, for failure to withhold or pay the taxes
withheld, has been increased to seven years from
the end of financial year to which default relates.
From 1 October 2014, an assessing officer
will be empowered to levy penalty for failure to
furnish or for furnishing incorrect statement of taxes
withheld or collected.
Dividends
From 1 April 2014, concessional tax on gross
dividends received by an Indian company from
specified foreign company will not have any sunset
date. The amendment is made with a view to
encourage the repatriation of income earned by
Indian companies from investments made abroad.
From 1 October 2014, the amount of dividend
available for distribution by domestic companies to
its shareholders will have to be grossed up for the
purpose of computing the tax on distributed profits.
This will marginally increase the outflow of tax on
distributed profits.
From 1 October 2014, the amount of income
available for distribution by the mutual fund to the
unit holders will have to be grossed up for the
purpose of computing the additional income tax.
This will marginally increase the outflow of tax on
distributed income.
Alternative Minimum Tax
Alternative minimum tax being levied on
certain persons other than a company has been now
extended to taxpayers claiming deduction of capital
expenditure in respect of specified business such as
cold chain facility, warehousing facility, building and
operating hotels/hospitals etc. From 1 April 2014, in
computing adjusted total income for alternative
minimum tax, such deductions have to be added
back to the total income.
Charitable Trust And Other Institutions
Under Section 10(23C)
Following amendments are proposed with effect
from 1 April 2014:
Any charitable and religious trust approved by
the Commissioner of Income Tax and availing
exemption of its income cannot claim any other
exemption except agricultural income or exemption
specified pertaining to university, hospital,
educational institution or institution established for
charitable or public religious purposes.
In computing the application/accumulation of
income of charitable trusts or other specified
institutions, depreciation allowance in respect of
asset, acquisition of which has been claimed as
application of income in the year of acquisition or
any other year, should not be considered.
Income received on behalf of any university or
other educational institution or hospital is exempt
provided it is not operating for profit and is wholly or
substantially financed by the Government. The
absence of an appropriate definition of substantially
financed by the Government led to a lot of
litigations. From 1 April 2014 a threshold percentage
of total receipts from the Government will be
specified.
Following amendments are proposed with effect
from 1 October 2014:
If trusts or institutions are approved by a
Commissioner of Income Tax for exemption of its
income, the said benefit of this exemption will be
available for the assessment years for which
proceedings are ongoing as on the date of
registration, provided the objects and activities of
the trusts or institution remains the same. Further,
the Assessing Officer cannot reopen any
assessment for escapement of income only for the
reason that registration is not obtained.
Commissioner of Income Tax can cancel the
registration of the trust or institution on the following
additional grounds:
o its income does not inure to the
benefit of general public;
o it is for benefit of any particular
religious community or caste;
o any income or property of the trust is
applied for benefit of specified persons
like author of trust, trustees etc.; or
o its funds are invested in
prohibited modes,
However, the trust or institution proves that there
was a reasonable cause for the activities to be
carried out in the above manner then its registration
will not be cancelled.
Business Trusts From 1 October 2014
Business Trusts includes new categories of
investment vehicles viz., the Real Estate Investment
Trusts (REIT) and Infrastructure Investment Trust
(InvIT). These investment vehicles require creation of
trust, recognition from SEBI and compulsory listing
on a recognized stock exchange in India. These
trusts will have to raise capital through issue of units
or through debt and acquire a controlling stake in
Special Purpose Vehicles (SPV) having income
bearing assets, which mainly focus on infrastructure
projects awarded through Public Private Partnership
(PPP) model.
It is proposed to give these business trusts a
formal recognition and confer benefits on them. The
following key proposals have been mooted:
(a) Transfer of shares of SPV to business
trust in exchange of units by sponsors will not
be taxable capital gain transfer.
(b) The period of holding of units in
business trust will also include the holding
period of shares held in the SPV for the unit
holder and the cost of the units will be the
cost incurred for acquiring the shares in the
SPV for the purpose of capital gain taxation.
(c) The units of the business trust are
subject to Securities Transaction Tax (STT);
hence, the resultant long-term capital gain on
transfer of units will be exempt from tax and
short-term capital gain will be at a
concessional tax rate of 15%. Such benefit
will not be available to units sold by sponsors
who have acquired such units in exchange of
shares in SPV.
(d) The interest and dividend received by a
business trust from an SPV will be exempt
from tax; capital gains in the hands of a
business trust will be taxed at the
concessional rate for capital gain transactions
and other income will be charged to tax at the
maximum marginal rate.
(e) SPV will be subjected to Dividend
Distribution Tax (DDT) on distribution of
dividend to business trust.
(f) The SPV is not obligated to withhold
tax on such payment of interest to the
business trust.
(g) Interest income received by the
business trust from SPV and distributed to the
unit holders will be subject to withholding tax
at 10% for resident unit holders and 5% for
non-resident unit holders.
(h) Income other than interest received
from SPV and distributed to unit holders will
be exempt from tax.
(i) Interest paid to non-residents in
relation to External Commercial Borrowings
(ECB) by the business trust will be subjected
to withholding tax at 5%.
(j) Business trusts will have to file income
tax returns and periodic statements of income
distributed to unit holders.
Search, Survey And Power To Call
For Information:
From 1 October 2014, tax authorities will be
empowered to conduct surveys to ensure proper
compliance of withholding tax regulations. They will
have the power to verify books of accounts,
documents, check cash, stock and other required
information. Books of accounts may also be
impounded and seized for a certain period.
In the course of search proceedings, if an
assessing officer seizes documents, valuables etc.
belonging to another taxpayer, the assessing officer
is duty bound to handover the seized material to the
assessing officer having jurisdiction over such other
taxpayer. The assessing officer receiving the seized
material shall, before initiating the assessment
proceedings, record his belief that the seized
material has a bearing to enhance the income of the
other taxpayer.
From 1 October 2014, when tax authorities
receive information from any source relating to any
taxpayer, they can issue notice to such taxpayer and
call for prescribed details for their verification.
Reference To Valuation Officer
Assessing officers can make reference to
valuation officer even if the books of a taxpayer are
correct and complete. The Valuation Officer will have
to complete valuation within six months and will be
empowered to do the best judgment valuation.
On receipt of a report from the valuation
officer, the assessing officer shall give an opportunity
of being heard to the taxpayer before completing the
assessment based on said valuation report.
Time period for valuation will be excluded
from time limit for completion of assessment.
Recovery Of Demand
In cases where notice of demand is served
and the same is disputed, the demand will be
continued to be treated as valid till the disposal of
appeal. This will be effective from 1 October 2014.
When a demand raised is reduced as a result
of an order of higher authorities and due to the
subsequent order the demand is increased then the
interest payable for non-payment of the demand
within the time period mentioned in the demand
notice would be computed from the day immediately
following the period mentioned in first demand
notice to the day on which demand is paid. This will
be effective from 1 October 2014.
Statement Of Financial Transaction
Or Reportable Account
Currently, certain specified persons are
required to furnish an annual information return in
respect of specified financial transactions registered
or recorded by them. Following changes are
proposed with effect from 1 April 2015:
o It is proposed to replace the annual
information return by a statement of
financial transaction or reportable
account.
o Further, it is proposed to include
prescribed reporting financial
institution under the list of specified
persons.
o The time line for rectifying a defect in
the statement furnished on receipt of
intimation from tax authority and for
furnishing the statement in response to
a notice is proposed to be reduced to
thirty days.
o On discovering any inaccuracy in the
statement furnished, the specified
person shall within a period of ten days
inform the authority and furnish the
correct information.
O If the prescribed reporting financial
institution provides inaccurate
information either deliberately or due
to non-compliance with the prescribed
due diligence or does not inform about
the inaccuracies within the specified
time, a penalty of ` 50,000 would be
levied.
Deduction
From 1 April 2014, with the intention of
encouraging the household savings, the deduction
available for sum paid by an Individual or Hindu
Undivided Family towards certain specified
instruments viz., life insurance premia, contribution
to public provident fund, scheme for deferred
annuities etc. has been increased from ` 100,000 to
` 150,000
Sunset date for claiming profit-linked
deduction by power companies extended from 31
March 2014 to 31 March 2017.
From 1 April 2014, the limit for deduction of
interest payment on housing loan in respect of
self-occupied property will be increased from
` 150,000 to ` 200,000
Business or Profession
From 1 April 2014, expenses incurred on
Corporate Social Responsibility will not be allowed
as business expenditure. Consequently, no tax
break will be available on such expenditure.
An investment-linked deduction of 15% is
available to corporate manufacturers for investment
in plant and machinery. The minimum investment
has been reduced to ` 25 crores (` 0.25 billion) and
will be available in the year(s) of investment from
1 April 2014 to 31 March 2017.
From 1 April 2014, deduction of certain
capital expenditure incurred on
o laying and operating a slurry pipeline
for transportation of iron ore and
o setting up and operating a
semiconductor wafer fabrication
manufacturing unit notified by
the CBDT.
will be available. This is however subject to a
condition that the asset on which such deduction is
claimed is used in the said business for 8 years
beginning with the previous year in which the asset
is acquired or capitalised. This deduction is not
D
i
r
e
c
t

T
a
x
available to the SEZ units, which are eligible and
have opted for tax holidays and vice versa.
Payments to non-residents which are liable to
withholding tax are allowed as a deduction only if the
withholding taxes are discharged strictly within the
prescribed due dates. From 1 April 2014, it is
proposed to allow such expenses provided, the
withholding taxes are discharged before the due
date of filing the return.
From 1 April 2014, where taxes are not
withheld or not remitted on any payments (including
salary) to residents liable to withholding,
disallowance will be restricted to 30% of such
payment.
Retrospectively from 1 April 2013, trading in
commodity derivatives in a recognized association
and chargeable to commodities transaction tax will
not be a speculative transaction.
From 1 April 2014, income of a taxpayer
engaged in the business of hiring, plying or leasing
goods carriage, will be higher of ` 7,500 for every
month or part of month during which the goods
carriage is owned by the taxpayer or the actual
income.
Capital Gains
As an industry friendly measure, the definition
of capital assets is being changed from 1 April 2014.
Capital assets will include any securities held by FII
in accordance with the regulations under SEBI Act.
Thus, income arising on transfer of such securities
will be taxable as Capital Gains/Loss.
From 1 April 2014, unlisted securities and
units of debt oriented mutual fund will be a long term
capital asset only if it is held for more than 36 months
as against the existing 12 months.
From 1 April 2014, beneficial tax rate of 10 per
cent on long-term capital gains computed before
giving effect to indexation adjustment will not be
available to mutual funds. Thus, these will now be
taxable at the regular rate of 20%.
From 1 April 2014, where an advance
received for transfer of a capital asset is forfeited, it
will be taxed as income from other sources. The
existing facility of deducting such amount from the
cost of acquisition has been dispensed with.
To overrule various judicial precedents and to
avoid continuing litigation, rollover exemption
derived by making an investment in a residential
house out of gains from sale of residential house or
other long term capital assets is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that exemption is available for
investment made in only one residential house
situated in India.
A few judgements overruled are:
o Gita Duggal case (2013) 257 CTR
208 (Del)
o CIT v. Syed Ali Adil (AP)(HC) (2013) 260
CTR 219,
o CIT vs. D. Ananda Basappa 309 ITR
329 (Kar.),
o Mr. Vinay Mishra vs ACIT (ITAT) ITA
195/Bang/ 2012 & 124/Bang/2012
o Mrs. Prema P. Shah and Sanjiv P Shah
Vs. ITO Mumbai ITAT
Similarly, exemption derived by making an
investment in certain bonds out of gains arising from
transfer of long term capital asset is being amended.
From 1 April 2014 an amendment is being
introduced to clarify that a maximum exemption of
` 5 million will be available per transfer.
A few judgments overruled are:
o Ms. Shantabai V. Kamat vs CIT (Panaji
ITAT) ITA NO. 10/PNJ/2013
o Shri Aspi Ginwala Vs ACIT -
ITANo.3226/ Ahd/2011 &
ITA No.3227/Ahd/2011
o Shri Vivek Jairazbhoy vs DCIT,
(International Taxation) -
I.T.A. No.236/Bang/2012
From 1 April 2014, amount of compensation
received in pursuance of an interim order of the
court, tribunal or other authority will be taxed under
the head capital gains in the previous year in which
the final order of such court is passed.
From 1 April 2014, transfer of Government
securities outside India by one non-resident to
another will not be a transfer for capital gains and
hence, will not be taxable.
Transfer Pricing
Deeming fiction provisions in transfer pricing
regulations covers transactions with unrelated
parties too. It is clarified that such an unrelated party
need not be a non-resident.
Finance Minister, in his speech, has proposed
to align transfer-pricing regulations with the global
practices by introducing the concept of range (may
be inter quartile range) and usage of multiple year
data for computation of arms length price.
However, arithmetic mean will continue where
comparables are inadequate. These proposals may
be implemented by way of Rules.
A rollback provision has been introduced
wherein taxpayer has an option to adopt the price
agreed in the Advance Pricing Agreement scheme to
similar transactions for past 4 years. This will help to
resolve the litigations of past years.
From 1 October 2014, a transfer-pricing
officer will be empowered to levy penalty for
non-furnishing of the prescribed transfer pricing
documents.
Withholding Tax
Tax at 2% will be withheld on payouts
(including bonus) under life insurance policies not
entitled to exemption. However, such withholding
will be applicable only when total payment in
financial year to the taxpayer is ` 100,000 or more.
Currently interest on foreign currency loans
availed and long term infrastructure bonds issued by
an Indian company is subject to a lower withholding
of 5%. This benefit is now extended to all long-term
bonds. Further, this will be applicable to borrowings
before 1 July 2017 and the recipient need not furnish
its PAN in case of infrastructure bonds.
Hitherto, the rectification of e-TDS return and
its processing was as per the notification issued by
the CBDT. With effect from 1 October 2014, a
specific provision has been brought in to formalize
the same.
From 1 October 2014, the time limit for
passing an order treating a taxpayer as assessee in
default, for failure to withhold or pay the taxes
withheld, has been increased to seven years from
the end of financial year to which default relates.
From 1 October 2014, an assessing officer
will be empowered to levy penalty for failure to
furnish or for furnishing incorrect statement of taxes
withheld or collected.
Dividends
From 1 April 2014, concessional tax on gross
dividends received by an Indian company from
specified foreign company will not have any sunset
date. The amendment is made with a view to
encourage the repatriation of income earned by
Indian companies from investments made abroad.
From 1 October 2014, the amount of dividend
available for distribution by domestic companies to
its shareholders will have to be grossed up for the
purpose of computing the tax on distributed profits.
This will marginally increase the outflow of tax on
distributed profits.
From 1 October 2014, the amount of income
available for distribution by the mutual fund to the
unit holders will have to be grossed up for the
purpose of computing the additional income tax.
This will marginally increase the outflow of tax on
distributed income.
Alternative Minimum Tax
Alternative minimum tax being levied on
certain persons other than a company has been now
extended to taxpayers claiming deduction of capital
expenditure in respect of specified business such as
cold chain facility, warehousing facility, building and
operating hotels/hospitals etc. From 1 April 2014, in
computing adjusted total income for alternative
minimum tax, such deductions have to be added
back to the total income.
Charitable Trust And Other Institutions
Under Section 10(23C)
Following amendments are proposed with effect
from 1 April 2014:
Any charitable and religious trust approved by
the Commissioner of Income Tax and availing
exemption of its income cannot claim any other
exemption except agricultural income or exemption
specified pertaining to university, hospital,
educational institution or institution established for
charitable or public religious purposes.
In computing the application/accumulation of
income of charitable trusts or other specified
institutions, depreciation allowance in respect of
asset, acquisition of which has been claimed as
application of income in the year of acquisition or
any other year, should not be considered.
Income received on behalf of any university or
other educational institution or hospital is exempt
provided it is not operating for profit and is wholly or
substantially financed by the Government. The
absence of an appropriate definition of substantially
financed by the Government led to a lot of
litigations. From 1 April 2014 a threshold percentage
of total receipts from the Government will be
specified.
Following amendments are proposed with effect
from 1 October 2014:
If trusts or institutions are approved by a
Commissioner of Income Tax for exemption of its
income, the said benefit of this exemption will be
available for the assessment years for which
proceedings are ongoing as on the date of
registration, provided the objects and activities of
the trusts or institution remains the same. Further,
the Assessing Officer cannot reopen any
assessment for escapement of income only for the
reason that registration is not obtained.
Commissioner of Income Tax can cancel the
registration of the trust or institution on the following
additional grounds:
o its income does not inure to the
benefit of general public;
o it is for benefit of any particular
religious community or caste;
o any income or property of the trust is
applied for benefit of specified persons
like author of trust, trustees etc.; or
o its funds are invested in
prohibited modes,
However, the trust or institution proves that there
was a reasonable cause for the activities to be
carried out in the above manner then its registration
will not be cancelled.
Business Trusts From 1 October 2014
Business Trusts includes new categories of
investment vehicles viz., the Real Estate Investment
Trusts (REIT) and Infrastructure Investment Trust
(InvIT). These investment vehicles require creation of
trust, recognition from SEBI and compulsory listing
on a recognized stock exchange in India. These
trusts will have to raise capital through issue of units
or through debt and acquire a controlling stake in
Special Purpose Vehicles (SPV) having income
bearing assets, which mainly focus on infrastructure
projects awarded through Public Private Partnership
(PPP) model.
It is proposed to give these business trusts a
formal recognition and confer benefits on them. The
following key proposals have been mooted:
(a) Transfer of shares of SPV to business
trust in exchange of units by sponsors will not
be taxable capital gain transfer.
(b) The period of holding of units in
business trust will also include the holding
period of shares held in the SPV for the unit
holder and the cost of the units will be the
cost incurred for acquiring the shares in the
SPV for the purpose of capital gain taxation.
(c) The units of the business trust are
subject to Securities Transaction Tax (STT);
hence, the resultant long-term capital gain on
transfer of units will be exempt from tax and
short-term capital gain will be at a
concessional tax rate of 15%. Such benefit
will not be available to units sold by sponsors
who have acquired such units in exchange of
shares in SPV.
(d) The interest and dividend received by a
business trust from an SPV will be exempt
from tax; capital gains in the hands of a
business trust will be taxed at the
concessional rate for capital gain transactions
and other income will be charged to tax at the
maximum marginal rate.
(e) SPV will be subjected to Dividend
Distribution Tax (DDT) on distribution of
dividend to business trust.
(f) The SPV is not obligated to withhold
tax on such payment of interest to the
business trust.
(g) Interest income received by the
business trust from SPV and distributed to the
unit holders will be subject to withholding tax
at 10% for resident unit holders and 5% for
non-resident unit holders.
(h) Income other than interest received
from SPV and distributed to unit holders will
be exempt from tax.
(i) Interest paid to non-residents in
relation to External Commercial Borrowings
(ECB) by the business trust will be subjected
to withholding tax at 5%.
(j) Business trusts will have to file income
tax returns and periodic statements of income
distributed to unit holders.
Search, Survey And Power To Call
For Information:
From 1 October 2014, tax authorities will be
empowered to conduct surveys to ensure proper
compliance of withholding tax regulations. They will
have the power to verify books of accounts,
documents, check cash, stock and other required
information. Books of accounts may also be
impounded and seized for a certain period.
In the course of search proceedings, if an
assessing officer seizes documents, valuables etc.
belonging to another taxpayer, the assessing officer
is duty bound to handover the seized material to the
assessing officer having jurisdiction over such other
taxpayer. The assessing officer receiving the seized
material shall, before initiating the assessment
proceedings, record his belief that the seized
material has a bearing to enhance the income of the
other taxpayer.
From 1 October 2014, when tax authorities
receive information from any source relating to any
taxpayer, they can issue notice to such taxpayer and
call for prescribed details for their verification.
Reference To Valuation Officer
Assessing officers can make reference to
valuation officer even if the books of a taxpayer are
correct and complete. The Valuation Officer will have
to complete valuation within six months and will be
empowered to do the best judgment valuation.
On receipt of a report from the valuation
officer, the assessing officer shall give an opportunity
of being heard to the taxpayer before completing the
assessment based on said valuation report.
Time period for valuation will be excluded
from time limit for completion of assessment.
Recovery Of Demand
In cases where notice of demand is served
and the same is disputed, the demand will be
continued to be treated as valid till the disposal of
appeal. This will be effective from 1 October 2014.
When a demand raised is reduced as a result
of an order of higher authorities and due to the
subsequent order the demand is increased then the
interest payable for non-payment of the demand
within the time period mentioned in the demand
notice would be computed from the day immediately
following the period mentioned in first demand
notice to the day on which demand is paid. This will
be effective from 1 October 2014.
Statement Of Financial Transaction
Or Reportable Account
Currently, certain specified persons are
required to furnish an annual information return in
respect of specified financial transactions registered
or recorded by them. Following changes are
proposed with effect from 1 April 2015:
o It is proposed to replace the annual
information return by a statement of
financial transaction or reportable
account.
o Further, it is proposed to include
prescribed reporting financial
institution under the list of specified
persons.
o The time line for rectifying a defect in
the statement furnished on receipt of
intimation from tax authority and for
furnishing the statement in response to
a notice is proposed to be reduced to
thirty days.
o On discovering any inaccuracy in the
statement furnished, the specified
person shall within a period of ten days
inform the authority and furnish the
correct information.
O If the prescribed reporting financial
institution provides inaccurate
information either deliberately or due
to non-compliance with the prescribed
due diligence or does not inform about
the inaccuracies within the specified
time, a penalty of ` 50,000 would be
levied.
Deduction
From 1 April 2014, with the intention of
encouraging the household savings, the deduction
available for sum paid by an Individual or Hindu
Undivided Family towards certain specified
instruments viz., life insurance premia, contribution
to public provident fund, scheme for deferred
annuities etc. has been increased from ` 100,000 to
` 150,000
Sunset date for claiming profit-linked
deduction by power companies extended from 31
March 2014 to 31 March 2017.
From 1 April 2014, the limit for deduction of
interest payment on housing loan in respect of
self-occupied property will be increased from
` 150,000 to ` 200,000
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Others
The Finance Minister has mentioned in his
speech that the benefit of advance ruling will be
extended to resident tax payers whose tax liability is
above a specified threshold limit. Further, the scope
of income tax settlement commission would be
widened.
Proposals brought in to introduce tax
accounting standards for computation of income.
Assessing Officer is empowered to do best
judgment assessment in case where the taxpayer
fails to follow tax accounting standards.
From 1 April 2014, acceptance or repayment
of loan exceeding ` 20,000 is permissible if made
using electronic clearing system through a bank
account in addition to existing mode of account
payee cheque or draft.
Where a property of taxpayer is attached
provisionally, such attachment can be extended up
to two years or up to sixty days from the date of
assessment order whichever is later.
From financial year 2014-15, mutual funds,
securitization trusts, venture capital companies and
venture capital funds are mandatorily required to file
tax returns.
It is proposed to give legal recognition for
verifying the tax returns through electronic mode.
From 1 October 2014, wilful failure to produce
accounts or documents in response to a notice or to
comply with the directions issued for special audit is
punishable with rigorous imprisonment up to one
year and fine.
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CHART FOR RATES OF TAXES FOR THE FINANCIAL YEAR 2014-15
TYPE OF ASSESSEE RANGE OF INCOME
PERSONAL TAX
CORPORATE TAX
MINIMUM ALTERNATE TAX
ALTERNATE MINIMUM TAX
TAX LIABILITY
Resident Individual who is of the age of 80
years or more
Resident Individual who is above the age of
60 years and less than 80 years
Other Individual, Hindu undivided family,
Association of person & Body of Individuals
Firms/LLP Tax
Domestic company
Foreign company
Domestic company
Foreign company
Person other than Company having adjusted total
income exceeding ` 2,000,000 from business or
professional and claiming deduction in respect of
certain income or Capital expenditure in case of
specified business or claiming SEZ tax holiday.
Up to ` 500,000
` 500,001- ` 1,000,000
` 1,000,001- ` 10,000,000
` 10,000,001 and above
Up to ` 300,000
` 300,001- ` 500,000
` 500,001- ` 1,000,000
` 1,000,001- ` 10,000,000
` 10,000,001 and above
Up to ` 250,000
` 250,001- ` 500,000
` 500,001- ` 1,000,000
` 1,000,001- ` 10,000,000
` 10,000,001 and above
` 15 ` 10,000,000
Above ` 10,000,000
` 15 ` 10,000,000
` 10,000,000 - ` 100,000,000
Above ` 100,000,000
` 15 ` 10,000,000
` 10,000,000 - ` 100,000,000
Above ` 100,000,000
` 15 ` 10,000,000
` 10,000,000 - ` 100,000,000
Above ` 100,000,000
` 15 ` 10,000,000
` 10,000,000 - ` 100,000,000
Above ` 100,000,000
` 15 ` 10,000,000
Above ` 10,000,000
Nil
(Taxable income - ` 500,000)* 20.60%
(Taxable income - ` 1,000,000)* 30.90% + ` 103,000
(Taxable income - ` 1,000,000)* 33.99% + ` 113,300

Nil
(Taxable income - ` 300,000)* 10.30%
(Taxable income - ` 500,000)* 20.60% + ` 20,600
(Taxable income - ` 1,000,000)* 30.90% + ` 123,600
(Taxable income - ` 1,000,000)* 33.99% + ` 135,960
Nil
(Taxable income - ` 250,000)* 10.30%
(Taxable income - ` 500,000)* 20.60% + ` 25,750
(Taxable income - ` 1,000,000)* 30.90% + ` 128,750
(Taxable income - ` 1,000,000)* 33.99% + ` 141,625

30.90% on Taxable income
33.99% on Taxable income
30.90% on Taxable income
32.445% on Taxable income
33.99% on Taxable income

41.20% on Taxable income
42.024% on Taxable income
43.26% on Taxable income
19.055% of Book profit
20.00775% of Book profit
20.9605% of Book profit

19.055% of Book profit
19.4361% of Book profit
20.00775% of Book profit
19.055% of Book profit
20.9605% of Book profit
The above rates are inclusive of surcharge, education cess and secondary and higher education cess, wherever applicable, without considering the benefit
of marginal relief (if any)
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PROPOSED WITHHOLDING TAX RATES FOR THE PAYMENTS TO NON-RESIDENTS
IN THE FINANCIAL YEAR 2014-2015 UNDER INCOME TAX ACT, 1961
Section Nature of payment
Recipient is a non-resident (other than foreign company)
With PAN Without PAN With PAN Without PAN
` 1 crore (` 10 Million) > ` 1 crore (` 10 Million)
194LB Interest by infrastructure debt fund 5.15 20.60 5.665 22.66
194LC
Interest by specified Indian infrastructure sector
companies
5.15 20.60 5.665 22.66
195 Other Interest 20.60 20.60 22.66 22.66
Royalty 25.75 25.75 28.325 28.325
Fee for technical services 25.75 25.75 28.325 28.325
Any other income (other than capital gains) 30.90 30.90 33.99 33.99
All figures are in percentage
The above rates are inclusive of surcharge, education cess and secondary and higher education cess, wherever applicable
The remitter may withhold the tax at the beneficial rate available, if any in the respective tax treaty, on production of tax residency certificate (TRC)
Section Nature of payment
Recipient is a foreign company
With PAN Without PAN With PAN Without PAN With PAN Without PAN
` 1 crore (` 10 Million)
` 1 to 10 crore (` 10 to 100
Million)
> ` 10 crore (` 100 Million)
194LB Interest by infrastructure debt fund 5.15 20.60 5.253 21.012 5.4075 21.63
194LC
Interest by specified Indian infrastructure sector
companies
5.15 20.60 5.253 21.012 5.4075 21.63
195 Other Interest
20.60 20.60 21.012 21.012 21.63 21.63
Royalty
25.75 25.75 26.265 26.265 27.0375 27.0375
Fee for technical services
25.75 25.75 26.265 26.265 27.0375 27.0375
Any other income (other than capital gains)
41.20 41.20 42.024 42.024 43.26 43.26
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PROPOSED WITHHOLDING TAX RATES FOR THE PAYMENTS TO RESIDENTS
IN THE FINANCIAL YEAR 2014-2015 UNDER INCOME TAX ACT, 1961
All figures are in percentage
Section Nature of payment
Recipient is
Resident Individual & HUF Resident Firm / LLP Resident Company
With PAN Without PAN With PAN Without PAN With PAN Without PAN
192 Salary
1
Individual tax rate Not applicable Not applicable
193 Interest on securities 10.00 20.00 10.00 20.00 10.00 20.00
194A Interest other than interest on securities
2
10.00 20.00 10.00 20.00 10.00 20.00
194C Payments to contractors:
2

Contractors 1.00 20.00 2.00 20.00 2.00 20.00
Contractors in transport business Nil 20.00 Nil 20.00 Nil 20.00
194D Insurance commission 10.00 20.00 10.00 20.00 10.00 20.00
194H Commission and brokerage
2
10.00 20.00 10.00 20.00 10.00 20.00
194I Rent:
2

Plant / machinery / equipment 2.00 20.00 2.00 20.00 2.00 20.00
Land / building / furniture / fittings 10.00 20.00 10.00 20.00 10.00 20.00
194J Fee for professional or technical services
2
10.00 20.00 10.00 20.00 10.00 20.00
194IA
Transfer of any immovable property by the
resident other than agricultural land or
statutory compulsory acquisition
1.00 20.00 1.00 20.00 1.00 20.00
1
Applicable to all types of Assessee
2
These above provisions are applicable to all types of assessee except individuals or Hindu Undivided Family, whose total sales, gross receipts or turnover from the
business or profession does not exceed the limits specified in section 44AB in the previous year.
indirect tax
Common amendments under Central Excise,
Customs and Service Tax
Settlement Commission
The scope of Settlement Commission was enlarged
in 2012 to encompass service tax as well. Now, the
name too undergoes a change and the Settlement
Commission will be known as Customs, Central
Excise and Service Tax Settlement Commission.
Currently, an application for settlement may be
made only upon filing of returns showing, inter alia,
payment of central excise duty. Now, the
Commission will be empowered to accept cases
where returns have not been filed for reasons to be
recorded in writing.
Concealment in the context of settlement in
Section 32O has now been clarified to mean
concealment made from a Central Excise Officer.
A similar explanation has been inserted in Section
127L of the Customs Act.
Advance Rulings
In order to reduce future litigation, resident private
companies can opt for Advance Rulings under
Customs, Central Excise and Service tax.
Power to condone delay in review by
Committee of Chief Commissioners
A Committee of Chief Commissioners is vested with
powers to review orders passed by a Commissioner
and to direct filing of an appeal, if it so merits. This
review is to be completed within three months of the
date of the order. The CBEC will now have powers to
condone a delay of 30 days after the expiry of the
initial period. Similar provisions are provided under
Customs too.
Increase in monetary limit for
discretionary acceptance of cases
The Appellate Tribunal could choose to accept or
reject cases where the amount in dispute was below
` 50,000. This has now been enhanced to ` 200,000.
Indirect Tax
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Pre-deposit of confirmed demands prior
to appeal
In an environment where adjudicating authorities
confirm nearly always 80% of the demands made in
show cause notices with consequential penalties
and thereafter the Tribunal quashes around 80% of
such demands, the amendment to mandate
pre-deposit of 7.5% of the duty/tax and penalty
before the first appellate authority and an 10% of the
duty/tax and penalty before the second appellate
authority is an extremely retrograde step.
Appellate authority relieved of a responsibility
to grant stay
By introducing a mandatory provision in place of a
discretionary provision, the Government seems to
have given itself a double edged sword. On the one
hand genuine litigants will be forced to pay the
minimum amount irrespective of the absurdity of
adjudication orders against them. On the other hand,
this will provide frivolous litigants an opportunity to
engage appellate forums by forking out a fraction of
the duty and penalty demanded. Whether this
substitution will pass legal muster in the High Courts
and/or Supreme Court is a question to be answered
on another day.
What adds salt to the injury is that often demands
are made not only on the company but also on its
officers and directors as well resulting in a situation
where such people too need to deposit the requisite
sum before appealing. Historical information on the
demands made and their final status should have
been the guiding factor, but sadly this seems to have
been bypassed. For a budget, which appears to
have had its lucid moments, this step stands apart
for its ludicrousness.
Customs
Baggage Rules
Baggage Rules have been amended to increase free
baggage allowance from ` 35,000 to ` 45,000.
Duty free allowance on cigarettes, cigars and
tobacco has been halved from 200 sticks to 100
sticks, 50 sticks to 25 sticks and 250 gms. to 125
gms. respectively.
Bill of Entry for land imports
Importers using land routes will now be permitted to
file a bill of entry before filing of the Import Report if
the goods are expected to arrive within 30 days of
such presentment.
Central Excise
E-payment of duties
From 1 October 2014, all Central Excise and Service Tax
assessees will have to pay duties and taxes electronically.
Relaxations may be given by an Assistant/Deputy
Commissioner on a case-by-case basis.
Relaxation of strictures in case of delay
in payment of duties
Presently where duty payment is delayed by more
than 30 days from the due date, clearances of
dutiable goods are permitted only upon payment of
duty for each clearance. This provision has been
done away and replaced with a penalty mechanism
of 1% for each months delay.
New mechanism to identify tax and duty evaders
Another puzzling amendment has been the
introduction of a new authority under Central Excise
with powers to call for information from a wide range
of people and authorities. Starting from the
assessee, this includes banks, state and central
government agencies and so on. One argument is
that this will afford an opportunity for this authority to
reconcile information filed by an assessee under
Central Excise with that of information filed with
other authorities such as banks, financial
institutions, VAT authorities etc. However, rather than
achieving this through computerisation and unifying
information by reference to a common identification
number, a rather convoluted approach seems to
have been undertaken. Indeed, this may be a
superfluous exercise under the GST regime.
War against consumption of tobacco
The Budget appears to have unleashed a war
against tobacco consumption. Apart from enacting
duty increases ranging from 10% to 72%, baggage
allowance for import of tobacco too has been
halved. This government appears determined to
throttle cancer-causing agents at source.
Central Excise Valuation Rules
Sale of goods below manufacturing cost and profit,
does not, by that fact alone, cease to be its
assessable value. This is a principle that has held
field for several decades and came to be confirmed
in CCE, Pune v. Dai Ichi Karkaria Ltd
1
. The decision
of Apex Court in CCE, Mumbai v. Fiat India Pvt Ltd
2

came to unsettle this position by holding that when
there is any extraneous consideration, then the
valuation offered based on the sale price cannot be
accepted but a cost construction based method
must be followed.
An amendment to the CE Valuation Rules will take
effect from 11 July 2014 restoring the erstwhile
principle but resorting to language that leaves much
to be desired of the skills of the draftsman. It states
where price is not the sole consideration and
no additional consideration is flowing (sic) the
value shall be deemed to be the transaction
value. If no additional consideration is flowing, how
then can the price not be the sole consideration?
But, we all know what the draftsman is trying to
say. The amendment here may suffer from drafting
skills but does not lack legal accuracy.
Service Tax
Legislative Amendments
By an amendment to the definition of metered cabs,
radio taxis have been brought under the service tax
net. With this amendment, radio taxis have been
brought on par with Rent-a-cab operators thereby
levelling the playing field amongst providers of
similar services.
Entry 55 of the State List in the Constitution vests the
State Government with powers to tax
advertisements other than those published in
newspapers or in broadcast media. An amendment
to the negative list has brought advertisements in
media other than print media within the service tax
net. What with the Constitution providing specific
directives on taxation of advertisement, this
amendment could lead to potential legal disputes on
interpretation of Federal and State powers.
The explanation to Section 67A which currently
borrows rate of exchange as notified under the
Customs Act, 1962 will be substituted and
henceforth, the rate of exchange will be notified
under the Service Tax Rules.
A time limit of six months has been imposed for
determination of tax due in cases where show cause
notices have been issued. However, rather than
making this time limit mandatory, the words suggest
only a recommendatory time limit.
Section 80 affords a waiver of penalty when cogent
reasons exist. This waiver has now been removed for
failure to pay tax on account of fraud, collusion, wilful
misstatement, suppression of facts or contravention of the
law to wilfully evade payment of tax.
Powers to approve search and seizure has now been
granted to Additional Commissioner of Central Excise
and both the Joint Commissioner and the Additional
Commissioner may authorise any Central Excise officer
to conduct such a search and seize.
Provisions exist in Central Excise, which permit the
Government to recover unpaid duties and penalties
from a successor to whom a business has been
transferred by a defaulter. Similar provisions are now
being introduced in Service tax so as to allow the
government to recover taxes and penalties from a
successor to whom the defaulter has transferred his
business.
Section 94 has been amended with a view to plug
evasion of taxes and leakage of revenue. The
Government is now empowered to frame rules to
prescribe records that may be maintained to ensure
proper levy and collection of tax as well as to
prescribe punitive measures such as restriction of
utilisation of CENVAT credit for evasion of tax or
misuse of CENVAT credit.
These legislative amendments will have the force of
law once the Finance Bill receives the assent of the
President of India after being passed in both houses
of the Parliament.
Service Tax (Determination of Value) Rules, 2006
From 1 October 2014, works contracts, other than
contracts for original works, will now be charged to
tax at 70% of the total value of the contract. This
amendment gives a closure to the dual abatement
structure, which exists now.
Point of Taxation Rules, 2011
From 1 October 2014, in the case of service tax
payable on reverse charge basis, the date of
payment of service tax will now be on the date of
payment of the value of service or on expiry of three
months whichever is earlier.
Place of Provision of Services Rules, 2012
Intermediaries
From 1 October 2014, the definition of intermediary
will be extended to cover supply of goods. With
this amendment, intermediaries facilitating the
provision of services/supply of goods, will attract tax
based on their location and not the location of the
recipient of those facilitation services.
Further, intermediary ought not to be understood to
mean just agents facilitating the conclusion of
contract between two (other) persons but also any
other person who may facilitate the conclusion of
such contract involving the provision of services /
supply of goods inter se.
Immediately, all agents (erstwhile, BAS-category of
service providers) representing overseas principals
and facilitating (a) supply of goods to buyers in India
or (b) sourcing of goods from producers in India,
could see a denial of export categorization of their
services. And service tax will be charged regardless
of the foreign exchange earned or the beneficiary of
these services being outside India. Buying agents,
selling agents, pre-sales/marketing call services and
every one in between will now be regarded as
taxable. Post-sale support/customer care services
could also be dragged into this provision as their
services.
In addition, inquiries may be launched to seek out
any other person who is playing a facilitative role.
Facilitate is a verb that means to make easy or
easier, to bring about or to preside over. Project
management, supervision and oversight and a
hundred other commercial arrangements come
within the sweep of this verb. Thus, all service
providers (non-BAS type also) whose role can be
ascribed a facilitative effect may be taxed and
denied the export categorization allowed till now. As
long as the role of such persons is not the
main-service or supply per se, it could be regarded
as facilitative and extended this new treatment.
Repair
Currently, goods temporarily imported for repair,
reengineering or reconditioning do not attract
service tax. From 1 October 2014, this relaxation will
be available only for repairs with an added condition
that these goods have to be re-exported without
being put to use in India except for the purpose of
such repair.
From 1 October 2014, by a fine juggling of words,
hiring of aircraft and vessels other than yachts will be
subject to tax if the service recipient is located in
India.
Interest on delayed payment of service tax
Currently, interest at 18% is levied on all delayed
payments of service tax. From 1 October 2014, this
will be replaced by the following convoluted table.
The mere thought of going through this torturous
calculations should be a sufficient deterrence for
delaying service tax payment.
Up to six months Between six months More than one year
and one year
18% per annum 24% per annum 30% per annum
CENVAT Credit Rules, 2004 (CENVAT Rules)
Time limit for availing CENVAT credit
In a throwback to the mid-nineties, the CENVAT
Rules have been amended to prescribe a 6-month
time limit for availing CENVAT credit. The reasoning
behind this amendment seems to be quite
unfathomable since credit is taken only of a duty
paid and when a due has been paid to the
Government it does not make any logical sense to
bind the payer to a time limit to avail credit.
In a recent judgement, the Mumbai branch of
CESTAT had held in the case of Shayona Pulp
Conversion Mills Private Limited that CENVAT credit
had to be availed within a period of 1 year. While
there was no legislative sanction to this mandate, the
honourable member decided to draw upon the logic
of importing a reasonable time-limit absent any
specific time limit.
The definitive wordings of the amendment preclude
an assessee from availing credit even in genuine
situations where interpretation issues prevented the
assessee from availing credit in the first instance.
Definition of place of removal
Rule 6 of the CENVAT Rules contains multiple
references to place of removal. While section 3 of
the Central Excise Act defines place of removal,
this definition was conspicuous by its absence in the
CENVAT Rules. This anomaly has been set right by
inserting clause (qa) in Rule 2 of the CENVAT Rules.
CENVAT credit under Reverse Charge
Presently, CENVAT credit of service tax paid under
reverse charge is available only upon payment of the
value of service as well as service tax thereon,
notwithstanding the fact that the service tax may
have been paid earlier. This requirement has now
been relaxed in cases where 100% of the tax is
payable by the recipient of the service. In such
cases, CENVAT credit may be availed immediately
upon payment of service tax.
A similar provision has also be made for tax paid
under partial reverse charge with a slight
modification that if the payment of the service is not
made within 3 months of the date of the invoice or
bill, the credit taken will have to be repaid. Of course,
credit may be taken again after payment for the
service. However, this will also be subject to the
overall time cap of 6 months from the invoice or bill.
Restriction on transfer of credit for
Large Taxpayer Units (LTUs)
Prior to the amendment, LTUs were at liberty to
transfer unutilised credit from one unit to another.
With an amendment this freedom has now been
curtailed. LTUs will now be required to offset credit
with duty/tax payable within the unit itself.
Credit relaxation for exports
Export services are not extended the privileges
available to exports if the payment is delayed
beyond the time permitted by the RBI. Therefore,
CENVAT Credit on such exports is now proposed to
be reversed where such delinquencies arise and
when such proceeds are realised albeit beyond the
prescribed time limit. Export of services and their
input services do not lend themselves to any form of
one-to-one co-relation. This amendment seems to
be unsympathetic towards the tax payer as well as
the administration. If a few of the several export
invoices in a given period are either not realised or
delayed, what proportion of the CENVAT Credit
relating to may be liable for such reversal. Time will
tell if a judicial intervention or administrative lethargy
will reduce the potential disputes in this regard.
Common amendments under Central Excise,
Customs and Service Tax
Settlement Commission
The scope of Settlement Commission was enlarged
in 2012 to encompass service tax as well. Now, the
name too undergoes a change and the Settlement
Commission will be known as Customs, Central
Excise and Service Tax Settlement Commission.
Currently, an application for settlement may be
made only upon filing of returns showing, inter alia,
payment of central excise duty. Now, the
Commission will be empowered to accept cases
where returns have not been filed for reasons to be
recorded in writing.
Concealment in the context of settlement in
Section 32O has now been clarified to mean
concealment made from a Central Excise Officer.
A similar explanation has been inserted in Section
127L of the Customs Act.
Advance Rulings
In order to reduce future litigation, resident private
companies can opt for Advance Rulings under
Customs, Central Excise and Service tax.
Power to condone delay in review by
Committee of Chief Commissioners
A Committee of Chief Commissioners is vested with
powers to review orders passed by a Commissioner
and to direct filing of an appeal, if it so merits. This
review is to be completed within three months of the
date of the order. The CBEC will now have powers to
condone a delay of 30 days after the expiry of the
initial period. Similar provisions are provided under
Customs too.
Increase in monetary limit for
discretionary acceptance of cases
The Appellate Tribunal could choose to accept or
reject cases where the amount in dispute was below
` 50,000. This has now been enhanced to ` 200,000.
I
n
d
i
r
e
c
t

T
a
x
Pre-deposit of confirmed demands prior
to appeal
In an environment where adjudicating authorities
confirm nearly always 80% of the demands made in
show cause notices with consequential penalties
and thereafter the Tribunal quashes around 80% of
such demands, the amendment to mandate
pre-deposit of 7.5% of the duty/tax and penalty
before the first appellate authority and an 10% of the
duty/tax and penalty before the second appellate
authority is an extremely retrograde step.
Appellate authority relieved of a responsibility
to grant stay
By introducing a mandatory provision in place of a
discretionary provision, the Government seems to
have given itself a double edged sword. On the one
hand genuine litigants will be forced to pay the
minimum amount irrespective of the absurdity of
adjudication orders against them. On the other hand,
this will provide frivolous litigants an opportunity to
engage appellate forums by forking out a fraction of
the duty and penalty demanded. Whether this
substitution will pass legal muster in the High Courts
and/or Supreme Court is a question to be answered
on another day.
What adds salt to the injury is that often demands
are made not only on the company but also on its
officers and directors as well resulting in a situation
where such people too need to deposit the requisite
sum before appealing. Historical information on the
demands made and their final status should have
been the guiding factor, but sadly this seems to have
been bypassed. For a budget, which appears to
have had its lucid moments, this step stands apart
for its ludicrousness.
Customs
Baggage Rules
Baggage Rules have been amended to increase free
baggage allowance from ` 35,000 to ` 45,000.
Duty free allowance on cigarettes, cigars and
tobacco has been halved from 200 sticks to 100
sticks, 50 sticks to 25 sticks and 250 gms. to 125
gms. respectively.
Bill of Entry for land imports
Importers using land routes will now be permitted to
file a bill of entry before filing of the Import Report if
the goods are expected to arrive within 30 days of
such presentment.
Central Excise
E-payment of duties
From 1 October 2014, all Central Excise and Service Tax
assessees will have to pay duties and taxes electronically.
Relaxations may be given by an Assistant/Deputy
Commissioner on a case-by-case basis.
Relaxation of strictures in case of delay
in payment of duties
Presently where duty payment is delayed by more
than 30 days from the due date, clearances of
dutiable goods are permitted only upon payment of
duty for each clearance. This provision has been
done away and replaced with a penalty mechanism
of 1% for each months delay.
New mechanism to identify tax and duty evaders
Another puzzling amendment has been the
introduction of a new authority under Central Excise
with powers to call for information from a wide range
of people and authorities. Starting from the
assessee, this includes banks, state and central
government agencies and so on. One argument is
that this will afford an opportunity for this authority to
reconcile information filed by an assessee under
Central Excise with that of information filed with
other authorities such as banks, financial
institutions, VAT authorities etc. However, rather than
achieving this through computerisation and unifying
information by reference to a common identification
number, a rather convoluted approach seems to
have been undertaken. Indeed, this may be a
superfluous exercise under the GST regime.
War against consumption of tobacco
The Budget appears to have unleashed a war
against tobacco consumption. Apart from enacting
duty increases ranging from 10% to 72%, baggage
allowance for import of tobacco too has been
halved. This government appears determined to
throttle cancer-causing agents at source.
Central Excise Valuation Rules
Sale of goods below manufacturing cost and profit,
does not, by that fact alone, cease to be its
assessable value. This is a principle that has held
field for several decades and came to be confirmed
in CCE, Pune v. Dai Ichi Karkaria Ltd
1
. The decision
of Apex Court in CCE, Mumbai v. Fiat India Pvt Ltd
2

came to unsettle this position by holding that when
there is any extraneous consideration, then the
valuation offered based on the sale price cannot be
accepted but a cost construction based method
must be followed.
An amendment to the CE Valuation Rules will take
effect from 11 July 2014 restoring the erstwhile
principle but resorting to language that leaves much
to be desired of the skills of the draftsman. It states
where price is not the sole consideration and
no additional consideration is flowing (sic) the
value shall be deemed to be the transaction
value. If no additional consideration is flowing, how
then can the price not be the sole consideration?
But, we all know what the draftsman is trying to
say. The amendment here may suffer from drafting
skills but does not lack legal accuracy.
Service Tax
Legislative Amendments
By an amendment to the definition of metered cabs,
radio taxis have been brought under the service tax
net. With this amendment, radio taxis have been
brought on par with Rent-a-cab operators thereby
levelling the playing field amongst providers of
similar services.
Entry 55 of the State List in the Constitution vests the
State Government with powers to tax
advertisements other than those published in
newspapers or in broadcast media. An amendment
to the negative list has brought advertisements in
media other than print media within the service tax
net. What with the Constitution providing specific
directives on taxation of advertisement, this
amendment could lead to potential legal disputes on
interpretation of Federal and State powers.
The explanation to Section 67A which currently
borrows rate of exchange as notified under the
Customs Act, 1962 will be substituted and
henceforth, the rate of exchange will be notified
under the Service Tax Rules.
A time limit of six months has been imposed for
determination of tax due in cases where show cause
notices have been issued. However, rather than
making this time limit mandatory, the words suggest
only a recommendatory time limit.
Section 80 affords a waiver of penalty when cogent
reasons exist. This waiver has now been removed for
failure to pay tax on account of fraud, collusion, wilful
misstatement, suppression of facts or contravention of the
law to wilfully evade payment of tax.
Powers to approve search and seizure has now been
granted to Additional Commissioner of Central Excise
and both the Joint Commissioner and the Additional
Commissioner may authorise any Central Excise officer
to conduct such a search and seize.
Provisions exist in Central Excise, which permit the
Government to recover unpaid duties and penalties
from a successor to whom a business has been
transferred by a defaulter. Similar provisions are now
being introduced in Service tax so as to allow the
government to recover taxes and penalties from a
successor to whom the defaulter has transferred his
business.
Section 94 has been amended with a view to plug
evasion of taxes and leakage of revenue. The
Government is now empowered to frame rules to
prescribe records that may be maintained to ensure
proper levy and collection of tax as well as to
prescribe punitive measures such as restriction of
utilisation of CENVAT credit for evasion of tax or
misuse of CENVAT credit.
These legislative amendments will have the force of
law once the Finance Bill receives the assent of the
President of India after being passed in both houses
of the Parliament.
Service Tax (Determination of Value) Rules, 2006
From 1 October 2014, works contracts, other than
contracts for original works, will now be charged to
tax at 70% of the total value of the contract. This
amendment gives a closure to the dual abatement
structure, which exists now.
Point of Taxation Rules, 2011
From 1 October 2014, in the case of service tax
payable on reverse charge basis, the date of
payment of service tax will now be on the date of
payment of the value of service or on expiry of three
months whichever is earlier.
Place of Provision of Services Rules, 2012
Intermediaries
From 1 October 2014, the definition of intermediary
will be extended to cover supply of goods. With
this amendment, intermediaries facilitating the
provision of services/supply of goods, will attract tax
based on their location and not the location of the
recipient of those facilitation services.
Further, intermediary ought not to be understood to
mean just agents facilitating the conclusion of
contract between two (other) persons but also any
other person who may facilitate the conclusion of
such contract involving the provision of services /
supply of goods inter se.
Immediately, all agents (erstwhile, BAS-category of
service providers) representing overseas principals
and facilitating (a) supply of goods to buyers in India
or (b) sourcing of goods from producers in India,
could see a denial of export categorization of their
services. And service tax will be charged regardless
of the foreign exchange earned or the beneficiary of
these services being outside India. Buying agents,
selling agents, pre-sales/marketing call services and
every one in between will now be regarded as
taxable. Post-sale support/customer care services
could also be dragged into this provision as their
services.
In addition, inquiries may be launched to seek out
any other person who is playing a facilitative role.
Facilitate is a verb that means to make easy or
easier, to bring about or to preside over. Project
management, supervision and oversight and a
hundred other commercial arrangements come
within the sweep of this verb. Thus, all service
providers (non-BAS type also) whose role can be
ascribed a facilitative effect may be taxed and
denied the export categorization allowed till now. As
long as the role of such persons is not the
main-service or supply per se, it could be regarded
as facilitative and extended this new treatment.
Repair
Currently, goods temporarily imported for repair,
reengineering or reconditioning do not attract
service tax. From 1 October 2014, this relaxation will
be available only for repairs with an added condition
that these goods have to be re-exported without
being put to use in India except for the purpose of
such repair.
From 1 October 2014, by a fine juggling of words,
hiring of aircraft and vessels other than yachts will be
subject to tax if the service recipient is located in
India.
Interest on delayed payment of service tax
Currently, interest at 18% is levied on all delayed
payments of service tax. From 1 October 2014, this
will be replaced by the following convoluted table.
The mere thought of going through this torturous
calculations should be a sufficient deterrence for
delaying service tax payment.
Up to six months Between six months More than one year
and one year
18% per annum 24% per annum 30% per annum
CENVAT Credit Rules, 2004 (CENVAT Rules)
Time limit for availing CENVAT credit
In a throwback to the mid-nineties, the CENVAT
Rules have been amended to prescribe a 6-month
time limit for availing CENVAT credit. The reasoning
behind this amendment seems to be quite
unfathomable since credit is taken only of a duty
paid and when a due has been paid to the
Government it does not make any logical sense to
bind the payer to a time limit to avail credit.
In a recent judgement, the Mumbai branch of
CESTAT had held in the case of Shayona Pulp
Conversion Mills Private Limited that CENVAT credit
had to be availed within a period of 1 year. While
there was no legislative sanction to this mandate, the
honourable member decided to draw upon the logic
of importing a reasonable time-limit absent any
specific time limit.
The definitive wordings of the amendment preclude
an assessee from availing credit even in genuine
situations where interpretation issues prevented the
assessee from availing credit in the first instance.
Definition of place of removal
Rule 6 of the CENVAT Rules contains multiple
references to place of removal. While section 3 of
the Central Excise Act defines place of removal,
this definition was conspicuous by its absence in the
CENVAT Rules. This anomaly has been set right by
inserting clause (qa) in Rule 2 of the CENVAT Rules.
CENVAT credit under Reverse Charge
Presently, CENVAT credit of service tax paid under
reverse charge is available only upon payment of the
value of service as well as service tax thereon,
notwithstanding the fact that the service tax may
have been paid earlier. This requirement has now
been relaxed in cases where 100% of the tax is
payable by the recipient of the service. In such
cases, CENVAT credit may be availed immediately
upon payment of service tax.
A similar provision has also be made for tax paid
under partial reverse charge with a slight
modification that if the payment of the service is not
made within 3 months of the date of the invoice or
bill, the credit taken will have to be repaid. Of course,
credit may be taken again after payment for the
service. However, this will also be subject to the
overall time cap of 6 months from the invoice or bill.
Restriction on transfer of credit for
Large Taxpayer Units (LTUs)
Prior to the amendment, LTUs were at liberty to
transfer unutilised credit from one unit to another.
With an amendment this freedom has now been
curtailed. LTUs will now be required to offset credit
with duty/tax payable within the unit itself.
Credit relaxation for exports
Export services are not extended the privileges
available to exports if the payment is delayed
beyond the time permitted by the RBI. Therefore,
CENVAT Credit on such exports is now proposed to
be reversed where such delinquencies arise and
when such proceeds are realised albeit beyond the
prescribed time limit. Export of services and their
input services do not lend themselves to any form of
one-to-one co-relation. This amendment seems to
be unsympathetic towards the tax payer as well as
the administration. If a few of the several export
invoices in a given period are either not realised or
delayed, what proportion of the CENVAT Credit
relating to may be liable for such reversal. Time will
tell if a judicial intervention or administrative lethargy
will reduce the potential disputes in this regard.
Common amendments under Central Excise,
Customs and Service Tax
Settlement Commission
The scope of Settlement Commission was enlarged
in 2012 to encompass service tax as well. Now, the
name too undergoes a change and the Settlement
Commission will be known as Customs, Central
Excise and Service Tax Settlement Commission.
Currently, an application for settlement may be
made only upon filing of returns showing, inter alia,
payment of central excise duty. Now, the
Commission will be empowered to accept cases
where returns have not been filed for reasons to be
recorded in writing.
Concealment in the context of settlement in
Section 32O has now been clarified to mean
concealment made from a Central Excise Officer.
A similar explanation has been inserted in Section
127L of the Customs Act.
Advance Rulings
In order to reduce future litigation, resident private
companies can opt for Advance Rulings under
Customs, Central Excise and Service tax.
Power to condone delay in review by
Committee of Chief Commissioners
A Committee of Chief Commissioners is vested with
powers to review orders passed by a Commissioner
and to direct filing of an appeal, if it so merits. This
review is to be completed within three months of the
date of the order. The CBEC will now have powers to
condone a delay of 30 days after the expiry of the
initial period. Similar provisions are provided under
Customs too.
Increase in monetary limit for
discretionary acceptance of cases
The Appellate Tribunal could choose to accept or
reject cases where the amount in dispute was below
` 50,000. This has now been enhanced to ` 200,000.
I
n
d
i
r
e
c
t

T
a
x
Pre-deposit of confirmed demands prior
to appeal
In an environment where adjudicating authorities
confirm nearly always 80% of the demands made in
show cause notices with consequential penalties
and thereafter the Tribunal quashes around 80% of
such demands, the amendment to mandate
pre-deposit of 7.5% of the duty/tax and penalty
before the first appellate authority and an 10% of the
duty/tax and penalty before the second appellate
authority is an extremely retrograde step.
Appellate authority relieved of a responsibility
to grant stay
By introducing a mandatory provision in place of a
discretionary provision, the Government seems to
have given itself a double edged sword. On the one
hand genuine litigants will be forced to pay the
minimum amount irrespective of the absurdity of
adjudication orders against them. On the other hand,
this will provide frivolous litigants an opportunity to
engage appellate forums by forking out a fraction of
the duty and penalty demanded. Whether this
substitution will pass legal muster in the High Courts
and/or Supreme Court is a question to be answered
on another day.
What adds salt to the injury is that often demands
are made not only on the company but also on its
officers and directors as well resulting in a situation
where such people too need to deposit the requisite
sum before appealing. Historical information on the
demands made and their final status should have
been the guiding factor, but sadly this seems to have
been bypassed. For a budget, which appears to
have had its lucid moments, this step stands apart
for its ludicrousness.
Customs
Baggage Rules
Baggage Rules have been amended to increase free
baggage allowance from ` 35,000 to ` 45,000.
Duty free allowance on cigarettes, cigars and
tobacco has been halved from 200 sticks to 100
sticks, 50 sticks to 25 sticks and 250 gms. to 125
gms. respectively.
Bill of Entry for land imports
Importers using land routes will now be permitted to
file a bill of entry before filing of the Import Report if
the goods are expected to arrive within 30 days of
such presentment.
Central Excise
E-payment of duties
From 1 October 2014, all Central Excise and Service Tax
assessees will have to pay duties and taxes electronically.
Relaxations may be given by an Assistant/Deputy
Commissioner on a case-by-case basis.
Relaxation of strictures in case of delay
in payment of duties
Presently where duty payment is delayed by more
than 30 days from the due date, clearances of
dutiable goods are permitted only upon payment of
duty for each clearance. This provision has been
done away and replaced with a penalty mechanism
of 1% for each months delay.
New mechanism to identify tax and duty evaders
Another puzzling amendment has been the
introduction of a new authority under Central Excise
with powers to call for information from a wide range
of people and authorities. Starting from the
assessee, this includes banks, state and central
government agencies and so on. One argument is
that this will afford an opportunity for this authority to
reconcile information filed by an assessee under
Central Excise with that of information filed with
other authorities such as banks, financial
institutions, VAT authorities etc. However, rather than
achieving this through computerisation and unifying
information by reference to a common identification
number, a rather convoluted approach seems to
have been undertaken. Indeed, this may be a
superfluous exercise under the GST regime.
War against consumption of tobacco
The Budget appears to have unleashed a war
against tobacco consumption. Apart from enacting
duty increases ranging from 10% to 72%, baggage
allowance for import of tobacco too has been
halved. This government appears determined to
throttle cancer-causing agents at source.
Central Excise Valuation Rules
Sale of goods below manufacturing cost and profit,
does not, by that fact alone, cease to be its
assessable value. This is a principle that has held
field for several decades and came to be confirmed
in CCE, Pune v. Dai Ichi Karkaria Ltd
1
. The decision
of Apex Court in CCE, Mumbai v. Fiat India Pvt Ltd
2

came to unsettle this position by holding that when
there is any extraneous consideration, then the
valuation offered based on the sale price cannot be
accepted but a cost construction based method
must be followed.
An amendment to the CE Valuation Rules will take
effect from 11 July 2014 restoring the erstwhile
principle but resorting to language that leaves much
to be desired of the skills of the draftsman. It states
where price is not the sole consideration and
no additional consideration is flowing (sic) the
value shall be deemed to be the transaction
value. If no additional consideration is flowing, how
then can the price not be the sole consideration?
But, we all know what the draftsman is trying to
say. The amendment here may suffer from drafting
skills but does not lack legal accuracy.
Service Tax
Legislative Amendments
By an amendment to the definition of metered cabs,
radio taxis have been brought under the service tax
net. With this amendment, radio taxis have been
brought on par with Rent-a-cab operators thereby
levelling the playing field amongst providers of
similar services.
Entry 55 of the State List in the Constitution vests the
State Government with powers to tax
advertisements other than those published in
newspapers or in broadcast media. An amendment
to the negative list has brought advertisements in
media other than print media within the service tax
net. What with the Constitution providing specific
directives on taxation of advertisement, this
amendment could lead to potential legal disputes on
interpretation of Federal and State powers.
The explanation to Section 67A which currently
borrows rate of exchange as notified under the
Customs Act, 1962 will be substituted and
henceforth, the rate of exchange will be notified
under the Service Tax Rules.
A time limit of six months has been imposed for
determination of tax due in cases where show cause
notices have been issued. However, rather than
making this time limit mandatory, the words suggest
only a recommendatory time limit.
Section 80 affords a waiver of penalty when cogent
reasons exist. This waiver has now been removed for
failure to pay tax on account of fraud, collusion, wilful
misstatement, suppression of facts or contravention of the
law to wilfully evade payment of tax.
Powers to approve search and seizure has now been
granted to Additional Commissioner of Central Excise
and both the Joint Commissioner and the Additional
Commissioner may authorise any Central Excise officer
to conduct such a search and seize.
Provisions exist in Central Excise, which permit the
Government to recover unpaid duties and penalties
from a successor to whom a business has been
transferred by a defaulter. Similar provisions are now
being introduced in Service tax so as to allow the
government to recover taxes and penalties from a
successor to whom the defaulter has transferred his
business.
Section 94 has been amended with a view to plug
evasion of taxes and leakage of revenue. The
Government is now empowered to frame rules to
prescribe records that may be maintained to ensure
proper levy and collection of tax as well as to
prescribe punitive measures such as restriction of
utilisation of CENVAT credit for evasion of tax or
misuse of CENVAT credit.
These legislative amendments will have the force of
law once the Finance Bill receives the assent of the
President of India after being passed in both houses
of the Parliament.
Service Tax (Determination of Value) Rules, 2006
From 1 October 2014, works contracts, other than
contracts for original works, will now be charged to
tax at 70% of the total value of the contract. This
amendment gives a closure to the dual abatement
structure, which exists now.
Point of Taxation Rules, 2011
From 1 October 2014, in the case of service tax
payable on reverse charge basis, the date of
payment of service tax will now be on the date of
payment of the value of service or on expiry of three
months whichever is earlier.
Place of Provision of Services Rules, 2012
Intermediaries
From 1 October 2014, the definition of intermediary
will be extended to cover supply of goods. With
this amendment, intermediaries facilitating the
provision of services/supply of goods, will attract tax
based on their location and not the location of the
recipient of those facilitation services.
Further, intermediary ought not to be understood to
mean just agents facilitating the conclusion of
contract between two (other) persons but also any
other person who may facilitate the conclusion of
such contract involving the provision of services /
supply of goods inter se.
Immediately, all agents (erstwhile, BAS-category of
service providers) representing overseas principals
and facilitating (a) supply of goods to buyers in India
or (b) sourcing of goods from producers in India,
could see a denial of export categorization of their
services. And service tax will be charged regardless
of the foreign exchange earned or the beneficiary of
these services being outside India. Buying agents,
selling agents, pre-sales/marketing call services and
every one in between will now be regarded as
taxable. Post-sale support/customer care services
could also be dragged into this provision as their
services.
In addition, inquiries may be launched to seek out
any other person who is playing a facilitative role.
Facilitate is a verb that means to make easy or
easier, to bring about or to preside over. Project
management, supervision and oversight and a
hundred other commercial arrangements come
within the sweep of this verb. Thus, all service
providers (non-BAS type also) whose role can be
ascribed a facilitative effect may be taxed and
denied the export categorization allowed till now. As
long as the role of such persons is not the
main-service or supply per se, it could be regarded
as facilitative and extended this new treatment.
Repair
Currently, goods temporarily imported for repair,
reengineering or reconditioning do not attract
service tax. From 1 October 2014, this relaxation will
be available only for repairs with an added condition
that these goods have to be re-exported without
being put to use in India except for the purpose of
such repair.
From 1 October 2014, by a fine juggling of words,
hiring of aircraft and vessels other than yachts will be
subject to tax if the service recipient is located in
India.
Interest on delayed payment of service tax
Currently, interest at 18% is levied on all delayed
payments of service tax. From 1 October 2014, this
will be replaced by the following convoluted table.
The mere thought of going through this torturous
calculations should be a sufficient deterrence for
delaying service tax payment.
Up to six months Between six months More than one year
and one year
18% per annum 24% per annum 30% per annum
CENVAT Credit Rules, 2004 (CENVAT Rules)
Time limit for availing CENVAT credit
In a throwback to the mid-nineties, the CENVAT
Rules have been amended to prescribe a 6-month
time limit for availing CENVAT credit. The reasoning
behind this amendment seems to be quite
unfathomable since credit is taken only of a duty
paid and when a due has been paid to the
Government it does not make any logical sense to
bind the payer to a time limit to avail credit.
In a recent judgement, the Mumbai branch of
CESTAT had held in the case of Shayona Pulp
Conversion Mills Private Limited that CENVAT credit
had to be availed within a period of 1 year. While
there was no legislative sanction to this mandate, the
honourable member decided to draw upon the logic
of importing a reasonable time-limit absent any
specific time limit.
The definitive wordings of the amendment preclude
an assessee from availing credit even in genuine
situations where interpretation issues prevented the
assessee from availing credit in the first instance.
Definition of place of removal
Rule 6 of the CENVAT Rules contains multiple
references to place of removal. While section 3 of
the Central Excise Act defines place of removal,
this definition was conspicuous by its absence in the
CENVAT Rules. This anomaly has been set right by
inserting clause (qa) in Rule 2 of the CENVAT Rules.
CENVAT credit under Reverse Charge
Presently, CENVAT credit of service tax paid under
reverse charge is available only upon payment of the
value of service as well as service tax thereon,
notwithstanding the fact that the service tax may
have been paid earlier. This requirement has now
been relaxed in cases where 100% of the tax is
payable by the recipient of the service. In such
cases, CENVAT credit may be availed immediately
upon payment of service tax.
A similar provision has also be made for tax paid
under partial reverse charge with a slight
modification that if the payment of the service is not
made within 3 months of the date of the invoice or
bill, the credit taken will have to be repaid. Of course,
credit may be taken again after payment for the
service. However, this will also be subject to the
overall time cap of 6 months from the invoice or bill.
Restriction on transfer of credit for
Large Taxpayer Units (LTUs)
Prior to the amendment, LTUs were at liberty to
transfer unutilised credit from one unit to another.
With an amendment this freedom has now been
curtailed. LTUs will now be required to offset credit
with duty/tax payable within the unit itself.
Credit relaxation for exports
Export services are not extended the privileges
available to exports if the payment is delayed
beyond the time permitted by the RBI. Therefore,
CENVAT Credit on such exports is now proposed to
be reversed where such delinquencies arise and
when such proceeds are realised albeit beyond the
prescribed time limit. Export of services and their
input services do not lend themselves to any form of
one-to-one co-relation. This amendment seems to
be unsympathetic towards the tax payer as well as
the administration. If a few of the several export
invoices in a given period are either not realised or
delayed, what proportion of the CENVAT Credit
relating to may be liable for such reversal. Time will
tell if a judicial intervention or administrative lethargy
will reduce the potential disputes in this regard.
Common amendments under Central Excise,
Customs and Service Tax
Settlement Commission
The scope of Settlement Commission was enlarged
in 2012 to encompass service tax as well. Now, the
name too undergoes a change and the Settlement
Commission will be known as Customs, Central
Excise and Service Tax Settlement Commission.
Currently, an application for settlement may be
made only upon filing of returns showing, inter alia,
payment of central excise duty. Now, the
Commission will be empowered to accept cases
where returns have not been filed for reasons to be
recorded in writing.
Concealment in the context of settlement in
Section 32O has now been clarified to mean
concealment made from a Central Excise Officer.
A similar explanation has been inserted in Section
127L of the Customs Act.
Advance Rulings
In order to reduce future litigation, resident private
companies can opt for Advance Rulings under
Customs, Central Excise and Service tax.
Power to condone delay in review by
Committee of Chief Commissioners
A Committee of Chief Commissioners is vested with
powers to review orders passed by a Commissioner
and to direct filing of an appeal, if it so merits. This
review is to be completed within three months of the
date of the order. The CBEC will now have powers to
condone a delay of 30 days after the expiry of the
initial period. Similar provisions are provided under
Customs too.
Increase in monetary limit for
discretionary acceptance of cases
The Appellate Tribunal could choose to accept or
reject cases where the amount in dispute was below
` 50,000. This has now been enhanced to ` 200,000.
I
n
d
i
r
e
c
t

T
a
x
Pre-deposit of confirmed demands prior
to appeal
In an environment where adjudicating authorities
confirm nearly always 80% of the demands made in
show cause notices with consequential penalties
and thereafter the Tribunal quashes around 80% of
such demands, the amendment to mandate
pre-deposit of 7.5% of the duty/tax and penalty
before the first appellate authority and an 10% of the
duty/tax and penalty before the second appellate
authority is an extremely retrograde step.
Appellate authority relieved of a responsibility
to grant stay
By introducing a mandatory provision in place of a
discretionary provision, the Government seems to
have given itself a double edged sword. On the one
hand genuine litigants will be forced to pay the
minimum amount irrespective of the absurdity of
adjudication orders against them. On the other hand,
this will provide frivolous litigants an opportunity to
engage appellate forums by forking out a fraction of
the duty and penalty demanded. Whether this
substitution will pass legal muster in the High Courts
and/or Supreme Court is a question to be answered
on another day.
What adds salt to the injury is that often demands
are made not only on the company but also on its
officers and directors as well resulting in a situation
where such people too need to deposit the requisite
sum before appealing. Historical information on the
demands made and their final status should have
been the guiding factor, but sadly this seems to have
been bypassed. For a budget, which appears to
have had its lucid moments, this step stands apart
for its ludicrousness.
Customs
Baggage Rules
Baggage Rules have been amended to increase free
baggage allowance from ` 35,000 to ` 45,000.
Duty free allowance on cigarettes, cigars and
tobacco has been halved from 200 sticks to 100
sticks, 50 sticks to 25 sticks and 250 gms. to 125
gms. respectively.
Bill of Entry for land imports
Importers using land routes will now be permitted to
file a bill of entry before filing of the Import Report if
the goods are expected to arrive within 30 days of
such presentment.
Central Excise
E-payment of duties
From 1 October 2014, all Central Excise and Service Tax
assessees will have to pay duties and taxes electronically.
Relaxations may be given by an Assistant/Deputy
Commissioner on a case-by-case basis.
Relaxation of strictures in case of delay
in payment of duties
Presently where duty payment is delayed by more
than 30 days from the due date, clearances of
dutiable goods are permitted only upon payment of
duty for each clearance. This provision has been
done away and replaced with a penalty mechanism
of 1% for each months delay.
New mechanism to identify tax and duty evaders
Another puzzling amendment has been the
introduction of a new authority under Central Excise
with powers to call for information from a wide range
of people and authorities. Starting from the
assessee, this includes banks, state and central
government agencies and so on. One argument is
that this will afford an opportunity for this authority to
reconcile information filed by an assessee under
Central Excise with that of information filed with
other authorities such as banks, financial
institutions, VAT authorities etc. However, rather than
achieving this through computerisation and unifying
information by reference to a common identification
number, a rather convoluted approach seems to
have been undertaken. Indeed, this may be a
superfluous exercise under the GST regime.
War against consumption of tobacco
The Budget appears to have unleashed a war
against tobacco consumption. Apart from enacting
duty increases ranging from 10% to 72%, baggage
allowance for import of tobacco too has been
halved. This government appears determined to
throttle cancer-causing agents at source.
Central Excise Valuation Rules
Sale of goods below manufacturing cost and profit,
does not, by that fact alone, cease to be its
assessable value. This is a principle that has held
field for several decades and came to be confirmed
in CCE, Pune v. Dai Ichi Karkaria Ltd
1
. The decision
of Apex Court in CCE, Mumbai v. Fiat India Pvt Ltd
2

came to unsettle this position by holding that when
there is any extraneous consideration, then the
valuation offered based on the sale price cannot be
accepted but a cost construction based method
must be followed.
An amendment to the CE Valuation Rules will take
effect from 11 July 2014 restoring the erstwhile
principle but resorting to language that leaves much
to be desired of the skills of the draftsman. It states
where price is not the sole consideration and
no additional consideration is flowing (sic) the
value shall be deemed to be the transaction
value. If no additional consideration is flowing, how
then can the price not be the sole consideration?
But, we all know what the draftsman is trying to
say. The amendment here may suffer from drafting
skills but does not lack legal accuracy.
Service Tax
Legislative Amendments
By an amendment to the definition of metered cabs,
radio taxis have been brought under the service tax
net. With this amendment, radio taxis have been
brought on par with Rent-a-cab operators thereby
levelling the playing field amongst providers of
similar services.
Entry 55 of the State List in the Constitution vests the
State Government with powers to tax
advertisements other than those published in
newspapers or in broadcast media. An amendment
to the negative list has brought advertisements in
media other than print media within the service tax
net. What with the Constitution providing specific
directives on taxation of advertisement, this
amendment could lead to potential legal disputes on
interpretation of Federal and State powers.
The explanation to Section 67A which currently
borrows rate of exchange as notified under the
Customs Act, 1962 will be substituted and
henceforth, the rate of exchange will be notified
under the Service Tax Rules.
A time limit of six months has been imposed for
determination of tax due in cases where show cause
notices have been issued. However, rather than
making this time limit mandatory, the words suggest
only a recommendatory time limit.
Section 80 affords a waiver of penalty when cogent
reasons exist. This waiver has now been removed for
failure to pay tax on account of fraud, collusion, wilful
misstatement, suppression of facts or contravention of the
law to wilfully evade payment of tax.
Powers to approve search and seizure has now been
granted to Additional Commissioner of Central Excise
and both the Joint Commissioner and the Additional
Commissioner may authorise any Central Excise officer
to conduct such a search and seize.
Provisions exist in Central Excise, which permit the
Government to recover unpaid duties and penalties
from a successor to whom a business has been
transferred by a defaulter. Similar provisions are now
being introduced in Service tax so as to allow the
government to recover taxes and penalties from a
successor to whom the defaulter has transferred his
business.
Section 94 has been amended with a view to plug
evasion of taxes and leakage of revenue. The
Government is now empowered to frame rules to
prescribe records that may be maintained to ensure
proper levy and collection of tax as well as to
prescribe punitive measures such as restriction of
utilisation of CENVAT credit for evasion of tax or
misuse of CENVAT credit.
These legislative amendments will have the force of
law once the Finance Bill receives the assent of the
President of India after being passed in both houses
of the Parliament.
Service Tax (Determination of Value) Rules, 2006
From 1 October 2014, works contracts, other than
contracts for original works, will now be charged to
tax at 70% of the total value of the contract. This
amendment gives a closure to the dual abatement
structure, which exists now.
Point of Taxation Rules, 2011
From 1 October 2014, in the case of service tax
payable on reverse charge basis, the date of
payment of service tax will now be on the date of
payment of the value of service or on expiry of three
months whichever is earlier.
Place of Provision of Services Rules, 2012
Intermediaries
From 1 October 2014, the definition of intermediary
will be extended to cover supply of goods. With
this amendment, intermediaries facilitating the
provision of services/supply of goods, will attract tax
based on their location and not the location of the
recipient of those facilitation services.
Further, intermediary ought not to be understood to
mean just agents facilitating the conclusion of
contract between two (other) persons but also any
other person who may facilitate the conclusion of
such contract involving the provision of services /
supply of goods inter se.
Immediately, all agents (erstwhile, BAS-category of
service providers) representing overseas principals
and facilitating (a) supply of goods to buyers in India
or (b) sourcing of goods from producers in India,
could see a denial of export categorization of their
services. And service tax will be charged regardless
of the foreign exchange earned or the beneficiary of
these services being outside India. Buying agents,
selling agents, pre-sales/marketing call services and
every one in between will now be regarded as
taxable. Post-sale support/customer care services
could also be dragged into this provision as their
services.
In addition, inquiries may be launched to seek out
any other person who is playing a facilitative role.
Facilitate is a verb that means to make easy or
easier, to bring about or to preside over. Project
management, supervision and oversight and a
hundred other commercial arrangements come
within the sweep of this verb. Thus, all service
providers (non-BAS type also) whose role can be
ascribed a facilitative effect may be taxed and
denied the export categorization allowed till now. As
long as the role of such persons is not the
main-service or supply per se, it could be regarded
as facilitative and extended this new treatment.
Repair
Currently, goods temporarily imported for repair,
reengineering or reconditioning do not attract
service tax. From 1 October 2014, this relaxation will
be available only for repairs with an added condition
that these goods have to be re-exported without
being put to use in India except for the purpose of
such repair.
From 1 October 2014, by a fine juggling of words,
hiring of aircraft and vessels other than yachts will be
subject to tax if the service recipient is located in
India.
Interest on delayed payment of service tax
Currently, interest at 18% is levied on all delayed
payments of service tax. From 1 October 2014, this
will be replaced by the following convoluted table.
The mere thought of going through this torturous
calculations should be a sufficient deterrence for
delaying service tax payment.
Up to six months Between six months More than one year
and one year
18% per annum 24% per annum 30% per annum
CENVAT Credit Rules, 2004 (CENVAT Rules)
Time limit for availing CENVAT credit
In a throwback to the mid-nineties, the CENVAT
Rules have been amended to prescribe a 6-month
time limit for availing CENVAT credit. The reasoning
behind this amendment seems to be quite
unfathomable since credit is taken only of a duty
paid and when a due has been paid to the
Government it does not make any logical sense to
bind the payer to a time limit to avail credit.
In a recent judgement, the Mumbai branch of
CESTAT had held in the case of Shayona Pulp
Conversion Mills Private Limited that CENVAT credit
had to be availed within a period of 1 year. While
there was no legislative sanction to this mandate, the
honourable member decided to draw upon the logic
of importing a reasonable time-limit absent any
specific time limit.
The definitive wordings of the amendment preclude
an assessee from availing credit even in genuine
situations where interpretation issues prevented the
assessee from availing credit in the first instance.
Definition of place of removal
Rule 6 of the CENVAT Rules contains multiple
references to place of removal. While section 3 of
the Central Excise Act defines place of removal,
this definition was conspicuous by its absence in the
CENVAT Rules. This anomaly has been set right by
inserting clause (qa) in Rule 2 of the CENVAT Rules.
CENVAT credit under Reverse Charge
Presently, CENVAT credit of service tax paid under
reverse charge is available only upon payment of the
value of service as well as service tax thereon,
notwithstanding the fact that the service tax may
have been paid earlier. This requirement has now
been relaxed in cases where 100% of the tax is
payable by the recipient of the service. In such
cases, CENVAT credit may be availed immediately
upon payment of service tax.
A similar provision has also be made for tax paid
under partial reverse charge with a slight
modification that if the payment of the service is not
made within 3 months of the date of the invoice or
bill, the credit taken will have to be repaid. Of course,
credit may be taken again after payment for the
service. However, this will also be subject to the
overall time cap of 6 months from the invoice or bill.
Restriction on transfer of credit for
Large Taxpayer Units (LTUs)
Prior to the amendment, LTUs were at liberty to
transfer unutilised credit from one unit to another.
With an amendment this freedom has now been
curtailed. LTUs will now be required to offset credit
with duty/tax payable within the unit itself.
Credit relaxation for exports
Export services are not extended the privileges
available to exports if the payment is delayed
beyond the time permitted by the RBI. Therefore,
CENVAT Credit on such exports is now proposed to
be reversed where such delinquencies arise and
when such proceeds are realised albeit beyond the
prescribed time limit. Export of services and their
input services do not lend themselves to any form of
one-to-one co-relation. This amendment seems to
be unsympathetic towards the tax payer as well as
the administration. If a few of the several export
invoices in a given period are either not realised or
delayed, what proportion of the CENVAT Credit
relating to may be liable for such reversal. Time will
tell if a judicial intervention or administrative lethargy
will reduce the potential disputes in this regard.
1
1999 (112) E.L.T. 353 (S.C.)
2
2012 (283) E.L.T. 161 (S.C.)
Common amendments under Central Excise,
Customs and Service Tax
Settlement Commission
The scope of Settlement Commission was enlarged
in 2012 to encompass service tax as well. Now, the
name too undergoes a change and the Settlement
Commission will be known as Customs, Central
Excise and Service Tax Settlement Commission.
Currently, an application for settlement may be
made only upon filing of returns showing, inter alia,
payment of central excise duty. Now, the
Commission will be empowered to accept cases
where returns have not been filed for reasons to be
recorded in writing.
Concealment in the context of settlement in
Section 32O has now been clarified to mean
concealment made from a Central Excise Officer.
A similar explanation has been inserted in Section
127L of the Customs Act.
Advance Rulings
In order to reduce future litigation, resident private
companies can opt for Advance Rulings under
Customs, Central Excise and Service tax.
Power to condone delay in review by
Committee of Chief Commissioners
A Committee of Chief Commissioners is vested with
powers to review orders passed by a Commissioner
and to direct filing of an appeal, if it so merits. This
review is to be completed within three months of the
date of the order. The CBEC will now have powers to
condone a delay of 30 days after the expiry of the
initial period. Similar provisions are provided under
Customs too.
Increase in monetary limit for
discretionary acceptance of cases
The Appellate Tribunal could choose to accept or
reject cases where the amount in dispute was below
` 50,000. This has now been enhanced to ` 200,000.
I
n
d
i
r
e
c
t

T
a
x
Pre-deposit of confirmed demands prior
to appeal
In an environment where adjudicating authorities
confirm nearly always 80% of the demands made in
show cause notices with consequential penalties
and thereafter the Tribunal quashes around 80% of
such demands, the amendment to mandate
pre-deposit of 7.5% of the duty/tax and penalty
before the first appellate authority and an 10% of the
duty/tax and penalty before the second appellate
authority is an extremely retrograde step.
Appellate authority relieved of a responsibility
to grant stay
By introducing a mandatory provision in place of a
discretionary provision, the Government seems to
have given itself a double edged sword. On the one
hand genuine litigants will be forced to pay the
minimum amount irrespective of the absurdity of
adjudication orders against them. On the other hand,
this will provide frivolous litigants an opportunity to
engage appellate forums by forking out a fraction of
the duty and penalty demanded. Whether this
substitution will pass legal muster in the High Courts
and/or Supreme Court is a question to be answered
on another day.
What adds salt to the injury is that often demands
are made not only on the company but also on its
officers and directors as well resulting in a situation
where such people too need to deposit the requisite
sum before appealing. Historical information on the
demands made and their final status should have
been the guiding factor, but sadly this seems to have
been bypassed. For a budget, which appears to
have had its lucid moments, this step stands apart
for its ludicrousness.
Customs
Baggage Rules
Baggage Rules have been amended to increase free
baggage allowance from ` 35,000 to ` 45,000.
Duty free allowance on cigarettes, cigars and
tobacco has been halved from 200 sticks to 100
sticks, 50 sticks to 25 sticks and 250 gms. to 125
gms. respectively.
Bill of Entry for land imports
Importers using land routes will now be permitted to
file a bill of entry before filing of the Import Report if
the goods are expected to arrive within 30 days of
such presentment.
Central Excise
E-payment of duties
From 1 October 2014, all Central Excise and Service Tax
assessees will have to pay duties and taxes electronically.
Relaxations may be given by an Assistant/Deputy
Commissioner on a case-by-case basis.
Relaxation of strictures in case of delay
in payment of duties
Presently where duty payment is delayed by more
than 30 days from the due date, clearances of
dutiable goods are permitted only upon payment of
duty for each clearance. This provision has been
done away and replaced with a penalty mechanism
of 1% for each months delay.
New mechanism to identify tax and duty evaders
Another puzzling amendment has been the
introduction of a new authority under Central Excise
with powers to call for information from a wide range
of people and authorities. Starting from the
assessee, this includes banks, state and central
government agencies and so on. One argument is
that this will afford an opportunity for this authority to
reconcile information filed by an assessee under
Central Excise with that of information filed with
other authorities such as banks, financial
institutions, VAT authorities etc. However, rather than
achieving this through computerisation and unifying
information by reference to a common identification
number, a rather convoluted approach seems to
have been undertaken. Indeed, this may be a
superfluous exercise under the GST regime.
War against consumption of tobacco
The Budget appears to have unleashed a war
against tobacco consumption. Apart from enacting
duty increases ranging from 10% to 72%, baggage
allowance for import of tobacco too has been
halved. This government appears determined to
throttle cancer-causing agents at source.
Central Excise Valuation Rules
Sale of goods below manufacturing cost and profit,
does not, by that fact alone, cease to be its
assessable value. This is a principle that has held
field for several decades and came to be confirmed
in CCE, Pune v. Dai Ichi Karkaria Ltd
1
. The decision
of Apex Court in CCE, Mumbai v. Fiat India Pvt Ltd
2

came to unsettle this position by holding that when
there is any extraneous consideration, then the
valuation offered based on the sale price cannot be
accepted but a cost construction based method
must be followed.
An amendment to the CE Valuation Rules will take
effect from 11 July 2014 restoring the erstwhile
principle but resorting to language that leaves much
to be desired of the skills of the draftsman. It states
where price is not the sole consideration and
no additional consideration is flowing (sic) the
value shall be deemed to be the transaction
value. If no additional consideration is flowing, how
then can the price not be the sole consideration?
But, we all know what the draftsman is trying to
say. The amendment here may suffer from drafting
skills but does not lack legal accuracy.
Service Tax
Legislative Amendments
By an amendment to the definition of metered cabs,
radio taxis have been brought under the service tax
net. With this amendment, radio taxis have been
brought on par with Rent-a-cab operators thereby
levelling the playing field amongst providers of
similar services.
Entry 55 of the State List in the Constitution vests the
State Government with powers to tax
advertisements other than those published in
newspapers or in broadcast media. An amendment
to the negative list has brought advertisements in
media other than print media within the service tax
net. What with the Constitution providing specific
directives on taxation of advertisement, this
amendment could lead to potential legal disputes on
interpretation of Federal and State powers.
The explanation to Section 67A which currently
borrows rate of exchange as notified under the
Customs Act, 1962 will be substituted and
henceforth, the rate of exchange will be notified
under the Service Tax Rules.
A time limit of six months has been imposed for
determination of tax due in cases where show cause
notices have been issued. However, rather than
making this time limit mandatory, the words suggest
only a recommendatory time limit.
Section 80 affords a waiver of penalty when cogent
reasons exist. This waiver has now been removed for
failure to pay tax on account of fraud, collusion, wilful
misstatement, suppression of facts or contravention of the
law to wilfully evade payment of tax.
Powers to approve search and seizure has now been
granted to Additional Commissioner of Central Excise
and both the Joint Commissioner and the Additional
Commissioner may authorise any Central Excise officer
to conduct such a search and seize.
Provisions exist in Central Excise, which permit the
Government to recover unpaid duties and penalties
from a successor to whom a business has been
transferred by a defaulter. Similar provisions are now
being introduced in Service tax so as to allow the
government to recover taxes and penalties from a
successor to whom the defaulter has transferred his
business.
Section 94 has been amended with a view to plug
evasion of taxes and leakage of revenue. The
Government is now empowered to frame rules to
prescribe records that may be maintained to ensure
proper levy and collection of tax as well as to
prescribe punitive measures such as restriction of
utilisation of CENVAT credit for evasion of tax or
misuse of CENVAT credit.
These legislative amendments will have the force of
law once the Finance Bill receives the assent of the
President of India after being passed in both houses
of the Parliament.
Service Tax (Determination of Value) Rules, 2006
From 1 October 2014, works contracts, other than
contracts for original works, will now be charged to
tax at 70% of the total value of the contract. This
amendment gives a closure to the dual abatement
structure, which exists now.
Point of Taxation Rules, 2011
From 1 October 2014, in the case of service tax
payable on reverse charge basis, the date of
payment of service tax will now be on the date of
payment of the value of service or on expiry of three
months whichever is earlier.
Place of Provision of Services Rules, 2012
Intermediaries
From 1 October 2014, the definition of intermediary
will be extended to cover supply of goods. With
this amendment, intermediaries facilitating the
provision of services/supply of goods, will attract tax
based on their location and not the location of the
recipient of those facilitation services.
Further, intermediary ought not to be understood to
mean just agents facilitating the conclusion of
contract between two (other) persons but also any
other person who may facilitate the conclusion of
such contract involving the provision of services /
supply of goods inter se.
Immediately, all agents (erstwhile, BAS-category of
service providers) representing overseas principals
and facilitating (a) supply of goods to buyers in India
or (b) sourcing of goods from producers in India,
could see a denial of export categorization of their
services. And service tax will be charged regardless
of the foreign exchange earned or the beneficiary of
these services being outside India. Buying agents,
selling agents, pre-sales/marketing call services and
every one in between will now be regarded as
taxable. Post-sale support/customer care services
could also be dragged into this provision as their
services.
In addition, inquiries may be launched to seek out
any other person who is playing a facilitative role.
Facilitate is a verb that means to make easy or
easier, to bring about or to preside over. Project
management, supervision and oversight and a
hundred other commercial arrangements come
within the sweep of this verb. Thus, all service
providers (non-BAS type also) whose role can be
ascribed a facilitative effect may be taxed and
denied the export categorization allowed till now. As
long as the role of such persons is not the
main-service or supply per se, it could be regarded
as facilitative and extended this new treatment.
Repair
Currently, goods temporarily imported for repair,
reengineering or reconditioning do not attract
service tax. From 1 October 2014, this relaxation will
be available only for repairs with an added condition
that these goods have to be re-exported without
being put to use in India except for the purpose of
such repair.
From 1 October 2014, by a fine juggling of words,
hiring of aircraft and vessels other than yachts will be
subject to tax if the service recipient is located in
India.
Interest on delayed payment of service tax
Currently, interest at 18% is levied on all delayed
payments of service tax. From 1 October 2014, this
will be replaced by the following convoluted table.
The mere thought of going through this torturous
calculations should be a sufficient deterrence for
delaying service tax payment.
Up to six months Between six months More than one year
and one year
18% per annum 24% per annum 30% per annum
CENVAT Credit Rules, 2004 (CENVAT Rules)
Time limit for availing CENVAT credit
In a throwback to the mid-nineties, the CENVAT
Rules have been amended to prescribe a 6-month
time limit for availing CENVAT credit. The reasoning
behind this amendment seems to be quite
unfathomable since credit is taken only of a duty
paid and when a due has been paid to the
Government it does not make any logical sense to
bind the payer to a time limit to avail credit.
In a recent judgement, the Mumbai branch of
CESTAT had held in the case of Shayona Pulp
Conversion Mills Private Limited that CENVAT credit
had to be availed within a period of 1 year. While
there was no legislative sanction to this mandate, the
honourable member decided to draw upon the logic
of importing a reasonable time-limit absent any
specific time limit.
The definitive wordings of the amendment preclude
an assessee from availing credit even in genuine
situations where interpretation issues prevented the
assessee from availing credit in the first instance.
Definition of place of removal
Rule 6 of the CENVAT Rules contains multiple
references to place of removal. While section 3 of
the Central Excise Act defines place of removal,
this definition was conspicuous by its absence in the
CENVAT Rules. This anomaly has been set right by
inserting clause (qa) in Rule 2 of the CENVAT Rules.
CENVAT credit under Reverse Charge
Presently, CENVAT credit of service tax paid under
reverse charge is available only upon payment of the
value of service as well as service tax thereon,
notwithstanding the fact that the service tax may
have been paid earlier. This requirement has now
been relaxed in cases where 100% of the tax is
payable by the recipient of the service. In such
cases, CENVAT credit may be availed immediately
upon payment of service tax.
A similar provision has also be made for tax paid
under partial reverse charge with a slight
modification that if the payment of the service is not
made within 3 months of the date of the invoice or
bill, the credit taken will have to be repaid. Of course,
credit may be taken again after payment for the
service. However, this will also be subject to the
overall time cap of 6 months from the invoice or bill.
Restriction on transfer of credit for
Large Taxpayer Units (LTUs)
Prior to the amendment, LTUs were at liberty to
transfer unutilised credit from one unit to another.
With an amendment this freedom has now been
curtailed. LTUs will now be required to offset credit
with duty/tax payable within the unit itself.
Credit relaxation for exports
Export services are not extended the privileges
available to exports if the payment is delayed
beyond the time permitted by the RBI. Therefore,
CENVAT Credit on such exports is now proposed to
be reversed where such delinquencies arise and
when such proceeds are realised albeit beyond the
prescribed time limit. Export of services and their
input services do not lend themselves to any form of
one-to-one co-relation. This amendment seems to
be unsympathetic towards the tax payer as well as
the administration. If a few of the several export
invoices in a given period are either not realised or
delayed, what proportion of the CENVAT Credit
relating to may be liable for such reversal. Time will
tell if a judicial intervention or administrative lethargy
will reduce the potential disputes in this regard.
Common amendments under Central Excise,
Customs and Service Tax
Settlement Commission
The scope of Settlement Commission was enlarged
in 2012 to encompass service tax as well. Now, the
name too undergoes a change and the Settlement
Commission will be known as Customs, Central
Excise and Service Tax Settlement Commission.
Currently, an application for settlement may be
made only upon filing of returns showing, inter alia,
payment of central excise duty. Now, the
Commission will be empowered to accept cases
where returns have not been filed for reasons to be
recorded in writing.
Concealment in the context of settlement in
Section 32O has now been clarified to mean
concealment made from a Central Excise Officer.
A similar explanation has been inserted in Section
127L of the Customs Act.
Advance Rulings
In order to reduce future litigation, resident private
companies can opt for Advance Rulings under
Customs, Central Excise and Service tax.
Power to condone delay in review by
Committee of Chief Commissioners
A Committee of Chief Commissioners is vested with
powers to review orders passed by a Commissioner
and to direct filing of an appeal, if it so merits. This
review is to be completed within three months of the
date of the order. The CBEC will now have powers to
condone a delay of 30 days after the expiry of the
initial period. Similar provisions are provided under
Customs too.
Increase in monetary limit for
discretionary acceptance of cases
The Appellate Tribunal could choose to accept or
reject cases where the amount in dispute was below
` 50,000. This has now been enhanced to ` 200,000.
I
n
d
i
r
e
c
t

T
a
x
Pre-deposit of confirmed demands prior
to appeal
In an environment where adjudicating authorities
confirm nearly always 80% of the demands made in
show cause notices with consequential penalties
and thereafter the Tribunal quashes around 80% of
such demands, the amendment to mandate
pre-deposit of 7.5% of the duty/tax and penalty
before the first appellate authority and an 10% of the
duty/tax and penalty before the second appellate
authority is an extremely retrograde step.
Appellate authority relieved of a responsibility
to grant stay
By introducing a mandatory provision in place of a
discretionary provision, the Government seems to
have given itself a double edged sword. On the one
hand genuine litigants will be forced to pay the
minimum amount irrespective of the absurdity of
adjudication orders against them. On the other hand,
this will provide frivolous litigants an opportunity to
engage appellate forums by forking out a fraction of
the duty and penalty demanded. Whether this
substitution will pass legal muster in the High Courts
and/or Supreme Court is a question to be answered
on another day.
What adds salt to the injury is that often demands
are made not only on the company but also on its
officers and directors as well resulting in a situation
where such people too need to deposit the requisite
sum before appealing. Historical information on the
demands made and their final status should have
been the guiding factor, but sadly this seems to have
been bypassed. For a budget, which appears to
have had its lucid moments, this step stands apart
for its ludicrousness.
Customs
Baggage Rules
Baggage Rules have been amended to increase free
baggage allowance from ` 35,000 to ` 45,000.
Duty free allowance on cigarettes, cigars and
tobacco has been halved from 200 sticks to 100
sticks, 50 sticks to 25 sticks and 250 gms. to 125
gms. respectively.
Bill of Entry for land imports
Importers using land routes will now be permitted to
file a bill of entry before filing of the Import Report if
the goods are expected to arrive within 30 days of
such presentment.
Central Excise
E-payment of duties
From 1 October 2014, all Central Excise and Service Tax
assessees will have to pay duties and taxes electronically.
Relaxations may be given by an Assistant/Deputy
Commissioner on a case-by-case basis.
Relaxation of strictures in case of delay
in payment of duties
Presently where duty payment is delayed by more
than 30 days from the due date, clearances of
dutiable goods are permitted only upon payment of
duty for each clearance. This provision has been
done away and replaced with a penalty mechanism
of 1% for each months delay.
New mechanism to identify tax and duty evaders
Another puzzling amendment has been the
introduction of a new authority under Central Excise
with powers to call for information from a wide range
of people and authorities. Starting from the
assessee, this includes banks, state and central
government agencies and so on. One argument is
that this will afford an opportunity for this authority to
reconcile information filed by an assessee under
Central Excise with that of information filed with
other authorities such as banks, financial
institutions, VAT authorities etc. However, rather than
achieving this through computerisation and unifying
information by reference to a common identification
number, a rather convoluted approach seems to
have been undertaken. Indeed, this may be a
superfluous exercise under the GST regime.
War against consumption of tobacco
The Budget appears to have unleashed a war
against tobacco consumption. Apart from enacting
duty increases ranging from 10% to 72%, baggage
allowance for import of tobacco too has been
halved. This government appears determined to
throttle cancer-causing agents at source.
Central Excise Valuation Rules
Sale of goods below manufacturing cost and profit,
does not, by that fact alone, cease to be its
assessable value. This is a principle that has held
field for several decades and came to be confirmed
in CCE, Pune v. Dai Ichi Karkaria Ltd
1
. The decision
of Apex Court in CCE, Mumbai v. Fiat India Pvt Ltd
2

came to unsettle this position by holding that when
there is any extraneous consideration, then the
valuation offered based on the sale price cannot be
accepted but a cost construction based method
must be followed.
An amendment to the CE Valuation Rules will take
effect from 11 July 2014 restoring the erstwhile
principle but resorting to language that leaves much
to be desired of the skills of the draftsman. It states
where price is not the sole consideration and
no additional consideration is flowing (sic) the
value shall be deemed to be the transaction
value. If no additional consideration is flowing, how
then can the price not be the sole consideration?
But, we all know what the draftsman is trying to
say. The amendment here may suffer from drafting
skills but does not lack legal accuracy.
Service Tax
Legislative Amendments
By an amendment to the definition of metered cabs,
radio taxis have been brought under the service tax
net. With this amendment, radio taxis have been
brought on par with Rent-a-cab operators thereby
levelling the playing field amongst providers of
similar services.
Entry 55 of the State List in the Constitution vests the
State Government with powers to tax
advertisements other than those published in
newspapers or in broadcast media. An amendment
to the negative list has brought advertisements in
media other than print media within the service tax
net. What with the Constitution providing specific
directives on taxation of advertisement, this
amendment could lead to potential legal disputes on
interpretation of Federal and State powers.
The explanation to Section 67A which currently
borrows rate of exchange as notified under the
Customs Act, 1962 will be substituted and
henceforth, the rate of exchange will be notified
under the Service Tax Rules.
A time limit of six months has been imposed for
determination of tax due in cases where show cause
notices have been issued. However, rather than
making this time limit mandatory, the words suggest
only a recommendatory time limit.
Section 80 affords a waiver of penalty when cogent
reasons exist. This waiver has now been removed for
failure to pay tax on account of fraud, collusion, wilful
misstatement, suppression of facts or contravention of the
law to wilfully evade payment of tax.
Powers to approve search and seizure has now been
granted to Additional Commissioner of Central Excise
and both the Joint Commissioner and the Additional
Commissioner may authorise any Central Excise officer
to conduct such a search and seize.
Provisions exist in Central Excise, which permit the
Government to recover unpaid duties and penalties
from a successor to whom a business has been
transferred by a defaulter. Similar provisions are now
being introduced in Service tax so as to allow the
government to recover taxes and penalties from a
successor to whom the defaulter has transferred his
business.
Section 94 has been amended with a view to plug
evasion of taxes and leakage of revenue. The
Government is now empowered to frame rules to
prescribe records that may be maintained to ensure
proper levy and collection of tax as well as to
prescribe punitive measures such as restriction of
utilisation of CENVAT credit for evasion of tax or
misuse of CENVAT credit.
These legislative amendments will have the force of
law once the Finance Bill receives the assent of the
President of India after being passed in both houses
of the Parliament.
Service Tax (Determination of Value) Rules, 2006
From 1 October 2014, works contracts, other than
contracts for original works, will now be charged to
tax at 70% of the total value of the contract. This
amendment gives a closure to the dual abatement
structure, which exists now.
Point of Taxation Rules, 2011
From 1 October 2014, in the case of service tax
payable on reverse charge basis, the date of
payment of service tax will now be on the date of
payment of the value of service or on expiry of three
months whichever is earlier.
Place of Provision of Services Rules, 2012
Intermediaries
From 1 October 2014, the definition of intermediary
will be extended to cover supply of goods. With
this amendment, intermediaries facilitating the
provision of services/supply of goods, will attract tax
based on their location and not the location of the
recipient of those facilitation services.
Further, intermediary ought not to be understood to
mean just agents facilitating the conclusion of
contract between two (other) persons but also any
other person who may facilitate the conclusion of
such contract involving the provision of services /
supply of goods inter se.
Immediately, all agents (erstwhile, BAS-category of
service providers) representing overseas principals
and facilitating (a) supply of goods to buyers in India
or (b) sourcing of goods from producers in India,
could see a denial of export categorization of their
services. And service tax will be charged regardless
of the foreign exchange earned or the beneficiary of
these services being outside India. Buying agents,
selling agents, pre-sales/marketing call services and
every one in between will now be regarded as
taxable. Post-sale support/customer care services
could also be dragged into this provision as their
services.
In addition, inquiries may be launched to seek out
any other person who is playing a facilitative role.
Facilitate is a verb that means to make easy or
easier, to bring about or to preside over. Project
management, supervision and oversight and a
hundred other commercial arrangements come
within the sweep of this verb. Thus, all service
providers (non-BAS type also) whose role can be
ascribed a facilitative effect may be taxed and
denied the export categorization allowed till now. As
long as the role of such persons is not the
main-service or supply per se, it could be regarded
as facilitative and extended this new treatment.
Repair
Currently, goods temporarily imported for repair,
reengineering or reconditioning do not attract
service tax. From 1 October 2014, this relaxation will
be available only for repairs with an added condition
that these goods have to be re-exported without
being put to use in India except for the purpose of
such repair.
From 1 October 2014, by a fine juggling of words,
hiring of aircraft and vessels other than yachts will be
subject to tax if the service recipient is located in
India.
Interest on delayed payment of service tax
Currently, interest at 18% is levied on all delayed
payments of service tax. From 1 October 2014, this
will be replaced by the following convoluted table.
The mere thought of going through this torturous
calculations should be a sufficient deterrence for
delaying service tax payment.
Up to six months Between six months More than one year
and one year
18% per annum 24% per annum 30% per annum
CENVAT Credit Rules, 2004 (CENVAT Rules)
Time limit for availing CENVAT credit
In a throwback to the mid-nineties, the CENVAT
Rules have been amended to prescribe a 6-month
time limit for availing CENVAT credit. The reasoning
behind this amendment seems to be quite
unfathomable since credit is taken only of a duty
paid and when a due has been paid to the
Government it does not make any logical sense to
bind the payer to a time limit to avail credit.
In a recent judgement, the Mumbai branch of
CESTAT had held in the case of Shayona Pulp
Conversion Mills Private Limited that CENVAT credit
had to be availed within a period of 1 year. While
there was no legislative sanction to this mandate, the
honourable member decided to draw upon the logic
of importing a reasonable time-limit absent any
specific time limit.
The definitive wordings of the amendment preclude
an assessee from availing credit even in genuine
situations where interpretation issues prevented the
assessee from availing credit in the first instance.
Definition of place of removal
Rule 6 of the CENVAT Rules contains multiple
references to place of removal. While section 3 of
the Central Excise Act defines place of removal,
this definition was conspicuous by its absence in the
CENVAT Rules. This anomaly has been set right by
inserting clause (qa) in Rule 2 of the CENVAT Rules.
CENVAT credit under Reverse Charge
Presently, CENVAT credit of service tax paid under
reverse charge is available only upon payment of the
value of service as well as service tax thereon,
notwithstanding the fact that the service tax may
have been paid earlier. This requirement has now
been relaxed in cases where 100% of the tax is
payable by the recipient of the service. In such
cases, CENVAT credit may be availed immediately
upon payment of service tax.
A similar provision has also be made for tax paid
under partial reverse charge with a slight
modification that if the payment of the service is not
made within 3 months of the date of the invoice or
bill, the credit taken will have to be repaid. Of course,
credit may be taken again after payment for the
service. However, this will also be subject to the
overall time cap of 6 months from the invoice or bill.
Restriction on transfer of credit for
Large Taxpayer Units (LTUs)
Prior to the amendment, LTUs were at liberty to
transfer unutilised credit from one unit to another.
With an amendment this freedom has now been
curtailed. LTUs will now be required to offset credit
with duty/tax payable within the unit itself.
Credit relaxation for exports
Export services are not extended the privileges
available to exports if the payment is delayed
beyond the time permitted by the RBI. Therefore,
CENVAT Credit on such exports is now proposed to
be reversed where such delinquencies arise and
when such proceeds are realised albeit beyond the
prescribed time limit. Export of services and their
input services do not lend themselves to any form of
one-to-one co-relation. This amendment seems to
be unsympathetic towards the tax payer as well as
the administration. If a few of the several export
invoices in a given period are either not realised or
delayed, what proportion of the CENVAT Credit
relating to may be liable for such reversal. Time will
tell if a judicial intervention or administrative lethargy
will reduce the potential disputes in this regard.
Common amendments under Central Excise,
Customs and Service Tax
Settlement Commission
The scope of Settlement Commission was enlarged
in 2012 to encompass service tax as well. Now, the
name too undergoes a change and the Settlement
Commission will be known as Customs, Central
Excise and Service Tax Settlement Commission.
Currently, an application for settlement may be
made only upon filing of returns showing, inter alia,
payment of central excise duty. Now, the
Commission will be empowered to accept cases
where returns have not been filed for reasons to be
recorded in writing.
Concealment in the context of settlement in
Section 32O has now been clarified to mean
concealment made from a Central Excise Officer.
A similar explanation has been inserted in Section
127L of the Customs Act.
Advance Rulings
In order to reduce future litigation, resident private
companies can opt for Advance Rulings under
Customs, Central Excise and Service tax.
Power to condone delay in review by
Committee of Chief Commissioners
A Committee of Chief Commissioners is vested with
powers to review orders passed by a Commissioner
and to direct filing of an appeal, if it so merits. This
review is to be completed within three months of the
date of the order. The CBEC will now have powers to
condone a delay of 30 days after the expiry of the
initial period. Similar provisions are provided under
Customs too.
Increase in monetary limit for
discretionary acceptance of cases
The Appellate Tribunal could choose to accept or
reject cases where the amount in dispute was below
` 50,000. This has now been enhanced to ` 200,000.
I
n
d
i
r
e
c
t

T
a
x
Pre-deposit of confirmed demands prior
to appeal
In an environment where adjudicating authorities
confirm nearly always 80% of the demands made in
show cause notices with consequential penalties
and thereafter the Tribunal quashes around 80% of
such demands, the amendment to mandate
pre-deposit of 7.5% of the duty/tax and penalty
before the first appellate authority and an 10% of the
duty/tax and penalty before the second appellate
authority is an extremely retrograde step.
Appellate authority relieved of a responsibility
to grant stay
By introducing a mandatory provision in place of a
discretionary provision, the Government seems to
have given itself a double edged sword. On the one
hand genuine litigants will be forced to pay the
minimum amount irrespective of the absurdity of
adjudication orders against them. On the other hand,
this will provide frivolous litigants an opportunity to
engage appellate forums by forking out a fraction of
the duty and penalty demanded. Whether this
substitution will pass legal muster in the High Courts
and/or Supreme Court is a question to be answered
on another day.
What adds salt to the injury is that often demands
are made not only on the company but also on its
officers and directors as well resulting in a situation
where such people too need to deposit the requisite
sum before appealing. Historical information on the
demands made and their final status should have
been the guiding factor, but sadly this seems to have
been bypassed. For a budget, which appears to
have had its lucid moments, this step stands apart
for its ludicrousness.
Customs
Baggage Rules
Baggage Rules have been amended to increase free
baggage allowance from ` 35,000 to ` 45,000.
Duty free allowance on cigarettes, cigars and
tobacco has been halved from 200 sticks to 100
sticks, 50 sticks to 25 sticks and 250 gms. to 125
gms. respectively.
Bill of Entry for land imports
Importers using land routes will now be permitted to
file a bill of entry before filing of the Import Report if
the goods are expected to arrive within 30 days of
such presentment.
Central Excise
E-payment of duties
From 1 October 2014, all Central Excise and Service Tax
assessees will have to pay duties and taxes electronically.
Relaxations may be given by an Assistant/Deputy
Commissioner on a case-by-case basis.
Relaxation of strictures in case of delay
in payment of duties
Presently where duty payment is delayed by more
than 30 days from the due date, clearances of
dutiable goods are permitted only upon payment of
duty for each clearance. This provision has been
done away and replaced with a penalty mechanism
of 1% for each months delay.
New mechanism to identify tax and duty evaders
Another puzzling amendment has been the
introduction of a new authority under Central Excise
with powers to call for information from a wide range
of people and authorities. Starting from the
assessee, this includes banks, state and central
government agencies and so on. One argument is
that this will afford an opportunity for this authority to
reconcile information filed by an assessee under
Central Excise with that of information filed with
other authorities such as banks, financial
institutions, VAT authorities etc. However, rather than
achieving this through computerisation and unifying
information by reference to a common identification
number, a rather convoluted approach seems to
have been undertaken. Indeed, this may be a
superfluous exercise under the GST regime.
War against consumption of tobacco
The Budget appears to have unleashed a war
against tobacco consumption. Apart from enacting
duty increases ranging from 10% to 72%, baggage
allowance for import of tobacco too has been
halved. This government appears determined to
throttle cancer-causing agents at source.
Central Excise Valuation Rules
Sale of goods below manufacturing cost and profit,
does not, by that fact alone, cease to be its
assessable value. This is a principle that has held
field for several decades and came to be confirmed
in CCE, Pune v. Dai Ichi Karkaria Ltd
1
. The decision
of Apex Court in CCE, Mumbai v. Fiat India Pvt Ltd
2

came to unsettle this position by holding that when
there is any extraneous consideration, then the
valuation offered based on the sale price cannot be
accepted but a cost construction based method
must be followed.
An amendment to the CE Valuation Rules will take
effect from 11 July 2014 restoring the erstwhile
principle but resorting to language that leaves much
to be desired of the skills of the draftsman. It states
where price is not the sole consideration and
no additional consideration is flowing (sic) the
value shall be deemed to be the transaction
value. If no additional consideration is flowing, how
then can the price not be the sole consideration?
But, we all know what the draftsman is trying to
say. The amendment here may suffer from drafting
skills but does not lack legal accuracy.
Service Tax
Legislative Amendments
By an amendment to the definition of metered cabs,
radio taxis have been brought under the service tax
net. With this amendment, radio taxis have been
brought on par with Rent-a-cab operators thereby
levelling the playing field amongst providers of
similar services.
Entry 55 of the State List in the Constitution vests the
State Government with powers to tax
advertisements other than those published in
newspapers or in broadcast media. An amendment
to the negative list has brought advertisements in
media other than print media within the service tax
net. What with the Constitution providing specific
directives on taxation of advertisement, this
amendment could lead to potential legal disputes on
interpretation of Federal and State powers.
The explanation to Section 67A which currently
borrows rate of exchange as notified under the
Customs Act, 1962 will be substituted and
henceforth, the rate of exchange will be notified
under the Service Tax Rules.
A time limit of six months has been imposed for
determination of tax due in cases where show cause
notices have been issued. However, rather than
making this time limit mandatory, the words suggest
only a recommendatory time limit.
Section 80 affords a waiver of penalty when cogent
reasons exist. This waiver has now been removed for
failure to pay tax on account of fraud, collusion, wilful
misstatement, suppression of facts or contravention of the
law to wilfully evade payment of tax.
Powers to approve search and seizure has now been
granted to Additional Commissioner of Central Excise
and both the Joint Commissioner and the Additional
Commissioner may authorise any Central Excise officer
to conduct such a search and seize.
Provisions exist in Central Excise, which permit the
Government to recover unpaid duties and penalties
from a successor to whom a business has been
transferred by a defaulter. Similar provisions are now
being introduced in Service tax so as to allow the
government to recover taxes and penalties from a
successor to whom the defaulter has transferred his
business.
Section 94 has been amended with a view to plug
evasion of taxes and leakage of revenue. The
Government is now empowered to frame rules to
prescribe records that may be maintained to ensure
proper levy and collection of tax as well as to
prescribe punitive measures such as restriction of
utilisation of CENVAT credit for evasion of tax or
misuse of CENVAT credit.
These legislative amendments will have the force of
law once the Finance Bill receives the assent of the
President of India after being passed in both houses
of the Parliament.
Service Tax (Determination of Value) Rules, 2006
From 1 October 2014, works contracts, other than
contracts for original works, will now be charged to
tax at 70% of the total value of the contract. This
amendment gives a closure to the dual abatement
structure, which exists now.
Point of Taxation Rules, 2011
From 1 October 2014, in the case of service tax
payable on reverse charge basis, the date of
payment of service tax will now be on the date of
payment of the value of service or on expiry of three
months whichever is earlier.
Place of Provision of Services Rules, 2012
Intermediaries
From 1 October 2014, the definition of intermediary
will be extended to cover supply of goods. With
this amendment, intermediaries facilitating the
provision of services/supply of goods, will attract tax
based on their location and not the location of the
recipient of those facilitation services.
Further, intermediary ought not to be understood to
mean just agents facilitating the conclusion of
contract between two (other) persons but also any
other person who may facilitate the conclusion of
such contract involving the provision of services /
supply of goods inter se.
Immediately, all agents (erstwhile, BAS-category of
service providers) representing overseas principals
and facilitating (a) supply of goods to buyers in India
or (b) sourcing of goods from producers in India,
could see a denial of export categorization of their
services. And service tax will be charged regardless
of the foreign exchange earned or the beneficiary of
these services being outside India. Buying agents,
selling agents, pre-sales/marketing call services and
every one in between will now be regarded as
taxable. Post-sale support/customer care services
could also be dragged into this provision as their
services.
In addition, inquiries may be launched to seek out
any other person who is playing a facilitative role.
Facilitate is a verb that means to make easy or
easier, to bring about or to preside over. Project
management, supervision and oversight and a
hundred other commercial arrangements come
within the sweep of this verb. Thus, all service
providers (non-BAS type also) whose role can be
ascribed a facilitative effect may be taxed and
denied the export categorization allowed till now. As
long as the role of such persons is not the
main-service or supply per se, it could be regarded
as facilitative and extended this new treatment.
Repair
Currently, goods temporarily imported for repair,
reengineering or reconditioning do not attract
service tax. From 1 October 2014, this relaxation will
be available only for repairs with an added condition
that these goods have to be re-exported without
being put to use in India except for the purpose of
such repair.
From 1 October 2014, by a fine juggling of words,
hiring of aircraft and vessels other than yachts will be
subject to tax if the service recipient is located in
India.
Interest on delayed payment of service tax
Currently, interest at 18% is levied on all delayed
payments of service tax. From 1 October 2014, this
will be replaced by the following convoluted table.
The mere thought of going through this torturous
calculations should be a sufficient deterrence for
delaying service tax payment.
Up to six months Between six months More than one year
and one year
18% per annum 24% per annum 30% per annum
CENVAT Credit Rules, 2004 (CENVAT Rules)
Time limit for availing CENVAT credit
In a throwback to the mid-nineties, the CENVAT
Rules have been amended to prescribe a 6-month
time limit for availing CENVAT credit. The reasoning
behind this amendment seems to be quite
unfathomable since credit is taken only of a duty
paid and when a due has been paid to the
Government it does not make any logical sense to
bind the payer to a time limit to avail credit.
In a recent judgement, the Mumbai branch of
CESTAT had held in the case of Shayona Pulp
Conversion Mills Private Limited that CENVAT credit
had to be availed within a period of 1 year. While
there was no legislative sanction to this mandate, the
honourable member decided to draw upon the logic
of importing a reasonable time-limit absent any
specific time limit.
The definitive wordings of the amendment preclude
an assessee from availing credit even in genuine
situations where interpretation issues prevented the
assessee from availing credit in the first instance.
Definition of place of removal
Rule 6 of the CENVAT Rules contains multiple
references to place of removal. While section 3 of
the Central Excise Act defines place of removal,
this definition was conspicuous by its absence in the
CENVAT Rules. This anomaly has been set right by
inserting clause (qa) in Rule 2 of the CENVAT Rules.
CENVAT credit under Reverse Charge
Presently, CENVAT credit of service tax paid under
reverse charge is available only upon payment of the
value of service as well as service tax thereon,
notwithstanding the fact that the service tax may
have been paid earlier. This requirement has now
been relaxed in cases where 100% of the tax is
payable by the recipient of the service. In such
cases, CENVAT credit may be availed immediately
upon payment of service tax.
A similar provision has also be made for tax paid
under partial reverse charge with a slight
modification that if the payment of the service is not
made within 3 months of the date of the invoice or
bill, the credit taken will have to be repaid. Of course,
credit may be taken again after payment for the
service. However, this will also be subject to the
overall time cap of 6 months from the invoice or bill.
Restriction on transfer of credit for
Large Taxpayer Units (LTUs)
Prior to the amendment, LTUs were at liberty to
transfer unutilised credit from one unit to another.
With an amendment this freedom has now been
curtailed. LTUs will now be required to offset credit
with duty/tax payable within the unit itself.
Credit relaxation for exports
Export services are not extended the privileges
available to exports if the payment is delayed
beyond the time permitted by the RBI. Therefore,
CENVAT Credit on such exports is now proposed to
be reversed where such delinquencies arise and
when such proceeds are realised albeit beyond the
prescribed time limit. Export of services and their
input services do not lend themselves to any form of
one-to-one co-relation. This amendment seems to
be unsympathetic towards the tax payer as well as
the administration. If a few of the several export
invoices in a given period are either not realised or
delayed, what proportion of the CENVAT Credit
relating to may be liable for such reversal. Time will
tell if a judicial intervention or administrative lethargy
will reduce the potential disputes in this regard.
Common amendments under Central Excise,
Customs and Service Tax
Settlement Commission
The scope of Settlement Commission was enlarged
in 2012 to encompass service tax as well. Now, the
name too undergoes a change and the Settlement
Commission will be known as Customs, Central
Excise and Service Tax Settlement Commission.
Currently, an application for settlement may be
made only upon filing of returns showing, inter alia,
payment of central excise duty. Now, the
Commission will be empowered to accept cases
where returns have not been filed for reasons to be
recorded in writing.
Concealment in the context of settlement in
Section 32O has now been clarified to mean
concealment made from a Central Excise Officer.
A similar explanation has been inserted in Section
127L of the Customs Act.
Advance Rulings
In order to reduce future litigation, resident private
companies can opt for Advance Rulings under
Customs, Central Excise and Service tax.
Power to condone delay in review by
Committee of Chief Commissioners
A Committee of Chief Commissioners is vested with
powers to review orders passed by a Commissioner
and to direct filing of an appeal, if it so merits. This
review is to be completed within three months of the
date of the order. The CBEC will now have powers to
condone a delay of 30 days after the expiry of the
initial period. Similar provisions are provided under
Customs too.
Increase in monetary limit for
discretionary acceptance of cases
The Appellate Tribunal could choose to accept or
reject cases where the amount in dispute was below
` 50,000. This has now been enhanced to ` 200,000.
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Pre-deposit of confirmed demands prior
to appeal
In an environment where adjudicating authorities
confirm nearly always 80% of the demands made in
show cause notices with consequential penalties
and thereafter the Tribunal quashes around 80% of
such demands, the amendment to mandate
pre-deposit of 7.5% of the duty/tax and penalty
before the first appellate authority and an 10% of the
duty/tax and penalty before the second appellate
authority is an extremely retrograde step.
Appellate authority relieved of a responsibility
to grant stay
By introducing a mandatory provision in place of a
discretionary provision, the Government seems to
have given itself a double edged sword. On the one
hand genuine litigants will be forced to pay the
minimum amount irrespective of the absurdity of
adjudication orders against them. On the other hand,
this will provide frivolous litigants an opportunity to
engage appellate forums by forking out a fraction of
the duty and penalty demanded. Whether this
substitution will pass legal muster in the High Courts
and/or Supreme Court is a question to be answered
on another day.
What adds salt to the injury is that often demands
are made not only on the company but also on its
officers and directors as well resulting in a situation
where such people too need to deposit the requisite
sum before appealing. Historical information on the
demands made and their final status should have
been the guiding factor, but sadly this seems to have
been bypassed. For a budget, which appears to
have had its lucid moments, this step stands apart
for its ludicrousness.
Customs
Baggage Rules
Baggage Rules have been amended to increase free
baggage allowance from ` 35,000 to ` 45,000.
Duty free allowance on cigarettes, cigars and
tobacco has been halved from 200 sticks to 100
sticks, 50 sticks to 25 sticks and 250 gms. to 125
gms. respectively.
Bill of Entry for land imports
Importers using land routes will now be permitted to
file a bill of entry before filing of the Import Report if
the goods are expected to arrive within 30 days of
such presentment.
Central Excise
E-payment of duties
From 1 October 2014, all Central Excise and Service Tax
assessees will have to pay duties and taxes electronically.
Relaxations may be given by an Assistant/Deputy
Commissioner on a case-by-case basis.
Relaxation of strictures in case of delay
in payment of duties
Presently where duty payment is delayed by more
than 30 days from the due date, clearances of
dutiable goods are permitted only upon payment of
duty for each clearance. This provision has been
done away and replaced with a penalty mechanism
of 1% for each months delay.
New mechanism to identify tax and duty evaders
Another puzzling amendment has been the
introduction of a new authority under Central Excise
with powers to call for information from a wide range
of people and authorities. Starting from the
assessee, this includes banks, state and central
government agencies and so on. One argument is
that this will afford an opportunity for this authority to
reconcile information filed by an assessee under
Central Excise with that of information filed with
other authorities such as banks, financial
institutions, VAT authorities etc. However, rather than
achieving this through computerisation and unifying
information by reference to a common identification
number, a rather convoluted approach seems to
have been undertaken. Indeed, this may be a
superfluous exercise under the GST regime.
War against consumption of tobacco
The Budget appears to have unleashed a war
against tobacco consumption. Apart from enacting
duty increases ranging from 10% to 72%, baggage
allowance for import of tobacco too has been
halved. This government appears determined to
throttle cancer-causing agents at source.
Central Excise Valuation Rules
Sale of goods below manufacturing cost and profit,
does not, by that fact alone, cease to be its
assessable value. This is a principle that has held
field for several decades and came to be confirmed
in CCE, Pune v. Dai Ichi Karkaria Ltd
1
. The decision
of Apex Court in CCE, Mumbai v. Fiat India Pvt Ltd
2

came to unsettle this position by holding that when
there is any extraneous consideration, then the
valuation offered based on the sale price cannot be
accepted but a cost construction based method
must be followed.
An amendment to the CE Valuation Rules will take
effect from 11 July 2014 restoring the erstwhile
principle but resorting to language that leaves much
to be desired of the skills of the draftsman. It states
where price is not the sole consideration and
no additional consideration is flowing (sic) the
value shall be deemed to be the transaction
value. If no additional consideration is flowing, how
then can the price not be the sole consideration?
But, we all know what the draftsman is trying to
say. The amendment here may suffer from drafting
skills but does not lack legal accuracy.
Service Tax
Legislative Amendments
By an amendment to the definition of metered cabs,
radio taxis have been brought under the service tax
net. With this amendment, radio taxis have been
brought on par with Rent-a-cab operators thereby
levelling the playing field amongst providers of
similar services.
Entry 55 of the State List in the Constitution vests the
State Government with powers to tax
advertisements other than those published in
newspapers or in broadcast media. An amendment
to the negative list has brought advertisements in
media other than print media within the service tax
net. What with the Constitution providing specific
directives on taxation of advertisement, this
amendment could lead to potential legal disputes on
interpretation of Federal and State powers.
The explanation to Section 67A which currently
borrows rate of exchange as notified under the
Customs Act, 1962 will be substituted and
henceforth, the rate of exchange will be notified
under the Service Tax Rules.
A time limit of six months has been imposed for
determination of tax due in cases where show cause
notices have been issued. However, rather than
making this time limit mandatory, the words suggest
only a recommendatory time limit.
Section 80 affords a waiver of penalty when cogent
reasons exist. This waiver has now been removed for
failure to pay tax on account of fraud, collusion, wilful
misstatement, suppression of facts or contravention of the
law to wilfully evade payment of tax.
Powers to approve search and seizure has now been
granted to Additional Commissioner of Central Excise
and both the Joint Commissioner and the Additional
Commissioner may authorise any Central Excise officer
to conduct such a search and seize.
Provisions exist in Central Excise, which permit the
Government to recover unpaid duties and penalties
from a successor to whom a business has been
transferred by a defaulter. Similar provisions are now
being introduced in Service tax so as to allow the
government to recover taxes and penalties from a
successor to whom the defaulter has transferred his
business.
Section 94 has been amended with a view to plug
evasion of taxes and leakage of revenue. The
Government is now empowered to frame rules to
prescribe records that may be maintained to ensure
proper levy and collection of tax as well as to
prescribe punitive measures such as restriction of
utilisation of CENVAT credit for evasion of tax or
misuse of CENVAT credit.
These legislative amendments will have the force of
law once the Finance Bill receives the assent of the
President of India after being passed in both houses
of the Parliament.
Service Tax (Determination of Value) Rules, 2006
From 1 October 2014, works contracts, other than
contracts for original works, will now be charged to
tax at 70% of the total value of the contract. This
amendment gives a closure to the dual abatement
structure, which exists now.
Point of Taxation Rules, 2011
From 1 October 2014, in the case of service tax
payable on reverse charge basis, the date of
payment of service tax will now be on the date of
payment of the value of service or on expiry of three
months whichever is earlier.
Place of Provision of Services Rules, 2012
Intermediaries
From 1 October 2014, the definition of intermediary
will be extended to cover supply of goods. With
this amendment, intermediaries facilitating the
provision of services/supply of goods, will attract tax
based on their location and not the location of the
recipient of those facilitation services.
Further, intermediary ought not to be understood to
mean just agents facilitating the conclusion of
contract between two (other) persons but also any
other person who may facilitate the conclusion of
such contract involving the provision of services /
supply of goods inter se.
Immediately, all agents (erstwhile, BAS-category of
service providers) representing overseas principals
and facilitating (a) supply of goods to buyers in India
or (b) sourcing of goods from producers in India,
could see a denial of export categorization of their
services. And service tax will be charged regardless
of the foreign exchange earned or the beneficiary of
these services being outside India. Buying agents,
selling agents, pre-sales/marketing call services and
every one in between will now be regarded as
taxable. Post-sale support/customer care services
could also be dragged into this provision as their
services.
In addition, inquiries may be launched to seek out
any other person who is playing a facilitative role.
Facilitate is a verb that means to make easy or
easier, to bring about or to preside over. Project
management, supervision and oversight and a
hundred other commercial arrangements come
within the sweep of this verb. Thus, all service
providers (non-BAS type also) whose role can be
ascribed a facilitative effect may be taxed and
denied the export categorization allowed till now. As
long as the role of such persons is not the
main-service or supply per se, it could be regarded
as facilitative and extended this new treatment.
Repair
Currently, goods temporarily imported for repair,
reengineering or reconditioning do not attract
service tax. From 1 October 2014, this relaxation will
be available only for repairs with an added condition
that these goods have to be re-exported without
being put to use in India except for the purpose of
such repair.
From 1 October 2014, by a fine juggling of words,
hiring of aircraft and vessels other than yachts will be
subject to tax if the service recipient is located in
India.
Interest on delayed payment of service tax
Currently, interest at 18% is levied on all delayed
payments of service tax. From 1 October 2014, this
will be replaced by the following convoluted table.
The mere thought of going through this torturous
calculations should be a sufficient deterrence for
delaying service tax payment.
Up to six months Between six months More than one year
and one year
18% per annum 24% per annum 30% per annum
CENVAT Credit Rules, 2004 (CENVAT Rules)
Time limit for availing CENVAT credit
In a throwback to the mid-nineties, the CENVAT
Rules have been amended to prescribe a 6-month
time limit for availing CENVAT credit. The reasoning
behind this amendment seems to be quite
unfathomable since credit is taken only of a duty
paid and when a due has been paid to the
Government it does not make any logical sense to
bind the payer to a time limit to avail credit.
In a recent judgement, the Mumbai branch of
CESTAT had held in the case of Shayona Pulp
Conversion Mills Private Limited that CENVAT credit
had to be availed within a period of 1 year. While
there was no legislative sanction to this mandate, the
honourable member decided to draw upon the logic
of importing a reasonable time-limit absent any
specific time limit.
The definitive wordings of the amendment preclude
an assessee from availing credit even in genuine
situations where interpretation issues prevented the
assessee from availing credit in the first instance.
Definition of place of removal
Rule 6 of the CENVAT Rules contains multiple
references to place of removal. While section 3 of
the Central Excise Act defines place of removal,
this definition was conspicuous by its absence in the
CENVAT Rules. This anomaly has been set right by
inserting clause (qa) in Rule 2 of the CENVAT Rules.
CENVAT credit under Reverse Charge
Presently, CENVAT credit of service tax paid under
reverse charge is available only upon payment of the
value of service as well as service tax thereon,
notwithstanding the fact that the service tax may
have been paid earlier. This requirement has now
been relaxed in cases where 100% of the tax is
payable by the recipient of the service. In such
cases, CENVAT credit may be availed immediately
upon payment of service tax.
A similar provision has also be made for tax paid
under partial reverse charge with a slight
modification that if the payment of the service is not
made within 3 months of the date of the invoice or
bill, the credit taken will have to be repaid. Of course,
credit may be taken again after payment for the
service. However, this will also be subject to the
overall time cap of 6 months from the invoice or bill.
Restriction on transfer of credit for
Large Taxpayer Units (LTUs)
Prior to the amendment, LTUs were at liberty to
transfer unutilised credit from one unit to another.
With an amendment this freedom has now been
curtailed. LTUs will now be required to offset credit
with duty/tax payable within the unit itself.
Credit relaxation for exports
Export services are not extended the privileges
available to exports if the payment is delayed
beyond the time permitted by the RBI. Therefore,
CENVAT Credit on such exports is now proposed to
be reversed where such delinquencies arise and
when such proceeds are realised albeit beyond the
prescribed time limit. Export of services and their
input services do not lend themselves to any form of
one-to-one co-relation. This amendment seems to
be unsympathetic towards the tax payer as well as
the administration. If a few of the several export
invoices in a given period are either not realised or
delayed, what proportion of the CENVAT Credit
relating to may be liable for such reversal. Time will
tell if a judicial intervention or administrative lethargy
will reduce the potential disputes in this regard.
Special Notes
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Effective date of change in rate of duty/tax
Amendment to the Act will take effect only after
enactment of the Finance Bill. But, amendment to
impose new duties or increase existing duties will
take effect immediately (10 July 2014) if the clause in
the Finance Bill is specified as a declared provision
under Provisional Collection of Taxes Act, 1931.
Amendment to Rules will take effect from the stated
effective date or date of its publication (10 July
2014).
Tariff amendment by issuance of notification will be
from date of such notification (10 July 2014).
Certain service tax related amendments are effective
from October 1, 2014 (ST3 period).
Effect on CENVAT of withdrawal of exemption
When an exempt product becomes dutiable (by way
of exemption being withdrawn), Cenvat credit
relatable to inputs lying in stock (as raw material or
works-in-progress) on the budget day, can be
claimed as opening balance of credit under Rule 3(2)
of the CENVAT Credit Rules, 2004. Similar
provisions for service provider are already made
under Rule 3(3) of the CENVAT Credit Rules, 2004.
Those transitioning from a without-Cenvat based
rate of tax to one with Cenvat, this provision would
equally be applicable.
Effect on CENVAT of introduction of exemption
Whenever excise duty becomes exempted on any
manufactured products, we need to remember that
CENVAT Credit balance stands disallowed by Rule
11(3) of CENVAT Rules, 2004. This results in an
instantaneous erosion of current asset balance and a
cost for the manufacturer. If there were an
accelerated utilization of credit, then in addition to
reversal, cash payment of the deficit will be required.
And in cases of credit-surplus, due to rate
imbalance, such surplus will lapse after reversal of
relatable credit.
Omission-Repeal:
Omission of a provision in a statute has the effect as
if that provision were never contained in the statute.
And upon such omission, proceedings initiated
previously come to a halt, if no saving clause were
attached during the omission. But, if a provision
were to be repealed then such repeal will not affect
any previous operation of the provision or any right,
privilege, obligation or liability acquired under the
(now) repealed provision.
Taxable Event and Payer of Tax
Service tax is a tax on service and the taxing events
giving rise to this incidence are contained in section
66B. Then, the law maker may, at his pleasure, place
the responsibility to discharge the tax so levied on
any person service provider or service recipient.
That being so, the law maker can even alter the
extent to which either of these persons is to
discharge the liability. Terminologies like reverse
charge and partial reverse charge are thrown around
as if to distinguish them from charge is any specific
manner only seem to confuse the nature of the
impost. When service recipient is called upon to
pay, whole or part, of tax levied under section 66B is
not to be understood as the liability of the service
provider being discharged by the service recipient.
Levy is on the service and liability is on the person
named in the law as his own liability.
Rule-making Powers obtained to cast additional
duties and obligations on service tax assessees
Union Budget 2014 has proposed certain
amendments to Section 94 of the Finance Act, 1994.
By way of these amendments, the Central
Government has obtained Rule making powers to
enable them to cast the following additional duties
and obligations on service tax assesses.
Furnishing information;
Keeping of records;
Verification of records;
Withdrawal of facilities; and
Imposition of CENVAT related restrictions
This amendment presses yet again on the nature
and amount of documentation on the part of every
service tax assessee and the detailed records that
are required to be maintained.
Such an amendment in the current Budget should
keep us anxious of the Rules that would be notified
at a later date. Furthermore, the nature of
compliances to these Rules and Regulations (to be
notified) cannot be overemphasised owing to the
fact that the interest rate has now been amended to
30 percent per annum when tax is paid beyond one
year.
Bad Debts and Reversal of Billing
Every service tax assessee providing output service
may come to a situation wherein the value of taxable
services provided may become doubtful and not
recoverable under certain circumstances. This being
a unilateral action, albeit based on the delinquency
of the customer, the service tax paid is not
recoverable. It is only when by mutual agreement,
the contract sum is lowered or credit note is issued,
can the service tax paid (at the time of billing)
become recoverable. Reference may be made to
Rule 6(3) of the Service Tax Rules prescribing the
provisions relating to issue of credit note or
amendments to the terms of the contract in cases
where the services are not provided wholly or
partially. Bad debts written off come at a price of
12.36 per cent.
E-Payment of Service Tax
Budget 2014 has made e-payment of service tax
mandatory for all service tax payments. When it may
not be convenient to make e-payment of service tax
on every due date, the concept of PLA may become
relevant and more user friendly to such assesees.
PLA works just like a current account in which all tax
deposited are recorded on the credit side of PLA.
Similarly, all tax utilisation and appropriation are
reflected on the debit side of the PLA. Considering
the current budget amendment, assesees may
explore this convenient possibility to discharge
service tax through PLA. Settled provisions in this
regard are incorporated under Rule 6(1A) of the
Service Tax Rules.
Exercise of Power to Arrest
As emphasized in Budget 2013 and consequent
amendments made therein, non-payment of Service
tax leads to imprisonment. Further, the monetary
threshold limit for imprisonment has been set as low
as Rs. 50 Lakhs remaining unpaid for just 6 months
after collection, the threat of prosecution is real.
Other offences being evasion of tax, misuse of credit
and falsification of records are also open to
prosecution. Fearsomeness of any weapon is
inversely proportional to the skill of the one wielding
it. With the current velocity of business transactions,
breaching this low threshold can take place in a very
short duration of time and could slip ones attention.
Proper delegation as well as appointment of
oversight functionaries may be imperative.
Distribution of CENVAT Credit by Input Service
Distributor
Much awaited clarification has been issued on the
distribution of common CENVAT Credit by Input
Service Distributor. It has now been clarified that
CENVAT credit is to be distributed between units in
the ratio of their turnover of previous year
irrespective of usage of such services in all or some
of the units.
Excise registration for Importers
Mandatory registration for importers introduced so
as to pass-on duties paid at input stage. Post this
amendment, there is a confusion prevailing in the
industry as to registration requirement where dealer
both procures goods within India and imports from
outside India. While department is insisting on
obtaining two separate registrations, one as a First
Stage Dealer and second, as an Importer. This
concept of parallel registrations would definitely
increase compliance costs of business. A
clarification in this behalf would have been
welcomed by the industry. Further, expectation from
the industry to allow endorsement on Bill of Entry to
pass-on credit for direct delivery shipments is not
fulfilled in the Budget.
Garnishee proceedings
Proceedings to recover tax dues from third parties
who owe money to the defaulter is a statutory
authority arising out of extraneous circumstances
wherein direct recovery is not viable. This power
cannot be exercised as a matter of routine.
Existence of a valid demand is a sine qua non for
such a proceeding to be initiated. Of equal
importance is the visible non-responsiveness of the
defaulter. But, these are matters of fact to be gone
into at a later stage when the use of garnishee
proceedings comes under challenge. The party who
is served a notice is to regard the notice of the tax
authority as being legitimate and not conduct his
own inquiry into the matter or play arbitrator. The
response ought to be swift and timely. Deliberate
disregard to the notice can render the notice to be in
default / contempt of order. The notice cannot be
put to great distress in the course of seeking
information about money owed to the alleged
defaulter. Garnishee proceedings were introduced
in Central Excise and Customs in Budget 2013.
Experience suggest that courts are reluctant to give
injunctive relief when garnishee orders are issued.
Pre-emptive steps to protect demand that are not
covered by stay orders is advisable.
SECTOR Specific:
IT / ITES and Software Taxation
Import of pre-packed software To pay
import duty (TCS (2004) 178 ELT 22 (SC)*);
Electronic download of license key To pay
Service Tax (TCS (2004) 178 ELT 22 (SC)* read with
Sixth Schedule of Karnataka VAT Act and Section
65(f) of Finance Act, 1994);
Manufacture of pre-packed software To pay
Excise duty and VAT (on sale) (TCS (2004) 178 ELT
22 (SC)* read with Sixth Schedule of Karnataka VAT
Act);
Sale of pre-packed software To pay VAT on
sale (TCS (2004) 178 ELT 22 (SC)* and Sixth
Schedule of Karnataka VAT Act);
Development of custom-built software (with
IP transfer) To pay ST (on labour portion) and VAT
(on material content) (Sixth Schedule of Karnataka
VAT Act);
Development of custom-built software (with
IP transfer) delivered on media To pay Excise duty
and VAT (on sale) (TCS (2004) 178 ELT 22 (SC)* and
Sixth Schedule of Karnataka VAT Act);
Installation To pay Service Tax (Section 65(d)
of Finance Act, 1994);
Customization To pay Service Tax (Section
65(d) of Finance Act, 1994);
Training To pay Service Tax (Section 65(d) of
Finance Act, 1994).
Customs Tariff Changes for IT Sector:
BCD on LCD and LED TV panels of below 19
inches reduced from 10 % to NIL.
BCD exempted on specified parts of LCD and
LED panels for TVs.
BCD on all inputs for manufacture of network
switches, Ethernet products and LTE products
exempted.
BCD on import of network switches, Ethernet
products and LTE products increased from NIL to
10% (only products not specified in ITA).
SAD on all inputs for manufacture of personal
computers and tablets exempted.
Full exemption to SAD on inputs used for
manufacture of smart cards.
BCD on E-book readers reduced from 7.5%
to NIL.
Central Excise Tariff changes:
Uniform excise duty rate of 12% (with
CENVAT) on smart cards is prescribed. Current rate
of 2% (without CENVAT) and 6% (with CENVAT) is
done away with.
Real Estate Development
Budget 2013 had amended tax on residential
constructions by altering the abatement on
high-end residential units by reducing the
abatement to 70 percent (from 75 percent) and
charge an effective rate of service tax at 3.708
percent (including cesses) for high end apartments.
The presently available options are as stated below:
Option I (Notification 26/2012-ST., dated June
20, 2012*) To pay service tax at 3.09 percent (high
end flat 3.708 percent) where the price will include
the share of land;
Option II (Rule 2A(i) of Service Tax Valuation
Rules*) To pay service tax at 3.708 percent where
the price will not include share of land and value
materials transferred; and
Option II (Rule 2A(ii)(A) of Service Tax
Valuation Rules*) To pay service tax at 4.944
percent where the price will not include share of
land.
* with full Input set off of service tax paid on input
services and capital goods
Budget 2014 has now enhanced service tax
rate to 8.65 percent in case of all contractors who
are not engaged in execution of original works. This
enhancement may pose high tax cost and such
contractors may shift to pay service tax based on
actual value of services through efficient
documentation.
Service tax refund for service exporters
All taxable service providers can claim refund of
input taxes under Cenvat Credit Rules. Exporters
first need to claim input credit by showing how their
service-exports qualify for credit from inputs, capital
goods and input services. Rule 5 allows refund of
surplus input credit. Except for the need for clarity
on the eligibility to credit, processing of refunds
claims is now quite smooth. Notification 27/2012
(ST) 18.06.2012 even allows self-verification and a
certificate to be produced from any Chartered
Accountant for admission of refund claims. With
availment of credit being attached with a time limit
and reversal of credit in case of delay in repatriation
of export proceeds add a new area of
documentation control is introduced. Also, while
applying the formula for proportional credit, export
is to be reckoned on the basis of collection of only
past exports.
Renting of immovable property
Budget 2011 carved out an amendment to dis-allow
CENVAT Credit of input services availed during the
period of construction of malls and commercial
complexes (proposed to be let out after completion
of construction). From that time onwards, input
service tax is a cost for developers engaged in
construction of commercial complexes and
shopping malls. Keeping this as a basis, input
service tax already availed was also demanded by
the Department for periods prior to the period of
amendment. Presently, cases are still being pursued
and conflicting decisions are being delivered on the
subject. While the appellate fora may have granted
stay from recovery of tax, this matter has not yet
reached finality in for previous years. The law has
come to be amended with finality only from April 1,
2011. Also, for those past years, Cenvat credit on
construction services availed by a person engaged
in letting out immovable property is yet to be
settled.
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Effective date of change in rate of duty/tax
Amendment to the Act will take effect only after
enactment of the Finance Bill. But, amendment to
impose new duties or increase existing duties will
take effect immediately (10 July 2014) if the clause in
the Finance Bill is specified as a declared provision
under Provisional Collection of Taxes Act, 1931.
Amendment to Rules will take effect from the stated
effective date or date of its publication (10 July
2014).
Tariff amendment by issuance of notification will be
from date of such notification (10 July 2014).
Certain service tax related amendments are effective
from October 1, 2014 (ST3 period).
Effect on CENVAT of withdrawal of exemption
When an exempt product becomes dutiable (by way
of exemption being withdrawn), Cenvat credit
relatable to inputs lying in stock (as raw material or
works-in-progress) on the budget day, can be
claimed as opening balance of credit under Rule 3(2)
of the CENVAT Credit Rules, 2004. Similar
provisions for service provider are already made
under Rule 3(3) of the CENVAT Credit Rules, 2004.
Those transitioning from a without-Cenvat based
rate of tax to one with Cenvat, this provision would
equally be applicable.
Effect on CENVAT of introduction of exemption
Whenever excise duty becomes exempted on any
manufactured products, we need to remember that
CENVAT Credit balance stands disallowed by Rule
11(3) of CENVAT Rules, 2004. This results in an
instantaneous erosion of current asset balance and a
cost for the manufacturer. If there were an
accelerated utilization of credit, then in addition to
reversal, cash payment of the deficit will be required.
And in cases of credit-surplus, due to rate
imbalance, such surplus will lapse after reversal of
relatable credit.
Omission-Repeal:
Omission of a provision in a statute has the effect as
if that provision were never contained in the statute.
And upon such omission, proceedings initiated
previously come to a halt, if no saving clause were
attached during the omission. But, if a provision
were to be repealed then such repeal will not affect
any previous operation of the provision or any right,
privilege, obligation or liability acquired under the
(now) repealed provision.
Taxable Event and Payer of Tax
Service tax is a tax on service and the taxing events
giving rise to this incidence are contained in section
66B. Then, the law maker may, at his pleasure, place
the responsibility to discharge the tax so levied on
any person service provider or service recipient.
That being so, the law maker can even alter the
extent to which either of these persons is to
discharge the liability. Terminologies like reverse
charge and partial reverse charge are thrown around
as if to distinguish them from charge is any specific
manner only seem to confuse the nature of the
impost. When service recipient is called upon to
pay, whole or part, of tax levied under section 66B is
not to be understood as the liability of the service
provider being discharged by the service recipient.
Levy is on the service and liability is on the person
named in the law as his own liability.
Rule-making Powers obtained to cast additional
duties and obligations on service tax assessees
Union Budget 2014 has proposed certain
amendments to Section 94 of the Finance Act, 1994.
By way of these amendments, the Central
Government has obtained Rule making powers to
enable them to cast the following additional duties
and obligations on service tax assesses.
Furnishing information;
Keeping of records;
Verification of records;
Withdrawal of facilities; and
Imposition of CENVAT related restrictions
This amendment presses yet again on the nature
and amount of documentation on the part of every
service tax assessee and the detailed records that
are required to be maintained.
Such an amendment in the current Budget should
keep us anxious of the Rules that would be notified
at a later date. Furthermore, the nature of
compliances to these Rules and Regulations (to be
notified) cannot be overemphasised owing to the
fact that the interest rate has now been amended to
30 percent per annum when tax is paid beyond one
year.
Bad Debts and Reversal of Billing
Every service tax assessee providing output service
may come to a situation wherein the value of taxable
services provided may become doubtful and not
recoverable under certain circumstances. This being
a unilateral action, albeit based on the delinquency
of the customer, the service tax paid is not
recoverable. It is only when by mutual agreement,
the contract sum is lowered or credit note is issued,
can the service tax paid (at the time of billing)
become recoverable. Reference may be made to
Rule 6(3) of the Service Tax Rules prescribing the
provisions relating to issue of credit note or
amendments to the terms of the contract in cases
where the services are not provided wholly or
partially. Bad debts written off come at a price of
12.36 per cent.
E-Payment of Service Tax
Budget 2014 has made e-payment of service tax
mandatory for all service tax payments. When it may
not be convenient to make e-payment of service tax
on every due date, the concept of PLA may become
relevant and more user friendly to such assesees.
PLA works just like a current account in which all tax
deposited are recorded on the credit side of PLA.
Similarly, all tax utilisation and appropriation are
reflected on the debit side of the PLA. Considering
the current budget amendment, assesees may
explore this convenient possibility to discharge
service tax through PLA. Settled provisions in this
regard are incorporated under Rule 6(1A) of the
Service Tax Rules.
Exercise of Power to Arrest
As emphasized in Budget 2013 and consequent
amendments made therein, non-payment of Service
tax leads to imprisonment. Further, the monetary
threshold limit for imprisonment has been set as low
as Rs. 50 Lakhs remaining unpaid for just 6 months
after collection, the threat of prosecution is real.
Other offences being evasion of tax, misuse of credit
and falsification of records are also open to
prosecution. Fearsomeness of any weapon is
inversely proportional to the skill of the one wielding
it. With the current velocity of business transactions,
breaching this low threshold can take place in a very
short duration of time and could slip ones attention.
Proper delegation as well as appointment of
oversight functionaries may be imperative.
Distribution of CENVAT Credit by Input Service
Distributor
Much awaited clarification has been issued on the
distribution of common CENVAT Credit by Input
Service Distributor. It has now been clarified that
CENVAT credit is to be distributed between units in
the ratio of their turnover of previous year
irrespective of usage of such services in all or some
of the units.
Excise registration for Importers
Mandatory registration for importers introduced so
as to pass-on duties paid at input stage. Post this
amendment, there is a confusion prevailing in the
industry as to registration requirement where dealer
both procures goods within India and imports from
outside India. While department is insisting on
obtaining two separate registrations, one as a First
Stage Dealer and second, as an Importer. This
concept of parallel registrations would definitely
increase compliance costs of business. A
clarification in this behalf would have been
welcomed by the industry. Further, expectation from
the industry to allow endorsement on Bill of Entry to
pass-on credit for direct delivery shipments is not
fulfilled in the Budget.
Garnishee proceedings
Proceedings to recover tax dues from third parties
who owe money to the defaulter is a statutory
authority arising out of extraneous circumstances
wherein direct recovery is not viable. This power
cannot be exercised as a matter of routine.
Existence of a valid demand is a sine qua non for
such a proceeding to be initiated. Of equal
importance is the visible non-responsiveness of the
defaulter. But, these are matters of fact to be gone
into at a later stage when the use of garnishee
proceedings comes under challenge. The party who
is served a notice is to regard the notice of the tax
authority as being legitimate and not conduct his
own inquiry into the matter or play arbitrator. The
response ought to be swift and timely. Deliberate
disregard to the notice can render the notice to be in
default / contempt of order. The notice cannot be
put to great distress in the course of seeking
information about money owed to the alleged
defaulter. Garnishee proceedings were introduced
in Central Excise and Customs in Budget 2013.
Experience suggest that courts are reluctant to give
injunctive relief when garnishee orders are issued.
Pre-emptive steps to protect demand that are not
covered by stay orders is advisable.
SECTOR Specific:
IT / ITES and Software Taxation
Import of pre-packed software To pay
import duty (TCS (2004) 178 ELT 22 (SC)*);
Electronic download of license key To pay
Service Tax (TCS (2004) 178 ELT 22 (SC)* read with
Sixth Schedule of Karnataka VAT Act and Section
65(f) of Finance Act, 1994);
Manufacture of pre-packed software To pay
Excise duty and VAT (on sale) (TCS (2004) 178 ELT
22 (SC)* read with Sixth Schedule of Karnataka VAT
Act);
Sale of pre-packed software To pay VAT on
sale (TCS (2004) 178 ELT 22 (SC)* and Sixth
Schedule of Karnataka VAT Act);
Development of custom-built software (with
IP transfer) To pay ST (on labour portion) and VAT
(on material content) (Sixth Schedule of Karnataka
VAT Act);
Development of custom-built software (with
IP transfer) delivered on media To pay Excise duty
and VAT (on sale) (TCS (2004) 178 ELT 22 (SC)* and
Sixth Schedule of Karnataka VAT Act);
Installation To pay Service Tax (Section 65(d)
of Finance Act, 1994);
Customization To pay Service Tax (Section
65(d) of Finance Act, 1994);
Training To pay Service Tax (Section 65(d) of
Finance Act, 1994).
Customs Tariff Changes for IT Sector:
BCD on LCD and LED TV panels of below 19
inches reduced from 10 % to NIL.
BCD exempted on specified parts of LCD and
LED panels for TVs.
BCD on all inputs for manufacture of network
switches, Ethernet products and LTE products
exempted.
BCD on import of network switches, Ethernet
products and LTE products increased from NIL to
10% (only products not specified in ITA).
SAD on all inputs for manufacture of personal
computers and tablets exempted.
Full exemption to SAD on inputs used for
manufacture of smart cards.
BCD on E-book readers reduced from 7.5%
to NIL.
Central Excise Tariff changes:
Uniform excise duty rate of 12% (with
CENVAT) on smart cards is prescribed. Current rate
of 2% (without CENVAT) and 6% (with CENVAT) is
done away with.
Real Estate Development
Budget 2013 had amended tax on residential
constructions by altering the abatement on
high-end residential units by reducing the
abatement to 70 percent (from 75 percent) and
charge an effective rate of service tax at 3.708
percent (including cesses) for high end apartments.
The presently available options are as stated below:
Option I (Notification 26/2012-ST., dated June
20, 2012*) To pay service tax at 3.09 percent (high
end flat 3.708 percent) where the price will include
the share of land;
Option II (Rule 2A(i) of Service Tax Valuation
Rules*) To pay service tax at 3.708 percent where
the price will not include share of land and value
materials transferred; and
Option II (Rule 2A(ii)(A) of Service Tax
Valuation Rules*) To pay service tax at 4.944
percent where the price will not include share of
land.
* with full Input set off of service tax paid on input
services and capital goods
Budget 2014 has now enhanced service tax
rate to 8.65 percent in case of all contractors who
are not engaged in execution of original works. This
enhancement may pose high tax cost and such
contractors may shift to pay service tax based on
actual value of services through efficient
documentation.
Service tax refund for service exporters
All taxable service providers can claim refund of
input taxes under Cenvat Credit Rules. Exporters
first need to claim input credit by showing how their
service-exports qualify for credit from inputs, capital
goods and input services. Rule 5 allows refund of
surplus input credit. Except for the need for clarity
on the eligibility to credit, processing of refunds
claims is now quite smooth. Notification 27/2012
(ST) 18.06.2012 even allows self-verification and a
certificate to be produced from any Chartered
Accountant for admission of refund claims. With
availment of credit being attached with a time limit
and reversal of credit in case of delay in repatriation
of export proceeds add a new area of
documentation control is introduced. Also, while
applying the formula for proportional credit, export
is to be reckoned on the basis of collection of only
past exports.
Renting of immovable property
Budget 2011 carved out an amendment to dis-allow
CENVAT Credit of input services availed during the
period of construction of malls and commercial
complexes (proposed to be let out after completion
of construction). From that time onwards, input
service tax is a cost for developers engaged in
construction of commercial complexes and
shopping malls. Keeping this as a basis, input
service tax already availed was also demanded by
the Department for periods prior to the period of
amendment. Presently, cases are still being pursued
and conflicting decisions are being delivered on the
subject. While the appellate fora may have granted
stay from recovery of tax, this matter has not yet
reached finality in for previous years. The law has
come to be amended with finality only from April 1,
2011. Also, for those past years, Cenvat credit on
construction services availed by a person engaged
in letting out immovable property is yet to be
settled.
S
p
e
c
i
a
l

N
o
t
e
s
Effective date of change in rate of duty/tax
Amendment to the Act will take effect only after
enactment of the Finance Bill. But, amendment to
impose new duties or increase existing duties will
take effect immediately (10 July 2014) if the clause in
the Finance Bill is specified as a declared provision
under Provisional Collection of Taxes Act, 1931.
Amendment to Rules will take effect from the stated
effective date or date of its publication (10 July
2014).
Tariff amendment by issuance of notification will be
from date of such notification (10 July 2014).
Certain service tax related amendments are effective
from October 1, 2014 (ST3 period).
Effect on CENVAT of withdrawal of exemption
When an exempt product becomes dutiable (by way
of exemption being withdrawn), Cenvat credit
relatable to inputs lying in stock (as raw material or
works-in-progress) on the budget day, can be
claimed as opening balance of credit under Rule 3(2)
of the CENVAT Credit Rules, 2004. Similar
provisions for service provider are already made
under Rule 3(3) of the CENVAT Credit Rules, 2004.
Those transitioning from a without-Cenvat based
rate of tax to one with Cenvat, this provision would
equally be applicable.
Effect on CENVAT of introduction of exemption
Whenever excise duty becomes exempted on any
manufactured products, we need to remember that
CENVAT Credit balance stands disallowed by Rule
11(3) of CENVAT Rules, 2004. This results in an
instantaneous erosion of current asset balance and a
cost for the manufacturer. If there were an
accelerated utilization of credit, then in addition to
reversal, cash payment of the deficit will be required.
And in cases of credit-surplus, due to rate
imbalance, such surplus will lapse after reversal of
relatable credit.
Omission-Repeal:
Omission of a provision in a statute has the effect as
if that provision were never contained in the statute.
And upon such omission, proceedings initiated
previously come to a halt, if no saving clause were
attached during the omission. But, if a provision
were to be repealed then such repeal will not affect
any previous operation of the provision or any right,
privilege, obligation or liability acquired under the
(now) repealed provision.
Taxable Event and Payer of Tax
Service tax is a tax on service and the taxing events
giving rise to this incidence are contained in section
66B. Then, the law maker may, at his pleasure, place
the responsibility to discharge the tax so levied on
any person service provider or service recipient.
That being so, the law maker can even alter the
extent to which either of these persons is to
discharge the liability. Terminologies like reverse
charge and partial reverse charge are thrown around
as if to distinguish them from charge is any specific
manner only seem to confuse the nature of the
impost. When service recipient is called upon to
pay, whole or part, of tax levied under section 66B is
not to be understood as the liability of the service
provider being discharged by the service recipient.
Levy is on the service and liability is on the person
named in the law as his own liability.
Rule-making Powers obtained to cast additional
duties and obligations on service tax assessees
Union Budget 2014 has proposed certain
amendments to Section 94 of the Finance Act, 1994.
By way of these amendments, the Central
Government has obtained Rule making powers to
enable them to cast the following additional duties
and obligations on service tax assesses.
Furnishing information;
Keeping of records;
Verification of records;
Withdrawal of facilities; and
Imposition of CENVAT related restrictions
This amendment presses yet again on the nature
and amount of documentation on the part of every
service tax assessee and the detailed records that
are required to be maintained.
Such an amendment in the current Budget should
keep us anxious of the Rules that would be notified
at a later date. Furthermore, the nature of
compliances to these Rules and Regulations (to be
notified) cannot be overemphasised owing to the
fact that the interest rate has now been amended to
30 percent per annum when tax is paid beyond one
year.
Bad Debts and Reversal of Billing
Every service tax assessee providing output service
may come to a situation wherein the value of taxable
services provided may become doubtful and not
recoverable under certain circumstances. This being
a unilateral action, albeit based on the delinquency
of the customer, the service tax paid is not
recoverable. It is only when by mutual agreement,
the contract sum is lowered or credit note is issued,
can the service tax paid (at the time of billing)
become recoverable. Reference may be made to
Rule 6(3) of the Service Tax Rules prescribing the
provisions relating to issue of credit note or
amendments to the terms of the contract in cases
where the services are not provided wholly or
partially. Bad debts written off come at a price of
12.36 per cent.
E-Payment of Service Tax
Budget 2014 has made e-payment of service tax
mandatory for all service tax payments. When it may
not be convenient to make e-payment of service tax
on every due date, the concept of PLA may become
relevant and more user friendly to such assesees.
PLA works just like a current account in which all tax
deposited are recorded on the credit side of PLA.
Similarly, all tax utilisation and appropriation are
reflected on the debit side of the PLA. Considering
the current budget amendment, assesees may
explore this convenient possibility to discharge
service tax through PLA. Settled provisions in this
regard are incorporated under Rule 6(1A) of the
Service Tax Rules.
Exercise of Power to Arrest
As emphasized in Budget 2013 and consequent
amendments made therein, non-payment of Service
tax leads to imprisonment. Further, the monetary
threshold limit for imprisonment has been set as low
as Rs. 50 Lakhs remaining unpaid for just 6 months
after collection, the threat of prosecution is real.
Other offences being evasion of tax, misuse of credit
and falsification of records are also open to
prosecution. Fearsomeness of any weapon is
inversely proportional to the skill of the one wielding
it. With the current velocity of business transactions,
breaching this low threshold can take place in a very
short duration of time and could slip ones attention.
Proper delegation as well as appointment of
oversight functionaries may be imperative.
Distribution of CENVAT Credit by Input Service
Distributor
Much awaited clarification has been issued on the
distribution of common CENVAT Credit by Input
Service Distributor. It has now been clarified that
CENVAT credit is to be distributed between units in
the ratio of their turnover of previous year
irrespective of usage of such services in all or some
of the units.
Excise registration for Importers
Mandatory registration for importers introduced so
as to pass-on duties paid at input stage. Post this
amendment, there is a confusion prevailing in the
industry as to registration requirement where dealer
both procures goods within India and imports from
outside India. While department is insisting on
obtaining two separate registrations, one as a First
Stage Dealer and second, as an Importer. This
concept of parallel registrations would definitely
increase compliance costs of business. A
clarification in this behalf would have been
welcomed by the industry. Further, expectation from
the industry to allow endorsement on Bill of Entry to
pass-on credit for direct delivery shipments is not
fulfilled in the Budget.
Garnishee proceedings
Proceedings to recover tax dues from third parties
who owe money to the defaulter is a statutory
authority arising out of extraneous circumstances
wherein direct recovery is not viable. This power
cannot be exercised as a matter of routine.
Existence of a valid demand is a sine qua non for
such a proceeding to be initiated. Of equal
importance is the visible non-responsiveness of the
defaulter. But, these are matters of fact to be gone
into at a later stage when the use of garnishee
proceedings comes under challenge. The party who
is served a notice is to regard the notice of the tax
authority as being legitimate and not conduct his
own inquiry into the matter or play arbitrator. The
response ought to be swift and timely. Deliberate
disregard to the notice can render the notice to be in
default / contempt of order. The notice cannot be
put to great distress in the course of seeking
information about money owed to the alleged
defaulter. Garnishee proceedings were introduced
in Central Excise and Customs in Budget 2013.
Experience suggest that courts are reluctant to give
injunctive relief when garnishee orders are issued.
Pre-emptive steps to protect demand that are not
covered by stay orders is advisable.
SECTOR Specific:
IT / ITES and Software Taxation
Import of pre-packed software To pay
import duty (TCS (2004) 178 ELT 22 (SC)*);
Electronic download of license key To pay
Service Tax (TCS (2004) 178 ELT 22 (SC)* read with
Sixth Schedule of Karnataka VAT Act and Section
65(f) of Finance Act, 1994);
Manufacture of pre-packed software To pay
Excise duty and VAT (on sale) (TCS (2004) 178 ELT
22 (SC)* read with Sixth Schedule of Karnataka VAT
Act);
Sale of pre-packed software To pay VAT on
sale (TCS (2004) 178 ELT 22 (SC)* and Sixth
Schedule of Karnataka VAT Act);
Development of custom-built software (with
IP transfer) To pay ST (on labour portion) and VAT
(on material content) (Sixth Schedule of Karnataka
VAT Act);
Development of custom-built software (with
IP transfer) delivered on media To pay Excise duty
and VAT (on sale) (TCS (2004) 178 ELT 22 (SC)* and
Sixth Schedule of Karnataka VAT Act);
Installation To pay Service Tax (Section 65(d)
of Finance Act, 1994);
Customization To pay Service Tax (Section
65(d) of Finance Act, 1994);
Training To pay Service Tax (Section 65(d) of
Finance Act, 1994).
Customs Tariff Changes for IT Sector:
BCD on LCD and LED TV panels of below 19
inches reduced from 10 % to NIL.
BCD exempted on specified parts of LCD and
LED panels for TVs.
BCD on all inputs for manufacture of network
switches, Ethernet products and LTE products
exempted.
BCD on import of network switches, Ethernet
products and LTE products increased from NIL to
10% (only products not specified in ITA).
SAD on all inputs for manufacture of personal
computers and tablets exempted.
Full exemption to SAD on inputs used for
manufacture of smart cards.
BCD on E-book readers reduced from 7.5%
to NIL.
Central Excise Tariff changes:
Uniform excise duty rate of 12% (with
CENVAT) on smart cards is prescribed. Current rate
of 2% (without CENVAT) and 6% (with CENVAT) is
done away with.
Real Estate Development
Budget 2013 had amended tax on residential
constructions by altering the abatement on
high-end residential units by reducing the
abatement to 70 percent (from 75 percent) and
charge an effective rate of service tax at 3.708
percent (including cesses) for high end apartments.
The presently available options are as stated below:
Option I (Notification 26/2012-ST., dated June
20, 2012*) To pay service tax at 3.09 percent (high
end flat 3.708 percent) where the price will include
the share of land;
Option II (Rule 2A(i) of Service Tax Valuation
Rules*) To pay service tax at 3.708 percent where
the price will not include share of land and value
materials transferred; and
Option II (Rule 2A(ii)(A) of Service Tax
Valuation Rules*) To pay service tax at 4.944
percent where the price will not include share of
land.
* with full Input set off of service tax paid on input
services and capital goods
Budget 2014 has now enhanced service tax
rate to 8.65 percent in case of all contractors who
are not engaged in execution of original works. This
enhancement may pose high tax cost and such
contractors may shift to pay service tax based on
actual value of services through efficient
documentation.
Service tax refund for service exporters
All taxable service providers can claim refund of
input taxes under Cenvat Credit Rules. Exporters
first need to claim input credit by showing how their
service-exports qualify for credit from inputs, capital
goods and input services. Rule 5 allows refund of
surplus input credit. Except for the need for clarity
on the eligibility to credit, processing of refunds
claims is now quite smooth. Notification 27/2012
(ST) 18.06.2012 even allows self-verification and a
certificate to be produced from any Chartered
Accountant for admission of refund claims. With
availment of credit being attached with a time limit
and reversal of credit in case of delay in repatriation
of export proceeds add a new area of
documentation control is introduced. Also, while
applying the formula for proportional credit, export
is to be reckoned on the basis of collection of only
past exports.
Renting of immovable property
Budget 2011 carved out an amendment to dis-allow
CENVAT Credit of input services availed during the
period of construction of malls and commercial
complexes (proposed to be let out after completion
of construction). From that time onwards, input
service tax is a cost for developers engaged in
construction of commercial complexes and
shopping malls. Keeping this as a basis, input
service tax already availed was also demanded by
the Department for periods prior to the period of
amendment. Presently, cases are still being pursued
and conflicting decisions are being delivered on the
subject. While the appellate fora may have granted
stay from recovery of tax, this matter has not yet
reached finality in for previous years. The law has
come to be amended with finality only from April 1,
2011. Also, for those past years, Cenvat credit on
construction services availed by a person engaged
in letting out immovable property is yet to be
settled.
S
p
e
c
i
a
l

N
o
t
e
s
Effective date of change in rate of duty/tax
Amendment to the Act will take effect only after
enactment of the Finance Bill. But, amendment to
impose new duties or increase existing duties will
take effect immediately (10 July 2014) if the clause in
the Finance Bill is specified as a declared provision
under Provisional Collection of Taxes Act, 1931.
Amendment to Rules will take effect from the stated
effective date or date of its publication (10 July
2014).
Tariff amendment by issuance of notification will be
from date of such notification (10 July 2014).
Certain service tax related amendments are effective
from October 1, 2014 (ST3 period).
Effect on CENVAT of withdrawal of exemption
When an exempt product becomes dutiable (by way
of exemption being withdrawn), Cenvat credit
relatable to inputs lying in stock (as raw material or
works-in-progress) on the budget day, can be
claimed as opening balance of credit under Rule 3(2)
of the CENVAT Credit Rules, 2004. Similar
provisions for service provider are already made
under Rule 3(3) of the CENVAT Credit Rules, 2004.
Those transitioning from a without-Cenvat based
rate of tax to one with Cenvat, this provision would
equally be applicable.
Effect on CENVAT of introduction of exemption
Whenever excise duty becomes exempted on any
manufactured products, we need to remember that
CENVAT Credit balance stands disallowed by Rule
11(3) of CENVAT Rules, 2004. This results in an
instantaneous erosion of current asset balance and a
cost for the manufacturer. If there were an
accelerated utilization of credit, then in addition to
reversal, cash payment of the deficit will be required.
And in cases of credit-surplus, due to rate
imbalance, such surplus will lapse after reversal of
relatable credit.
Omission-Repeal:
Omission of a provision in a statute has the effect as
if that provision were never contained in the statute.
And upon such omission, proceedings initiated
previously come to a halt, if no saving clause were
attached during the omission. But, if a provision
were to be repealed then such repeal will not affect
any previous operation of the provision or any right,
privilege, obligation or liability acquired under the
(now) repealed provision.
Taxable Event and Payer of Tax
Service tax is a tax on service and the taxing events
giving rise to this incidence are contained in section
66B. Then, the law maker may, at his pleasure, place
the responsibility to discharge the tax so levied on
any person service provider or service recipient.
That being so, the law maker can even alter the
extent to which either of these persons is to
discharge the liability. Terminologies like reverse
charge and partial reverse charge are thrown around
as if to distinguish them from charge is any specific
manner only seem to confuse the nature of the
impost. When service recipient is called upon to
pay, whole or part, of tax levied under section 66B is
not to be understood as the liability of the service
provider being discharged by the service recipient.
Levy is on the service and liability is on the person
named in the law as his own liability.
Rule-making Powers obtained to cast additional
duties and obligations on service tax assessees
Union Budget 2014 has proposed certain
amendments to Section 94 of the Finance Act, 1994.
By way of these amendments, the Central
Government has obtained Rule making powers to
enable them to cast the following additional duties
and obligations on service tax assesses.
Furnishing information;
Keeping of records;
Verification of records;
Withdrawal of facilities; and
Imposition of CENVAT related restrictions
This amendment presses yet again on the nature
and amount of documentation on the part of every
service tax assessee and the detailed records that
are required to be maintained.
Such an amendment in the current Budget should
keep us anxious of the Rules that would be notified
at a later date. Furthermore, the nature of
compliances to these Rules and Regulations (to be
notified) cannot be overemphasised owing to the
fact that the interest rate has now been amended to
30 percent per annum when tax is paid beyond one
year.
Bad Debts and Reversal of Billing
Every service tax assessee providing output service
may come to a situation wherein the value of taxable
services provided may become doubtful and not
recoverable under certain circumstances. This being
a unilateral action, albeit based on the delinquency
of the customer, the service tax paid is not
recoverable. It is only when by mutual agreement,
the contract sum is lowered or credit note is issued,
can the service tax paid (at the time of billing)
become recoverable. Reference may be made to
Rule 6(3) of the Service Tax Rules prescribing the
provisions relating to issue of credit note or
amendments to the terms of the contract in cases
where the services are not provided wholly or
partially. Bad debts written off come at a price of
12.36 per cent.
E-Payment of Service Tax
Budget 2014 has made e-payment of service tax
mandatory for all service tax payments. When it may
not be convenient to make e-payment of service tax
on every due date, the concept of PLA may become
relevant and more user friendly to such assesees.
PLA works just like a current account in which all tax
deposited are recorded on the credit side of PLA.
Similarly, all tax utilisation and appropriation are
reflected on the debit side of the PLA. Considering
the current budget amendment, assesees may
explore this convenient possibility to discharge
service tax through PLA. Settled provisions in this
regard are incorporated under Rule 6(1A) of the
Service Tax Rules.
Exercise of Power to Arrest
As emphasized in Budget 2013 and consequent
amendments made therein, non-payment of Service
tax leads to imprisonment. Further, the monetary
threshold limit for imprisonment has been set as low
as Rs. 50 Lakhs remaining unpaid for just 6 months
after collection, the threat of prosecution is real.
Other offences being evasion of tax, misuse of credit
and falsification of records are also open to
prosecution. Fearsomeness of any weapon is
inversely proportional to the skill of the one wielding
it. With the current velocity of business transactions,
breaching this low threshold can take place in a very
short duration of time and could slip ones attention.
Proper delegation as well as appointment of
oversight functionaries may be imperative.
Distribution of CENVAT Credit by Input Service
Distributor
Much awaited clarification has been issued on the
distribution of common CENVAT Credit by Input
Service Distributor. It has now been clarified that
CENVAT credit is to be distributed between units in
the ratio of their turnover of previous year
irrespective of usage of such services in all or some
of the units.
Excise registration for Importers
Mandatory registration for importers introduced so
as to pass-on duties paid at input stage. Post this
amendment, there is a confusion prevailing in the
industry as to registration requirement where dealer
both procures goods within India and imports from
outside India. While department is insisting on
obtaining two separate registrations, one as a First
Stage Dealer and second, as an Importer. This
concept of parallel registrations would definitely
increase compliance costs of business. A
clarification in this behalf would have been
welcomed by the industry. Further, expectation from
the industry to allow endorsement on Bill of Entry to
pass-on credit for direct delivery shipments is not
fulfilled in the Budget.
Garnishee proceedings
Proceedings to recover tax dues from third parties
who owe money to the defaulter is a statutory
authority arising out of extraneous circumstances
wherein direct recovery is not viable. This power
cannot be exercised as a matter of routine.
Existence of a valid demand is a sine qua non for
such a proceeding to be initiated. Of equal
importance is the visible non-responsiveness of the
defaulter. But, these are matters of fact to be gone
into at a later stage when the use of garnishee
proceedings comes under challenge. The party who
is served a notice is to regard the notice of the tax
authority as being legitimate and not conduct his
own inquiry into the matter or play arbitrator. The
response ought to be swift and timely. Deliberate
disregard to the notice can render the notice to be in
default / contempt of order. The notice cannot be
put to great distress in the course of seeking
information about money owed to the alleged
defaulter. Garnishee proceedings were introduced
in Central Excise and Customs in Budget 2013.
Experience suggest that courts are reluctant to give
injunctive relief when garnishee orders are issued.
Pre-emptive steps to protect demand that are not
covered by stay orders is advisable.
SECTOR Specific:
IT / ITES and Software Taxation
Import of pre-packed software To pay
import duty (TCS (2004) 178 ELT 22 (SC)*);
Electronic download of license key To pay
Service Tax (TCS (2004) 178 ELT 22 (SC)* read with
Sixth Schedule of Karnataka VAT Act and Section
65(f) of Finance Act, 1994);
Manufacture of pre-packed software To pay
Excise duty and VAT (on sale) (TCS (2004) 178 ELT
22 (SC)* read with Sixth Schedule of Karnataka VAT
Act);
Sale of pre-packed software To pay VAT on
sale (TCS (2004) 178 ELT 22 (SC)* and Sixth
Schedule of Karnataka VAT Act);
Development of custom-built software (with
IP transfer) To pay ST (on labour portion) and VAT
(on material content) (Sixth Schedule of Karnataka
VAT Act);
Development of custom-built software (with
IP transfer) delivered on media To pay Excise duty
and VAT (on sale) (TCS (2004) 178 ELT 22 (SC)* and
Sixth Schedule of Karnataka VAT Act);
Installation To pay Service Tax (Section 65(d)
of Finance Act, 1994);
Customization To pay Service Tax (Section
65(d) of Finance Act, 1994);
Training To pay Service Tax (Section 65(d) of
Finance Act, 1994).
Customs Tariff Changes for IT Sector:
BCD on LCD and LED TV panels of below 19
inches reduced from 10 % to NIL.
BCD exempted on specified parts of LCD and
LED panels for TVs.
BCD on all inputs for manufacture of network
switches, Ethernet products and LTE products
exempted.
BCD on import of network switches, Ethernet
products and LTE products increased from NIL to
10% (only products not specified in ITA).
SAD on all inputs for manufacture of personal
computers and tablets exempted.
Full exemption to SAD on inputs used for
manufacture of smart cards.
BCD on E-book readers reduced from 7.5%
to NIL.
Central Excise Tariff changes:
Uniform excise duty rate of 12% (with
CENVAT) on smart cards is prescribed. Current rate
of 2% (without CENVAT) and 6% (with CENVAT) is
done away with.
Real Estate Development
Budget 2013 had amended tax on residential
constructions by altering the abatement on
high-end residential units by reducing the
abatement to 70 percent (from 75 percent) and
charge an effective rate of service tax at 3.708
percent (including cesses) for high end apartments.
The presently available options are as stated below:
Option I (Notification 26/2012-ST., dated June
20, 2012*) To pay service tax at 3.09 percent (high
end flat 3.708 percent) where the price will include
the share of land;
Option II (Rule 2A(i) of Service Tax Valuation
Rules*) To pay service tax at 3.708 percent where
the price will not include share of land and value
materials transferred; and
Option II (Rule 2A(ii)(A) of Service Tax
Valuation Rules*) To pay service tax at 4.944
percent where the price will not include share of
land.
* with full Input set off of service tax paid on input
services and capital goods
Budget 2014 has now enhanced service tax
rate to 8.65 percent in case of all contractors who
are not engaged in execution of original works. This
enhancement may pose high tax cost and such
contractors may shift to pay service tax based on
actual value of services through efficient
documentation.
Service tax refund for service exporters
All taxable service providers can claim refund of
input taxes under Cenvat Credit Rules. Exporters
first need to claim input credit by showing how their
service-exports qualify for credit from inputs, capital
goods and input services. Rule 5 allows refund of
surplus input credit. Except for the need for clarity
on the eligibility to credit, processing of refunds
claims is now quite smooth. Notification 27/2012
(ST) 18.06.2012 even allows self-verification and a
certificate to be produced from any Chartered
Accountant for admission of refund claims. With
availment of credit being attached with a time limit
and reversal of credit in case of delay in repatriation
of export proceeds add a new area of
documentation control is introduced. Also, while
applying the formula for proportional credit, export
is to be reckoned on the basis of collection of only
past exports.
Renting of immovable property
Budget 2011 carved out an amendment to dis-allow
CENVAT Credit of input services availed during the
period of construction of malls and commercial
complexes (proposed to be let out after completion
of construction). From that time onwards, input
service tax is a cost for developers engaged in
construction of commercial complexes and
shopping malls. Keeping this as a basis, input
service tax already availed was also demanded by
the Department for periods prior to the period of
amendment. Presently, cases are still being pursued
and conflicting decisions are being delivered on the
subject. While the appellate fora may have granted
stay from recovery of tax, this matter has not yet
reached finality in for previous years. The law has
come to be amended with finality only from April 1,
2011. Also, for those past years, Cenvat credit on
construction services availed by a person engaged
in letting out immovable property is yet to be
settled.
S
p
e
c
i
a
l

N
o
t
e
s
Effective date of change in rate of duty/tax
Amendment to the Act will take effect only after
enactment of the Finance Bill. But, amendment to
impose new duties or increase existing duties will
take effect immediately (10 July 2014) if the clause in
the Finance Bill is specified as a declared provision
under Provisional Collection of Taxes Act, 1931.
Amendment to Rules will take effect from the stated
effective date or date of its publication (10 July
2014).
Tariff amendment by issuance of notification will be
from date of such notification (10 July 2014).
Certain service tax related amendments are effective
from October 1, 2014 (ST3 period).
Effect on CENVAT of withdrawal of exemption
When an exempt product becomes dutiable (by way
of exemption being withdrawn), Cenvat credit
relatable to inputs lying in stock (as raw material or
works-in-progress) on the budget day, can be
claimed as opening balance of credit under Rule 3(2)
of the CENVAT Credit Rules, 2004. Similar
provisions for service provider are already made
under Rule 3(3) of the CENVAT Credit Rules, 2004.
Those transitioning from a without-Cenvat based
rate of tax to one with Cenvat, this provision would
equally be applicable.
Effect on CENVAT of introduction of exemption
Whenever excise duty becomes exempted on any
manufactured products, we need to remember that
CENVAT Credit balance stands disallowed by Rule
11(3) of CENVAT Rules, 2004. This results in an
instantaneous erosion of current asset balance and a
cost for the manufacturer. If there were an
accelerated utilization of credit, then in addition to
reversal, cash payment of the deficit will be required.
And in cases of credit-surplus, due to rate
imbalance, such surplus will lapse after reversal of
relatable credit.
Omission-Repeal:
Omission of a provision in a statute has the effect as
if that provision were never contained in the statute.
And upon such omission, proceedings initiated
previously come to a halt, if no saving clause were
attached during the omission. But, if a provision
were to be repealed then such repeal will not affect
any previous operation of the provision or any right,
privilege, obligation or liability acquired under the
(now) repealed provision.
Taxable Event and Payer of Tax
Service tax is a tax on service and the taxing events
giving rise to this incidence are contained in section
66B. Then, the law maker may, at his pleasure, place
the responsibility to discharge the tax so levied on
any person service provider or service recipient.
That being so, the law maker can even alter the
extent to which either of these persons is to
discharge the liability. Terminologies like reverse
charge and partial reverse charge are thrown around
as if to distinguish them from charge is any specific
manner only seem to confuse the nature of the
impost. When service recipient is called upon to
pay, whole or part, of tax levied under section 66B is
not to be understood as the liability of the service
provider being discharged by the service recipient.
Levy is on the service and liability is on the person
named in the law as his own liability.
Rule-making Powers obtained to cast additional
duties and obligations on service tax assessees
Union Budget 2014 has proposed certain
amendments to Section 94 of the Finance Act, 1994.
By way of these amendments, the Central
Government has obtained Rule making powers to
enable them to cast the following additional duties
and obligations on service tax assesses.
Furnishing information;
Keeping of records;
Verification of records;
Withdrawal of facilities; and
Imposition of CENVAT related restrictions
This amendment presses yet again on the nature
and amount of documentation on the part of every
service tax assessee and the detailed records that
are required to be maintained.
Such an amendment in the current Budget should
keep us anxious of the Rules that would be notified
at a later date. Furthermore, the nature of
compliances to these Rules and Regulations (to be
notified) cannot be overemphasised owing to the
fact that the interest rate has now been amended to
30 percent per annum when tax is paid beyond one
year.
Bad Debts and Reversal of Billing
Every service tax assessee providing output service
may come to a situation wherein the value of taxable
services provided may become doubtful and not
recoverable under certain circumstances. This being
a unilateral action, albeit based on the delinquency
of the customer, the service tax paid is not
recoverable. It is only when by mutual agreement,
the contract sum is lowered or credit note is issued,
can the service tax paid (at the time of billing)
become recoverable. Reference may be made to
Rule 6(3) of the Service Tax Rules prescribing the
provisions relating to issue of credit note or
amendments to the terms of the contract in cases
where the services are not provided wholly or
partially. Bad debts written off come at a price of
12.36 per cent.
E-Payment of Service Tax
Budget 2014 has made e-payment of service tax
mandatory for all service tax payments. When it may
not be convenient to make e-payment of service tax
on every due date, the concept of PLA may become
relevant and more user friendly to such assesees.
PLA works just like a current account in which all tax
deposited are recorded on the credit side of PLA.
Similarly, all tax utilisation and appropriation are
reflected on the debit side of the PLA. Considering
the current budget amendment, assesees may
explore this convenient possibility to discharge
service tax through PLA. Settled provisions in this
regard are incorporated under Rule 6(1A) of the
Service Tax Rules.
Exercise of Power to Arrest
As emphasized in Budget 2013 and consequent
amendments made therein, non-payment of Service
tax leads to imprisonment. Further, the monetary
threshold limit for imprisonment has been set as low
as Rs. 50 Lakhs remaining unpaid for just 6 months
after collection, the threat of prosecution is real.
Other offences being evasion of tax, misuse of credit
and falsification of records are also open to
prosecution. Fearsomeness of any weapon is
inversely proportional to the skill of the one wielding
it. With the current velocity of business transactions,
breaching this low threshold can take place in a very
short duration of time and could slip ones attention.
Proper delegation as well as appointment of
oversight functionaries may be imperative.
Distribution of CENVAT Credit by Input Service
Distributor
Much awaited clarification has been issued on the
distribution of common CENVAT Credit by Input
Service Distributor. It has now been clarified that
CENVAT credit is to be distributed between units in
the ratio of their turnover of previous year
irrespective of usage of such services in all or some
of the units.
Excise registration for Importers
Mandatory registration for importers introduced so
as to pass-on duties paid at input stage. Post this
amendment, there is a confusion prevailing in the
industry as to registration requirement where dealer
both procures goods within India and imports from
outside India. While department is insisting on
obtaining two separate registrations, one as a First
Stage Dealer and second, as an Importer. This
concept of parallel registrations would definitely
increase compliance costs of business. A
clarification in this behalf would have been
welcomed by the industry. Further, expectation from
the industry to allow endorsement on Bill of Entry to
pass-on credit for direct delivery shipments is not
fulfilled in the Budget.
Garnishee proceedings
Proceedings to recover tax dues from third parties
who owe money to the defaulter is a statutory
authority arising out of extraneous circumstances
wherein direct recovery is not viable. This power
cannot be exercised as a matter of routine.
Existence of a valid demand is a sine qua non for
such a proceeding to be initiated. Of equal
importance is the visible non-responsiveness of the
defaulter. But, these are matters of fact to be gone
into at a later stage when the use of garnishee
proceedings comes under challenge. The party who
is served a notice is to regard the notice of the tax
authority as being legitimate and not conduct his
own inquiry into the matter or play arbitrator. The
response ought to be swift and timely. Deliberate
disregard to the notice can render the notice to be in
default / contempt of order. The notice cannot be
put to great distress in the course of seeking
information about money owed to the alleged
defaulter. Garnishee proceedings were introduced
in Central Excise and Customs in Budget 2013.
Experience suggest that courts are reluctant to give
injunctive relief when garnishee orders are issued.
Pre-emptive steps to protect demand that are not
covered by stay orders is advisable.
SECTOR Specific:
IT / ITES and Software Taxation
Import of pre-packed software To pay
import duty (TCS (2004) 178 ELT 22 (SC)*);
Electronic download of license key To pay
Service Tax (TCS (2004) 178 ELT 22 (SC)* read with
Sixth Schedule of Karnataka VAT Act and Section
65(f) of Finance Act, 1994);
Manufacture of pre-packed software To pay
Excise duty and VAT (on sale) (TCS (2004) 178 ELT
22 (SC)* read with Sixth Schedule of Karnataka VAT
Act);
Sale of pre-packed software To pay VAT on
sale (TCS (2004) 178 ELT 22 (SC)* and Sixth
Schedule of Karnataka VAT Act);
Development of custom-built software (with
IP transfer) To pay ST (on labour portion) and VAT
(on material content) (Sixth Schedule of Karnataka
VAT Act);
Development of custom-built software (with
IP transfer) delivered on media To pay Excise duty
and VAT (on sale) (TCS (2004) 178 ELT 22 (SC)* and
Sixth Schedule of Karnataka VAT Act);
Installation To pay Service Tax (Section 65(d)
of Finance Act, 1994);
Customization To pay Service Tax (Section
65(d) of Finance Act, 1994);
Training To pay Service Tax (Section 65(d) of
Finance Act, 1994).
Customs Tariff Changes for IT Sector:
BCD on LCD and LED TV panels of below 19
inches reduced from 10 % to NIL.
BCD exempted on specified parts of LCD and
LED panels for TVs.
BCD on all inputs for manufacture of network
switches, Ethernet products and LTE products
exempted.
BCD on import of network switches, Ethernet
products and LTE products increased from NIL to
10% (only products not specified in ITA).
SAD on all inputs for manufacture of personal
computers and tablets exempted.
Full exemption to SAD on inputs used for
manufacture of smart cards.
BCD on E-book readers reduced from 7.5%
to NIL.
Central Excise Tariff changes:
Uniform excise duty rate of 12% (with
CENVAT) on smart cards is prescribed. Current rate
of 2% (without CENVAT) and 6% (with CENVAT) is
done away with.
Real Estate Development
Budget 2013 had amended tax on residential
constructions by altering the abatement on
high-end residential units by reducing the
abatement to 70 percent (from 75 percent) and
charge an effective rate of service tax at 3.708
percent (including cesses) for high end apartments.
The presently available options are as stated below:
Option I (Notification 26/2012-ST., dated June
20, 2012*) To pay service tax at 3.09 percent (high
end flat 3.708 percent) where the price will include
the share of land;
Option II (Rule 2A(i) of Service Tax Valuation
Rules*) To pay service tax at 3.708 percent where
the price will not include share of land and value
materials transferred; and
Option II (Rule 2A(ii)(A) of Service Tax
Valuation Rules*) To pay service tax at 4.944
percent where the price will not include share of
land.
* with full Input set off of service tax paid on input
services and capital goods
Budget 2014 has now enhanced service tax
rate to 8.65 percent in case of all contractors who
are not engaged in execution of original works. This
enhancement may pose high tax cost and such
contractors may shift to pay service tax based on
actual value of services through efficient
documentation.
Service tax refund for service exporters
All taxable service providers can claim refund of
input taxes under Cenvat Credit Rules. Exporters
first need to claim input credit by showing how their
service-exports qualify for credit from inputs, capital
goods and input services. Rule 5 allows refund of
surplus input credit. Except for the need for clarity
on the eligibility to credit, processing of refunds
claims is now quite smooth. Notification 27/2012
(ST) 18.06.2012 even allows self-verification and a
certificate to be produced from any Chartered
Accountant for admission of refund claims. With
availment of credit being attached with a time limit
and reversal of credit in case of delay in repatriation
of export proceeds add a new area of
documentation control is introduced. Also, while
applying the formula for proportional credit, export
is to be reckoned on the basis of collection of only
past exports.
Renting of immovable property
Budget 2011 carved out an amendment to dis-allow
CENVAT Credit of input services availed during the
period of construction of malls and commercial
complexes (proposed to be let out after completion
of construction). From that time onwards, input
service tax is a cost for developers engaged in
construction of commercial complexes and
shopping malls. Keeping this as a basis, input
service tax already availed was also demanded by
the Department for periods prior to the period of
amendment. Presently, cases are still being pursued
and conflicting decisions are being delivered on the
subject. While the appellate fora may have granted
stay from recovery of tax, this matter has not yet
reached finality in for previous years. The law has
come to be amended with finality only from April 1,
2011. Also, for those past years, Cenvat credit on
construction services availed by a person engaged
in letting out immovable property is yet to be
settled.
S
p
e
c
i
a
l

N
o
t
e
s
Effective date of change in rate of duty/tax
Amendment to the Act will take effect only after
enactment of the Finance Bill. But, amendment to
impose new duties or increase existing duties will
take effect immediately (10 July 2014) if the clause in
the Finance Bill is specified as a declared provision
under Provisional Collection of Taxes Act, 1931.
Amendment to Rules will take effect from the stated
effective date or date of its publication (10 July
2014).
Tariff amendment by issuance of notification will be
from date of such notification (10 July 2014).
Certain service tax related amendments are effective
from October 1, 2014 (ST3 period).
Effect on CENVAT of withdrawal of exemption
When an exempt product becomes dutiable (by way
of exemption being withdrawn), Cenvat credit
relatable to inputs lying in stock (as raw material or
works-in-progress) on the budget day, can be
claimed as opening balance of credit under Rule 3(2)
of the CENVAT Credit Rules, 2004. Similar
provisions for service provider are already made
under Rule 3(3) of the CENVAT Credit Rules, 2004.
Those transitioning from a without-Cenvat based
rate of tax to one with Cenvat, this provision would
equally be applicable.
Effect on CENVAT of introduction of exemption
Whenever excise duty becomes exempted on any
manufactured products, we need to remember that
CENVAT Credit balance stands disallowed by Rule
11(3) of CENVAT Rules, 2004. This results in an
instantaneous erosion of current asset balance and a
cost for the manufacturer. If there were an
accelerated utilization of credit, then in addition to
reversal, cash payment of the deficit will be required.
And in cases of credit-surplus, due to rate
imbalance, such surplus will lapse after reversal of
relatable credit.
Omission-Repeal:
Omission of a provision in a statute has the effect as
if that provision were never contained in the statute.
And upon such omission, proceedings initiated
previously come to a halt, if no saving clause were
attached during the omission. But, if a provision
were to be repealed then such repeal will not affect
any previous operation of the provision or any right,
privilege, obligation or liability acquired under the
(now) repealed provision.
Taxable Event and Payer of Tax
Service tax is a tax on service and the taxing events
giving rise to this incidence are contained in section
66B. Then, the law maker may, at his pleasure, place
the responsibility to discharge the tax so levied on
any person service provider or service recipient.
That being so, the law maker can even alter the
extent to which either of these persons is to
discharge the liability. Terminologies like reverse
charge and partial reverse charge are thrown around
as if to distinguish them from charge is any specific
manner only seem to confuse the nature of the
impost. When service recipient is called upon to
pay, whole or part, of tax levied under section 66B is
not to be understood as the liability of the service
provider being discharged by the service recipient.
Levy is on the service and liability is on the person
named in the law as his own liability.
Rule-making Powers obtained to cast additional
duties and obligations on service tax assessees
Union Budget 2014 has proposed certain
amendments to Section 94 of the Finance Act, 1994.
By way of these amendments, the Central
Government has obtained Rule making powers to
enable them to cast the following additional duties
and obligations on service tax assesses.
Furnishing information;
Keeping of records;
Verification of records;
Withdrawal of facilities; and
Imposition of CENVAT related restrictions
This amendment presses yet again on the nature
and amount of documentation on the part of every
service tax assessee and the detailed records that
are required to be maintained.
Such an amendment in the current Budget should
keep us anxious of the Rules that would be notified
at a later date. Furthermore, the nature of
compliances to these Rules and Regulations (to be
notified) cannot be overemphasised owing to the
fact that the interest rate has now been amended to
30 percent per annum when tax is paid beyond one
year.
Bad Debts and Reversal of Billing
Every service tax assessee providing output service
may come to a situation wherein the value of taxable
services provided may become doubtful and not
recoverable under certain circumstances. This being
a unilateral action, albeit based on the delinquency
of the customer, the service tax paid is not
recoverable. It is only when by mutual agreement,
the contract sum is lowered or credit note is issued,
can the service tax paid (at the time of billing)
become recoverable. Reference may be made to
Rule 6(3) of the Service Tax Rules prescribing the
provisions relating to issue of credit note or
amendments to the terms of the contract in cases
where the services are not provided wholly or
partially. Bad debts written off come at a price of
12.36 per cent.
E-Payment of Service Tax
Budget 2014 has made e-payment of service tax
mandatory for all service tax payments. When it may
not be convenient to make e-payment of service tax
on every due date, the concept of PLA may become
relevant and more user friendly to such assesees.
PLA works just like a current account in which all tax
deposited are recorded on the credit side of PLA.
Similarly, all tax utilisation and appropriation are
reflected on the debit side of the PLA. Considering
the current budget amendment, assesees may
explore this convenient possibility to discharge
service tax through PLA. Settled provisions in this
regard are incorporated under Rule 6(1A) of the
Service Tax Rules.
Exercise of Power to Arrest
As emphasized in Budget 2013 and consequent
amendments made therein, non-payment of Service
tax leads to imprisonment. Further, the monetary
threshold limit for imprisonment has been set as low
as Rs. 50 Lakhs remaining unpaid for just 6 months
after collection, the threat of prosecution is real.
Other offences being evasion of tax, misuse of credit
and falsification of records are also open to
prosecution. Fearsomeness of any weapon is
inversely proportional to the skill of the one wielding
it. With the current velocity of business transactions,
breaching this low threshold can take place in a very
short duration of time and could slip ones attention.
Proper delegation as well as appointment of
oversight functionaries may be imperative.
Distribution of CENVAT Credit by Input Service
Distributor
Much awaited clarification has been issued on the
distribution of common CENVAT Credit by Input
Service Distributor. It has now been clarified that
CENVAT credit is to be distributed between units in
the ratio of their turnover of previous year
irrespective of usage of such services in all or some
of the units.
Excise registration for Importers
Mandatory registration for importers introduced so
as to pass-on duties paid at input stage. Post this
amendment, there is a confusion prevailing in the
industry as to registration requirement where dealer
both procures goods within India and imports from
outside India. While department is insisting on
obtaining two separate registrations, one as a First
Stage Dealer and second, as an Importer. This
concept of parallel registrations would definitely
increase compliance costs of business. A
clarification in this behalf would have been
welcomed by the industry. Further, expectation from
the industry to allow endorsement on Bill of Entry to
pass-on credit for direct delivery shipments is not
fulfilled in the Budget.
Garnishee proceedings
Proceedings to recover tax dues from third parties
who owe money to the defaulter is a statutory
authority arising out of extraneous circumstances
wherein direct recovery is not viable. This power
cannot be exercised as a matter of routine.
Existence of a valid demand is a sine qua non for
such a proceeding to be initiated. Of equal
importance is the visible non-responsiveness of the
defaulter. But, these are matters of fact to be gone
into at a later stage when the use of garnishee
proceedings comes under challenge. The party who
is served a notice is to regard the notice of the tax
authority as being legitimate and not conduct his
own inquiry into the matter or play arbitrator. The
response ought to be swift and timely. Deliberate
disregard to the notice can render the notice to be in
default / contempt of order. The notice cannot be
put to great distress in the course of seeking
information about money owed to the alleged
defaulter. Garnishee proceedings were introduced
in Central Excise and Customs in Budget 2013.
Experience suggest that courts are reluctant to give
injunctive relief when garnishee orders are issued.
Pre-emptive steps to protect demand that are not
covered by stay orders is advisable.
SECTOR Specific:
IT / ITES and Software Taxation
Import of pre-packed software To pay
import duty (TCS (2004) 178 ELT 22 (SC)*);
Electronic download of license key To pay
Service Tax (TCS (2004) 178 ELT 22 (SC)* read with
Sixth Schedule of Karnataka VAT Act and Section
65(f) of Finance Act, 1994);
Manufacture of pre-packed software To pay
Excise duty and VAT (on sale) (TCS (2004) 178 ELT
22 (SC)* read with Sixth Schedule of Karnataka VAT
Act);
Sale of pre-packed software To pay VAT on
sale (TCS (2004) 178 ELT 22 (SC)* and Sixth
Schedule of Karnataka VAT Act);
Development of custom-built software (with
IP transfer) To pay ST (on labour portion) and VAT
(on material content) (Sixth Schedule of Karnataka
VAT Act);
Development of custom-built software (with
IP transfer) delivered on media To pay Excise duty
and VAT (on sale) (TCS (2004) 178 ELT 22 (SC)* and
Sixth Schedule of Karnataka VAT Act);
Installation To pay Service Tax (Section 65(d)
of Finance Act, 1994);
Customization To pay Service Tax (Section
65(d) of Finance Act, 1994);
Training To pay Service Tax (Section 65(d) of
Finance Act, 1994).
Customs Tariff Changes for IT Sector:
BCD on LCD and LED TV panels of below 19
inches reduced from 10 % to NIL.
BCD exempted on specified parts of LCD and
LED panels for TVs.
BCD on all inputs for manufacture of network
switches, Ethernet products and LTE products
exempted.
BCD on import of network switches, Ethernet
products and LTE products increased from NIL to
10% (only products not specified in ITA).
SAD on all inputs for manufacture of personal
computers and tablets exempted.
Full exemption to SAD on inputs used for
manufacture of smart cards.
BCD on E-book readers reduced from 7.5%
to NIL.
Central Excise Tariff changes:
Uniform excise duty rate of 12% (with
CENVAT) on smart cards is prescribed. Current rate
of 2% (without CENVAT) and 6% (with CENVAT) is
done away with.
Real Estate Development
Budget 2013 had amended tax on residential
constructions by altering the abatement on
high-end residential units by reducing the
abatement to 70 percent (from 75 percent) and
charge an effective rate of service tax at 3.708
percent (including cesses) for high end apartments.
The presently available options are as stated below:
Option I (Notification 26/2012-ST., dated June
20, 2012*) To pay service tax at 3.09 percent (high
end flat 3.708 percent) where the price will include
the share of land;
Option II (Rule 2A(i) of Service Tax Valuation
Rules*) To pay service tax at 3.708 percent where
the price will not include share of land and value
materials transferred; and
Option II (Rule 2A(ii)(A) of Service Tax
Valuation Rules*) To pay service tax at 4.944
percent where the price will not include share of
land.
* with full Input set off of service tax paid on input
services and capital goods
Budget 2014 has now enhanced service tax
rate to 8.65 percent in case of all contractors who
are not engaged in execution of original works. This
enhancement may pose high tax cost and such
contractors may shift to pay service tax based on
actual value of services through efficient
documentation.
Service tax refund for service exporters
All taxable service providers can claim refund of
input taxes under Cenvat Credit Rules. Exporters
first need to claim input credit by showing how their
service-exports qualify for credit from inputs, capital
goods and input services. Rule 5 allows refund of
surplus input credit. Except for the need for clarity
on the eligibility to credit, processing of refunds
claims is now quite smooth. Notification 27/2012
(ST) 18.06.2012 even allows self-verification and a
certificate to be produced from any Chartered
Accountant for admission of refund claims. With
availment of credit being attached with a time limit
and reversal of credit in case of delay in repatriation
of export proceeds add a new area of
documentation control is introduced. Also, while
applying the formula for proportional credit, export
is to be reckoned on the basis of collection of only
past exports.
Renting of immovable property
Budget 2011 carved out an amendment to dis-allow
CENVAT Credit of input services availed during the
period of construction of malls and commercial
complexes (proposed to be let out after completion
of construction). From that time onwards, input
service tax is a cost for developers engaged in
construction of commercial complexes and
shopping malls. Keeping this as a basis, input
service tax already availed was also demanded by
the Department for periods prior to the period of
amendment. Presently, cases are still being pursued
and conflicting decisions are being delivered on the
subject. While the appellate fora may have granted
stay from recovery of tax, this matter has not yet
reached finality in for previous years. The law has
come to be amended with finality only from April 1,
2011. Also, for those past years, Cenvat credit on
construction services availed by a person engaged
in letting out immovable property is yet to be
settled.
JCSS Consulting Private Limited
Bangalore
No.20, Uniworth Plaza, 2nd Floor, Sankey Road, Bangalore - 560 020
Tel: +91-80-23347000 Fax: +91-80-23316852
Chennai
No. 2 (Old No. 23), 1st Floor, Ramakrishna Nagar, Second Main Road, R A Puram, Chennai- 600 028
Tel: +91-44-42075580 / 43084525 Fax: +91-44-42075681
Hyderabad
1st Floor, Block "A", Palace View Estate, No.8-2-120, Road No.2, Banjara Hills, Hyderabad - 500 034
Tel: +91-40-66134401 Fax: +91-40-66134402
Gurgaon
Unit No: 220, Suncity Trade Tower, Sector 21, Near Krishna Chowk, Gurgaon - 122 001
Tel: +91-124- 6694670 /79
Pune
B-202, MICCIA Trade Tower, International Convention Centre, Senapati Bapat Road, Pune - 411 016
Tel: +91-20-40032770 Fax: +91-20-40032771
Ahmedabad
#805 A, Pinnacle Business Park, Corporate Road, Prahlad Nagar, Ahmedabad 380 015
Tel: +91-79-40047072 / 73