1 Taxation

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TAXATION
AMENDMENTS MATERIAL FOR NOV 2016 IPCC EXAMS
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Page 1
INDEX
S. No.
Particulars
Page No.
1.
Income Tax
4 33
2.
Indirect Taxes
35 82
NOTE:
All Amendments are already included in the following editions of MM materials 35 & 35.5,
Except Amendments in Central Excise and Circulars issued by CBEC recently.
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COURSE MATERIAL
Quality Education
INCOME TAX
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Page 3
MASTER MINDS
No.1 for CA/CWA & MEC/CEC
AMENDMENTS BY FINANCE ACT 2015

S.No
Chapter
Additions
Deletions
Modifications
Introduction To Income Tax
Nil
Nil
Residential Status
Nil
Nil
Exempted Incomes
10 (23EE)
Nil
10(11A), 10(23FBA / FBB)

10(23C), 10(23FC)
Salaries
Nil
Nil
10(14) & Rule 2B
Income From House

Property
Nil
Nil
Nil
PGBP-I & II
32AD
Nil
32(1), 35(2AB), 35(2AA),

36(1)(iii),(vii), (xii)
Capital Gains
47(xviii), 2(42A),
49(2AD),
49(2ABB)
Nil
47(viab), (vicc), 49(1)
8
9
Income From Other Sources
Nil
Nil
Nil
Clubbing Provisions
Nil
Nil
Nil
10
Set off & carry forward of

losses
Nil
Nil
Nil
11
Chapter VI A Deductions
80CCD(1B)
Nil
80C, 80D, 80DD, 80DDB,

80G, 80JJAA, 80U
12
Return of Income
Nil
Nil
139(1), 139(A)
12
Advance Tax & Interest
Nil
Nil
Nil
13
TDS & TCS
192(2D)
Nil
192A, 197A, 194A, 194C,

194LD, 195(6), 203A
Tax rates (surcharge rates),

2(24)
Sec.6(1) & 6(3)
AMENDMENTS AT A GLANCE FINANCE ACT, 2015

S.NO.
A.
1.
B.
1.
2.
C.
1.
2.
3.
Particulars
INTRODUCTION TO INCOME TAX
Rates of Income Tax
RESIDENTIAL STATUS AND SCOPE OF TOTAL INCOME
CBDT to prescribe the manner of computation of period of stay for an
Indian citizen, being a member of the crew of a foreign bound ship
leaving India
Residential status of a company to be determined on the basis of Place
of Effective Management
PROFITS AND GAINS OF BUSINESS OR PROFESSION
Balance 50% of additional depreciation to be allowed in the subsequent
year, where the plant and machinery is put to use for less than 180 days
during the previous year of acquisition and installation
Manufacturing industries set up in the notified backward areas of specified
States to be eligible for a deduction @ 15% of the actual cost of new plant
and machinery acquired and installed during the previous year
Additional depreciation @ 35% to be allowed to assessees setting up
manufacturing units in notified backward areas of specified States and
acquiring and installing of new plant and machinery
Section
-
6(1)
6(3)
32(1)
32AD
32(1)(iia)
IPCC_ Income Tax Amendments Material (For Nov - 2016) ____________________4
Ph:
98851 25025/26
4.
5.
www.mastermindsindia.com
Prescribed conditions relating to maintenance of accounts, audit, etc. to

be fulfilled by the approved in-house R&D facility [Section 35(2AB)];
Prescribed Authority may also submit Report to Chief Commissioner or
Commissioner
Interest paid in respect of capital borrowed for acquisition of an asset, for
the period upto the date on which the asset is first put to use to be
capitalized, even if the acquisition of the asset is not for extension of
existing business or profession
35(2AB) &
35 (2AA)
36(1)(iii)
6.
Amount of debt taken into account in computing the income of the

assessee on the basis of notified ICDSs to be allowed as deduction in the
previous year in which such debt or part thereof becomes irrecoverable
36(1)(vii)
7.
Amount of expenditure incurred by a co-operative society for purchase of

sugarcane at price fixed by the Government allowable as deduction
36(1)(xvii)
D.
Capital Gains
1.
Any transfer of capital asset, being share of a foreign company, referred

in Explanation 5 to section 9(i), deriving its value substantially from the
shares in an Indian company, in a scheme of amalgamation/demerger
not to be regarded as transfer under section 47, where the
amalgamating/demerged and amalgamated/resulting companies are
foreign companies
2.
Transfer of units by unit holders in consolidation scheme of mutual funds

not to be regarded as transfer
47(viab),
47(vicc) & 49
47(xviii),
2(42A) &
49(2AD)
3.
Cost of acquisition of the capital asset acquired in the scheme of demerger

referred to in section 47(vib) in the hands of resulting company
49(1)(iii)(e)
4.
Cost of acquisition and period of holding of shares acquired on

redemption of Global Depository Receipts (GDRs) by a non-resident
assessee
49(2ABB) &
2(42A)
E.
Deductions from Gross Total Income
1.
Deduction under section 80C to be available in respect of deposit in

Sukanya Samriddhi Account Scheme for the welfare of girl child
80C &
10(11A)
2.
Increase in the limit of deduction in respect of contribution to certain

pension funds under section 80CCC
80CCC
3.
Additional deduction in respect of contribution to NPS of Central

Government under section 80CCD(1B) and enhancement of limit of
deduction under section 80CCD(1)
4.
5.
6.
7.
8.
Enhancement of the limit of deduction under section 80D and allowability

of deduction for incurring medical expenditure in respect of very senior
citizen
Increase in the limit of deduction under section 80DD and 80U in respect
of persons with disability and severe disability
Enhanced limit of deduction for expenditure incurred in respect of
medical treatment of very senior citizen
Scope of section 80G expanded to allow 100% deduction in respect of
donation to Swachh Bharat Kosh, Clean Ganga Fund and National Fund
for Control of Drug Abuse Exemption of income of Swachh Bharat Fund
& Clean Ganga Fund
Deduction for employment of new regular workmen extended to all
assessees deriving profits and gains from manufacture of goods in a
factory
80CCD(1B)
&
80CCD(1)
80D
80DD & 80U
80DDB
80G
10(23C)
80JJAA

F.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
13.
G.
1.
2.
MASTER MINDS
Provisions concerning Advance Tax and TDS

Person responsible for paying income chargeable under the head
Salaries to obtain proof or evidence or particulars of prescribed
deductions/exemptions/set-off of losses claimed by the assessee
Tax to be deducted@10% on premature taxable withdrawal from
employees provident fund
Co-operative banks to deduct tax at source on interest on time deposits
credited or paid to its members
Interest on recurring deposits to be subject to tax deduction at source
under section 194A
Threshold limit to be reckoned with reference to the aggregate interest
credited or paid by all branches of a banking company/co-operative
bank/public company which has adopted core banking solutions
Tax deduction from interest on compensation awarded by the Motor
Accidents Claims Tribunal to be made at the time of payment, where the
interest or aggregate interest paid exceeds Rs.50,000
Exemption from applicability of TDS provisions under section 194C to be
available only in respect of payments to transport operators owning ten or
less goods carriages at any time during the previous year, on furnishing
of PAN
Extension of eligible period of concessional tax rate@5% under section
194LD
Person responsible for paying any sum, whether or not chargeable to tax,
to a non-corporate non-resident or to a foreign company, to furnish the
information relating to payment of such sum in the prescribed form and
prescribed manner
Facilitating filing of Form 15G/15H for payments made under life
insurance policy
Notified deductors not required to obtain and quote TAN
Enabling provision for computation of fee payable under section 234E at
the time of processing TDS statements
Provisions for filing return of income
Beneficial Owner / Beneficiary of any asset located outside India required
to file return of income in the prescribed form and manner
Monetary limits of specified transactions which require quoting of PAN
192(2D)
192A & 197A
194A
194A
194A(3)
194A
194C(6)
194LD
195(6)
197A
203A
200A
139(1)
139(A)
Ph:
98851 25025/26
1. BASIC CONCEPTS
1) INCOME TAX RATES APPLICABLE FOR THE A.Y. 2016-17

A. Individual/Hindu undivided Family/ AOP /BOI
TAXABLE
INCOME(Rs.)
MALE /
FEMALE
<60 YRS.
(Non
resident)
H.U.F / AOP
/ BOI
< 60 YRS.
RESIDENT
SENIOR
CITIZEN 60 &
< 80 YRS.
RESIDENT
VERY
SR.CITIZEN
80 YRS.
Nil
Nil
Nil
Nil
2,50,001 to 3,00,000
10%
10%
Nil
Nil
3,00,001 to 5,00,000
10%
10%
10%
Nil
5,00,001 to 10,00,000
20%
20%
20%
20%
Above 10,00,000
30%
30%
30%
30%
UP TO 2,50,000
Primary & Secondary Education Cess: 3% cess on (tax + surcharge) in all cases.
B. Firm / LLP / Local Authority / Company (Domestic or Foreign)
The rate of tax for A.Y.2016-17 is
Firm / LLP / Local Authority / Domestic Company @ 30%
Foreign Company @ 40%
C. SURCHARGE: It is a tax on tax.

Assessee
1. Domestic
Companies
2. Foreign
Companies
3. Others
TI < Rs.1
Crore
-
Applicable Surcharge
TI > Rs. 1 Crore, but TI < Rs. 10
Crores
7% (earlier 5%)
TI > Rs. 10
Crores
12% (earlier 10%)
2%
5%
12% (earlier 10%)
12% (earlier 10%)
D. Marginal relief:
a) In case of non corporate assessees (other than company) exceeds 1 crore.
Marginal relief is available in respect of these assessees.
Illustration:
Mr. Ram derives a taxable income of Rs.1,03,00,000. Compute the tax liability for the year
ended 31.03.2016.
Solution:
The tax payable on total income of Rs. 1,03,00,000 of X Ltd. computed (including surcharge
@ 12%) is Rs. 32,64,800. However, the tax cannot exceed Rs. 31,25,000 (i.e., the tax of Rs.
28,25,000 payable on total income of Rs. 1 crore plus Rs. 3,00,000, being the amount of total
income exceeding Rs. 1 crore). Therefore, the tax payable on Rs. 1,03,00,000 would be Rs.
31,25,000. The marginal relief is Rs. 1,39,800 (i.e., Rs. 32,64,800 - Rs. 31,25,000).
b) In case of a domestic company, whose total income is > Rs. 1 crore but Rs. 10 crore
Illustration:
Compute the tax liability of X Ltd., a domestic company, assuming that the total income of X
Ltd. is Rs. 1,01,00,000 and the total income does not include any income in the nature of
capital gains.
MASTER MINDS
Solution:
The tax payable on total income of Rs. 1,01,00,000 of X Ltd. computed @ 32.1% (including
surcharge@7%) is Rs. 32,42,100. However, the tax cannot exceed Rs. 31,00,000 (i.e., the tax
of Rs. 30,00,000 payable on total income of Rs. 1 crore plus Rs. 1,00,000, being the amount
of total income exceeding Rs. 1 crore). Therefore, the tax payable on Rs. 1,01,00,000 would
be Rs. 31,00,000. The marginal relief is Rs. 1,42,100 (i.e., Rs. 32,42,100 - Rs. 31,00,000).
c) In case of a domestic company, whose total income is > Rs.10 crore
Illustration:
Compute the tax liability of X Ltd., a domestic company, assuming that the total income of X
Ltd. is Rs. 10,01,00,000 and the total income does not include any income in the nature of
capital gains.
Solution:
The tax payable on total income of Rs. 10, 01, 00,000 of X Ltd. computed@ 33.6% (including
surcharge@12%) is Rs. 3,36,33,600. However, the tax cannot exceed Rs. 3,22,00,000 [i.e.,
the tax of Rs. 3,21,00,000 (32.1% of Rs. 10 crore) payable on total income of Rs. 10 crore
plus Rs. 1,00,000, being the amount of total income exceeding Rs. 10 crore]. Therefore, the
tax payable on Rs. 10,01,00,000 would be Rs. 3,22,00,000. The marginal relief is Rs.
14,33,600 (i.e., Rs. 3,36,33,600 - Rs. 3,22,00,000).
2) Insertion of new clause in Definition of income (sec.2(24)(xviii): Any Assistance provided by
central government or state government or any authority or body or Agency by way of subsidy or
grant or incentive or Duty Draw Back(DDB) or Waiver or Concession or Re-imbursement or BY
WHAT EVER NAME called, will be treated as income (TAXABLE UNDER PGBP) of the
Assessee.(ICDS VII Government Grants)
However, if the grant is received in respect of Depreciable Assets then it shall be reduced from
Actual cost Defined under Explanation1 to Sec. 43(1).
2. RESIDENTIAL STATUS
1) Determination of Residential Status of Crew Member of a ship: W.e.f. 01.04.2016 in the case
of an individual, being a Indian citizen and a Member of the Crew of a Foreign-bound Ship leaving
India, the period(s) of stay in India shall, in respect of such voyage, be determined in the manner
and subject to such prescribed conditions. For determining the period of Stay in India, the
following period shall not be includedPeriod beginning From
Period ending to
Date entered into the Continuous

Discharge Certificate in respect of joining
the ship by the said individual for the
eligible voyage
Date entered into Continuous Discharge

Certificate in respect of the signing off by that
individual from the ship in respect of such
voyage.
Meaning of Terms:
a) Continuous Discharge Certificate shall have the meaning assigned to it in the Merchant
Shipping (Continuous Discharge Certificate Cum-Seafarers Identity Document) Rules, 2001
under Merchant Shipping Act, 1958.
b) Eligible voyage shall mean a voyage undertaken by a ship engaged in the carriage of
passengers or freight in international traffic wherei)
For the voyage having originated from any port in India, has as its destination any port
outside India and
ii) For the voyage Originated from any port outside India, has as its destination any port in
India.
Ph:
98851 25025/26
Illustration:
Mr. Alok is an Indian citizen and a member of the crew of a Singapore bound Indian ship engaged
in carriage of passengers in international traffic departing from Mumbai port on 6th June, 2015.
From the following details for the P.Y.2015-16, determine the residential status of Mr. Alok for
A.Y.2016-17, assuming that his stay in India in the last 4 previous years (preceding P.Y.2015-16)
is 400 days and last seven previous years (preceding P.Y.2015-16) is 750 days:
Particulars
Date
Date entered into the Continuous Discharge Certificate in respect of
6th June, 2015
joining the ship by Mr. Alok
Date entered into the Continuous Discharge Certificate in respect of 9th December, 2015
signing off the ship by Mr. Alok
Solution:
1. U/s 6(1), any person who stays in India for a period of 182 days or more,
during the Relevant Previous Year is a Resident for that year.
2. For a Member of the Crew of a Foreign-bound Ship leaving India, to
determine the period of Stay in India, the following period shall not be
included:
Principles
Analysis
Conclusion
Period beginning From

Date entered into the Continuous
Discharge Certificate in respect of
joining the ship by the said
individual for the eligible voyage
Period ending to
Date entered into Continuous
Discharge Certificate in respect of
the signing off by that individual
from the ship in respect of such
voyage
Period of Exclusion from Stay in India = From 06.06.2015 to 09.12.2015 = 187
days [25+31+31+30+31+30+9]
Mr. Aloks period of stay in India during the P.Y.2015-16 would be 179 days
[i.e., 366 days 187 days]. Since his period of stay in India during the
P.Y.2015-16 is less than 182 days, he is a non-resident for A.Y.2016-17.
The above voyage is a Eligible Voyage as the Ship is engaged in the carriage of freight in
international traffic having originated from a port in India, and has as its destination any port
outside India (Mumbai Port to Singapore Port).
Note - Since the residential status of Mr. Alok is non-resident for A.Y.2016-17 consequent to his
number of days of stay in P.Y.2015-16 being less than 182 days, his period of stay in the earlier
previous years become irrelevant.
2) Residential Status Of Company
a) Resident: Company would be resident in India in any previous year, if
i)
It is an Indian company (or)
ii) Its place of effective management (POEM), in that year, is in India.

In any other case the company shall be considered as non resident
Explanation:
1. Indian Company
Always Resident (irrespective

of where its POEM functions.)
2. Other companies(foreign company) if place of

effective management
(a) In India
Resident
(b) Outside India
Non Resident
Note: Place of effective management to mean a place where key management and commercial
decisions are necessary for the conduct of the business of an entity as a whole are, in substance
made.
MASTER MINDS
3) Section 9: explanation 6 to section 9(1)(i): Explanation 5 to section 9(1)(i) inserted vide

Finance Act, 2012 has the effect of bringing within tax net the transfer of share or interest
(interest) in a foreign company or entity (entity by a non-resident outside India, if such interest
in the entity derives its value substantially from the assets located in India, commonly referred to
as indirect transfer. It was not clear before the amendment as to what would constitute for the
purpose of the above explanation.
It is now provides that the share or interest of the foreign company or entity shall be deemed to
derive its value substantially from the assets (whether tangible or intangible) located in India, if, on
the specified date the value of Indian assetsa) Exceeds the amount of Rs. 10 crores; and
b) Represents at least a 50% of the value of all the assets owned by the company or entity;
The value of an asset shall be the fair market value as on the specified date, of such asset
without deduction of liabilities, if any, in respect of the asset, determined in such manner as may
be prescribed
The taxation of the gains arising on the transfer of a share or interest deriving, directly or
indirectly, its value substantially from assets located in India will be on proportional basis. The
method of determining proportionality will be on proportional basis. The method of determining
proportionality will be specified in the rules. However such indirect transfers will not be taxed in
the following cases:
Where the non-resident transferor, individually or along with its associated enterprises, at any
time in the 12 months preceding the date of transfer of interest in an entity.
i)
Neither holds the right of the management or control in such entity which directly holds assets
in India nor holds right of the management or control in such entity which would enable it to
the right of the management or control of the entity which holds assets in India.
ii) Neither holds more than 5% of the total voting power or share capital or interest in such entity
directly owning assets in India nor does it holds a percentage of the total voting power or
share capital or interest in any entity which results in more than 5% of the total voting power or
share capital or interest in the entity directly owning assets in India.
4) Sec 9(1)(v): Sec 9(1)(v) relates to interest income and provides that the income by way of interest, if
payable by the specified persons shall be sec 9(1)(v)(c) deemed to accrue or arise in india.
An Explanation has been inserted after providing that in the case of a non- resident, being a
person engaged in the business of banking, any interest payable by the permanent
establishment(PE) in India of such non-resident to the head office or any PE or any other part of
such non-resident outside India, shall be deemed to accrue or arise in India and shall be
chargeable to tax in addition to any income attributable tom PE in India and the PE in India shall
be deemed to be a person separate and independent of the non-resident person of which it is PE
and the provisions of the act relating to computation of total income, determination of tax and
collection and recovery shall apply accordingly.
3. INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME

S. No
1
SECTION
10(11A)
10(22B)
10(23c)
CONDITIONS FOR EXEMPTION

Any payment (interest accruing and withdrawals) from an account, opened
as per sukanya samriddhi Account Rules, 2014 made under the Government
savings bank Act,1873,is exempt from Tax.
Any income of a news agency set up in India solely for collection and
distribution of news as the Central Government may notify shall be exempt,
subject to the condition that such news agency applies its income or
accumulates it for application solely for collection and distribution of news
and does not distribute its income in any manner to its members.
Without any conditions the Income of
Swachh bharat kosh (F- Act-2015, w.e.f. A.Y. 2015 16)
Ph:
98851 25025/26
Clean Ganga Fund (F- Act-2015, w.e.f. A.Y. 2015 16)

Is exempted
4
10(23EE)
Specified income of core settlement guarantee fund is exempt:

a) Entity: Core settlement guarantee Fund ,set up by a recognized clearing
corporation
b) Exempt incomes: following incomes of above fund is exempti) Contribution received from specified persons,
ii) Penalties imposed by the recognized clearing corporation and credited to
the core settlement guarantee fund, or
iii) Income from investment made by the fund.
c) Taxable if shared with specified person: if any amount standing to the
credit of the fund and not charged to income-tax during any previous year is
shared, either wholly or in part with the specified person, the whole of the
amount so shared shall be deemed to be the income of the previous year in
which such amount is so shared and shall, accordingly be chargeable to
income-tax.
d) Specified person shall mean , Any recognized clearing corporation which establishes and maintains the
core settlement guarantee fund, and
Any recognized stock exchange being a shareholder in such recognized
clearing corporation, or as a contributor to the core settlement guarantee
fund, and any clearing member contributing to the core settlement guarantee
fund.
10(23FBA) Any income of an investment fund other than the income chargeable under
the head profits and gains of business or profession(incomes from
investment funds/ unit holders are exempt)
10(23FBB) Any income referred to in sec.115UB, accruing or arising to, or received by ,
a unit holder of an investment fund, being that proportion of income which is
of the same nature as income chargeable under the head profits and gains
of business or profession. (incomes from investments fund / unit holder are
exempt)
NOTE: investment fund is as specified under sec.115UB Explanation 1
clause (a).
10(23FCA) Any income of a business trust, being a real estate investment trust, by way
of renting or leasing or letting out any real estate asset owned directly by
such business trust, shall be exempt.
10(38)
Exemption of long term capital gain arising from sale of unit of business trust
subjected to STT
4. INCOME FROM SALARIES

Increase in the maximum limit for exemption of transport allowance [notification no. 39/2015,
dated 13 04 2015] (sec 10(14) & Rule 2BB)
Transport allowance: it is given to meet the employees expenditure for traveling
from his residence to office and back.
Transport allowance received.
Less: Exempt u/s 10(14) Rs.1600 p.m. (EARLIER 800 p.m.)(If employee is blind
/ deaf & dumb / handicapped, Rs.3200 p.m. (EARLIER 1600 p.m.))
XXX
TAXABLE AMOUNT
XXX
XXX
MASTER MINDS
5. PROFITS AND GAINS OF BUSINESS OR PROFESSION

1. Amendments Relating To Additional Depreciation
a) Additional depreciation @ 20%: An assessee who is engaged in manufacturing activity or
engaged in power sector is eligible to claim an additional depreciation @ 20% of actual cost
(50% of 20% in case of the asset put to use for less than 180 days). in respect of ELIGIBLE
PLANT AND MACHINERY
b) Additional depreciation @ 35%: In order to encourage acquisition and installation plant and
machinery for setting up of manufacturing units in the notified backward areas of the states of
Andhra Pradesh, Bihar, Telangana and West Bengal, a proviso has been inserted to
section 32(1)(iia) to allow higher additional depreciation @ 35% (instead of 20%)(50% of 35%
in case of the asset put to use for less than 180 days) in respect of the actual cost of new
machinery or plant (other than a ship and aircraft) acquired and installed during the period
between 1st April, 2015 and 31st March, 2020 by a manufacturing undertaking or enterprise
which is set up in the notified backward areas of these specified States on or after 1st April,
2015.
c) Balance 50% of additional depreciation to be allowed in the subsequent year
(applicable to both (a) & (b) points): Balance 50% of the additional depreciation on new
plant and machinery acquired and used for less than 180 days which has not been allowed in
the year of acquisition and installation of such plant & machinery, shall be allowed in the
immediately succeeding previous year.
Illustration:
XYZ ltd., a manufacturing concern, furnishes the following particulars:
S.No
Particulars
Rs.
1.
Opening WDV of plant and machinery as on 1.4.2015
30,00,000
2.
3.
New plant and machinery purchased and put to use on 08.06.2015

New plant and machinery acquired and put to use on 15.12.2015
20,00,000
8,00,000
4.
Computer acquired and installed in the office premises on 2.1.2016
3,00,000
Compute the amount of depreciation and additional depreciation as per the income tax Act, 1961
for the A.Y. 2016 - 17.
Solution:
Computation of depreciation and additional depreciation for A.Y. 2016 - 17
Particulars
Normal depreciation:
@ 15% on Rs. 50,00,000 [See Working Notes 1 & 2]
@ 7.5% (50% of 15%, since put to use for less than 180
days) on Rs. 8,00,000
@ 30% (50% of 60%, since put to use for less than 180
days) on Rs. 3,00,000
Additional Depreciation:
@ 20% on Rs. 20,00,000 (new plant and machinery put to
use for more than 180 days)
@10% (50% of 20%, since put to use for less than 180
days) on Rs. 8,00,000
Total depreciation
Plant &
Machinery
(15%)
Computer
(60%)
7,50,000
60,000
90,000
40,000
80,000
12,90,000
90,000
Ph:
98851 25025/26
Working Notes:
1) Computation of actual cost of Plant & Machinery as on 31.03.2016
Particulars
Plant & Machinery
Written down value as on 1.4.2015

Add: Plant & Machinery purchased on 08.6.2015
Add: Plant & Machinery acquired on 15.12.2015
Computer acquired and installed in the office
premises
Actual cost of as on 31.03.2016
Computer
30,00,000
20,00,000
8,00,000
58,00,000
3,00,000
3,00,000
2) Composition of plant and machinery included in the WDV as on 31.3.2016

Particulars
Plant & Machinery
Computer
Plant and machinery put to use for 180 days or more

[Rs. 30,00,000 (Opening WDV) + Rs. 20,00,000
(purchased on 8.6.2015)]
50,00,000
Plant and machinery put to use for less than 180 days
Computers put to use for less than 180 days
8,00,000
58,00,000
3,00,000
3,00,000
Notes:
1. As per the second proviso to section 32(1)(ii), where an asset acquired during the previous
year is put to use for less than 180 days in that previous year, the amount of deduction
allowable as normal depreciation and additional depreciation would be restricted to 50% of
amount computed in accordance with the prescribed percentage.
Therefore, normal depreciation on plant and machinery acquired and put to use on
15.12.2015 and computer acquired and installed on 02.01.2016, is restricted to 50% of 15%
and 60%, respectively. The additional depreciation on the said plant and machinery is
restricted to Rs.80,000, being 10% (i.e., 50% of 20%) of Rs.8 lakh
2. As per third proviso to section 32(1)(ii), the balance additional depreciation of Rs.80,000 being
50% of Rs.1,60,000 (20% of Rs.8,00,000) would allowed as deduction in the A.Y.2017-18.
3. As per section 32(1)(iia), additional depreciation is allowable in the case of any new
machinery or plant acquired and installed after 31.3.2005 by an assessee engaged, inter alia,
in the business of manufacture or production of any article or thing, @ 20% of the actual cost
of such machinery or plant.
However, additional depreciation shall not be allowed in respect of, inter alia, any machinery
or plant installed in office premises, residential accommodation or in any guest house.
Accordingly, additional depreciation is not allowable on computer installed in the office
premises.
2. Section 32AD:
Investment In New Plant And Machinery In Notified Backward Areas Of Specified States
a) Applicable Assessee: Industrial undertaking (Manufacturers)
b) Investment: Investment in new plant and machinery in notified backward areas in specified
States of Andhra Pradesh, Bihar, Telangana and West Bengal.
c) Investment Period: 1st April, 2015 to 31st March, 2020.
d) Deduction: 15% of cost of new plant and machinery.
e) Double benefits available: Where the assesse is a Company, deduction under section 32AD
would be available over and above the existing deduction available under section 32AC,
subject to the satisfaction of conditions thereunder.
MASTER MINDS
f) Holding Period: If any new asset acquired and installed by the assesses is sold or otherwise
transferred except in connection with the amalgamation or demerger or reorganisation of
business referred to in section 47(xiii), (xiiib) or (xiv), within a period of 5 years from the date
of its installation, the consequence of the same shall be as under:
i)
The amount of deduction allowed under section 32AD (1) in respect of such new asset
shall be deemed to be income chargeable under the head profit and gains of business and
profession of the year in which new asset is sold or otherwise transferred.
ii) In addition to the above, if any capital gain arises under section 50 on account of transfer
of such new asset that too shall become taxable in that previous year.
g) For the purpose of this section, New plant and machinery does not include
i)
Any ship or aircraft;
ii) Any plant and machinery, which before its installation by the assesse, was used either
within or outside India by any other person;
iii) Any plant and machinery installed in any office premises or any residential
accommodation, including accommodation in the nature of guest house
iv) Any office appliances including computers or computer software;
v) Any vehicle;
vi) Any plant and machinery, the whole of the actual cost of which is allowed as
deduction.(whether by way of depreciation or otherwise)
Note:
i)
It may be noted that deduction u/s. 32AC and/or 32AD in respect of new plant & machinery
acquired and installed shall be allowed as a deduction in addition to the normal depreciation u/s.
32 and additional depreciation u/s. 32(1)(iia), irrespective of number of days for which the asset is
put to use.
ii) The Eligible plant & machinery discussed under sec 32AC, 32AD, 32(1) (iia) & 54GB are one and
the same.
iii) Certain districts of Bihar notified as backward areas under the first proviso to section 32(1)(iia)
and section 32AD(1)
Accordingly, the Central Government has, vide this notification, notified the following 21 districts
of the State of Bihar as backward areas under the first proviso to section 32(1)(iia) and section
32AD(1).
S. No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
District
Patna
Nalanda
Bhojpur
Rohtas
Kaimur
Gaya
Jehanabad
Aurangabad
Nawada
Vaishali
Sheohar
S. No.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
District
Samastipur
Darbhanga
Madhubani
Purnea
Katihar
Araria
Jamui
Lakhisarai
Supaul
Muzaffarpur
Illustration:
X ltd set up a manufacturing unit in notified backward area in the state of Telangana on 01.06.2015. It
invested Rs.30 core in new plant and machinery on 1.6.2015. Further, it invested Rs.25 core in the
plant and machinery on 01.11.2015, out of which Rs.5 core was second hand plant and machinery.
Compute the depreciation under sec:32, is X ltd entitled for any other benefit in respect of such
investment? If so, what is the benefit available?
Ph:
98851 25025/26
Would your answer change where such manufacturing unit set up by a firm?
Solution:
i) Computation of depreciation under section 32 for X Ltd. for A.Y. 2016-17
Particulars
Plant and machinery acquired on 01.06.2015
Plant and machinery acquired on 01.11.2015
WDV as on 31.03.2016
Less: Depreciation @ 15% on Rs. 30 crore
Depreciation @ 7.5% (50% of 15%) on Rs. 25 crore
Additional Depreciation@35% on Rs. 30 crore
Additional Depreciation@17.5% (50% of 35%) on Rs. 20 crore
WDV as on 01.04.2016
Rs. in crores
30.00
25.00
55.00
4.50
1.87
10.50
3.50
20.37
34.63
Computation of deduction under section 32AC & 32AD for X Ltd. for A.Y. 2016-17
Particulars
Deduction under section 32AC(1A) @ 15% on Rs. 50 crore (since
investment in new plant and machinery acquired and installed in the
previous year 2015-16 by X Ltd., a manufacturing company,
exceeds Rs. 25 crore)
Deduction under section 32AD @ 15% on Rs. 50 crore
Total benefit
Rs. in crores
7.50
7.50
15.00
ii) Yes, the answer would be different, where the manufacturing unit is set up by a firm. The deduction
under section 32AC is available only to corporate assesses, and therefore, the deduction of Rs. 7.50
crore under section 32AC would not be available if the manufacturing unit is set up by X & Co., a firm.
However, it would be eligible for deduction of Rs. 7.50 crore under section 32AD.
Notes:
1. As per the second proviso to section 32(1)(ii), where an asset acquired during the previous year is
put to use for less than 180 days in that previous year, the amount deduction allowable as normal
depreciation and additional depreciation would be restricted to 50% of amount computed in
accordance with the prescribed percentage.
Therefore, normal depreciation on plant and machinery acquired and put to use on 1.11.2015 is
restricted to 7.5% (being 50% of 15%) and additional depreciation is restricted to 17.5% (being
50% of 35%).
2. As per third proviso to section 32(1) (ii), the balance additional depreciation of Rs. 3.5 crore, being
50% of Rs. 7 crore (35% of Rs. 20 crore) would be allowed as deduction in the A.Y.2017-18.
3. As per section 32(1)(iia), additional depreciation is allowable in the case of any new machinery or
plant acquired and installed after 31.3.2005 by an assessee engaged, inter alia, in the business of
manufacture or production of any article or thing. In this case, since new plant and machinery
acquired was installed by a manufacturing unit set up in a notified backward area in the State of
Telangana, the rate of additional depreciation is 35% of actual cost of new plant and machinery.
Since plant and machinery of Rs. 20 crore was put to use for less than 180 days, additional
depreciation @17.5% (50% of 35%) is allowable as deduction. However, additional depreciation
shall not be allowed in respect of second hand plant and machinery of Rs. 5 crore.
Likewise, the benefit available under sections 32AC and 32AD would not be allowed in respect of
second hand plant and machinery.
Accordingly, additional depreciation and investment allowance under sections 32AC and 32AD
have not been provided on Rs. 5 crore, being the actual cost of second hand plant and machinery
acquired and installed in the previous year.
MASTER MINDS

3. Section 35(2AA):
After Amendment
Section 35(2AA) provides for a weighted
deduction 200% for Scientific research
under a programme approved by the
prescribed authority.
(prescribed
authority
namely
the
secretary department of scientific and
industrial research (DSIR))
The prescribed authority shall submit its

report in the prescribed form to the
principal DG or DG, principal chief
commissioner or chief commissioner
Reason: to provide better facility to the assessee, which were paid to National laboratory,
university or Indian Institute of Technology or a specified person with a specified direction to
get weighted deduction 200%.
Before Amendment
Section 35(2AA) provides for a weighted
deduction 200% for Scientific research
under a programme approved by the
prescribed authority.
(prescribed
authority
namely
the
secretary department of scientific and
industrial research (DSIR))
The prescribed authority shall submit its
report in the prescribed form to the
principal DG or DG.
4. Section 35(2AB):
According to Section 35(2AB), to get weighed deduction 200% in respect of expenditure on
in house research and development expenses inserting the following new conditions (w.e.f
A.Y 2016-17)
a) Assessee must enter into an agreement with the prescribed authority for co-operation in such
research and development facility and fulfills prescribed conditions with regard to maintenance
and audit of the accounts and also furnishes prescribed reports
b) The prescribed authority shall submit its report in the prescribed form to the principal DG or
DG, principal chief commissioner or chief commissioner.
5. Amendments relating to sec 36(1)
a) Interest on borrowed capital - Sec 36(1)(iii):
Before Amendment
After Amendment
Proviso to section 36(1)(iii): Interest paid in Proviso to section 36(1)(iii): Interest paid in
respect of capital borrowed for acquisition of respect of capital borrowed for acquisition of
an asset, for period up to the date on which an asset, for period up to the date on which the
the asset is first put to use to be capitalized, asset is first put to use to be capitalized, even
only if the acquisition of an asset is for an if the acquisition of an asset is not for an
extension of existing business or profession. extension of existing business or profession.
Reason:
In order to remove the inconsistency between the requirement under the income tax
Act, 1961 and the requirement under ICDS IX.
The proviso to section 36(1)(iii) has been amended to remove the condition that the
acquisition should have been for extension of existing business or profession.
b) Bad debts - sec 36(1)(vii):
Before Amendment
One of the essential conditions for claiming
bad debts as deduction
It should be written off in the books of
accounts
Note: Mere provision is not sufficient but actual
write off of account is required.
After Amendment
One of the essential conditions for claiming
bad debts as deduction
It should be written off in the books of
accounts
However, actual written off in the books of
accounts is not necessary, if a debt which
has not been recognized in the books of
accounts as per the accounting Standards
but has been taken into Account in the
computation of Income As per noticed
ICDS has become irrecoverable, still it can
be claimed as bad debts.
Ph:
98851 25025/26
Reason : There are significant deviations between the notified ICDSs and accounting standards
in case of recognition of income or gains or postponing the recognition of expenditure or losses
under tax laws and consequently, impacting the computation of tax liability under income tax Act
In order to overcome this difficulty arising out of the notified ICDS a second proviso has now
been inserted in sec 36(1)(vii)
If a debt, which has not been recognised in the books of accounts as per the requirement of
the accounting standards but has been taken into account in the computation of income as
per notified ICDS, has become irrecoverable, it can still be claimed as bad debts u/s
36(1)(vii) since it shall be deemed that the debt has been written off as irrecoverable in the
books of accounts by virtue of the second proviso to sec 36(1)(vii)
c) Co-operative societies sec 36(1)(xvii): The amount of expenditure incurred by a cooperative society engaged in the business of manufacture of sugar for purchase of sugarcane
at a price which is equal to or less than the price fixed or approved by the Government. Thus,
it may be noted that amount paid in excess of the price approved by the Government shall not
be allowed as deduction for purchase of sugarcane.
Some important circulars issued by CBDT:1. Deduction in respect of cost of production allowable under section 37 in the case of
Abandoned Feature Films [Circular No. 16/2015, dated 6.10.2015]
The deduction in respect of the cost of production of a feature film certified for release by the
Board of Film Censors in a previous year is provided in Rule 9A.( Rule 9A if Censor board is
certified then the cost of production of the film is allowed as deduction).
But in case of abandoned films, since certificate of Board of Film Censors is not received, in
some cases no deduction was allowed by applying Rule 9A of the Rules or by treating the
expenditure as capital expenditure.
CLARIFICATION:It is clarified that Rule 9A does not apply to abandoned feature films. So, The cost of production of
an abandoned feature film is to be treated as revenue expenditure (not capital expenditure)
and allowed as per the provisions of section 37 of the Income -tax Act, 1961.
2. Interest from non-SLR Securities of Banks: Whether chargeable under the head Profits
and gains of business or profession or Income from other sources?
[Circular No. 18, dated 2.11.2015]
Section 56(1)(id) provides that income by way of interest on securities shall be chargeable to
income-tax under the head "Income from Other Sources", if the income is not chargeable to
income-tax under the head "Profits and Gains of Business and Profession".
The investments made by a banking concern are part of the business of banking.
Therefore, the income arising from such investments is attributable to the business of banking
falling under the head "Profits and Gains of Business and Profession". (CIT v. Nawanshahar
Central Cooperative Bank Ltd. [2007]) (SC)
3. Allowability of Employer's Contribution to funds for welfare of employees paid after the
due date under the relevant Act but before the due date of filing of return of income under
section 139(1)
[Circular No.22/2015 dated 17 12 - 2015]
Under section 43B of the Income-tax Act, 1961, certain deductions are admissible only on
payment basis. The CBDT has observed that some field officers disallow employer's
contributions to provident fund for the welfare of employees, if it has been paid after the 'due
dates' as per the relevant Acts.
CLARIFICATION:CBDT has clarified the issue that the deduction is allowable to the employer, if he deposits the
contributions to welfare funds on or before the 'due date' of filing of return of income. U/S 139
(1). (i.e. due dates as per relevant Acts is not considered)
Note: It is further clarified that this Circular does not apply to claim of deduction relating to
employee's contribution to welfare funds
MASTER MINDS
6. CAPITAL GAINS
1. Notification of new cost inflation index (CII):
The CII applicable for AY 2016-17 is 1081 (Notification no. 60/2015 dated 24.6.2015)
2. Section 47 exception to transfer:
Sec
47(viab)
(w.e.f.
AY201617)
47(vicc)
(w.e.f.
AY201617)
47(viii)
Nature of transaction
not regarded as
transfer
Conditions to be
fulfilled for the
transaction not to be
regarded as transfer
between transferor
and transferee(sec.47)
Holding period
in the hands of
the transferee
sec 2(42A)
Cost in
hands of
transferee
[sec.49(1)]
Transfer in a scheme
of amalgamation:
Asset
transferred:
share of a foreign co.
referred to in Expln.5 to
sec.9(1)(i), which derives
,directly or indirectly, its
value substantially from
the share(s)of an Indian
co.
From:
amalgamating
foreign co.
To:
amalgamated
foreign co.
At least 25% of the

shareholders
of
amalgamating foreign
co.
remain
shareholders
of
amalgamated foreign
co.
Such transfer does
not attract capital
gain tax in country in
which
the
amalgamating
company
is
incorporated
Previous owners
holding period
shall be included
Cost to
previous
owner
Transfer in a scheme
of Demerger:
Asset
transferred:
share of a foreign co.
referred to in Expln. 5 to
sec.9 (1) (i), which
derives,
directly
or
indirectly
its
value
substantially from the
share(s) of an Indian co.
From: demerged foreign
co.
To: resulting foreign co.
Shareholders holding
th
not less than 3/4 in
value of shares of
demerged foreign co.
continue to remain
shareholders
of
resulting co.
Such transfer does not
attract capital gain tax
in the country in which
the
demerged
company
is
incorporated
Previous owners
holding period
shall be included
Cost to
previous
owner
Transfer by a unit holder,

made in consideration of
the allotment to him of a
capital asset, being unit (s),
in
the
consolidated
scheme of a mutual fund
Assets Transferred: unit(s)
held by him in the
consolidating scheme of
the mutual fund
Consolidation is of two
or more schemes of
equity oriented or of two
or more schemes of a
fund other than equity
oriented fund
Holding period in
consolidating
scheme of
mutual fund
shall be
included.
Cost to
consolidating
scheme of
mutual fund
Meaning of the following terms:

a) Consolidating scheme of mutual fund: The scheme of mutual fund which merges under the
process of consolidation of the schemes of mutual fund in accordance with the SEBI (Mutual
Funds) Regulations1996 made under SEBI act 1992
b) Consolidated scheme of mutual fund: The scheme with which the consolidating scheme
merges or which is formed as a result of such merger.
Ph:
98851 25025/26
3. Insertion of new clause for determining cost of acquisition and period of holding by a non resident assessee:
i)
Cost of acquisition of shares acquired on redemption of GDRs[sec 49(2ABB)]: Sub

section 2(ABB) has been inserted in sec 49, to provide that the cost of acquisition of the
capital asset, being share or shares of a company acquired by a non resident assessee,
consequent to redemption of GDRs [referring to section 115AC(1)(b)] held by him would be
the price of such share or shares prevailing on any recognized stock exchange on the
date in which a request for such redemption was made.
ii) Period of holding of shares acquired on redemption of GDRs [sec 2(42A)]: Period of
holding would be taken from the date on which a request for such redemption was made.
Some important circulars issued by CBDT: Principles to determine whether gains on sale of
listed shares and other securities would constitute capital gains or business income:There is no universal principle, to decide whether, shares held as investments or held as stock in
trade
CLARIFICATION:
CBDT realizing that major part of shares/securities transactions takes place in respect of the listed
ones and with a view to reduce litigation and uncertainty in the matter, instructs the Assessing
Officers to take into account the following while deciding whether the surplus generated from sale of
listed shares or other securities would be treated as Capital Gain or Business Income
1. Where assessee opts to treat such shares and securities as stock in - trade:
Where the assessee itself, irrespective of the period of holding the listed shares and securities,
opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities
would be treated as its business income,
2. Listed shares and securities held for a period of more than 12 months: In respect of listed
shares and securities held for a period of more than 12 months immediately preceding the date
of its transfer, if the assessee desires to treat the income arising from the transfer thereof as
Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand,
once taken by the assessee in a particular Assessment Year, shall remain applicable in
subsequent Assessment Years also and the taxpayers shall not be allowed to adopt a
different/contrary stand in this regard in subsequent years;
Other cases: In all other cases, the nature of transaction (i.e. whether the same is in the nature of
capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars
issued by the CBDT.
7. CHAPTER - VI A DEDUCTIONS
1. Section 80C: deposit in sukanya samriddhi scheme for welfare of girl child: Sukanya
samriddhi scheme for welfare of girl child has been notified as eligible deposit schemes of central
Govt u/s 80C (2). Accordingly where an individual has paid any contribution to such deposit
scheme, he will be allowed a deduction provided the contribution is made in the name of:
a) The individual himself or herself or
b) The girl child of individual or
c) Any girl child for whom such individual is legal guardian.
Would be eligible for deduction u/s 80C
Note: Interest accruing on deposits and withdrawals from the sukanya samriddhi scheme
would be exempt u/s 10(11A)
2. Section 80CCC: increase in ceiling limit: The present ceiling limit of 1,00,000/- has been
increased to 1,50,000/- in respect of contribution to pension fund of LIC or any other insurer.
However this deduction is subject to the overall limit of 1,50,000/- as mentioned u/s 80CCE.
MASTER MINDS

3. Section 80CCD: Contribution to notified pension scheme (NPS)
A. Deduction in respect of Assessees contribution:
a) Sec 80CCD(1): the assessee contribution shall be allowed as deduction subject to

maximum of 10% of the salary or 10% of the GTI, as the case may be. (Now the limit of
1,00,000/- has been eliminated)
Note:- Atal pension yojana is notified under section 80CCD(1), So contribution to this
scheme, would qualify for deduction U/S 80CCD
b) Sec 80CCD (1B): Further the above contribution the assesse can also make a separate
contribution of 50,000/-. The deduction under this sub section is over and above the
overall limit of sec.80CCE.
B. Deduction in respect of employer or CG contribution (sec. 80CCD(2)): Further the
contribution by Employer or CG will be allowed as a deduction subject to maximum of 10% of
the salary. The deduction under this sub sec is over and above the overall limit of sec.80CCE.
The following table summarizes ceiling limit under these sections
Section
Particulars
Before
amendment
(Ceiling limit in
Rs.)
After
amendment
(Ceiling limit Rs.)
80C
Investment in specified instruments
1,50,000
1,50,000
80CCC
Contribution to certain pension funds
1,00,000
1,50,000
80CCD(1)
Contribution to Notified Pension

Scheme (NPS)
1,00,000
10% of salary or
10% of GTI, as
the case may be
(Now the limit of
1, 00,000 has
been eliminated.)
80CCE
Aggregate deduction under sections

80C, 80CCC &
80CCD(1)
1,50,000
1,50,000
contribution to NPS notified by the

80CCD(1B) CG (outside the limit of Rs. 1,50,000
u/s 80CCE)
Not Applicable
50,000
Note:
a) Thus the maximum contribution allowed under this section.80CCD(1) shall be 10% of the
salary or GTI and further the deduction will be allowed of Rs, 50,000/- foe assessee
contribution u/s 80CCD(1B).
Deduction also available towards Employers contribution subject to maximum of 10% of
the salary(sec.80CCD(2)).
b) Salary includes DA (forming part of retirement) but excludes all other allowances and
perquisites.
Illustration:
The following are the particulars of investments and payments made by Mr. A, employed with ABC
Ltd., during the previous year 2015-16:
a) Deposited Rs.1,20,000 in public provident fund
b) Paid life insurance premium of Rs.15,000 on the policy taken on 1.5.2012 to insure his life (Sum
assured Rs.1,20,000).
c) Deposited Rs.30,000 in a five year term deposit with bank.
Ph:
98851 25025/26
d) Contributed Rs.1,80,000, being 15% of his salary, to the NPS of the Central Government. A
matching contribution was made by ABC Ltd.
i)
Compute the deduction available to Mr. A under Chapter VI-A for A.Y.2016-17.
ii) Would your answer be different, if Mr. A contributed Rs.1,20,000 (being, 10% of his salary)
towards NPS of the Central Government?
Solution:
i)
Deduction available to Mr. A under Chapter VI-A for A.Y.2016 - 17

Section
80C
Particulars
Rs.
Rs.
Deposit in public provident fund
1,20,000
12,000
Life insurance premium paid Rs. 15,000 (deduction
restricted to Rs. 12,000, being 10% of Rs. 1,20,000, being
sum assured, since the policy was taken after 31.3.2012)
Five year term deposit with bank
30,000
Total
1,62,000
Restricted to
1,50,000
Contribution to NPS of the Central Government,
1,20,000
Rs.1,30,000 [Rs.1,80,000 Rs.50,000, being deduction
80CCD(1) under section
80CCD(1B)], restricted to 10% of salary [Rs.1,80,000 x
10/15] [See Note 1]
Total
2,70,000
Aggregate deduction under section 80C and 80CCD(1),
1,50,000
80CCE
Rs.2,70,000, but restricted to
Rs.50,000 would be eligible for deduction in respect of
50,000
80CCD(1B)
contribution to NPS of the Central Government
Employer contribution to NPS, restricted to
1,20,000
80CCD(2)
10% of salary [See Note 2]
Deduction under Chapter VI-A
3,20,000
Notes:
a) The deduction under section 80CCD (1B) would not be subject to overall limit of Rs.1.50 lakh
under section 80CCE. Therefore, it is more beneficial for Mr. A to claim deduction under
section 80CCD (1B) first in respect of contribution to NPS. Thereafter, the remaining amount
of Rs.1,30,000 can be claimed as deduction under section 80CCD(1), subject to a maximum
of 10% of salary.
b) The entire employers contribution to notified pension scheme has to be first included under
the head Salaries while computing gross total income and thereafter, deduction under
section 80CCD(2) would be allowed, subject to a maximum of 10% of salary.
ii) If the contribution towards NPS is Rs.1,20,000, here again, it is beneficial for Mr. A to first claim
deduction of Rs.50,000 under section 80CCD (1B) and the balance of Rs.70,000 can be claimed
under section 80CCD (1), since the deduction available under section 80CCD (1B) is over and
above the aggregate limit of Rs.1,50,000 under section 80CCE. In any case, the aggregate
deduction of Rs.2,20,000 [i.e., Rs.1,50,000 under section 80C and Rs.70,000 under section
80CCD(1)] cannot exceed the overall limit of Rs.1,50,000 under section 80CCE. The total
deduction under Chapter VIA would remain the same i.e., Rs.3,20,000.
4. Section 80D:
a) Enhancement of the ceiling limit
Nature of payment:
i)
Up to Rs. 25,000 (earlier Rs.15,000) to an assessee, being an individual/HUF in respect of
Health insurance Premia paid by any mode other than cash, to effect or to keep in
force insurance on the health of the assessee or his family.
MASTER MINDS
Any contribution made to CGHS or any other notified scheme; and
Any payment made on account of preventive health checkup of the assessee or his
family; and
ii) An additional deduction of Rs. 25,000 (earlier Rs.15,000) is provided to an individual to
effect or to keep in force insurance on the health of his or her parent or parents
iii) If the sum specified in a & b above is paid to effect or keep in force an insurance of a
person who is a senior citizen, being a resident individual of the age of 60 years or more at
any time during the previous year, the limit specified would be Rs.30,000(earlier
Rs.20,000) instead of Rs.25,000 (earlier Rs.15,000)
b) Allowability of medical expenditure in respect of very senior citizen upto Rs.30,000: Any
payment made on account of medical expenditure in respect of a very senior citizen, if no
payment has been made to keep in force insurance on health of such person.
The aggregate deduction available to any individual/ or his parents in respect of health
insurance premium and the medical expenditure incurred would, however, be limited to
Rs.30,000.
Note:
A very senior citizen is as an individual resident in India who is of the age of eighty years or
more at any time during the relevant previous year.
The following table summarizes the deduction allowable u/s. 80D:
Description
Amount paid in respect of

self, spouse &
dependent
children
parents,
dependent or not
Total deduction
u/s 80D
a. in respect of medi claim premium and preventive health check up

No one attained the age of
60 years
25,000(earlier
15,000)
25,000 (earlier
15,000)
Rs. 50,000
assessee and his

less than 60 years
and parent is a
citizen or very
citizen
family
of age
senior
senior
25,000(earlier
15,000)
30,000 (earlier
20,000)
55,000
assessee and the parents

attained the age of 60
years or above
30,000(earlier
20,000)
30,000 (earlier
20,000)
60,000
b. in respect of medical expenditure incurred for a very senior citizen

Assessee and his family
less than 80 years of age
and parent is a very senior
citizen.
Nil
30,000
30,000
Assessee
and
parent
attained the age of 80
years or above
30,000
30,000
60,000
Maximum
cumulative
deduction under a and b
30,000
30,000
60,000
Copyrights Reserved
To
MASTER MINDS , Guntur
Ph: 98851 25025/26
Illustration:
Mr. Arjun (52 years old) furnishes the following particulars in respect of the following payments:
S. No.
Particulars
Amount
(Rs.)
Premium paid for insuring the health of

Self
spouse
dependant son
mother
Paid for Preventive Health Check up of
himself
spouse
mother
Incurred medical expenditure of Rs.25,000 and Rs.15,000 for his mother,
aged 80 years and father, aged 85 years. Both mother and father are
resident in India.
1.
2.
3.
10,000
8,000
4,000
18,000
2,000
1,500
4,000
Compute the deduction available to Mr. Arjun under section 80D for the A.Y. 2016-17.
Solution:
Computation of deduction under section 80D for the A.Y. 2016-17
S.No.
1.
i)
In respect of premium paid for insuring the health of

Self
spouse
dependant son
Total
ii) In respect of expenditure on preventive health check up of
Self
Spouse
Total
Restricted to [Rs.25,000 Rs.22,000, since maximum deduction is
Rs.25,000]
Aggregate of deduction (I+II) under (1) restricted to
i) In respect of payment towards health insurance premium for his
mother
ii) In respect of preventive health check up of his mother [Rs. 4,000,
restricted to Rs. 2,000, (Rs. 5,000 Rs. 3,000), since maximum
deduction for preventive health check up under section 80D is Rs. 5,000]
iii) Medical expenditure for father would only be eligible for deduction
[See Note below]
Amount of deduction under (2) restricted to
Total deduction under section 80D [(1) + (2)]

2.
Amount
(Rs.)
Particulars
10,000
8,000
4,000
22,000
2,000
1,500
3,500
3,000
25,000
18,000
2,000
15,000
35,000
30,000
55,000
Note: Irrespective of the fact that the mother of Arjun is a very senior citizen the deduction under
section 80D would not available to him in respect of the medical expenditure incurred for his mother,
since Mr. Arjun has taken a health insurance policy for his mother.
5. Section 80DD: Enhancement of the ceiling limit:
a) Section 80DD, inter alia, provides for a deduction of Rs. 75,000,(earlier Rs. 50,000 )to an
individual or HUF, who is a resident in India, who has incurred
i)
Expenditure for the medical treatment (including nursing), training and rehabilitation of a
dependent, being a person with disability or
ii) Paid any amount to LIC or any other insurer in respect of a scheme for the maintenance of
a disabled dependent.
MASTER MINDS
If the dependent is suffering from severe disability, the deduction under section 80DD is
Rs. 1,25,000.(earlier Rs.1,00,000)
The following table summarizes the deduction allowable u/s. 80DD:
Maintenance and medical
treatment of:
Persons with disability
Persons with severe disability
Before amendment
(Ceiling limit in Rs.)
50,000
1,00,000
After amendment
75,000
1,25,000
6. Section 80U: Enhancement of the ceiling limit: Section 80U, inter alia, provides for a deduction
of Rs. 75,000(earlier Rs. 50,000), to an individual, being a resident, who, at any time during the
previous year, is certified by the medical authority to be a person with disability. If the person is
suffering from severe disability, deduction under section 80U is Rs.1,25,000. (Earlier
Rs. 1,00,000)
The following table summarizes the deduction allowable u/s. 80U:
Maintenance and medical
treatment of:
Persons with disability
Persons with severe disability
Before amendment
50,000
1,00,000
After amendment
75,000
1,25,000
7. Section 80DDB: Enhanced limit of deduction for expenditure incurred in respect of medical
treatment of very senior citizen
a) Section 80DDB has been amended to provide for a higher limit of deduction of upto Rs.
80,000, for the expenditure incurred in respect of the medical treatment of himself or a
dependent, being a very senior citizen.
S.NO
1.
2.
3.
Dependent
A very senior citizen, being a resident individual
A senior citizen, being a resident individual
Dependent, other than mentioned in (1) & (2) above
Maximum limit
(Rs.)
80,000
60,000
40,000
b) Further the condition to obtain a certificate from the specialist doctor working in government
hospital has been removed. Means the assessee will be required to obtain a prescription for
such medical treatment from a specialist doctor(need not worked in Govt hospital).
8. Section 80G: New funds has been notified for donations(W.e.f. 01.04.2016): The following
three funds had been notified to get 100% deduction in respect of ALL ASESSEES which comes
under category 1 of sec 80G
a) The National Fund for Control of Drug Abuse constituted u/s 7A of the Narcotic Drugs &
Psychotropic Substances Act, 1985.
b) Swachh Bharat Kosh set up by the Central Government (See Note below)
c) Clean Ganga Fund, set up by the Central Government, where such Assessee is a Resident
(see Note below)
Note: Deduction is not available for sum spent by the Assessee in pursuance of Corporate
Social Responsibility u/s 135(5) of the Companies Act, 2013.
9. Section 80JJAA:
Before amendment
i) Eligible Assessees: Indian company
i)
ii) Additional wages to mean the wages ii)
paid to the new regular workmen in
excess of 100 workmen employed during
the previous year.
After amendment
Eligible Assessees: All Assessees
Additional wages to mean the wages
paid to the new regular workmen in
excess of 50 workmen employed during
the previous year.
Ph: 98851 25025/26
Reason: For the purpose of encouraging generation of employment, section 80JJAA(1)

has been amended to extend the benefit so far available only to corporate assessees to
all assessees whose gross total income includes profits and gains derived from
manufacture of goods in a factory.
Note
i)
No deduction would be allowed if the factory is acquired by the assessee by way of transfer
from any other person or as a result of any business reorganization.
ii) Regular workman does not include a casual workman or a workman employed through
contract labour or any other workman employed for a period of less than 300 days during the
previous year.
Illustration:
Mr. A has commenced the operations of manufacture of goods in a factory on 1.4.2015. He employed
125 new workmen during the P.Y.2015-16, which included
i)
15 casual workmen;
ii) 15 workmen employed through contract labour;

iii) 25 regular workmen employed on 1.4.2015;
iv) 55 regular workmen employed on 1.5.2015; and
v) 15 regular workmen employed on 1.7.2015
Compute the deduction, if any, available to Mr. A for A.Y.2016-17, if wages @ Rs.5,000 per month is
paid to each workman and the profits and gains derived from manufacture of goods in the factory for
the A.Y.2016-17 is Rs.4.75 lakhs.
Solution:
Mr. A is eligible for deduction under section 80JJAA since his gross total income includes profits and
gains derived from the manufacture of goods in a factory and he has employed more than 50 new
regular workmen in his factory.
Working Note:
Number of new regular workmen
Particulars
Total number of workmen employed during the year
Less: Casual workmen employed during the year
Workmen employed through contract labour
Workmen employed for a period of less than 300 days during the P.Y.2015-16
(workmen employed on 1.7.2015)
Total number of new regular workmen
Number of new regular workmen in excess of 50 = 80 50
No. of workmen
125
15
15
15
45
80
30
Note Regular workman does not include a casual workman or a workman employed through
contract labour or any other workman employed for a period of less than 300 days during the
previous year.
Alternative answer: (As per Bare Act)
Number of new regular workmen in excess of 50 = (80 50 = 30)
15 casual workmen
No deduction u/s .80JJAA
Nil
15 workmen employed through contract labour
Nil
25 regular workmen employed on 1 4 - 2015.
Deduction available u/s .80JJAA
25x5000x12m=15,00,000
55 regular workmen employed on 1-5 - 2015.

(But 5 members are eligible for deduction,
because restricted to 30 members)
Deduction available u/s .80JJAA
5x5000x11m=2,75,000
15 regular workmen employed on 1 - 7 - 2015.
Nil
Therefore the deduction u/s 80JJAA is Rs.5,32,500. [(15,00,000 + 2,75,000) x 30%]
MASTER MINDS
7. TAX DEDUCTED AT SOURCE

1. Section 192(2D):Obligation of person responsible for TDS on salaries: The person
responsible for making payment (employer), for the purpose of estimating income of assessee or
computing the amount of tax deductible, shall obtain the evidence or proof or particulars of
prescribed claims (including claim for set off of loss) from the assessee in the prescribed form and
manner.
2. Section 192A:TDS @ 10% on premature withdrawal from employees provident fund
a) Person responsible to deduct TDS: Trustees of employees provident fund scheme or any
person authorised under the scheme
b) Situation: if the accumulated balance due to an employee participating in a recognized
provident fund is includable in his total income(which is not exempt from tax u/s 10(12))
c) Rate of TDS: 10%.
However where the payee has not furnished PAN, then tax @ maximum marginal rate (i.e,
34.608 %)
d) Time of deduction at the time of payment of the accumulated balance due to the employee.
e) No TDS: where the payment or aggregate payment is less than Rs.30,000 (TDS only if
amount is Rs.30,000 or more).
3. Section 194A: Rationalization of the provisions of sec.194A (w.e.f 01.06.2015).
a) Cooperative banks to deduct tax at source on interest on time deposits credited or paid to it
members if interest exceeds Rs.10,000.
Note: exemption has been granted from the deduction of tax at source in respect of the
following (no TDS is required):
i)
Interest credited or paid by a cooperative society(other than a cooperative bank) to its

members
ii) Interest credited or paid by a cooperative society to any other cooperative society;
iii) Interest credited or paid by a firm to a partner of the firm.
b) Interest on recurring deposits exceeds Rs.10,000 then subject to TDS
Note: Definition of time deposits include recurring deposits with in its scope for the
purpose of TDS u/s 194A
c) Threshold limit to be reckoned with reference to the aggregate interest credited or paid by all
branches of a banking company/co-operative bank/public company which has adopted core
banking solutions(CBS) [Section 194A(3)]
Payer
Payer has adopted core

banking solutions(CBS)
Computation of interest for

threshold
or
yes
Rs.10,000 cumulative for

all branches
Public company with main

objective of providing long
term finance for construction
or purchase of residential
houses in India
no
Rs.10,000 per branch
yes
Rs. 5,000 cumulative for all

branches
no
Rs. 5,000 per branch
Banking
company
cooperative society
d) Interest on the compensation amount awarded by the Motor Accidents Claims Tribunal shall be
made only at the time of payment, and that too only if the amount of interest payment or the
aggregate amount of such interest payments during the financial year exceeds Rs. 50,000.
Note: No tax is deductible at source on such income credited by way of interest on the
compensation amount awarded by the Motor Accidents Claims Tribunal.
Ph:
98851 25025/26
Illustration:
Examine the TDS implications under section 194A in the cases mentioned hereunder
i)
On 1.10.2015, Mr. Harish made a six-month fixed deposit of Rs. 10 lakh@9% p.a. with ABC
Co-operative Bank. The fixed deposit matures on 31.3.2016.
ii) On 1.6.2015, Mr. Ganesh made three nine month fixed deposits of Rs. 1 lakh each carrying
interest@9% with Dwarka Branch, Janakpuri Branch and Rohini Branches of XYZ Bank, a
bank which has adopted CBS. The fixed deposits mature on 28.2.2016.
iii) On 1.4.2015, Mr. Rajesh started a 1 year recurring deposit of Rs. 20,000 per month@8% p.a.
with PQR Bank. The recurring deposit matures on 31.3.2016.
Solution:
i)
ABC Co-operative Bank has to deduct tax at source@10% on the interest of Rs. 45,000 (9%
Rs. 10 lakh ) under section 194A. The tax deductible at source under section 194A from
such interest is, therefore, Rs. 4,500.
ii) XYZ Bank has to deduct tax at source@10% under section 194A, since the aggregate interest
on fixed deposit with the three branches of the bank is Rs. 20,250 [1,00,000 3 9% 9/12],
which exceeds the threshold limit of Rs. 10,000. Since XYZ Bank has adopted CBS, the
aggregate interest credited/paid by all branches has to be considered. Since the aggregate
interest of Rs. 20,250 exceeds the threshold limit of Rs. 10,000, tax has to be deducted@10%
under section 194A.
iii) Tax has to be deducted under section 194A by PQR Bank on the interest of Rs. 10,400 falling
due on recurring deposit on 31.3.2015 to Mr. Rajesh, since
a) recurring deposit has been included in the definition of time deposit; and
b) Such interest exceeds the threshold limit of Rs. 10,000.
4. Section 194C(6): Tax deduction in case of transport operators
Before amendment
After amendment
Exemption of TDS to the transport operators

if the following conditions satisfied
cumulatively.
Exemption of TDS to the transport operators

if the following conditions satisfied
cumulatively.
1. Payee is engaged in the business of

plying, hiring or leasing goods carriages.
1. Payee is engaged in the business of

plying, hiring or leasing goods carriages.
2. Payee furnishes PAN to the person

responsible for TDS u/s.194C (6).
2. Payee does not own more than 10

goods carriages at any time during the
previous year.
3. Payee furnishes PAN to the person
responsible for TDS u/s.194C(6)
Reason: To reduce the compliance burden on the small transport operators, as defined in
section 44AE by exempting them from TDS under section 194C on furnishing of PAN, the
language of section 194C(6) did not convey the correct intention. Consequently, all
transporters, irrespective of the number of goods carriages owned by them, were claiming
exemption from TDS under section 194C(6) by furnishing their PAN.
In order to convey the true intent of law, section 194C(6) has been amended to clarify that
the relaxation provided only to who owns 10 or less goods carriages at any time during the
previous year(i.e, small transport operators)
MASTER MINDS

5. Section 194LD:
Before amendment
After amendment
1. Tax is required to be deducted at a

concessional rate of 5% in case of
interest payable to Foreign Institutional
Investors (FIIs) and Qualified Foreign
Investors (QFIs) on their investments in
Government securities and rupee
denominated bonds of an Indian
company provided that the rate of
interest does not exceed the rate notified
by the Central Government in this
regard.
2. This concessional TDS rate applicable
only on payment of interest payable
between 1st June, 2013 to 31stmay
2015.
1. Tax is required to be deducted at a

concessional rate of 5% in case of
interest payable to Foreign Institutional
Investors (FIIs) and Qualified Foreign
Investors (QFIs) on their investments in
Government securities and rupee
denominated bonds of an Indian
company provided that the rate of
interest does not exceed the rate notified
by the Central Government in this
regard.
2. This concessional TDS rate applicable
only on payment of interest payable
between 1st June, 2013 to 30th June
2017.
Reason: The Finance (No.2) Act, 2014 has extended the limitation date for availing
benefit of concessional rate of TDS@5% under section 194LC in respect of External
Commercial Borrowings (ECB) from 30th June, 2015 to 30th June, 2017.
In line with such extension, the benefit of concessional rate of TDS@5% under section
194LD has also been extended in respect of such interest payable to FIIs and QFIs up to
30th June, 2017.
6. Section 194LBA:
Interest on certain income from units of a business trust
nature of distributed income
TDS if unit holder is

resident
TDS if unit holder is

non resident(not being
a company or a foreign
company)
Income of a business trust, by way of

interest received or receivable from a
special purpose vehicle.[sec 10 (23FC)
10%
5%
Income of a real estate investment trust

(REIT), by way of renting or leasing or
letting out any real estate asset owned
directly by such REIT[sec 10(23FCA)
10%
at the rates in force
7. Section 194LBB
Income of unit holder from alternative investment fund
Type of income
Person responsible
for TDS
Time to TDS
Rate of TDS
income referred to in sec 115UB,accruing or arising to, or

received by, a unit holder of an alternative investment fund ,
being other than that proportion of income which is of the same
nature of income chargeable under the head PGBP.
person responsible for making the payment
at the time of credit or payment, whichever is earlier
10%
8. Section 195(6):
a) Section 195(6) requires the person referred to in section 195(1) to furnish prescribed
information.
Ph:
98851 25025/26
b) Section 195(1) casts responsibility on every person responsible for paying any interest
(other than interest referred to in sections 194LB or 194LC or 194LD) or any sum chargeable
to tax (not being in the nature of salary) to a non-corporate nonresident or to a foreign
company, to deduct tax at the rates in force.
c) Now sec 195(6) has been substituted to provide that on the above payer to furnish information
about all the above mentioned payments whether or not chargeable to tax. In the
prescribed form and prescribed manner.
9. Section 197A: Facilitating filing of Form 15G/15H for payments made under life insurance
policy u/s 194DA: According to Section 197A, tax shall not be deducted, if the recipient of
certain payments on which tax is deductible furnishes to the payer, a self-declaration in
prescribed Form No.15G/15H, declaring that the tax on his estimated total income of the relevant
previous year would be nil.
Section 197A has been amended for making the recipients of payments referred to in section
194DA also eligible for filing self-declaration in Form No.15G/15H for non-deduction of tax at
source in accordance with the provisions of section 197A.
10. Section 203A: notified deductors not required to obtain and quote TAN: The quoting of TAN
for reporting of tax deducted at source is a matter of procedure. The same purpose would be
served by requiring mandatory quoting of PAN particularly for the transactions which are likely to
be one time transaction.
For example, a one-time transaction of purchase of immovable property from non-resident by an
individual or HUF on which tax is deductible under section 195.
Therefore, in order to alleviate the compliance burden of such deductors, section 203A has been
amended to provide that the requirement of obtaining and quoting of TAN under section 203A
shall not apply to such person(a one-time transaction done by an individual or HUF), as may be
notified by the Central Government in this behalf.
Some important circulars issued by CBDT:1. Tax not to be deducted from payments made to Corporations whose income is exempt
under section 10(26BBB) [Circular No. 7/2015, dated 23-04-2015]
CLARIFICATION:The CBDT has, vide this circular, clarified that since corporations covered under section
10(26BBB) satisfy the two conditions i.e.,(1).unconditional exemption of income under section
10, (2).no statutory liability to file return of income under section 139,
Hence, there would be no requirement for tax deduction at source from the payments made to
such corporations since their income is anyway exempt under section 10.
Note: Section 10(26BBB), exempts any income of a corporation established by a Central, State or
Provincial Act for the welfare and economic up liftment of ex-service-men being the citizen of India.
2. Applicability of provisions for deduction of tax at source under section 194A on interest
on fixed deposit made in the name of the Registrar General of Court or the depositor of
the Fund on directions of Courts [Circular No.23/2015, dated 28-12- 2015]
CLARIFICATION:The CBDT has clarified that the interest on FDRs made in the name of Registrar General of the
Court or the depositor of the fund on the directions of the Court, will not be subject to TDS till the
matter is decided by the Court. However, once the Court decides the ownership of the money
lying in the fixed deposit, the provisions of section 194A will apply to the recipient of the income.
2. Applicability of TDS provisions on payments by broadcasters or Television Channels to
production houses for production of content or programme for telecasting
[Circular No. 04/2016, dated 29-2-2016]
Whether payments made by the broadcaster/telecaster to production houses for production of
content/programme are comes under section 194C or 194J?
MASTER MINDS
CLARIFICATION:In this regard, the CBDT has clarified that while applying the relevant provisions of TDS on a
contract for content production, a distinction is required to be made between:
(i) A payment for production of content / programme as per the specifications of the
broadcaster/telecaster then 194C is attracted
(ii) A payment for acquisition of broadcasting/ telecasting rights of the content already produced
by the production house.(only for telecasting) then 194C is not attracted, but other TDS
sections will apply.
4. Applicability of TDS provisions on payments by television channels and publishing
houses to advertisement companies for procuring or canvassing for advertisements
[Circular No. 05/2016, dated 29-2-2016]
CLARIFICATION:The CBDT noted that there are two types of payments involved in the advertising business:
i) Payment by client to the advertising agency,- then 194C is attracted
ii) Payment by advertising agency to the television channel/newspaper company - 194C is not
attracted.
iii) payments made by television channels/newspaper companies to the advertising agency for
booking or procuring of or canvassing for advertisements.- then no TDS provisions is
attracted
8. RETURN OF INCOME
1. Section 139(1): Mandatory filing of return by resident person in certain cases even though
otherwise not required.
Before amendment
The fourth proviso to section 139(1) requires
a person, being a resident and ordinarily
resident in India, having
(1) any asset (including financial interest in
any entity) located outside India or
(2) Signing authority in any account located
outside India
To file a return of income in the prescribed
form compulsorily, whether or not he has
income chargeable to tax. The return of
income should be verified in the prescribed
manner and provide such particulars as may
be prescribed.
After amendment
The fourth proviso to section 139(1) requires
a person, being a resident and ordinarily
resident in India within the meaning of sec
6(6), who is not required to furnish a return
u/s 139(1) and who at any time during the
previous year
(a) holds, as a beneficial owner or
otherwise, any asset (including any financial
interest in any entity) located outside India or
has a signing authority in any account
located outside India; or
(b) Is a beneficiary of any asset (including
any financial interest in any entity) located
outside India?
To file a return of income in the prescribed
form compulsorily, whether or not he has
income chargeable to tax. The return of
income should be verified in the prescribed
manner and provide such particulars as may
be prescribed.
However in case of an individual, being a
beneficiary of any asset (including any
financial interest in any entity) located
outside India, the return of income shall not
be necessary in case where, income, if any,
arising from such asset is includable in the
income of the beneficiary owner,.
Ph:
98851 25025/26
MEANINGS:
a) Beneficial owner: An individual who has provided, directly or indirectly, consideration for the
asset for the immediate or the future benefit ,direct or indirect ,of himself or any other person
b) Beneficiary: An individual who derives benefit from the asset during the previous year and
the consideration for such asset has been provided by any person other than such
beneficiary.
2. Section 139(6): Particulars required to be furnished with the return: Amendments made in
sec 139(1), with that effect section 139(6) has been amended: The assessee shall be required to
furnish the particulars of the assets of the prescribed nature and value, held by him as a beneficial
owner or otherwise or in which he is a beneficiary
Transactions requiring the PAN (Rule 114B):
Monetary limits of specified transactions which require quoting of PAN
The Government is committed to curbing the circulation of black money and widening of tax base. To
collect information of certain types of transactions from third parties in a non-intrusive manner, it is
mandatory under Rule 114B of the Income-tax Rules to quote PAN where the transactions exceed a
specified limit.
S. No.
Nature of transaction
Value of transaction
Before Amendment
After Amendment
1.
Sale or purchase of a motor vehicle or All such transactions

vehicle, other than two wheeled vehicles.
All such transactions
2.
Opening an account [other than a time - All such transactions

deposit Referred to at Sl. No.12 and a Basic
Savings Bank Deposit Account] with a
banking company or a co-operative bank.
3.
Making an application to any banking All such transactions

company or a co-operative bank or to any
other company or institution, for issue of a
credit or debit card.
4.
Opening of a demat account with a All such transactions

depository, participant, custodian of securities
or any other person registered under section
12(1A) of the Securities and Exchange Board
of India Act, 1992.
5.
Payment in cash of
Payment to a hotel or restaurant against a bill Payment in cash of
or bills at any one time.
an amount exceeding an amount exceeding
Rs. 25,000.
Rs. 50,000.
6.
Payment in cash of
Payment in connection with travel to any Payment in cash of
foreign country or payment for purchase of an amount exceeding an amount exceeding
any foreign currency at any one time.
Rs. 25,000.
Rs. 50,000.
7.
Payment to a Mutual Fund for purchase of its Amount exceeding

units
Rs. 50,000.
Amount exceeding
Rs. 50,000.
8.
Payment to a company or an institution for Amount exceeding

acquiring debentures or bonds issued by it.
Rs. 50,000.
Amount exceeding
Rs. 50,000.
9.
Payment to the Reserve Bank of India for

acquiring bonds issued by it.
Amount exceeding
Rs. 50,000.
10.
Deposit with a banking company or a Deposits in cash

Deposits in cash
cooperative Bank.
exceeding Rs. 50,000 exceeding Rs. 50,000
during any one day.
during any one day
Amount exceeding
Rs. 50,000.
MASTER MINDS

11.
Purchase of bank drafts or pay orders or Payment in cash of

bankers cheques from a banking company or an amount exceeding
a co-operative.
Rs. 50,000 during
any one day.
Payment in cash of
an amount exceeding
Rs. 50,000 during any
one day.
A time deposit with, (i) a banking company or a co-operative bank

(ii) a Post Office;
12
(iii) a Nidhi referred to in section 406 of the

Companies Act, 2013; or
(iv) a non-banking financial company which
holds a certificate of registration under
section 45-IA of the Reserve Bank of
India Act, 1934, to hold or accept deposit
from public.
13.
Payment for one or more pre-paid payment

instruments, as defined in the policy
guidelines for issuance and operation of prepaid payment instruments issued by Reserve
Bank of India under the Payment and
Settlement Systems Act, 2007, to a banking
company or a co-operative bank to which the
Banking Regulation Act, 1949, applies
(including any bank or banking institution
referred to in section 51 of that Act) or to any
other company or institution.
Amount exceeding
Rs. 50,000
Amount exceeding
Rs. 50,000
or aggregating to
more than
Rs. 5 lakh during a
financial year.
Payment in cash or
by way of a bank draft
or pay order or
bankers cheque of
an
amount
aggregating to more
than Rs. 50,000 in a
financial year.
14.
Payment as life insurance premium to an Amount aggregating

insurer as defined in the Insurance Act, 1938. to more than Rs.
50,000 in a financial
year.
15.
A contract for sale or purchase of securities Amount

exceeding Amount
exceeding
(other than shares) as defined in section 2(h) Rs. 1 lakh per Rs. 1 lakh per
of the Securities Contracts (Regulation) Act, transaction
transaction
1956.
16.
Sale or purchase, by any person, of shares of Amount exceeding

a company not listed in a recognised stock Rs. 50,000 per
exchange.
transaction
Amount exceeding
Rs. 1 lakh per
transaction
17.
Sale or purchase of any immovable property. Amount exceeding

Rs. 5 lakhs
Amount exceeding
Rs. 10 lakh or valued
by stamp valuation
authority referred to in
section 50C of the Act
at an amount
exceeding Rs. 10
lakh
18.
Sale or purchase, by any person, of goods or

services of any nature other than those
specified at Sl. No. 1 to 17 of this Table, if
any.
Amount exceeding
Rs. 2 lakh per
transaction:
Amount aggregating
to more than Rs.
50,000 in a financial
year.
Copyrights Reserved
To
Ph: 98851 25025/26
Minor to quote PAN of parent or guardian

However, where a person, entering into any transaction referred to in this rule, is a minor and who
does not have any income chargeable to income-tax, he shall quote the PAN of his father or mother
or guardian, as the case may be, in the document pertaining to the said transaction.
Declaration by a person not having PAN
Further, any person who does not have a PAN and who enters into any transaction specified in this
rule, shall make a declaration in Form No.60 giving therein the particulars of such transaction.
Non-applicability of Rule 114B
Also, the provisions of this rule shall not apply to the following class or classes of persons, namely:i)
the Central Government, the State Governments and the Consular Offices;
ii) the non-residents referred to in section 2(30) in respect of the transactions other than a
transaction referred to at Sl. No. 1 or 2 or 4 or 7 or 8 or 10 or 12 or 14 or 15 or 16 or 17 of the
Table.
Copyrights Reserved
To
Verified by: Narasimhulu Sir, Samba siva Sir
Raja Shekar Sir, Ramakrishna Sir

Executed By: Srinivas Sir
Education is the most powerful weapon which you can use to change the
world.
Nelson Mandela
THE END
CA - IPCC
COURSE MATERIAL
Quality Education
INDIRECT TAXES
Cell: 98851 25025 / 26

Page 34
Ph:
98851 25025/26
AMENDMENTS AT A GLANCE FINANCE ACT, 2015

(Significant Notifications issued during 01.03.2015 to 30.04.2016)
S.NO
Particulars
Effective
Date
1.
Central Excise Duty

Standard ad valorem rate of excise duty increased from
12% to 12.50% and education cesses leviable on
excisable goods fully exempted
01.03.2015
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Central excise registration to be granted online within 2

working days
Authentication of invoices by digital signatures
Allow single Registration for different premises of the
same registered person
Interest payable on delayed payment of excise duty has
been reduced from 18% to 15%
In place of Annual Financial Information Statement [ER-4],
an Annual Return will have to be filed by central excise
assessees by 30th November of the succeeding year
The Central Government has fixed tariff values for
readymade garments under Chapter 61 and 62 as 60%
(earlier 30%) of the retail sale price of the readymade
garments.
Higher threshold exemption (SSI exemption) up to 6
crores for jewellery manufacturers if his aggregate
domestic clearances during preceding financial year did
not exceed Rs. 12 crore.
Customs Duty
Notifications exempting education cesses on CVD
rescinded consequent to education cesses on excise
duty being exempted
Education Cess and Secondary & Higher
Education Cess leviable on imported goods to continue
Service Tax
Chapter V of Finance Act, 1994
(i) Service tax rate enhanced from 14% to 14.5%
( including SBC @ 0.5%)
Activities undertaken by (i) chit fund foremen in relation to
chit and (ii) lottery distributors and selling agents in
relation to lotteries are not transactions in money or
actionable claim and are thus, liable to service tax Explanation 2 substituted in the definition of service
POT RULES
Rule-5: in rule 5 inserted
Explanation 1: this rule shall apply mutatis mutandis in
case of new levy of service
Explanation 2: new levy or tax shall be payable on all
the cases other than specified above.
Rule -7:
a) When there is a change in the service tax liability or
extent of liability of the service recipient, date of
issuance of invoice to be the POT under rule 7, if
service has been provided and the invoice issued
before date of such change, but payment has not
been made as on such date
Relevant
section/Rule/
Notification
01.03.2015
01.03.2016
01.03.2016
01.04.2016
01.04.2016
01.04.2016
01.03.2016
01.03.2015
15.11.2015
Section 66B
14.05.2015
Explanation 2 to
section 65B(44)
13.04.2016
Rule-5
13.04.2016
Rule-7
IPCC_ Indirect Taxes Amendments Material (For Nov-2016) ___________________35
15.
16.
b) In case of services provided by Government to

business entities, POT under rule 7 will be the date
on which payment becomes due or the date when
payment is made, whichever is earlier
All services provided by the Government or
local authority to a business entity removed
from the Negative List (i.e. taxable)
Definition of Government incorporated in the Act
MASTER MINDS
01.04.2016
Section 66D(a)(iv)
14.05.2015
Section
65B(26A)
17.
Services by way of carrying out any process amounting

to manufacture/ production of potable liquor made liable
to service tax
01.06.2015
Section 66D(f)
18.
Admission to entertainment events or access to

amusement facilities made liable to service tax
Consideration for a service includes (i)
reimbursements and (ii) amount retained by
distributor/selling agent of lottery from gross sale amount
of lottery ticket or discount received thereon
In case of service provided by Government to a business
entity, interest chargeable on deferred payment to be
included in the value of the taxable service
01.06.2015
Section 66D(j)
14.05.2015
Clause (a) of
Explanation to
section 67
13.04.2016
[Rule 6(2)(iv) of
the Service Tax
Determination of
Value Rules,
2006]
19.
20.
II
21.
Others notifications
Ambulance services provided by all service
providers (whether or not by clinical establishment or an
authorized medical practitioner or paramedics) exempted
22.
Exemption in respect of services provided by a senior

advocate to an advocate or partnership firm of advocates
and person represented on an arbitral tribunal to an
arbitral tribunal withdrawn (Entry no 6):
01.04.2016
23.
Specified services provided by the Indian Institutes of

Management (IIM) exempted (Entry no 9B):
01.03.2016
24.
Services by assessing bodies empanelled centrally by

DGT, Ministry of Skill Development & Entrepreneurship
under SDI scheme exempted(Entry no 9C):
01.04.2015
01.04.2016
25.
Services provided by way of skill/vocational training by

DDU-GKY training providers exempted(Entry no 9D):
01.04.2016
26.
Threshold limit of consideration charged per performance

in folk or classical art forms of music/ dance/ theatre
raised from Rs. 1,00,000 to Rs. 1,50,000
01.04.2016
27.
Exemption to transportation of food stuff by rail or vessels

or road limited to milk, salt and food grain including
flours, pulses and rice
Exemption to transportation of passengers by ropeway,
cable car or aerial tramway withdrawn
01.04.2015
1. General insurance provided under Pradhan Mantri

Suraksha Bima Yojna exempted
2. General insurance provided under Niramaya Health
Insurance Scheme exempted
Life insurance provided under following schemes
exempted:
30.04.2015
28.
29.
30.
Mega Exemption
Notification No.
25/2012 ST
dated
20.06.2012
01.04.2016
Ph: 98851 25025/26
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
Varishtha Pension Bima Yojna
01.04.2015
Pradhan Mantri Jeevan Jyoti Bima Yojna and Pradhan

Mantri Jan Dhan Yojna
30.04.2015
Collection of contribution under Atal Pension Yojna

(APY) exempted
Annuity under the National Pension System (NPS)
exempted
Exemption to services by (i) mutual fund
agent/distributor to a mutual fund or asset management
company and (ii) selling/ marketing agent of lottery tickets
to a distributor/selling agent, withdrawn
Services provided by (i) business facilitator/business
correspondent with respect to Basic Savings Bank
Deposit Accounts covered by Pradhan Mantri Jan Dhan
Yojana and (ii) an intermediary to business
facilitator/business correspondent with respect to such
services, exempt from service tax
Exemption to carrying out an intermediate production
process of alcoholic liquor for home consumption on job
work basis withdrawn
Exemption withdrawn for services by way of
making telephone calls from departmentally run public
telephone etc.
Treatment of effluent by Common Effluent
Treatment Plant operator exempted
Pre-conditioning, pre-cooling, ripening, waxing, retail
packing, labelling of fruits and vegetables exempted
Admission to a museum, national park, wildlife sanctuary,
tiger reserve or zoo exempted
Exhibition of movie by exhibitor to distributor/ association
of persons consisting of such exhibitor as one of its
members exempted
Services by way of right to admission to certain
events/programmes exempted
Services provided by Employees Provident Fund
Organisation (EPFO) to persons governed under the
Employees Provident Funds and Miscellaneous
Provisions (EPFMP) Act, 1952 are exempted
Services provided by Insurance Regulatory and
Development Authority of India (IRDA) to insurers under
the Insurance Regulatory and Development Authority of
India (IRDAI) Act, 1999 are exempted
Services provided by Securities and Exchange Board of
India (SEBI) set up under
the Securities and Exchange Board of India Act, 1992 by
way of protecting the interests of investors in securities
and to promote the development of, and to regulate, the
securities market are exempted
Services provided by National Centre for Cold Chain
Development (NCCCD) under Ministry of Agriculture,
Cooperation and Farmers Welfare by way of cold chain
knowledge dissemination are exempted
Services provided by Government or a local authority to a
business entity with a turnover up to Rs. 10 lakh in
preceding FY exempted
30.04.2015
01.04.2016
01.04.2015
21.10.2015
01.06.2015
01.04.2015
Mega Exemption
Notification No.
25/2012 ST
dated
20.06.2012
01.04.2015
01.04.2015
01.04.2015
01.04.2015
01.06.2015
01.04.2016
01.04.2016
01.04.2016
01.04.2016
01.04.2016

47.
48.
49.
50.
51.
52.
53.
The following Specified services provided by Government

or a local authority exempted
1. Services in relation to any function entrusted to a
municipality under article 243W of the Constitution
2. Services provided to another Government or local
authority
3. Services provided by way of issuance of passport,
visa, driving licence, birth certificate or death
certificate
4. Services where gross amount charged does not
exceed Rs. 5000
5. Services by way of tolerating non-performance of a
contract
6. Services of registration, testing, calibration, safety
check/certification relating to protection/safety of
workers, consumers or public at large, required under
any law
7. Right to use natural resources assigned before 1st
April, 2016
8. Services in relation to any function entrusted to a
Panchayat under article 243G of the Constitution
9. Services of inspection, container stuffing etc. in
relation to import export cargo after office hours or on
holidays.
Abatement in case of Transport of goods in containers
by rail by any person other than Indian Railways reduced
from 70% to 60%.
Note:- Now CENVAT credit on input services can be
taken along with the abatement benefit.
Services of goods transport agency in relation to
transportation of goods
(i) other than used household goods - 70%
(ii) Household Goods 60%
30% abatement for services provided in relation to chit
Services by a tour operator in relation to,(i) A tour, only for the purpose of arranging or booking
accommodation for any person-90%
(ii) A tour other than (i) above -70%
Note:- Consequently, with effect from
01.04.2016,
definition of package tour has been omitted.
Service provided with respect to Kailash Mansarovar and
Haj pilgrimage exempted
Services provided by BIRAC approved bio-incubators to
incubatees also exempted
MASTER MINDS
13.04.2016
01.04.2016
01.04.2016
Abatement
Notification No.
26/2012 ST
dated
20.06.2012
01.04.2015
01.04.2016
20.08.2014
01.03.2016.
Notification No.
12/2016 ST dated
01.03.2016.
Notification No.
02/2016 ST dated
03.02.2016
Notification No.
31/2012 ST
dated
20.06.2012
54.
Refund of Swachh Bharat Cess to SEZ units/developers
03.02.2016
55.
GTA service provided for transport of export

goods by road from place of removal/ CFS/ICD to land
customs station exempted
01.04.2015
56.
100% service tax to be paid under reverse charge in

case of service provided by
(a) mutual fund agent/ distributor to mutual fund/ asset
management company,( omitted)
01.04.2015
Ph:
98851 25025/26
57.
III
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
IV
70.
71.
72.
73.
74.
(b) selling/marketing agent of lottery tickets to lottery

distributor/selling agent and
(c) person involving an aggregator
Service tax to be paid under reverse charge in case of
ALL taxable services provided by
Government (except specified services)
Scope of reverse charge widened
Service Tax Rules, 1994
Concept of aggregator introduced in service tax Definition of aggregator and brand name inserted in rule
2
Aggregator to pay service tax under reverse
Charge
Service tax to be payable by provider of service in case
of service provided by (a) mutual fund agent/ distributor
to mutual fund/ asset management company, (b)
selling/marketing agent of lottery tickets to lottery
distributor/selling agent ( forward charge)
Service tax to be payable by the recipient of
service in relation to ALL services provided by
Government to business entities (except specified
services)
CBEC to specify conditions, safeguards and procedure
for registration in service tax
01.04.2015
01.03.2015
01.04.2016
Reverse Charge
Notification No.
30/2012 ST
dated
20.06.2012
01.03.2015
01.03.2015
Rule 2(1)
01.03.2015
Rule
2(1)(d)(i)(AAA)
Rule
2(1)(d)(i)(EEA) &
Rule
2(1)(d)(i)(EEB)
01.04.2016
01.04.2016
Rule 2(1)(d)(i)(E)
01.03.2015
New sub-rule (9)

inserted and
sub-rule (1A)
omitted in rule 4
New Rule 4C
Provisions introduced for authentication of

01.03.2015
invoices by digital signatures
Sub-rule (6A) of rule 6 omitted consequent to
14.05.2015
amendment made in section 73
Alternative rates for payment of service tax on air travel
01.06.2015
agents service, life insurance services,money changing
service and service provided by lottery distributor/selling
agent increased pursuant to the upward revision in
service tax rate.
Note:- Composition rate in case of single premium
annuity policies to be 1.4% of the
single premium charged
Entire service tax to be paid under reverse charge in
01.04.2015
case of manpower supply and security services
Provisions introduced for filing of Annual Returns
01.04.2016
Annual return filed by the due date may be revised within
01.04.2016
1 month from the date of
its submission
Delayed filing of Annual Return to attract a late fee of Rs.
01.04.2016
100 per day for the period in default subject to a
maximum of Rs. 20,000
CENVAT Credit Rules, 2004
Scope of definition of capital goods & inputs widened
01.04.2016
Services by way of sale of dutiable goods on commission
03.02.2016
basis is sales promotion and thus, an eligible input
service
Restriction on ship breaking units to avail only 85%
01.02.2016
CENVAT credit of CVD done away with
Swachh Bharat Cess cannot be paid by utilizing
03.02.2016
CENVAT credit of any other duty
CENVAT credit of only NCCD to be utilised for payment
01.03.2016
of the NCCD payable on all goods
Rule 6(6A)
omitted
Sub rules (7),
(7A), (7B) and
(7C) of rule 6
Rule - 7
Rule 7B(2)
Rule 7C(2)
Rule 2(a) & (k)

Rule 2(l)
Rule 3(1)(vii)
Rule 3(4)
Rule 3(4)
MASTER MINDS

75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
89.
90.
Manufacturers allowed to utilize credit of

education cess (EC) and secondary and higher
education cess (SHEC) for payment of excise duty or
output service tax.
CENVAT credit allowed on inputs and capital goods
received directly in the premises of the job worker
Jewellery manufacturer (excluding manufacturer of plain
silver jewellery) with turnover upto Rs. 12 crore in
preceding year eligible to avail 100% CENVAT credit on
capital goods in the year of purchase
CENVAT credit allowed on tools of Chapter 82 of the
Central Excise Tariff sent to another manufacturer or jobworker for production of goods
Permission given for sending inputs/partially processed
inputs outside factory to a job-worker and clearance
therefrom on payment of duty to be valid for 3 financial
years
Service tax paid on assignment charges of a natural
resource to be allowed as CENVAT credit spread over
the time for which the rights have been assigned
Provisions relating to availment of CENVAT credit under
partial and full reverse charge brought at par
Export goods defined for the purpose of refund of
CENVAT credit under rule 5
30.04.2015
01.03.2016
Third, fourth and

fifth provisos
inserted in rule
3(7)(b)
Rules 4(1) and
4(2)(a)
[Rule 4(2)(a)]
01.04.2016
Rule 4(5)(b)
01.04.2016
[Rule 4(6)]
13.04.2016
Rule 4(7)
01.04.2015
Rule 4(7)
01.03.2015
01.03.2016
01.04.2015
Clause (1A) of
Explanation 1 to
rule 5
Rule - 5
Rule 5 (B)
Time limit for final refund claim

No refund of CENVAT credit under rule 5B to service
providers providing manpower supply/ security services
Rule 6 simplified and rationalized
Manner of distribution of credit by input service distributor
- redrafted
Manufacturers with multiple manufacturing units enabled to
maintain a common warehouse for inputs and distribute
inputs with credits to the individual manufacturing units
Invoice issued by a service provider for clearance of
inputs/capital goods also to be an eligible document
under rule 9
Certificate issued by an Appraiser of Customs to be a
valid document under rule 9 for goods imported through
authorized courier
Provisions applicable to first/second stage dealer
regarding maintenance of records to be able to pass on
the credit, to apply to an importer issuing cenvatable
invoice
01.04.2016
01.04.2016
Rule - 6
Rule - 7
01.04.2016
New rule 7B
01.04.2016
Rule 9(1)(a)(i)
31.12.2015
Rule 9(1)(d)
01.03.2015
Rule 9(4)
01.03.2015
Copyrights Reserved
To
Ph:
98851 25025/26
1. CENTRAL EXCISE DUTY
1. Standard ad valorem rate of excise duty:

Before amendment(till 28 .02.2015)
Effective rate of excise duty
12.36%(including EC and SHEC)
After amendment (w.e.f 01.03.2015)
was Effective Rate of excise duty is 12.5% (EC

and SHEC exempted)
Illustration: Calculate the assessable value and the excise duty payable from the following
particulars:
List price of the product (inclusive of taxes)
Rs. 5,960
Trade discount
10%
VAT
12.5%
Excise duty
12.5%
An exemption notification grants exemption of 50% of the duty payable on this product.
Solution:
Particulars
List price of the product
Less: Trade discount
Price net of discounts but including taxes (a)
Less: VAT [(Rs. 5,364 x 12.5)/112.5]
Price-cum-duty
Less: Excise duty @ 6.25% (on account of 50% exemption) [(Rs.
4,768 x 6.25)/106.25] (rounded off to nearest rupee) (b)
Assessable value (a) - (b)
Amount in (Rs.)
5,960
596
5,364
596
4,768
280
4488
2. Registration procedure:(a) Central excise registration to be granted online within 2 working days (w.e.f 1.03.2015):
With effect from 01.03.2015, only an online application can be made for obtaining central
excise registration and the same will be granted within two working days of the receipt of a
duly completed application form. Verification of documents and premises, as the case may be,
can be carried out after the grant of the Registration.
(b) Registration of different premises of the same registered person: if the person has more
than one premises requiring registration, separate registration certificate shall be obtained for
each of such premises.
However, if two or more premises of same factory are located within a close area in the
jurisdiction of a range Superintendent, the manufacturing process under taken therein are
interlinked, and the units are not operating under any of the area based exemption
notifications, the commissioner of central excise, may, subject to proper accountal of a
movement of goods from one premises to other and such other conditions and limitations as
he may impose, allow single registration
(c) Authentication of invoices by digital signatures (w.e.f 01.03.2016): An invoice issued
under central excise law by a manufacturer may now be authenticated by means of a digital
signature. However, where the duplicate copy of the invoice meant for transporter is digitally
signed, a hard copy of the duplicate copy of the invoice meant for transporter and self attested
by the manufacturer would be used for transport of goods.
3. INTEREST ON DELAYED PAYMENT OF EXCISE DUTY:Before amendment ( till 31.03.16)
Failure to pay the amount of duty by due
date attracts interest at the rate @ 18% per
annum on the outstanding amount.
After amendment (w.e.f. 1.04.16)

Failure to pay the amount of duty by due
date attracts interest at the rate @ 15% per
annum on the outstanding amount.
MASTER MINDS

4. FILING OF RETURNS & THEIR PERIODICITY
particulars
Before amendment ( till 31.03.16)
After amendment (w.e.f. 1.04.16)
Form
ER-4
ER-4
Periodicity
Annually
Annually
Purpose -
Annual financial information

statements to be filed by
assessees paying duty of Rs. 1
crore or more.
Annual return to be filed by

assessees paying duty of Rs. 1 crore
or more.
Last date -
30th April of each financial year
30th November of the succeeding

year
5. TARIFF VALUE:Before amendment

For Readymade garments tariff value is
30% of retail sale price.
After amendment
For Readymade garments tariff value is
60% of retail sale price
6. SSI EXEMPTION:a) SSI exemption In case of jewellery manufacturers:- With effect from 01.03.2016, excise
duty of 1% (without CENVAT credit) or 12.5% (with CENVAT credit) has been levied on
articles of jewellery [excluding silver jewellery, other than studded with diamonds/other
precious stones]. The SSI exemption for such jewellery manufacturers would be upto Rs. 6
crore in a year with an eligibility limit of Rs. 12 crore in the preceding year. Thus, a jewellery
manufacturer will be eligible for exemption from excise duty on first clearances upto Rs. 6
crore during a financial year, if his aggregate domestic clearances during preceding financial
year did not exceed Rs. 12 crore.
b) SSI exemption In case of other manufacturers:A unit whose turnover does not exceed Rs. 4 crores in the previous year is entitled to full
exemption from payment of duty on its first clearances of up to Rs. 150 lakh in the
current financial year.
2. CUSTOMS DUTY
1. Exempting education cesses on CVD:
Before amendment(till 28 .02.2015)
After amendment(w.e.f 01.03.2015)
Effective rate of CVD was 12%(with EC and

SHEC exempted)
Effective rate of CVD is 12.5% (with EC and

SHEC not being leviable at all)
Note: however EC and SHEC leviable on imported goods to be continue

Illustration:
An importer has imported a machinery to be used for providing the service of construction
of commercial buildings. The assessable value of imported machinery as approved by
customs is Rs. 1,00,000. Customs duty payable is 10%. If the machinery is manufactured in
India, excise duty @ 12.5% is leviable on such machinery. Education cess and secondary
and higher education cess are as applicable. Special CVD is payable on said machinery.
You are required to:
a) Calculate the total customs duty payable.
b) Examine whether the importer can avail any CENVAT credit? If yes, how much?
Ph:
98851 25025/26
Solution:
Particulars
Duty %
Assessable value
Amount
(Rs.)
Amount of
Duty (Rs.)
1,00,000.00
Basic customs duty
10
Sub-Total for calculating CVD

CVD x excise duty rate
10,000.00
10,000.00
1,10,000.00
12.5
13,750.00
13,750.00
23,750.00
Sub-total for education cess on customs (Rs.

10,000 + Rs. 13,750)
Education cess of customs
475.00
475.00
Secondary and Higher Education cess of

customs
237.50
237.50
1,24,462.50
Sub-total for Special CVD (Rs. 1,00,000 + Rs.

10,000 Rs. 13,750 + Rs. 475 + Rs. 237.50)
Special CVD u/s 3(5)
4,978.50
4,978.50
Total customs duty
29,441
Customs duty payable (rounded off)
29,441
Since importer is a service provider, he can avail CENVAT credit of only CVD i.e. only of Rs.
13,750 and not of special CVD.
3. SERVICE TAX
1. BASIC CONCEPTS OF SERVICE TAX
1) Service tax rate:
Before amendment (till 14.11.2015)
After amendment (w.e.f 15.11.2015)
Effective rate of service tax was 14%(no Effective rate of service tax was 14.5%
Education cess is added)
(including Swachh Bharat Cess @ 0.5% )
Treatment of Swachh Bharat Cess (SBC) in different cases:a) Swachh Bharat cess to be levied on value of all or any of taxable services @ 0.5% w.e.f
15.11.2015 (it is applicable from Nov 2016 Exams ONWARDS.)
b) Not applicable on services fully exempt and those covered under Negative List
c) Utilisation of Swachh Bharat Cess: Proceeds of the SBC will be credited to the consolidated
fund of India, such sums of money for the purposes of financing and promoting Swachh
Bharat initiatives.
d) Swachh Bhart Cess to be independent from Service Tax: SBC would be levied, charged,
collected and paid to Government independent of Service Tax. This needs to be charged
separately on the Invoice.
e) Reverse Charge applicable on Swachh Bharat Cess: The reverse charge under section
68(2) of the Finance Act, 1994, is made applicable to SBC. So, service receiver is also
required to pay SBC in respect of reverse charge mechanism, SBC liability is determined in
accordance with Rule 7 of Point of Taxation Rules, as per which, point of taxation is the date
on which consideration is paid to the service provider.
f) No admissibility of credit of Swachh Bharat Cess: SBC is not integrated in the CENVAT
Credit Chain. Therefore, credit of SBC cannot be availed. Further, SBC cannot be paid by
utilizing credit of any other duty or tax. So it must be paid in Cash.
MASTER MINDS
g) Point of taxation of SBC to be determined as per Rule 5 of POT Rules, 2011: As regards
Point of Taxation, since this levy has come for the first time, all services (except those
services which are in the Negative List or are wholly exempt from service tax) are being
subjected to SBC for the first time. SBC, therefore, is a new levy, which was not in existence
earlier. Hence, rule 5 of the Point of Taxation Rules, 2011 would be applicable in this case.
h) Calculation of SBC for services where abatement is allowed: Taxable services, on which
service tax is leviable on a certain percentage of value of taxable service, will attract SBC on the
same percentage of value. For example, in the case of GTA, [Service Tax + SBC] % would be
(14% Service Tax + 0.5% SBC) x 30% = 4.35% (4.20% + 0.15%) of the total amount charged.
i)
Calculation of Service Tax and SBC on services covered under Rule 2A, 2B or 2C of
Service Tax (Determination of Value) Rules, 2006: The tax (Service Tax and SBC) on
services covered by Rule 2A, 2B or 2C of Service Tax (Determination of Value) Rules, 2006,
would be computed by multiplying the value determined in accordance with these respective
rules with [14% + 0.5%]. Therefore, effective rate of Service Tax plus SBC in case of original
works and other than original works under the works contract service would be 5.8% [(14% +
0.5%) x 40%] and 10.15% [(14% + 0.5%) x 70%] respectively.
j)
Applicability of SBC on services covered by Rule 6 of Service Tax Rules (i.e. air travel
agent, life insurance premium, purchase and sale of foreign currency and services by
lottery distributors/ selling agents): Shall have the option to pay SBC as determined as per
the following formula:
Service Tax liability [calculated as per sub-rule (7), (7A), (7B) or (7C)] x 0.5%/14%]
Example: Air travel agent to pay service tax at special rates of 0.7% and 1.4% of basic pay in
case of domestic and international bookings for air travel respectively.
Basic fare incase of domestic bookings. 1,00,000 x 0.7 %
= 700
Basic fare incase of International bookings 1,00,000 x 1.4% = 1400

Total Service tax
Add: Swacch Bharath Cess (2100 x 0.5 / 14)
2100
=
75
2175
The option under this sub-rule once exercised, shall apply uniformly in respect of such
services and shall not be changed during a financial year under any circumstances.
k) Reversal of CENVAT Credit by a person providing both exempted and taxable service
under Rule 6 of CENVAT Credit Rule: As SBC is not integrated in the CENVAT Credit chain
and reversal under Rule 6 is payment of amount equal to 7% of the value of exempted
services, hence, reversal of SBC is not required under Rule 6 of CENVAT Credit Rules, 2004.
2) Explanation 2 substituted in the definition of service:
The new Explanation 2 reads as under:
For the purposes of this clause, the expression transaction in money or actionable claim
shall not include
a) any activity relating to use of money or its conversion by cash or by any other mode, from one
form, currency or denomination, to another form, currency or denomination for which a
separate consideration is charged;
b) Any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in
money or actionable claim, including the activity carried out
i)
by a lottery distributor or selling agent in relation to promotion, marketing, organizing,

selling of lottery or facilitating in organizing lottery of any kind, in any other manner;
ii) by a foreman of chit fund for conducting or organizing a chit in any manner.
Note: Lottery distributor or selling agent means a person appointed or authorized by a
State for the purposes of promoting, marketing, selling or facilitating in organizing lottery of any
kind, in any manner, organized by such State in accordance with the provisions of the Lotteries
(Regulation) Act, 1998.
Ph:
98851 25025/26
2. POINT OF TAXATION
1) RULE -5:Where a service is taxed for the first time, then,

a) No tax shall be payable to the extent the invoice has been issued and the payment received
against such invoice before such service became taxable;
b) No tax shall be payable if the payment has been received before the service becomes taxable and
invoice has been issued within 14 days of the date when the service is taxed for the first time.
Explanation 1: this rule shall apply mutatis mutandis in case of new levy of service
Explanation 2: new levy or tax shall be payable on all the cases other than specified above.
OBJECTIVE OF AMENDEMENT:For Explanation 1:- Doubts have been raised regarding, applicability of provisions of chapter V of
finance act 1994, and rules made there under. for this purpose explanation 1 is being inserted in
rule 5, stating that if there is any changes made in chapter V and rules made there under, the
same are applicable in case of new levy on services.
For Explanation 2:- in rule 5 specified only two situations, for these two situations the new levy
would not apply (i.e. S.T is not payable)
Doubts have been raised regarding, any situation raised, other than specified above two
situations. Whether general rule (Rule 3) is applicable or not? For this purpose explanation - 2 is
being inserted, stating that service tax shall be payable on all the cases other than specified
above two situations.
2) RULE - 7:a) Point of taxation shall be the date of issuance of invoice in case of change in liability to
pay service tax by the service recipient.
if there is change in the liability of a person required to pay tax as recipient of service (notified
under sub-section (2) of section 68 of the act), the service has been provided and the invoice
has been issued before the date of such change, however, the payment has not been made
as on such date, the point of taxation shall be the date of issuance of invoice.
Illustration:- XYZ Ltd. provided services to ABC Ltd. which was chargeable to tax under
reverse charge basis. XYZ Ltd. billed ABC Ltd. Rs.4,00,000 (before claiming abatement of
40%) on 01-04-2016. W.e.f. 01-05-2016 the abatement was increased from 40% to 50%.
Determine the amount of service tax to be deposited by ABC Ltd. if it makes payment on 0106-2016.
Solution: According to Rule 7 of the Point of taxation Rules, 2011, where there is change in the
liability or extent of liability of a person required to pay tax as recipient of service notified under
section 68(2) of the Act, in case service has been provided and the invoice issued before the
date of such change, but payment has not been made as on such date, the point of taxation shall
be the date of issuance of invoice. Since in this case there is change in liability of ABC Ltd. on
account of change in percentage of abatement, hence, the point of taxation shall be the date of
issuance of invoice. Therefore, the service tax to be deposited by ABC Ltd. shall be 14.5% of
Rs.2,40,000 i.e.[ Rs.4,00,000 less abatement Rs.1,60,000 (40% of Rs.4,00,000)] = Rs.34,800.
b) Point of taxation in case of service provided by the government or local authority to
business entity:In case of services provided by the government or local authority TO any business entity, the
point of taxation shall be the earlier of the dates on which(a) Any payment ,part or full, in respect of such service becomes due ,as specified in the
invoice, bill, challan or any other document issued by the government or local authority
demanding such payment ; or
(b) Payment for such service is made
MASTER MINDS
Illustration:- ABC Ltd. of Delhi received taxable services from Delhi Government on 01-052016 for which an invoice was raised on 01-05-2016 and due date of payment was 31-052016. Determine the point of taxation in accordance with POT Rules if ABC Ltd. makes the
payment for the said services on:Case I: 10-06-2016
Case II: 25-05-2016
Solution: According to Rule 7 of the Point of taxation Rules, 2011, in case of services
provided by the Government or local authority to any business entity, the point of taxation
shall be the earlier of the dates on which, (a) any payment, part or full, in respect of such service becomes due, as specified in the
invoice, bill, challan or any other document issued by the Government or local authority
demanding such payment; or
(b) payment for such services is made.
Case - I: Since the payment has been made after the due date, point of taxation shall be the
date when payment s due i.e. 31-05-2016.
Case II: Since the payment has been made prior to due date, the point of taxation shall be
the date of paymenti.e.25-05-2016.
3. NEGATIVE LIST OF SERVICES

1) Section 66D(a)(iv): All services provided by the government or local authority to a
business entity is taxable (The word support services removed from the negative list)
Before amendment
After amendment
Support
services
provided
by
the Any services provided by the government or
government or local authority to the business local authority to the business entity are
entity are taxable
taxable
Points to be noted:a) Consequently, the definition of support service as provided under section 65B(49) had also
been omitted vide the Finance Act, 2015.
b) service tax on these services was made payable under reverse charge.(i.e. S.R business
entity)
Some new mega exemptions are inserted, relating to service provided by Govt or local
authority:Entry no:
Issues
Exemption
39
By way of municipal functions
Services by Government, a local authority or a

government authority by way of any activity in
relation to any function entrusted to municipality
under article 243W of the constitution.
48
Services provided by government or

a local authority to a business entity
Exempt - if its turnover in preceding FY does

not exceed Rs. 10 lakhs.
54
Services provided by government or

a local authority to another
government or a local authority
55
Services provided to individuals
Services provided by Government or Local

authority to another government or local
authority. However, the said exemption does
not cover services specified in sub-clauses
(i),(ii) & (iii) of clause (a) of section 66D of
the Finance Act, 1994.
authority to an Individual who may be carrying
out a profession or Business by way of grant of
Passport, Visa, Driving license, Birth
certificate or Death certificate.
Ph:
98851 25025/26
56
Services where gross amount

charged does not exceed Rs. 5000
57
Services by way of tolerating nonperformance of a contract
authority to where the gross amount charged for
such services does not exceed Rs.5,000.
However, the said exemption does not cover
services specified in sub-clauses (i),(ii) & (iii) of
clause (a) of section 66D of the Finance Act, 1994.
Further, in case of continuous supply of
service as a defined in Rule 2(C) of POT Rules,
2011.the exemption shall apply only where the
gross amount charged for such service does
not exceed Rs.5,000 in a financial year.
authority by way of
tolerating
nonperformance of a contract for which
consideration in the form of fines or liquidated
damages is payable to the government or local
authority under such contract.
Note: It is clarified that fines and penalty
chargeable by Government or a local authority
imposed for violation of a statute, bye-laws,
rules or regulations are not leviable to Service
Tax.
authority by way of
a) Registration required under any law for the
time being in force.
58
Services by way of registration
59
Services by way of assignment of

right to use natural resources to an
individual farmer
60
Any function entrusted to a

panchayat
61
Services by way of assignment of

right to use any natural resource
prior to 1-4-2016
b) Testing, Calibration, Safety check or

certification relating to protection or safety
of workers, consumers or public at large,
required under any law for the time being in
force.
Note: However, It is clarified that any activity
undertaken by government or a local authority
against a consideration constitutes a service
and the amount charged for performing
suchactivities is liable to service tax except for
above two services.
authority by way of assignment / allocation of
right to use natural resources to an individual
farmer for the purpose of agriculture.
Note: However, such allocation / auctions to
categories of persons other than individual
farmers would be leviable to service tax.
Services provided by Government or a Local
authority or a governmental authority by way of
any activity in relation to any function entrusted
to a panchayat under article 243G of the
constitution.
authority by way of assignment of right to use
any natural resource where such right to use
was assigned by the government or the local
authority before the 1st April, 2016.
Provided that the exemption shall apply only to
service tax payable on one time charge
payable, in full upfront or in installments, for
assignment of right to use such natural
resources.
MASTER MINDS
62
63
Services to telecom service provider

license fee or spectrum user
charges for F.Y 2015 -16.
Merchant overtime charges
(Service tax is payable on such installments in

view of Rule 7 of POT rules, 2011 as amended
by vide Notification No. 24/2016 ST dated
13.04.2016. However, the same have been
specifically exempted through this notification.)
Note: The exemption not apply to any periodic
payment required to be made by the assignee,
such as Spectrum user charges, license fee in
respect of Spectrum, or monthly payments with
respect to the local extracted from the coal
mine or royalty payable on extracted coal which
shall be taxable.
authority by way of allowing a business entity to
operate as a telecom service provider or use
radiofrequency spectrum during the financial
year 2015-16 on payment of license fee or
spectrum user charges, as the case may be.
Services provided by Government by way of
deputing officers after office hours or on
holidays for inspection or container stuffing or
such other duties in relation to import export
cargo on payment of Merchant Overtime
Charges (MOT).
2) Section 65B(26A): Definition of Government incorporated in the Act:

Government means the Departments of the Central Government, a State Government and its
Departments and a Union territory and its Departments, but shall not include any entity, whether
created by a statute or otherwise, the accounts of which are not required to be kept in accordance
with article 150 of the Constitution or the rules made there under.
3) Services by way of carrying out any process amounting to manufacture/production of
potable liquor made liable to service tax [Section 66D(f)]:
Before amendment
After amendment
Services by way of carrying out any process Services by way of carrying out any process
amounting to manufacture or production of amounting to manufacture or production of
goods excluding alcoholic liquor for
goods.
human consumption.
Note: with the effect of amendment made in sec 66D (f), the definition u/s 65B (40) has
been amended
a) The words alcoholic liquors for human consumption have been omitted from the
definition of the term process amounting to manufacture or production of goods as provided
in clause (40) of section 65B.
The amended definition reads as under:
"Processes amounting to manufacture or production of goods" means a process on
which duties of excise are leviable under Sec. 3 of the Central Excise Act, 1944 or the
Medicinal and Toilet Preparation (Excise Duties) Act, 1955 or any process amounting to
manufacture of alcoholic liquors for human consumption, opium, Indian hemp and
other narcotic drugs and narcotics on which duties of excise are leviable under any State
Act - Sec. 65B(40).
b) Mega Exemption Notification No. 25/2012 ST dated 20.06.2012 has been amended to
withdraw exemption pertaining to intermediate production of alcoholic liquor for human
consumption.
Ph: 98851 25025/26
4) Section 66D(j): Admission to entertainment events or access to amusement facilities made

liable to service tax:
Admission to entertainment events or access to amusement facilities has been omitted vide the
Finance Act, 2015. Consequently, the definitions of amusement facility and entertainment
event as contained in section 65B(9) and section 65B(24) have also been omitted.
However the following exemptions have been provided in respect of admission to entertainment
events or access to amusement facilities [vide exemption notification no.25/2012 ST, dated
20-06-2012].
a) The services provided by way of admission to a museum, zoo, national park, wildlife
sanctuary and a tiger reserve have been exempted.
(Entry 45 to mega exemption notification)

b) The services provided by way of right to admission to
i)
Exhibition of cinematographic film, circus, dance, or, theoretical performance including

drama or ballet.
ii) Recognized sporting event.

iii) Award function, concert, pageant, musical performance or any sporting event other than a
recognized sporting event, where the consideration for admission is not more than Rs. 500
per person.
(Entry.47 of mega exemption notification)
Cinema Circus Dance Any Amount
theatre
Recognized sporting event
Taxable service
Admission into
entertainment event
Upto Rs.500
Non Recognized Sporting Event

Award convert-pageant -Music
Exempt
Exempt
ST Payable
> Rs.500
OTHERS
ST Payable
SOME IMPORTANT CIRCULARS ISSUED BY CBEC:1) Clarification regarding levy of service tax on joint venture:[circular no: 179/5/2014 ST
dated 24.09.2014.]:
a) Services provided by the members of the Joint Venture (JV) to the JV and vice versa or
between the members of the JV are treated as distinct persons therefore, taxable services
provided for consideration are taxable.
b) If cash calls (capital contributions) made by the members to the JV are merely a transaction in
money and hence not in the nature of consideration for taxable service, but which may vary from
case to case. Detailed and close scrutiny of the terms of JV agreement may be required in each
case, to determine the service tax treatment of cash calls.
2) All testing and ancillary activities related to testing of seeds are covered in the negative
list and are thus, not liable to service tax:
Issue: Whether all activities incidental to seed testing are leviable to service tax and only the
activity in so far it relates to actual testing has been exempted in the negative list under section
66D(i) of the Finance Act, 1994?
Seed is not covered under the definition of agriculture produce. All services relating to agriculture
by way of agriculture operations directly relating to production of agriculture produce including
testing are covered in section 66D(i) the scope of coverage of the negative list entry and to cover
any testing in agricultural operations in negative list, which are directly linked to production of
agriculture produce and not to limit its scope only to seeds.
MASTER MINDS
Clarification:In view of the above, it has been clarified that all testing and ancillary activities to testing such
as seed certification, technical inspection, technical testing, analysis, tagging of seeds,
rendered during testing of seeds, are covered within the meaning of testing as mentioned in
section 66D(d)(i) of the Finance Act, 1994. Therefore, such services are not liable to service
tax under section 66B of the Finance Act, 1994.
4. VALUATION OF TAXABLE SERVICES

1) Section 67:Consideration [Amended w.e.f.14-05-2015] includes
a) Any amount that is payable for the taxable services provided or to be provided;
b) Any reimbursable expenditure or cost incurred by the service provider and charged, in the
course of providing or agreeing to provide a taxable service, except in such circumstances,
and subject to such conditions, as may be prescribed;
c) Any amount retained by the lottery distributor or selling agent from gross sale amount of
lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount
received, that is to say, the difference in the face value of lottery ticket and the price at which
the distributor or selling agent gets such ticket.
2) In case of service provided by Government to a business entity, interest chargeable on
deferred payment to be included in the value of the taxable service
[Rule 6(2)(iv) of the Service Tax Determination of Value Rules, 2006]
Interest on delay payments: interest on delayed payment of any consideration for the provision
of service or sale of property, whether movable or immovable, for such payment which is not
included in the value of taxable services
Exception:-However, service tax is payable on the interest charged by government or a local
authority where the payment for service is allowed to be made under deferred payment option
since the same is included in the value of the taxable service.
5. EXEMPTIONS AND ABATEMENTS

A. MEGA EXEMPTION NOTIFICATION:
1) Health care services(Entry no 2):
Before amendment
After amendment
Ambulance services provided by way of

transportation of a patient, to and from a
clinical establishment, was exempt from
service tax only when the said service was
provided by a clinical establishment or an
authorized
medical
practitioner
or
paramedics.
Ambulance services provided by all service

providers (whether or not by clinical
establishment or an authorized medical
practitioner or paramedics) is exempted.
2) Exemption in respect of services provided by a senior advocate to an advocate or

partnership firm of advocates and person represented on an arbitral tribunal to an arbitral
tribunal withdrawn (Entry no 6):
Legal services: Services provided by a) an arbitral tribunal to i)
any person other than a business entity; or
ii) A business entity with a turnover up to Rs. 10 lakh in the preceding financial year.
b) A partnership firm of advocates or an individual as an advocate other than a senior

advocate, by way of legal services to-
Ph:
98851 25025/26
i)
an advocate or partnership firm of advocates providing legal services ;
ii) any person other than a business entity; or

iii) a business entity with a turnover up to Rs. 10 lakh in the preceding financial year.
c) a person represented on an arbitral tribunal to an arbitral tribunal (deleted w.e.f 1.04.2016)
c) A senior advocate by way of legal services to a person other than a person ordinarily carrying
out any activity relating to industry, commerce or any other business or profession .i.e
business entity ( inserted w.e.f 1.04.2016)
CLARIFICATION:a) In the following cases service tax will apply
i)
A person represented on an arbitral tribunal to an arbitral tribunal.
ii) Services provided by a senior advocate to an advocate or partnership firm of advocates

iii) Services provided by a senior advocate to a business entity
b) Legal services provided by OTHER THAN a senior advocate to a business entity with a turnover
up to Rs. 10,00,000 in the preceding financial year is exempted
However, in respect of services provided to business entities, with a turnover exceeding Rs.10
lakh in the preceding financial year, tax is required to be paid on reverse charge by the business
entities.
c) Legal services provided by a senior advocate shall not be covered under the ambit of reverse
charge mechanism. So, in case of legal services provided by senior advocates, service tax shall
be payable by service provider( forward charge) (w.e.f. 1.04.2016)
Recipient of
service
Reverse
charge
provisions
Service
Provider
Nature of
service
1.
Senior advocate
as a person
represented on
an arbitral
tribunal
Arbitration
services
Individual
Exempted
Not
applicable
Exemption
given earlier
is continued
2.
Senior advocate
as a person
represented on
an arbitral
tribunal
Arbitration
services
Arbitration
Tribunal
Taxable
service
Not
applicable
Exemption
withdrawn
w.e.f. 1-4-16.
Service
provider
liable to pay
S.T
3.
Senior Advocate
Legal
Services
Individual other Exempted

than
person
carrying on any
business
or
profession.
Not
applicable
Exemption
given earlier
is continued.
4.
Senior Advocate
Legal
Services
Individual
Advocate
firm
Advocates
Taxable
or service
of
Not
applicable
Service tax is
payable by
senior
advocate
5.
Senior Advocate
Legal
Services
Business entity Taxable

(10 lakhs limit service
of turn over is
not applicable)
Not
applicable
Service tax is
payable by
senior
advocate
S.
No
Taxability
Remarks
MASTER MINDS
Note:
1. Business entity is defined in section 65B of the Finance Act, 1994 as any person ordinarily
carrying out any activity relating to industry, commerce or any other business or profession.
Thus, it includes sole proprietors as well.
The business entity can, however, take input tax credit of such tax paid in terms of the CENVAT
Credit Rules, 2004, if otherwise eligible. The provisions relating to arbitral tribunal are also on
similar lines.
2. Senior and other Advocates (Sec.16 of the Advocates Act, 1961 (25 of 1961): It means
There shall be two classes of advocates, namely, senior advocates and other advocates.
i)
ii) An advocate may, with his consent, be designated as senior advocate if the Supreme Court or
a high court is of opinion that by virtue of his ability (standing at the bar or special knowledge
or experience in law) he is deserving of such distinction.
iii) Senior advocates, shall in the matter of their practice, be subject to such restrictions as the bar
council of India may, in the interest of the legal profession, prescribe.
iv) An advocate of the Supreme Court who has senior advocate of that court immediately before
the appointed day shall, for the purposes of this section, be deemed to be a senior advocate
3)
a) Specified services provided by the Indian Institutes of Management (IIM) exempted
(Entry no 9B):
Services provided by the Indian Institute of management, as per the guidelines of the central
government, to their students, by way of the following educational programmes, except
executive development programme,i)
Two year full time residential post graduate programmes in management for the post
graduate diploma in management, to which admissions are made on the basis of Common
Admission Test (CAT), conducted by Indian Institute of Management;
ii) Fellow programme in Management

iii) Five year integrated programme in management.
are exempted.
b) Services by assessing bodies empanelled centrally by DGT, Ministry of Skill
Development & Entrepreneurship under SDI scheme exempted(Entry no 9C):
Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry
of Skill Development and Entrepreneurship by way of assessments under Skill Development
Initiative(SDI)scheme.
NOTE:-Ministry of Skill Development & Entrepreneurship (MSDE) coordinates the
various skill development efforts
fragmented across the country, for building the vocational and technical training
framework, skill up-gradation,
building of new skills, and innovative thinking not only for existing jobs but also jobs that
are to be created. SDI
Scheme is launched by MSDE.
DGT, MSDE empanels assessing bodies to assess the competencies of the persons
trained under SDI Scheme.
Such assessment is done by assessors of high competence, repute and integrity sector
c) Services provided by way of skill/vocational training by DDU-GKY training providers
exempted(Entry no 9D):
Services provided by way of skill / vocational training by Deen Dayal Upadhayy Grameen
Kaushalya Yojana training partners.
Ph:
98851 25025/26
NOTE:- Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) is the

skilling and placement initiative of the Ministry of Rural Development (MoRD),
Government of India, for poor and disadvantaged rural youth. The skill training is
imparted under said program by the Project Implementation Agencies which are
organisations from specific sector industries, education and training or NGOs who have
a reputation in delivering skilling, training and development programs. They are
responsible for carrying out skill gap assessment, enrollment, training, counselling,
placement, post placement support, career progression and other services.
4) Output services by artist in folk or classical form: (Entry no 16)
Before amendment
After amendment
services provided by a performing artist in

folk or classical art forms of (i) music, or (ii)
dance, or (iii) theatre, will be limited only to
such cases where amount charged is upto
Rs. 1,00,000 for a performance. Is exempt
from service tax
However service provided by an artist as
brand ambassador will continue to remain
taxable.
services provided by a performing artist in

folk or classical art forms of (i) music, or (ii)
dance, or (iii) theatre, will be limited only to
such cases where amount charged is upto
Rs. 1,50,000 for a performance. Is exempt
from service tax
However service provided by an artist as
brand ambassador will continue to remain
taxable.
5) General exemption of transportation of specified goods by rail or vessel or goods

transport agency[Entry no 20]
Before amendment
Transportation of foodstuff - including flours,
tea, coffee, Jaggery, sugar, milk
products, salt and edible oil, excluding
alcoholic beverages - by rail/ vessel and by
goods carriage was exempt from service.
After amendment
Transportation of foodstuff only milk, salt
and food grain including flours, pulses
and rice by rail/ vessel and by goods
carriage is exempt from service tax.
6) Exemption to transportation of passengers by ropeway, cable car or aerial tramway

withdrawn (Entry no 23):Transportation of passengers, with or without accompanied belongings by ropeway, cable car or
aerial tramway withdrawn the exemption.so, these are taxable.
7)
a) Services of general insurance business: (Entry no 26)
A new clause (p & q) has been inserted vide Notification No. 12/2016 ST dated 30.04.2016
in the said entry to exempt services of general insurance business provided under
Pradhan Mantri Suraksha Bima Yojna.(w.e.f 30.04.2015)
Niramaya Health Insurance Scheme implemented by trust constituted under the

provisions of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy,
Mental Retardation and Multiple Disability Act, 1999 in collaboration with Private / Public
insurance companies. (w.e.f. 1.04.2016)
NOTE:- Niramaya Health Insurance Scheme: In order to provide an affordable health
insurance facility to persons with developmental disabilities viz, autism, cerebral palsy,
mental retardation & multiple disabilities, Niramaya Health Insurance Scheme is launched
by National Trust, in collaboration with private/ public insurance companies.
b) Services of Life insurance business:((Entry no 26A): New Clauses (d), (e) and (f) have
been inserted vide Notification No. 12/2015 ST dated 30.04.2015 in the said entry to
exempt services of life insurance business provided in respect of the following additional
schemes:
MASTER MINDS
Varishtha Pension Bima Yojna - [w.e.f 01.04.2015]
Pradhan Mantri Jeevan Jyoti Bima Yojna [w.e.f 30.04.2015]
Pradhan Mantri Jan Dhan Yojna - [w.e.f 30.04.2015]

c) Collection of contribution under Atal Pension Yojana (APY):[Entry no 26B]: A new entry
26B has been inserted in the notification vide Notification No. 12/2015 ST dated 30.04.2015 to
exempt the services by way of
Collection of contribution under Atal Pension Yojna.
d) Annuity under the National Pension System (NPS) exempted:[Entry no 26C]:

Services of Life insurance business provided by way of annuity under the National Pension
System (NPS) regulated by Pension Fund Regulatory and Development Authority (PFRDA) of
India under the pension fund regulatory and development authority Act 2013.
8) Agency Services[Entry no 29] : services by the following persons in respective capabilitiesa) Sub broker or an authorized person to a stock broker;
b) Authorized person to a member of a commodity exchange;
c) mutual fund agent to a mutual fund or asset management company[deleted w.e.f 1.04.2015]
d) distributor to a mutual fund or asset management company[deleted w.e.f 1.04.2015]
e) selling or marketing agent of lottery tickets to a distributor or a selling agent. [deleted w.e.f
1.04.2015]
f) Selling agent or a distributor of SIM cards or recharge coupon vouchers;
g) business facilitator or a business correspondent to a banking company with respect to Basic
Savings Bank Deposit Account covered by Pradhan Mantri Jan Dhan Yojana in the banking
companys rural area branch, by way of account opening, cash deposits, cash withdrawals,
obtaining e-life certificate, Aadhar seeding;(Inserted w.e.f. 21.10.2015)
(ga) any person as an intermediary to a business facilitator or a business correspondent with
respect to services mentioned in clause (g); (Inserted w.e.f. 21.10.2015)
(gb) business facilitator or a business correspondent to an insurance company in a rural area;
(Inserted w.e.f. 21.10.2015)
h) Sub-contractor providing services by way of works contract to another contractor providing
works contract services which are exempt;
Note: Thus, the service tax will be payable on these deleted services (clause c, d, e) and clause
g and h are exempted from service tax
9) Job work [Entry no 30]:
Before amendment
After amendment
Carrying out an intermediate production

process as job work in relation to any goods
on which appropriate duty is payable by the
principal manufacturer was exempt from
service tax.
Carrying out an intermediate production

process as job work in relation to any goods
excluding alcoholic liquor for human
consumption on which appropriate duty is
payable by the principal manufacturer was
exempt from service tax.
Thus, carrying out an intermediate
production process alcoholic liquor for
human consumption on job work is liable
to service tax. (w.e.f. 01.06.2015)
10) New Exemptions:

a) Entry no 43: Services by operator of Common Effluent Treatment Plant by way of treatment
of effluent are exempt from service tax.
Ph:
98851 25025/26
b) Entry no 44:Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing,

labelling of fruits and vegetables, which do not change or alter the essential characteristics of
the said fruits or vegetables, are exempt from service tax.
c) Entry no 45: Services by way of admission to a museum, zoo, national park, wild life
sanctuary and a tiger reserve are exempt from service tax.
Here,
i)
National park has the meaning assigned to it in the clause (21) of the section 2 of The
Wild Life (Protection) Act, 1972.
ii) Wildlife sanctuary means sanctuary as defined in the clause (26) of the section 2 of The
Wild Life (Protection) Act, 1972.
iii) Zoo has the meaning assigned to it in the clause (39) of the section 2 of the Wild Life
(Protection) Act, 1972.
Section 2(39) of the Wild Life (Protection) Act, 1972 provides that Zoo means an
establishment, whether stationary or mobile, where captive animals are kept for exhibition
to the public but does not include a circus and an establishment of a licenced dealer in
captive animals.
iv) Tiger reserve has the meaning assigned to it in clause (e) of section 38K of the Wild Life
(Protection) Act, 1972.
d) Entry no 46: Service provided by way of exhibition of movie by an exhibitor to the distributor
or an association of persons consisting of the exhibitor as one of its members are exempt
from service tax.
e) Entry no 47: Services by way of right to admission toi)
exhibition of cinematographic film, circus, dance, or theatrical performance including

drama or ballet;
ii) recognized sporting event;

iii) award function, concert, pageant, musical performance or any sporting event other than a
recognised sporting event, where the consideration for admission is not more than Rs. 500
per person are exempt from service tax.
Therefore, service tax would be levied on service by way of admission to entertainment
event of concerts, pageants, musical performance, award functions and sporting events
other than the recognized sporting event, if the amount charged is more than Rs. 500
for right to admission to such an event.
Note: Recognised sporting event means any sporting event
Organised by a recognised sports body where the participating team or individual

represent any district, state, zone or country;
Covered under entry 11.

Entry 11 of the notification covers services by way of sponsorship of sporting events
organiseda) by a national sports federation, or its affiliated federations, where the participating
teams or individuals represent any district, state, zone or country;
b) by Association of Indian Universities, Inter-University Sports Board, School Games
Federation of India, All India Sports Council for the Deaf, Paralympic Committee of
India or Special Olympics Bharat;
c) by Central Civil Services Cultural and Sports Board;
d) as part of national games, by Indian Olympic Association; or
e) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme.
MASTER MINDS
11) SERVICES BY SPECIFIED BODIES EXEMPTED (New Entries 49 to 52 have been inserted to
exempt the services provided by the specified bodies)
a) Entry no 49: Services provided by Employees Provident Fund Organisation (EPFO) to

persons governed under the Employees Provident Funds and Miscellaneous Provisions
(EPFMP) Act, 1952.
b) Entry no 50: Services provided by Insurance Regulatory and Development Authority of India
(IRDA) to insurers under the Insurance Regulatory and Development Authority of India
(IRDAI) Act, 1999.
c) Entry no 51: Services provided by Securities and Exchange Board of India (SEBI) set up
under the Securities and Exchange Board of India Act, 1992 by way of protecting the interests
of investors in securities and to promote the development of, and to regulate, the securities
market.
d) Entry no 52: Services provided by National Centre for Cold Chain Development (NCCCD)
under Ministry of Agriculture, Cooperation and Farmers Welfare by way of cold chain
knowledge dissemination.
Entry No 54 To 63 Are Discussed In Negative List Chapter, Under The Heading,
Services Provided By Government Or Local Authority
B. ABATEMENT NOTIFICATION:
1) Notification No. 8/2016 ST dated 01.03.2016 as under:
S.
No.
Description of taxable
service
Percentage
of abatement
Before
2.
2A
Transport of goods by
rail
Transport of goods in
containers by any person
other than Indian
railways.
70
Conditions
After
70
70
60
3.
Transport of passengers,
with or without
accompanied belongings
by rail
70
70
10.
Transport of goods in a
vessel
70
70
CENVAT credit on inputs, capital

goods and input services, used for
providing the taxable service, has
not been taken under the provisions
of CENVAT Credit Rules, 2004.
Note:- So, Input Service has been
avail in addition to the Abatement.
Ph:
98851 25025/26
7.
7A.
8.
11.
Services of goods
transport agency (GTA)
in relation to
transportation of goods
other than used house
hold goods.
Services of goods
transport agency in
relation to transportation
of used household
goods.
Services provided by a
foreman of chit fund in
relation to chit
Services by a tour operator
in relation to,i) a tour, only for the
purpose of arranging or
booking accommodation
for any person
ii) Tours other than (i)

above.
70
70
70
60
Nil
30
90
90
75/60
70
CENVAT credit on inputs, capital

goods and input services, used for
providing the taxable service, has
not been taken by the service
provider under the provisions of the
CENVAT Credit Rules, 2004
i)
CENVAT credit on inputs,

capital goods and input services
other than the input service of a
tour operator, used for providing
the taxable service, has not
been taken under the provisions
of the CENVAT Credit Rules,
2004.
ii) The invoice, bill or challan
issued indicates that it is
towards the charges for such
accommodation.
iii) This exemption shall not apply in
such cases where the invoice,
bill or challan issued by the tour
operator, in relation to a tour,
includes only the service
charges for arranging or booking
accommodation for any person
but does not include the cost of
such accommodation.
i) CENVAT credit on inputs, capital
goods and input services other
than input services of a tour
operator, used for providing the
taxable service, has not been
taken under the provisions of the
CENVAT Credit Rules, 2004.
ii) The bill issued for this purpose
indicates that it is inclusive of
charges for such a tour and the
amount charged in the bill is the
gross amount charged for such
a tour.
NOTE :1. The amendment made in serial no.11, Consequently, with effect from 01.04.2016, definition of
package tour has been omitted.
2. Cost of fuel to be included in consideration charged, for availing abatement for renting of motor
cab service
MASTER MINDS
However, the fair market value of goods and services so supplied may be determined in
accordance with the generally accepted accounting principles.
3. 70% abatement available on ancillary services provided by a GTA in the course of transportation
of goods
C. OTHER EXEMPTION NOTIFICATIONS
:-
1) Pilgrimage services: Services provided by a specified organisation in respect of a religious

pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under
bilateral arrangement, are exempt from service tax.(notification no.17/2014 dated
20.08.2014)
Note: Specified organisation means:
Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand Undertaking;
Haj Committee of India and State Haj Committees constituted under the Haj Committee
Act, 2002, for making arrangements for the pilgrimage of Muslims of India for Haj.
(or)
2) Services provided by BIRAC approved bio-incubators to incubatees also exempted

Services provided by Biotechnology Industry Research Assistance Council (BIRAC) approved
biotechnology incubators to the incubatees. .(notification no.12/2016 dated 01.03.2016)
3) Refund of Swachh Bharat Cess to SEZ units/developers.(notification no.2/2016 dated
03.02.2016)
a) The service tax paid on the specified services that are common to the authorized
operation in an SEZ and the operation in domestic tariff area [DTA unit(s)] shall be
distributed amongst the SEZ Unit or the Developer and the DTA unit (s) in the manner as
prescribed in rule 7 of the CENVAT Credit Rules. For the purpose of distribution, the
turnover of the SEZ Unit or the Developer shall be taken as the turnover of authorised
operation during the relevant period.
b) The SEZ Unit or the Developer shall be entitled to refund of the service tax paid on (i) the
specified services on which ab-initio exemption is admissible but not claimed, and (ii) the
amount distributed to it in terms of clause (a).
c) The SEZ unit or the developer shall be entitled toi)
Refund of the Swachh Bharat Cess paid on the specified services on which ab-initio
exemption is admissible but not claimed and
ii) The refund of amount as determined by multiplying total service tax distributed to it in
terms of Clause (a) by effective rate of Swachh Bharat Cess and dividing the product
by rate of service tax specified in Section 66B of the Finance Act, 1944.
=
( A )X Effective Rate of Swachh Bharat Cess

( A ) X 0.5
=
%
Rate of service tax
14
Here A = the service tax paid on specified services that are common to authorized
operations in SEZ and DTA.
4) GTA service provided for transport of export goods by road from place of removal/
CFS/ICD to land customs station exempted.
Before amendment
After amendment
The following services by goods transport The following services by goods transport
agency are exempt:
agency are exempt:
a) Transport of goods by road from any a) Transport of goods by road from any
container freight station (CFS) or inland
container freight station (CFS) or inland
container depot (ICD) to port / airport as the
container depot (ICD) to port / airport /
land customs station as the case may
case may be, from where the goods are
exported; or
be, from where the goods are exported;
or
Ph:
98851 25025/26
b) Transport of goods by road from the place b) Transport of goods by road from the
of removal (i.e. factory) to CFS, ICD, Port /
place of removal (i.e. factory) to CFS,
ICD, Port / airport / land customs
airport, as the case may be, from where the
station, as the case may be, from
goods are exported
where the goods are exported
SOME IMPORTANT CIRCULARS ISSUED BY CBEC:Services provided by Institutes of Language Management (ILMs) are liable to service tax
Clarification:- Institutes of Language Management (ILMs) are engaged by various
schools/institutions to develop knowledge and language skills of students. The services provided
by the ILMs are not covered by section 66D (l) of the Finance Act, 1994 or Entry 9 of Notification
No. 25/2012 ST as they are not providing pre-school education or education up to higher
secondary school (or equivalent) or education for obtaining a qualification recognized by law.
6. SERVICE TAX PROCEDURES

1) Full reverse charge (100% service tax to be paid by the person liable for paying service tax
other than service provider):
S.
No.
1.
2.
3.
In relation to service
provided or agreed to be
provided by-
Service provided to
(i.e. Service Receiver)
% Of service tax
payable by any Person
liable for paying
service tax other than
the service provider
(100%)
By way of Legal services

i. an arbitral tribunal, or
ii. a firm of advocates or an
individual advocate other
than senior advocate,
To any business entity

located in the taxable
territory.
The recipient of such

service.
Note: the turnover of
business entity in the
preceding F.Y does not
exceed Rs 10 lakh then
the legal service is
exempt from service tax.
Government or local authority

by way of any services
Except,
i. renting
of
immovable
property, and
ii. services specified in sub
clauses (i), (ii) and (iii) of
clause (a) of section 66D
of the Finance Act, 1994,
Supply of manpower for any
purpose or security services
Note:
Service
provider:
Service provider located in the
taxable territory must fall
under any one of the following
categories,i) Individual
ii) Hindu Undivided Family
iii) Partnership firm, whether
registered or not; or
iv) Association of Persons.

territory.

service.

territory.
Note:
Service Recipient: Service
Recipient located in the
taxable territory must be a
Business Entity registered
as a Body Corporate

service.
MASTER MINDS

Mutual fund agent/distributor
services (Omitted)
(W.E.F 01-04-2016)
Mutual fund or asset

management company
Lottery selling or marketing

agent services
Services
involving
an
aggregator (refer note point)
Lottery distributor or selling

agent
To the recipient of the
Services
4.
5.
6.
Recipient of service
Note:- so, the effect of
amendment S.P shall
liable to pay service tax.
(forward charge i.e.
mutual fund agents/
distributor agents)
Recipient of service
Aggregator(other
service recipient)
than
Note: - Services involving an aggregator: Concept of aggregator introduced in service tax.

Therefore, companies which act as aggregator for service providers like travel portals, food
portals or cab services will now be liable to pay service tax.
Definition of aggregator and brand name inserted in rule 2 [Rule 2(1)]: Aggregator means a
person, who owns and manages a web based software application, and by means of the
application and a communication device, enables a potential customer to connect with persons
providing service of a particular kind under the brand name or trade name of the aggregator
[Rule 2(1)(aa)]
Accordingly, brand name or trade name has also been defined by inserting clause (bca) in rule
2(1) as under:
Brand name or trade means a brand name or a trade name whether registered or not, that is to
say, a name or a mark, such as an
Invented word or writing,
Logo,
Or a symbol,
Label,
Monogram,
Signature
which is used for the purpose of indicating, or so as to indicate a connection, in the course of
trade, between a service and some person using the name or mark with or without any indication
of the identity of that person [Rule 2(1)(bca)]. [Effective from 01.03.2015]
Aggregator to pay service tax under reverse charge [Rule 2(1)(d)(i)(AAA)]: Rule
2(1)(d)(i)(AAA) in relation to service provided or agreed to be provided by a person involving an
aggregator in any manner, the aggregator of the service would be the person liable for paying
service tax.
The liability of aggregator has been represented in the diagram given below:
Ph: 98851 25025/26
2) Facility of (a) quarterly payment of service tax and payment of service tax on receipt basis
extended to OPC having service turnover upto Rs. 50 lakh in the previous financial year
and (b) quarterly payment of service tax extended to HUF [Rule 6(1)]
Particulars
(a) Quarterly payment of service tax
(b) Payment of service tax on receipt
basis, whose turnover up to 50 lakhs,
in the Previous financial year.
One person company (OPC)

eligible or not
HUF
eligible or not
3) CBEC to specify conditions, safe guards and procedure for registration in service tax
(inserted Rule 4(9):
a) Online Registration: with effect from 01.03.2015, registration for single premises will be
granted online within two days of filing the application. The documentation, time limits
and procedure for online registration is outlined below:
b) General procedure
i)
Applicants seeking registration for single premises shall file an online applicationfor
registration on ACES website in Form ST-1.
ii) Following details are to be mandatorily furnished in the application form:
Permanent Account Number (PAN) of the proprietor or the legal entity being registered
(except Government Departments)
E-mail and mobile number
iii) Registration would be granted online within 2 days of filing the complete application
form. On grant of registration, the applicant would be enabled to electronically pay service
tax.
iv) Registration Certificate downloaded from the ACES website would be accepted as proof of
registration and there would be no need for a signed copy.
c) Documentation required: A self attested copy of the following documents will have to be
submitted by registered post/ speed post to the concerned Division, within 7 days of filing the
Form ST-1 online, for the purposes of verification:
i)
Copy of the PAN Card of the proprietor or the legal entity registered
ii) Photograph and proof of identity of the person filling the application
iii) Document to establish possession of the premises to be registered such as proof of
ownership, lease or rent agreement, allotment letter from Government, No Objection
Certificate from the legal owner
iv) Details of the main Bank Account
v) Memorandum/Articles of Association/List of Directors
vi) Authorisation by the Board of Directors/Partners/Proprietor for the person filing the
application
vii) Business transaction numbers obtained from other Government departments or agencies
such as Customs Registration No. (BIN No), Import Export Code (IEC) number, State
Sales Tax Number (VAT), Central Sales Tax Number, Company Index Number (CIN)
which have been issued prior to the filing of the service tax registration application
Verification of premises, if there arises any need for the same, will have to be authorised
by an officer not below the rank of Additional/Joint Commissioner
MASTER MINDS
d) Revocation of registration certificate: The registration certificate may be revoked by the

Deputy/Assistant Commissioner in any of the following situations, after giving the assessee an
opportunity to represent against the proposed revocation and taking into consideration the
reply received, if any:
i)
The premises are found to be non existent or not in possession of the assessee.
ii) No documents are received within 15 days of the date of filing the registration application.
iii) The documents are found to be incomplete or incorrect in any respect.
4) Authentication by Digital Signature [Rule 4C]: Any invoice, bill or challan issued under rule 4A
or consignment note issued under rule 4B may be authenticated by means of a digital signature.
The Board may specify the conditions, safeguards and procedure to be followed by any person
issuing digitally signed invoices, by way of a notification.[w.e.f from 1-03-2015 ]
5) Composition scheme: Person liable for paying the service tax in relation to the services
provided, shall have the option to pay following amounts instead of paying service tax at the rate
of 14.5%
a) Air travel agent:
In the case of
Domestic bookings
International bookings
Before amendment
0.6% of basic fare
1.2% of basic fare
After amendment
0.7% of basic fare
1.4% of basic fare
b) Life insurance business: Where amount of the gross premium allocated for investment or
savings on behalf of policy holder is not intimated to the policy holder at the time of providing
of service:In respect of the
amount of the
premium charged
For the First year
For the
year
Subsequent
Before amendment
After amendment
on 3% of the gross
amount of premium
charged
on 1.5% of the gross
amount of premium
charged

amount of premium
charged
amount of premium
charged
Note:- In case of single premium annuity (insurance) policies,@ 1.4% of the single premium
charged from the policy holder, in cases where the amount allocated for investment or savings
on behalf of policy holder is not intimated to the policy holder at the time of providing of
service.
c) Money changing services:
Gross amount of
currency exchanged
Up to Rs.1,00,000
Exceeding Rs.1,00,000
- up to Rs. 10,00,000
Exceeding Rs.10,00,000
Before amendment
After amendment
0.12% of the gross

amount
of
currency
exchanged
or
Rs.30;
which ever is higher
Rs.120 + 0.06% of the
gross amount of currency
exchanged exceeding Rs.
1,00,000
up
to
Rs.10,00,000
Rs,660 +0.012% of the
gross amount of the
currency
exchanged
exceeding Rs.10,00,000
or Rs.6,000; whichever is
lower
0.14 % of the gross

amount
of
currency
exchanged
or
Rs.35;
which ever is higher.
Rs. 140 + 0.07% of the
gross amount of the
currency
exchanged
exceeding
Rs.1,00,000
upto Rs.10,00,000.
Rs.770 + 0.014% of the
gross amount of the
currency
exchanged
exceeding Rs.10,00,000
or Rs.7,000; which ever is
lower
Ph:
98851 25025/26
d) Distributor or selling agent of lottery services

Conditions
Before amendment
After amendment
If the lottery scheme is

one where the guaranteed
price payout is more than
80%
Rs. 7,000 on every Rs.

10,00,000 (or part of
10,00,000)of
aggregate
face value of lottery tickets
printed by organizing states

10,00,000 (or part of
10,00,000)of
aggregate
printed by organizing states
If the lottery scheme is

one where the guaranteed
price pay out is less than
80%

10,00,000 (or part of
10,00,000)of
aggregate
printed
by
organizing
states

10,00,000 (or part of
10,00,000)of
aggregate
printed
by
organizing
states
6) Service tax (amendment) Rules 2016 (w.e.f 01-04-2016):

(i) Provisions introduced for filing of Annual Returns [Rule 7]
In rule 7 of service tax rules 1994, sub rules (3A) and (3B) was inserted, namely:(3A) Notwithstanding anything contained in sub rule (1):Every assesse shall submit an annual return for the financial year to which the return relates,
in such form and manner as may be specified in the notification in the official Gazette by the
CBEC, by the 30th day of November of the succeeding financial year.
(3B) the central government may, subject to such conditions or limitations, specify by
notification an assesse or class of assesses who may not be required to submit the annual
return referred to in sub rule (3A).
(ii) Annual return filed by the due date may be revised within 1 month from the date of its
submission [Rule 7B(2)]
An assesse who has filed the annual return referred to in sub rule (3A) of rule 7 by the due date
may submit a revised return within a period of one month from the date of submission of the said
annual return.
(iii) Delayed filing of Annual Return to attract a late fee of Rs. 100 per day for the period in
default subject to a maximum of Rs. 20,000 [Rule 7C(2)]

Where the annual return is filed by the assesse after the due date, the assesse shall pay to the
credit of central government, An amount calculated at the rate of Rs. 100 per day for the period
of delay in filing of such return, but subject to a maximum of Rs. 20,000.
SOME IMPORTANT CIRCULARS ISSUED BY CBEC:1. Applicability of service tax on the services received by apparel exporters in relation to
fabrication of garments: The terms of agreement and scope of activity undertaken by
the service provider would determine the nature of service being provided which
would vary from case to case.
Issue: Whether services received by apparel exporters from third party on job work is a
service of manpower supply, which neither falls under the negative list nor is specifically
exempt and thus, liable to service tax?
OR
Whether services received by them is of job work involving a process amounting to
manufacture or production of goods, and thus, would fall under negative list and hence would
not attract service tax?
MASTER MINDS

Manpower supply service: The nature of
manpower supply service is quite distinct from
the service of job work. The essential
characteristics of manpower supply service are
that the supplier provides manpower which is at
the disposal and temporarily under effective
control of the service recipient during the period
of contract. Service providers accountability is
only to the extent and quality of manpower.
Deployment of manpower normally rests with
the service recipient. The value of service has a
direct correlation to manpower deployed, i.e.,
manpower deployed multiplied by the rate. In
other words, manpower supplier will charge for
supply of manpower even if manpower remains
idle.
Job work: On the other hand, the essential

characteristics of job work service are that
service provider is assigned a job e.g.
fabrication/stitching, labeling etc. of garments in
case of apparel. Service provider is accountable
for the job he undertakes. It is for the service
provider to decide how he deploys and uses his
manpower. Service recipient is concerned only
as regard the job work. In other words service
receiver is not concerned about the manpower.
The value of service is function of quantum of
job work undertaken, i.e. number of pieces
fabricated etc. It is immaterial as to whether the
job worker
undertakes job work in his premises or in the
premises of service receiver.
CLARIFICATION:- the exact nature of service needs to be determined on the facts of each case
which would vary from case to case. The terms of agreement and scope of activity undertaken by
the service provider would determine the nature of service being provided.
Note :- every job work is not covered under the negative list. Only if the job work involves a
process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944,
would it be covered under negative list in terms of Section 66D(f) read with section 65B(40) of the
Finance Act, 1994.
2. Incentives received by air travel agents from computer reservation system companies
(CCRS) are liable to service tax:Clarification:It has been clarified that incentives received by the ATAs from the companies providing
computer reservation system (CCRS) are for using the software and platform provided by the
CCRS like Galileo, Amadeus, etc. The CCRS are providing these incentives either for achieving
the targeted booking of air tickets or for loyalty for booking of air tickets using their software
system. Thus, the service provided by CCRS is to the Airlines and ATA is promoting the service
provided by CCRS to Airlines. Thus, the service provided by the ATAs to CCRS is neither
covered in the negative list (section 66D of the Finance Act, 1994) nor exempt by a notification.
Therefore, service tax is leviable on the same.
1. CENVAT CREDIT RULES 2004

AMENDMENTS IN RULE 2
a) Rule 2(a)
Scope of definition of capital goods widened The scope of definition of capital goods has been
widened to include within its ambit the following goods:
i)
Wagons falling under sub-heading 8606 92 of the Central Excise Tariff

(The above amendment (i) include in the definition of capital goods is as follows:Grinding wheels and the like, and parts there of falling under heading 6804 and wagons of
sub heading 860692 of the First Schedule to the Excise Tariff Act.)
ii) Equipment or appliance used in an office located within a factory ( It may be noted that
CENVAT credit will be allowed only on those equipment or appliance which are used in an
office located within the factory and not outside the factory.)
iii) Capital goods used outside the factory of the manufacturer of the final products for
pumping of water, for captive use within the factory.
Ph:
98851 25025/26
(The above amendments (ii) &(iii) includes in the definition of capital goods as follows:Capital goods includes Motor vehicles, other than those falling under tariff headings:
8702, 8703, 8704 (includes dumpers), 8711
But dumpers and tippers as capital goods if
It is used for:
i)
In the factory of the manufacturer of the final products, but does not include any
equipment or appliance used in an office; or (omitted w.e.f 01-04-2016)
ii) Outside the factor of the manufacturer of the final products of generation of electricity or
for pumping of water for captive use within the factory; or
iii) For providing output service.)
b) Rule 2(k):
Scope of definition of inputs widened
The scope of definition of inputs has been widened to include within its ambit the following goods:
1. All goods used for pumping of water for captive use.
2. All capital goods which have a value up to Rs. 10,000 per piece (Thus, on such capital
goods, 100% credit can be taken in the same year in which they are received.)
Consequential amendment has been made in the definition of input [item (C)] to provide that
input excludes
Capital goods except when
i)
used as parts or components in the manufacture of a final product; or
ii) the value of such capital goods is up to Rs.10,000 per piece;

Clarification Regarding Sales Promotion In The Definition Of Input Service:Clarification given by CBEC in vide Notification No. 2/2016 CE (NT) dated 03.02.2016 to clarify that
sales promotion includes services by way of sale of dutiable goods on commission basis.
a) Rule 3 (1) :Restriction on ship breaking units to avail only 85% CENVAT credit of CVD is withdrawn
[Rule 3(1)(vii)]
Proviso to clause (vii) of rule 3(1) restricted CENVAT credit of CVD (leviable under section 3(1) of
the Customs Tariff Act) paid on ships, boats and other floating structures for breaking up [Entry
8908 00 00 of the Customs Tariff], to the extent of 85%.
Clarification:CENVAT credit shall not be allowed in excess of 85% of the additional duty of customs paid
under section 3(1) of the customs Tariff Act, on ships, boats and other Floating Structures for
breaking up, falling under Tariff item 8908 00 00 of the First Schedule to the customs Tariff
Act.(Omitted w.e.f. 01.03.2015).
Thus, ship breaking units would be entitled to avail 100% credit of the CVD paid with effect from
01.03.2015.
b) Rule 3 (4) :i)
Swachh Bharat Cess cannot be paid by utilizing CENVAT credit of any other duty
The CENVAT credit of any duty specified in rule 3(1) shall not be utilized for payment of
Swachh Bharat Cess.
Note:- rule 3(1) is duties / taxes eligible for CENVAT credit. i.e. BED, NCCD, CVD, output
service tax etc.. shall not be utilized for payment of Swachh Bharat Cess.
ii) CENVAT credit of only NCCD to be utilised for payment of the NCCD payable on all
goods
MASTER MINDS
NCCD: The CENVAT credit of any duty specified in rule 3(1), except the National calamity
contingent duty thereof, shall not be utilized for payment of National calamity contingent duty
leviable under section 136 of the Finance act, 2001.
Clarification: credit of NCCD, can be utilized only for payment of NCCD. Besides this,
CREDIT OF OTHER DUTIES cannot be utilized for payment of NCCD (w.e.f 01-03-2016).
Prior 01-03-2016 there is no restriction on utilization of credit of basic excise duty for payment
of NCCD (EXCEPT MOBILE PHONES).
iii) Infrastructure Cess: The CENVAT credit of any duty specified in rule 3(1) shall not be
utilized for payment of Infrastructure cess leviable under section 162(1) of the Finance
Act, 2016
Clarification: W.e.f 01-03-2016, Infrastructure cess is been levied on Motor vehicles of

Heading 8703. No credit of this Cess is available Under Rule 3(1). Further, credit of other
Duties cannot be used for payment of Infrastructure cess. Hence, this amount has to be paid
in cash.
c) Rule 3 (7)(b) :- Specific Restrictions In Relation To Utilization Of Credit:EC and SHEC can be used for payment of excise duty or out put service tax ( w.e.f
30.04.2015): Notification No. 12/2015 CE (NT) dated 30.04.2015 has inserted third, fourth and
fifth provisos in rule 3(7)(b) to give effect to this amendment.
Before amendment
EC can be utilized for payment of EC
SHEC can be utilized for payment of SHEC
After amendment
Manufactures allowed to utilize credit of EC
and SHEC for payment of excise duty or
output service tax (conditional)
However, pursuant to the exemption granted to EC and SHEC leviable on all excisable goods
(with effect from 01.03.2015), a manufacturer has been allowed to utilise the following credits of
EC and SHEC for the payment of basic excise duty or output service tax:
Conditions:
A. EC and SHEC paid on inputs or capital goods
i.
Credit of EC and SHEC paid on inputs or capital goods received in the factory of
manufacture of final product on/after the 1st day of March, 2015.can be utilized for payment
of duty of excise specified in first schedule to the Excise Tariff act.
ii. Credit of EC and SHEC paid on inputs or capital goods received in the premises of the
provider of output service on or after 01-06-2015 can be utilized for payment of service tax
on any output service.
Note: the credit of balance 50% EC & SHEC paid on capital goods received in the factory of
manufacture of final product / premises of the provider of output service in the financial year
2014-15 can be utilized for payment of duty of excise / service tax on any output service
B. EC and SHEC paid on input services
i)
The credit of EC and SHEC paid on input services received by the manufacturer of final
product on or after the 1st day of March, 2015 can be utilized for payment of duty of excise
specified in first schedule to the Excise Tariff act.
ii) The credit of EC and SHEC paid on input services in respect of which the invoice, bill,
challan or Service Tax Certificate for Transportation of goods by Rail ( referred to in Rule 9),
as the case may be is received by the provider of output service on or after the of 1st day of
June, 2015 can be utilized for payment of service tax on any output service.
Copyrights Reserved
To
Ph:
98851 25025/26
a) [Rules 4(1) and 4(2)(a)]:

CENVAT credit allowed on inputs and capital goods received directly in the premises of
the job worker [Rules 4(1) and 4(2)(a)]:
Before amendment
According to Rule 4(1) and rule 4(2A) when
goods were directly sent to job-workers
premises without bringing them in the
manufacturer/output
service
providers
premises, CENVAT credit could be taken
only when such goods were received
back from the job-workers premises in
the premises of manufacturer/output
service provider.
After amendment
Rule 4(1) and rule 4(2)(a) have been
amended to allow CENVAT credit in
respect of inputs and capital goods
immediately on receipt of the same in the
premises of job worker where the same
are sent directly to the job worker on the
direction of the manufacturer or the provider
of output service, as the case may be.
b) Rule 4(2)(a):General provision: Availment of credit not exceeding 50% in the year of acquisition.
But in some cases, 100% credit on capital goods can be taken in the same financial year.
One of the case is Units eligible for SSI exemption:i)
SSI exemption In case of jewellery manufacturers:- An Assessee engaged in the

manufacture of articles of Jewellery, other than Articles of Silver Jewellery but inclusive of
Articles of Silver Jewellery studded with diamond, ruby, emerald or sapphire, Falling under
chapter heading 7113 of the First Schedule of the Excise Tariff Act, shall be eligible for 100%
credit on capital goods in the same financial year, if his aggregate value of clearances of
all excisable goods for home consumption in the preceding financial year, computed in the
manner specified in the said notification did not exceed Rs.12crores;
ii) SSI exemption In case of other manufacturers:-
A unit whose turnover does not exceed Rs. 4 crores in the previous year is entitled to full
exemption from payment of duty on its first clearances of up to Rs. 150 lakh in the
current financial year, Shall be eligible for 100% credit on capital goods in the same
financial year,
c) Rule 4(5)(b):CENVAT credit allowed on tools of Chapter 82 of the Central Excise Tariff sent to another
manufacturer or job-worker for production of goods:Credit admissible on Jigs, fixtures, moulds and dies sent to another manufacturer/ Job-worker
[Rule 4(5)(b)]:
The CENVAT credit shall also be allowed to a manufacturer of final products in respect of Jigs,
fixtures, moulds and dies, or tools falling under Chapter 82 of the First Schedule to the
Excise Tariff Act, sent by such manufacturer to,i) Another manufacturer for the production of goods; or
ii) A job worker for the production of goods on his behalf,
According to his specifications
However, Credit Shall also be allowed where Jigs, fixtures, moulds and dies, or tools
falling under chapter 82 of the first schedule to the Excise Tariff Act, are sent by the
manufacturer of final products to the premises of another manufacturer or job worker
without bringing these to his own premises.
Clarification:The benefit extended to manufacturers of final product to take CENVAT credit on tools falling
under chapter 82 of the first schedule to the Excise Tariff Act,
MASTER MINDS

d) Rule 4(6):-
Permission given for sending inputs/partially processed inputs outside factory to a job-worker
and clearance therefrom on payment of duty shall be valid for 3 financial years (Earlier
Permission shall be valid for 1 financial year)
e) Rule 4(7):Time limit for availing credit on inputs and input services:Before amendment
After amendment
The manufacturer and the provider of

output service shall not take CENVAT
credit after 6 months of the date of
issue of any of the documents specified
in rule 9(1)
The manufacturer and the provider of output

service shall not take CENVAT credit after 1 year
of the date of issue of any of the documents
specified in rule 9(1) except in case of services
provided by Government, Local Authority or any
other person, by way of assignment of right to
use any natural resource.
Service tax paid on assignment charges of a natural resource to be allowed as CENVAT

credit spread over the time for which the rights have been assigned
i)
Input Service Credit to be availed within one year from the date of invoice: The
manufacturer or the provider of output service shall not take CENVAT credit after one year of
the date of issue of any of the documents specified in rule 9(1) except in case of services
provided by Government, Local Authority or any other person, by way of assignment of
right to use any natural resource.
Clarification: Amendment is made to allow CENVAT credit to be taken on the basis of the
documents specified in Rule 9(1) of CENVAT Credit Rules, 2004 even after the period of 1
Year from the date of issue of such a document in case of services provided by the
Government or a local Authority or any other person by way of assignment of right to
use any natural resource.
ii)
(a) CENVAT credit of service tax paid on one time charges for assignment of right to use
natural resources etc.- To be spread over the period of 3 years[substituted by Notification
No. 24/2016 dated 13-04-2016 CE(NT) dated 13-04-2016]: The CENVAT credit of service
Tax paid in a financial year , on the onetime charges payable in full Upfront or in
installments, for the service of assignment of the right to use any natural resource by the
government, local Authority or any other person, shall be spread evenly over a period
of three years:
Amount of CENVAT Credit that
shall be taken in a financial year
Service Tax paid on the ch arg es payable for the

assignment of the right to use natural resources
3
(b) Further assignment of Rights- CENVAT credit to the extent of the service tax payable on
for such further assignment to be allowed in the same financial year: Where the
manufacturer of Goods or provider of output service , as the case may be , further assigns
such right to use assigned to him by the Government or any other person , in any financial
year, to another person against a consideration , such amount of balance CENVAT credit
as does not exceed the service tax payable on the consideration charged by him for such
further assignment shall be allowed in the same Financial Year.
Utilization of CENVAT credit in case of assignment of Licenses:
Illustration: Swadeshi Ltd. has obtained by way of assignment a spectrum license on 1 4
2016 from TRAI for a period of 10 Years. The total license fee paid is Rs 300Crores plus service
tax @ 14.5%.During the F.Y. 2016-2017, the company has provided telecommunication services
of Rs. 110 crores plus Service tax @ 14.5%. Compute the amount of Service Tax Payable by the
Company.
Ph:
98851 25025/26
What would be your answer in case the company has assigned such rights to Teletalk Ltd for a
consideration of Rs.210crores plus service tax @ 14.5% in financial year 2017- 18.
Solution:
i)
The relevant computations are as follows (amounts in Rs.)

Particulars
S. No
ST
SBC
Total
1.
Value of taxable services provided 110 Crores
15.40
0.55
15.95
2.
CENVAT Credit: Service tax paid on spectrum

license [300 crores x 14% 3]
14.00
14.00
3.
Service tax payable in cash [1-2]
1.40
0.55
1.95
Working Notes:
1. The CENVAT Credit of Service Tax paid in a financial year, on the onetime charges payable
in full upfront or in installments, for the service of assignment of the right to use any natural
resource by the Government, local authority or any other person, shall be spread evenly over
a period of 3 years
2. No CENVAT credit is allowed of Swachh Bharat Cess. Further, SBC cannot be paid by
utilizing credit of any other duty or tax
ii) Where the provider of output service further assigns such right to use, in any financial year, to
another person against a consideration, such amount of balance CENVAT credit as does not
exceed the service tax payable on the consideration charged by him for such further
assignment, shall be allowed in the same financial year: In case the company has assigned
such rights to Teletalk limited for a consideration of 210 Crores in financial year 2017-18.
Hence, the remaining CENVAT Credit of 28 Crores [42 Crores 14 Crores] can be utilized
for payment of service tax liability. The utilization of CENVAT Credit shall be restricted to
service tax liability
S. No
Particulars
ST
SBC
Total
1.
Value of taxable services provided Rs 210 Crores
29.40
1.05
30.45
2.
CENVAT Credit: Remaining CENVAT Credit 28

Crores to be utilized to the extent of service tax
payable
28.00
28.00
Service tax payable in cash [1-2]
1.40
1.05
2.45
3.
f) Credit allowed on payment of service tax, if service tax is paid under reverse charge (both
full and partial reverse charge): In respect of input service where the whole or part of the
service tax is liable to be paid by the recipient of the service, credit of service tax payable by the
service recipient shall be allowed after the service tax is paid [First proviso to sub-rule (7)].
Effect of amendment: In case of partial reverse charge (w.e.f. 01-04-2015): in respect of input
service where part of the service tax is liable to be paid by the recipient of service, credit of
service tax shall be allowed as underFor service receivers portion: only after payment of service tax to the treasury of the
government by the receiver of service
For service providers portion: CENVAT credit shall be allowed, on or after the day on which
the invoice, bill or, as case may be, challan referred to in rule 9, is received.
a) Rule 5:
Export goods defined for the purpose of refund of CENVAT credit: The definition of export
goods has now been inserted in the rule to mean any goods which are to be taken out of India to
a place outside India.
MASTER MINDS
Time limit for filing refund claim [Amended by Notification No. 14/2016- CE (N.T.) dated 1-32016 w.e.f. 1-3-2016]: The application in the Form A along with the documents specified therein
and enclosures relating to the quarter for which refund is being claimed shall be filed as under:
(i) In case of manufacturer, before the expiry of the period specified in Section 11B of the Central
Excise Act, 1944;
(ii) In case of service provider, before the expiry of 1 year from the date of
(a) Receipt of payment in convertible foreign exchange, where provision of service had been
completed prior to receipt of such payment; or
(b) Issue of invoice, where payment for the service had been received in advance prior to the
date of issue of the invoice.
b) Rule 5B:No refund of CENVAT credit under rule 5B to service providers providing manpower
supply/ security services
Rule 5B of the CENVAT Credit Rules, 2004 provides that service providers, rendering notified
reverse charge services, being unable to utilise the CENVAT credit availed on inputs and input
services for payment of service tax on such output services, shall be allowed refund of such
unutilised CENVAT credit.
In this regard, following partial reverse charge services were notified
(i) renting of a motor vehicle designed to carry passengers on non-abated value, to any person
who is not engaged in a similar business;
(ii) supply of manpower for any purpose or security services; or (deleted w.e.f. 01.04.2015)
(iii) service portion in the execution of a works contract
Clarification:
Since with effect from 01.04.2015, service tax with respect to supply of manpower for any
purpose or security services is payable on the basis full reverse charge, service providers of
said services will no longer be eligible for refund of CENVAT credit. Further, application in Form A
for claiming refund has also been suitably modified.
Rule 6:- Total Rule 6 Is Re-Drafted, the amended rule 6 is as follows:
Obligation of a manufacturer or producer of final products and a provider of output service [Rule 6]
[Amended by Notification No. 13/2016- CE (N.T.) dated 1-3-2016 w.e.f 1-4-2016]:
W.e.f. 1-4-2016 the provisions are as under,
1. No CENVAT credit on inputs and input services used in exempt goods! services [(Rule 6(1)]: The
CENVAT credit shall not be allowed on
a) such quantity of input i)
as is used in or in relation to the manufacture of exempted goods; or
ii) for provision of exempted services; or
b) input service as is used

i)
in or in relation to the manufacture of exempted goods and their clearance upto the place
of removal; or
ii) for provision of exempted services, and
the credit not allowed shall be calculated and paid by the manufacturer or the provider of
output service, in terms of the provisions of Rule 6(2)/(3), as the case may be.
Ph:
98851 25025/26
Note:
a) CENVAT not to be denied to job workers of Jewellery: The CENVAT credit on inputs shall not be
denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground
that the said inputs are used in the manufacture of goods cleared without payment of duty under
the provisions of that rule.
b) Exempted goods or final products shall include non-excisable goods [Explanation 1]: For the
purposes of this rule, exempted goods or final products shall include non-excisable goods cleared
for a consideration from the factory.
c) Valuation of non-excisable goods [Explanation 2]: Value of non-excisable goods
i) Invoice value; and
ii) if invoice value is not available, such value shall be determined by using reasonable means
consistent with the principles of valuation contained in the Excise Act and the rules made
there under.
d) Activities not a service u/s 65B(44) to be included in exempted service [Explanation 3]: For the
purposes of this rule, exempted services as defined in Rule 2(e) shall include an activity, which is
not a service as defined in section 65B(44) of the Finance Act, 1994 provided that such activity
has used inputs or input services.
e) Valuation of such activities [Explanation 4]: Value of such an activity =
i)
The invoice! agreement/ contract value; and
ii) where such value is not available, such value shall be determined by using reasonable means
consistent with the principles of valuation contained in the Finance Act, 1994 and the rules
made there under.
2. No CENVAT credit if final product or output service exempt (Rule 6(2)):

i)
A manufacturer who exclusively manufactures exempted goods for their clearance upto the
place of removal; or
ii) A service provider who exclusively provides exempted services, shall pay the whole amount of
credit of input and input services and shall, in effect, not be eligible for credit of any inputs and
input services.
3. Manufacturer of dutiable & exempt goods or provider of taxable & exempt services Options to
be adopted for credit on inputs and input services (Rule 6(3)):
a) A manufacturer who manufactures two classes of goods, namely :i) non-exempted goods removed;
ii) exempted goods removed;
(or)
b) a provider of output service who provides two classes of services, namely :i)
non-exempted services;
ii) exempted services,
Shall follow any one of the following options applicable to him, namely:OPTION 1: ADHOC REVERSAL:
Pay an amount equal to i)
6% of value of the exempted goods; and
ii) 7% of value of the exempted services,

subject to a maximum of the sum total of opening balance of the credit of input and input services
available at the beginning of the period to which the payment relates and the credit of input and input
services taken during that period.
However, following points have to be considered here:
i)
Excise duty paid on exempted goods to be reduced: If any duty of excise is paid on the exempted
goods, the same shall be reduced from the above amount.
MASTER MINDS
ii) If benefit of abatement is taken, then abatement value to be considered: If any part of the value of
a taxable service has been exempted on the condition that no CENVAT credit of inputs and input
services, used for providing such taxable service, shall be taken, then, the ad-hoc reversal shall
be on such abated value i.e. 7% of the value so exempted.
Example: If gross amount charged is 100, abatement is 60%, then, the abated value being 60, the
adhoc reversal shall be 7% of 60.
iii) Transportation of goods or passengers by rail service: In case of transportation of goods or
passengers by rail, the amount required to be paid under above shall be an amount equal to 2%
of value of the exempted services, instead of 7% of value of exempted services.
Illustration:M/s. XYZ Ltd. engaged in manufacturing of dutiable and exempted goods and provision of taxable
and exempted services, furnishes you the following information for the month of April,2016 (all
information in addition to the other)a) Total value of dutiable excisable goods cleared during the month : RS 100 lakhs (Duty @ 12.5%)
b) Value of excisable goods falling under Notf. No.1/2011-CE, dtd1-3-2011 : Rs 5 lakhs (Duty @ 2%)
c) Value of excisable goods falling under Notf. No. 12/2012[SR.No.128]: Value =Rs 5 lakhs (Duty @
1%)
d) Other exempted excisable goods, cleared during the month : Value = Rs 100 lakshs
e) Clearances of excisable goods to SEZ without payment of duty : Value =Rs 15 Lakshs
f) Total Value of taxable services provided : Rs 50 lakhs (Rate of service tax : 14.5%)
g) Gross Value of other taxable services provided (abatement @ 30% in value availed on the
condition of non-availment of CENVAT credit) : Rs 50 lakhs (rate of services tax : 14.5%)
h) Non-taxable services provided : Rs 30 Lakhs
i) Value of traded goods : Rs 20 lakhs
j)
Total CENVAT Credit availed during the month (all common inputs and input services) : Rs 25
lakhs.
It doesnt maintain separate accounts for the various inputs and input services used in such
excisable goods and services and has, therefore, opted for option under rule 6(3)(a) of the CENVAT
Credit Rules, 2004 (Value based payment on exempted goods and services).
Assume that payment of all services provided, as aforesaid, was received in the same month itself.
You are required to compute the amount of payment to be made for the month of April, 2016.
Solution : Since M/s. XYZ Ltd. has opted for value-based payment on exempted goods and services,
therefore, it shall pay 6 % of the value of exempted goods and 7% of the value of exempted services
computed as follows(a)Duty payable on dutiable excisable goods (Rs 100 lakhs x 12.5%)
(b) &(c) (i) Duty payable on excisable goods falling under Notification No.1/2011-CE,
dated 1-3-2011 and 12/2012-CE (these goods are exempted goods under Rule
2(d) [Rs 5 lakh x 2% +Rs 5 lakhs x1%]
(ii) Since these goods are deemed to be exempted goods, therefore,6% of the
value thereof is payable under Rule 6(3), However, the duty paid on such
exempted goods under Notification No 1/2011-CE and 12/2012-CE, Shall be
allowed as deduction. [6% of (RS 5 lakh+Rs.5 lakhs)]-Duty paid in (b)(i) above]
= 60,000 15,000
(d) 6% of the value of exempted excisable goods under Rule6(3) i.e 6% of Rs 100
lakhs
(e) Clearances of excisable goods to SEZ without payment of duty No payment
under Rule 6(3) is required in view of specific provisions of Rule 6(6)
(f) Service Tax on taxable services [ Rs 50 lakh x 14.5%]
12,50,000
15,000
45,000
6,00,000
Nil
7,25,000
Ph:
98851 25025/26
(g) (i) Service Tax payable on taxable value (net of abatement ) [(Rs 50 lakh
30%)x14.5% ]
(ii) 7 % of the value for which abatement claimed (Service for which abatement in
value is availed are covered under exempted Sevices under Rule 2(e) The
amount of 7% of the value of exempted services is payable on the abatement
availed. [Rs 50 lakh x 30% x7%]
(h) 7% of the value of non-taxable services [services not taxable u/s 66B of the
Finance Act, 1994 are also exempted services under Rule 2(e) , hence payment
under Rule 6(3) required to be made in respect thereof.] [ Rs 30 lakh x 7%]
(i) 7% of the value of trading of goods [ Trading is also exempted services under
Rule 2(e) ].
Total of (a) to (i) above
Less : CENVAT Credit of common inputs and input services.
Net sum payable through electronic banking
5,07,500
1,05,000
2,10,000
1,40,000
35,97,500
25,00,000
10,97,500
OPTION 2: FORMULA BASED (PROPORTIONATE) REVERSAL FOR INPUTS AND INPUT

SERVICES [Rule 6(3A)]:
Pay an amount as determined under rule 6(3A):
The manufacturer of final products or the provider of output service shall determine the
credit required to be paid, out of this total credit of inputs and input services taken during
the month, denoted as T, in the following sequential steps and provisionally pay every
month, the amounts determined under sub-clauses (i) and (iv), namely:
i) the amount of CENVAT credit attributable to inputs and input services used
a) exclusively in or in relation to the manufacture of exempted goods removed; or
b) for provision of exempted services,
shall be called ineligible credit, denoted as A, and shall be paid;
ii) the amount of CENVAT credit attributable to inputs and input services used
a) exclusively in or in relation to the manufacture of non-exempted goods removed; or
b) for the provision of non-exempted services,
shall be called eligible credit, denoted as B, and shall not be required to be paid;
iii) credit left after attribution of credit under rule 6(3A)(b)(i)/(ii) shall be called common
credit, denoted as C and calculated as,
C = T - (A + B);
Explanation: Where the entire credit has been attributed under rule 6(3A)(b)(i)/(ii),
namely ineligible credit or eligible credit, there shall be left no common credit for
further attribution.
iv) the amount of common credit attributable towards exempted goods removed or for
provision of exempted services shall be called ineligible common credit, denoted as D
and calculated as follows and shall be paid, D = (F/F) x C;
However, where no final products were manufactured or no output service was
provided in the preceding financial year, the CENVAT credit attributable to ineligible
common credit shall be deemed to be 50% of the common credit.
The sum total of value of exempted services provided
+ Value of exempted goods removed during the
preceeding financial year (E)
x Common Credit (C)

i.e.D =
The
sum
total
of
value
of
non
Exempted
services
provided
+ Value of exempted services provided + value of non exempted
goods removed + Value of exempted goods removed during the
preceeding financial year (F)
v) remainder of the common credit shall be called eligible common credit and denoted as
G, where, G=C-D;
MASTER MINDS
Explanation: For the removal of doubts, it is hereby declared that out of the total credit T, which is
sum total of A, B, D, and G, the manufacturer or the provider of the output service shall be able to
attribute provisionally and retain credit of B and G, namely, eligible credit and eligible common
credit and shall provisionally pay the amount of credit of A and D, namely, ineligible credit and
ineligible common credit.
Interest @ 15% p.a. in case of delay in payment: Where manufacturer or the provider of the output
service fails to pay the amount determined under sub-clause (i) or sub-clause (iv), he shall be liable
to pay the interest from the due date of payment till the date of payment of such amount, at the rate
of 15% per annum.
T
The manufacturer or the provider of output service shall determine the amount of
(Annual) CENVAT credit attributable to exempted goods removed and provision of exempted
services for the whole of financial year, out of the total credit denoted as T (Annual)
taken during the whole of financial year in the following manner, namely:A
(i) The CENVAT credit attributable to inputs and input services used exclusively in or in
(Annual) relation to the manufacture of exempted goods removed or for provision of exempted
services on the basis of inputs and input services actually so used during the financial
year, shall be called Annual ineligible credit and denoted as A (Annual);
B
(ii) the CENVAT credit attributable to inputs and input services used exclusively in or in
(Annual) relation to the manufacture of non-exempted goods removed or for the provision of
non-exempted services on the basis of inputs and input services actually so used shall
be called Annual eligible credit and denoted as B(Annual);
C
(iii) common credit left for further attribution shall be denoted as C (Annual) and
(Annual) calculated as, C (Annual) = T (Annual) - [A (Annual) + B (Annual)]
D
(iv) common credit attributable towards exempted goods removed or for provision of
(Annual) exempted services shall be called Annual ineligible common credit, denoted by D
(Annual) and shall be calculated as, D (Annual) = (H/I) x C (Annual)
Value of exempted services provided + Value of
exempted goods removed during the financial year (H)
i.e.D( Annual) =
x C( Annual)
Value
of
non
exempted
services
provided
+
value
of
exempted
services provided + Value of non exempted goods removed + value of
exempted goods removed during the financial year (I)
Copyrights Reserved
To
Ph:
98851 25025/26
The above provisions of sub rule (3A) has been summarized in the following diagram:
Manufacturer manufacturing NEGR+EGR
OR
Output service provider providing NES+ES
Avail credit on ALL I + IS
T= Total monthly credit taken
Credit Attributable to I +IS used

exclusively in manufacture of
EGR / provision of ES
Credit attributable to I +IS used

exclusively in manufacture of
NEGR/ provision of NES
Remaining Credit = T-(A+B)
Common Credit
Ineligible credit
Eligible credit
NOT TO BE PAID
Remaining common
credit = C-D
Credit attributable to
EGR/ ES
D= E/F x C
E= value of (ES+EGR) in PFY
F= Value of (NES+ES+NEGR
+ EGR) in PFY
D = 50% of C, if no final
products
manufactured/
output service provided in
PFY
Eligible common
credit
NOT TO BE PAID
Ineligible credit
TO BE PAID
At the end of the year actual amounts of A + D will be computed for the whole year in the similar
manner as described above by taking annual figures of T B & C and H [value of ES + EGR during
the FY] & I [Value of NES + ES + NEGR + EGR during the FY] in place of E & F.
Shortfall, if any, will be paid by 30th June of the SFY failing which interest @ 15% will be payable
from 30th June of SFY till the date of payment of such amount. Excess amount paid, if any, can
be taken as credit. If the amount to be paid provisionally is not paid by the due date of payment,
interest @ 15% will be payable from the due date of payment till the date of payment of such
amount.
NEGR
EGR
: Non exempted goods removed

: Exempted goods removed
IS
: Input Services
PFY
: Preceding Financial Year
NES
: Non exempted services
FY
: Financial Year
ES
: Exempted service
SFY
: Succeeding Financial Year
: Inputs
MASTER MINDS
Procedural Compliances:
1. Intimation in writing to the Superintendent before exercising the option: For determination of
amount
required to be paid under Rule 6(3)(ii), the manufacturer of goods or the provider of
output service shall follow the following procedure and conditions, namely :The manufacturer of goods or the provider of output service shall intimate in writing to the
Superintendent of Central Excise giving the following particulars, namely :i)
Name, address and registration number of the manufacturer of goods or provider of output
service;
ii) Date from which the option under this clause is exercised or proposed to be exercised;
iii) Description of inputs and input services used exclusively in or in relation to the manufacture of
exempted goods removed or for provision of exempted services and description of such
exempted goods removed and such exempted services provided;
iv) Description of inputs and input services used exclusively in or in relation to the manufacture of
non-exempted goods removed or for the provision of non-exempted services and description
of such non-exempted goods removed and non-exempted services provided;
v) CENVAT credit of inputs and input services lying in balance as on the date of exercising the
option under this condition;
2. Payment of differential amount by 30th June of the financial year: The manufacturer or the
provider of output service shall pay on or before the 30th June of the succeeding financial year,
an amount equal to difference between the total of the amount of Annual ineligible credit and
Annual ineligible common credit and the aggregate amount of ineligible credit and ineligible
common credit for the period of whole year, namely, [{A (Annual) + D(Annual)} - {(A + D)
aggregated for the whole year)}], where the former of the two amounts is greater than the later;
3. Interest @ 15% p.a. payable in case of delay in payment: Where the aforesaid amount is not
paid by the 30th June of the succeeding financial year, the manufacturer of goods or the provider
of output service, shall, in addition to the amount of credit so paid, be liable to pay on such
amount an interest @ 15% p.a., from the 30th June of the succeeding financial year till the date of
payment of such amount;
4. Re-credit in case provisional amount of CENVAT credit reversed is greater than actual
amount to be reversed: The manufacturer or the provider of output service, shall at the end of
the financial year, take credit of amount equal to difference between the total of the amount of the
aggregate of ineligible credit and ineligible common credit paid during the whole year and the total
of the amount of annual ineligible credit and annual ineligible common credit, namely, [{(A + D)
aggregated for the whole year)} {A (Annual) + D (Annual)}], where the former of the two
amounts is greater than the later;
5. Intimation to the Superintendent: The manufacturer of the goods or the provider of output
service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of 15
days from the date of payment or adjustment, as above, the following particulars, namely :i)
details of credit attributed towards eligible credit, ineligible credit, eligible common credit and
ineligible common credit, month-wise, for the whole financial year, determined on provisional basis;
ii) CENVAT credit annually attributed to eligible credit, ineligible credit, eligible common credit
and ineligible common credit for the whole of financial year, determined on actual basis;
iii) amount short paid along with the date of payment of the short-paid amount, i.e. if actual
reversible is more than provisional reversal,
iv) interest payable and paid on such short paid amount; and
v) credit taken on account of excess payment with the date of taking the credit.
Ph:
98851 25025/26
Illustration:M/s xyz & co. ltd., a manufacturer of dutiable as well as exempted goods and also a provider of
taxable as well as exempted services, furnishes the following information
S. No
1.
2.
3.
4.
Particulars
Value of exempted goods removed @650 per unit
Value of non-exempted goods removed
Value of exempted services provided
Value of non - exempted services provided
Financial
Year 15 16
585
400
250
500
For the month

of April, 2016
65
50
30
60
The details of CENVAT credit during the month of April, 2016 are as under:
Particulars
Rs.
Total CENVAT credit taken of inputs and inputs services
The amount of CENVAT credit attributable to input services used exclusively in

the manufacture of exempted goods and for provisions of exempted services
4,00,000
The amount of CENVAT credit attributable to input services used exclusively in

the manufacture of dutiable goods removed and provision of taxable services.
1,00,000
10,00,000
You are required to compute the provisional amount of proportionate credit reversible under rule
6(3A) of the CENVAT credit rules, 2004 for the month of April, 2016.
Total CENVAT credit taken of inputs and input services
Less: The amount of CENVAT credit attributable to inputs and input services used
exclusively in the manufacture of exempted goods and for provision of
exempted services which shall be required to be paid.
[A]
Less : The amount of CENVAT credit attributable to inputs and input services used
exclusively in the manufacture of dutiable goods removed and provision of
taxable services which shall not be required to be paid.
[B]
Common credit
[C]
The amount of common credit attributable towards exempted goods removed or for
provision of exempted services shall be called ineligible common credit, denoted as D
and calculated as follows and shall be paid
[D]
Provisional CENVAT Credit reversible u/r 6(3A) for the month [A]+[D]
10,00,000
4,00,000
1,00,000
5,00,000
2,40634
6,40,634
6. Failure to exercise option by manufacturer! service provider Adjudicating authority may allow to
follow the above procedure and require payment of prescribed amount along with interest
calculated @ 15% p.a. [Rule 6(3AA)]: Where a manufacturer or a provider of output service has
failed to exercise the option as above and follow prescribed procedure, the Central Excise Officer
competent to adjudicate a case based on amount of CENVAT credit involved, may allow such
manufacturer or provider of output service to follow the procedure and pay the amount calculated
for each of the months along with interest calculated @ 15% p.a. from the due date for payment
of amount for each of the month, till the date of payment thereof.
7. Transitional provision - Existing Rule 6 of CCR would continue to be in operation upto 30-062016, for the units who are required to discharge the obligation in respect of financial year 201516 [Rule 6(3AB)]: Assessee who has opted to pay an amount under Rule 6(3)(ii)/(iii) in the
financial year 2015-16, shall pay the amount along with interest or take credit for the said financial
year in terms of Rule 6(3A), as they prevail on the day of publication of this notification and for this
purpose these provisions shall be deemed to be in existence till the 30th June, 2016.
MASTER MINDS
Other aspects:
1. Option, once exercised, applies to all goods/services for that financial year
[Explanation 1]:
If the manufacturer of goods or the provider of output service, avails any of the option, he shall
exercise such option for all exempted goods manufactured by him or, as the case may be, all
exempted services provided by him, and such option shall not be withdrawn during the remaining
part of the financial year.
2. No credit on ineligible inputs/ services [Explanation 2]: No CENVAT credit shall be taken on the
duty or tax paid on any goods and services that are not inputs or input services.
3. Clarification of Certain terms [Explanation 3]: For the purposes of Rule 6(3) and Rule 6(3A),a) Non-exempted goods removed means the final products excluding exempted goods
manufactured and cleared upto the place of removal;
b) Exempted goods removed means the exempted goods manufactured and cleared upto the
place of removal;
c) Non-exempted services means the output services excluding exempted services.
4. Special provisions for reversal of CENVAT credit in case of banking company and a financial
institution including a non-banking financial company- Reversal either on actual basis or of 50%
credit taken each month [Rule 6(3B)]: A banking company and a financial institution including a
non-banking financial company, engaged in providing services by way of extending deposits,
loans or advances, in addition to options given in Rule 6(1), (2) and (3), shall have the option to
pay for every month an amount equal to 50% of the CENVAT credit availed on inputs and input
services in that month.
5. No CENVAT Credit on capital goods are used for the manufacture of exempted goods or provision of
exempted service for 2 years from the date of commencement of commercial production or provision
of service [Rule 6(4)] : No CENVAT credit shall be allowed on capital goods used exclusively in the
manufacture of exempted goods or in providing exempted services for a period of 2 years from the
date of commencement of the commercial production or provision of services, as the case may be,
other than the final products or output services which are exempt from the whole of the duty of excise
leviable thereon under any notification where exemption is granted based upon the value or quantity
of clearances made or services provided in a financial year.
Capital goods installed after the date of commencement of commercial production or provision of
service - Period of 2 years to be reckoned from the date of installation: Where capital goods are
received after the date of commencement of commercial production or provision of services, as
the case may be, the period of two years shall be computed from the date of installation of such
capital goods.
6. Non applicability of above provisions - i.e. entire CENVAT credit of duty/ tax paid on
inputs/ input services/ capital goods will be allowed if goods cleared to SEZ, EHTP etc.:
The provisions discussed above [sub-rules (1), (2), (3) and (4)] shall not be applicable,a) In case of manufacturer of excisable goods [Rule 6(6)] : if the excisable goods removed
without payment of duty are either,
i)
cleared to a unit in a special economic zone or to a developer of a special economic zone

for their authorized operations; or
ii) cleared to a 100% export-oriented undertaking; or

iii) cleared to a limit in an Electronic Hardware Technology Park or Software Technology
Park; or
iv) supplied to the United Nations or an international organization for their official use or
supplied to projects funded by them, on which exemption of duty is available under
Notification No.108/95-CE; or
supplied for the use of foreign diplomatic missions or consular missions or career
consular offices- or diplomatic agents in terms of the provisions of Notification No.
12/2012-CE; or
Ph:
98851 25025/26
v) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002;
or
vi) gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of
manufacture of copper or zinc by smelting; or
vii) all goods, which are exempt from the duties of customs leviable under the First Schedule
to the Customs Tariff Act, 1975 and the additional duty leviable under section 3(1) of the
said Customs Tariff Act, when imported into India and are supplied-
against International Competitive Bidding; or

to a power project from which power supply has been tied up through tariff based
competitive bidding; or
to a power project awarded to a developer through tariff based competitive bidding, in
terms of Notification No. 12/2012-CE, dated 17-03-2012.
viii) Supplies made for setting up of solar power generation projects or facilities.
ix) Ethanol produced from molasses generated from cane crushed in the sugar Season 201516 i.e. 1st October, 2015 onwards, for supply to the public sector oil marketing companies,
namely, Indian Oil Corporation Ltd., Hindustan Petroleum Corporation Ltd. or Bharat
Petroleum Corporation Ltd., for the purposes of blending with petrol, in terms of the
provisions of S.No. 40A of the Table in Notification No.12/2012-CE, dated 17-03-2012,
number G.S.R. 163(E), dated 17-03-2012.
b) In case of provider of taxable services [Rule 6(7)] : If the taxable services are provided,
without payment of service tax, to a unit in a Special Economic Zone or to a developer of a
Special Economic Zone for their authorized operations or when a service is exported or when
a service is provided or agreed to be provided by way of transportation of goods by a
vessel from customs station of clearance in India to a place outside India.
As per Rule 6(8), for the purpose of this rule, a service provided or agreed to be provided
shall not be an exempted service when, i) The service is exported as given under Rule 6A of the Service Tax Rules, 1994 and the
payment for the service is to be received in convertible foreign currency; and
ii) Such payment has not been received for a period of six months or such extended period,
as may be allowed from time-to-time by the Reserve Bank of India, from the date of
provision.
However, if such payment is received after the specified or extended period allowed by the Reserve Bank of India,
but within one year from such period,
The service provider shall be entitled to take the credit of the amount equivalent to the
CENVAT credit paid earlier in terms of sub-rule (3) to the extent it relates to such
payment, on the basis of documentary evidence of the payment so received.
a) Rule 7:- Total Rule 7 Is Re-Drafted, the amended rule 7 is as follows:
The following are the provisions, in brief, relating to Input Service Distributor:
1. Definition (Rule 2(m) of the CENVAT Credit Rules, 2004): Input service distributor means:
(i) An office of the manufacturer or producer of final products or provider of output service,
(ii) Which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards
purchase of input services; and
(iii) Issues invoice, bill or, challan as the case may be;
(iv) For the purposes of distributing the credit of service tax paid on the said service;
(v) To such manufacturer or producer or provider or an outsourced manufacturing unit as the
case may be;
MASTER MINDS
2. Manner of distribution of credit by input service distributor [Rule 7 of CEWVAT Credit

Rules, 2004]: The input service distributor shall distribute the CENVAT credit in respect of the
service tax paid on the input service to its manufacturing units or unit providing output service or
an outsourced manufacturing units, as defined in Explanation 4, subject to the following
conditions, namely :
(i) The credit distributed against a document referred to in rule 9 does not exceed the amount of
service tax paid thereon;
(ii) The credit of service tax attributable as input service to a particular unit shall be distributed
only to that unit;
(iii) The credit of service tax attributable as input service to more than one unit but not to all the
units shall be distributed only amongst such units to which the input service is attributable and
such distribution shall be pro rata on the basis of the turnover of such units, during the
relevant period, to the total turnover of all such units to which such input service is attributable
and which are operational in the current year, during the said relevant period;
(iv) the credit of service tax attributable as input service to all the units shall be distributed to all
the units pro rata on the basis of the turnover of such units during the relevant period to the
total turnover of all the units, which are operational in the current year, during the said relevant
period;
(v) outsourced manufacturing unit shall maintain separate account for input service credit
received from each of the input service distributors and shall use it only for payment of duty on
goods manufactured for the input service distributor concerned;
(vi) credit of service tax paid on input services, available with the input service distributor, as on
31-03-2016, shall not be transferred to any outsourced manufacturing unit and such credit
shall be distributed amongst the units excluding the outsourced manufacturing units,
Explanation: The provision of this clause shall, mutatis-mutandis, apply to any outsourced
manufacturer commencing production of goods on or after the 1 of April, 2016;
(vii) Provisions of rule 6 shall apply to the units manufacturing goods or provider of output
service and shall not apply to the input service distributor.
Unit: For the purposes of this rule, unit includes the premises of a provider of output service or the
premises of a manufacturer including the factory, whether registered or otherwise or the premises of
an outsourced manufacturing unit. (Explanation 1)
Total Turnover: For the purposes of this rule, the total turnover shall be determined in the same
manner as determined under rule 5.
The turnover of an outsourced manufacturing unit shall be the turnover of goods manufactured by
such outsourced manufacturing unit for the input service distributor. (Explanation 2)
Relevant period - Month or Quarter: For the purposes of this rule, the relevant period shall be,a) If the assessee has turnover in the financial year preceding to the year during which credit is to be
distributed for month or quarter, as the case maybe, the said financial year; or;
b) If the assessee does not have turn over for some or all the units in the preceding financial year,
the last quarter for which details of turnover of all the units are available, previous to the month or
quarter for which credit is to be distributed. (Explanation 3)
Outsourced manufacturing unit : For the purposes of this rule, outsourced manufacturing unit
means a job-worker who is liable to pay duty on the value determined under rule 1OA of the Central
Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 on the goods
manufactured for the input service distributor or a manufacturer who manufactures goods, for the
input service distributor under a contract, bearing the brand name of such input service distributor
and is liable to pay duty on the value determined under section 4A of the Excise Act. (Explanation 4)
Ph:
98851 25025/26
b) Rule 7B:A new rule 7B has been inserted to prescribe the provisions relating to Distribution of credit on
inputs by warehouse of manufacturer. [Rule 7B] [Inserted by Notification No.13/2016-CE
(N.T.) dated 1-3-2016 w.e.f. 1-4-2016]:
1. A manufacturer having one or more Factories, Shall be allowed to take credit on inputs received
under the cover of an invoice issued by a warehouse of the said manufacturer, who receives
inputs under cover of documents specified under Rule-9, towards the purchase of such inputs.
2. Provisions of First Stage Dealer/Second stage dealer to be applicable: The Provisions of these
rules made under the Excise Act as applicable to a first stage dealer or Second stage dealer,
shall, mutatis mutandis, apply to such warehouse of the manufacturer.
AMENDMENTS RELATING TO RULE 9
a) Rule 9(1)(a)(i):Invoice issued by a service provider for clearance of inputs/capital goods also to be an
eligible document
Before amendment
After Amendment
only an invoice issued by a manufacturer for Rule 9(1)(a)(i) has been amended to provide
clearance of inputs or capitals goods could be that an invoice issued by manufacturer or a
service provider for clearance of inputs or
a valid document for availing CENVAT credit
capitals
goods will also be a valid document
under rule 9(1)(a)(i).
for availing CENVAT credit.
b) Rule 9(1)(d):Certificate issued by an Appraiser of Customs to be a valid document under rule 9 for
goods imported through authorised courier
Before Amendment
After Amendment
Prior to 31.12.2015, certificate issued by

an appraiser of customs was a valid
document for availing credit in respect of
goods imported through a Foreign Post
Office in terms of rule 9(1)(d).
the amended Rule 9(1)(d) is to provide that a

certificate issued by an appraiser of customs will
also be a valid document for availing CENVAT
credit in respect of goods imported through an
authorized courier registered with the Principal
Commissioner
of
Customs
or
the
Commissioner of Customs in-charge of the
customs airport.
c) Rule 9(4): Provisions applicable to first/second stage dealer regarding maintenance of records
to be able to pass on the credit, to apply to an importer issuing CENVATable invoice [Rule 9(4)]:
Credit on goods purchased from first stage / second stage dealer: Sub-rule (4) lays down that the
CENVAT credit in respect of inputs or capital goods purchased from a first stage dealer or second
stage dealer shall be allowed only ifa) Such first stage dealer/second stage dealer has maintained records indicating the fact that the
input or capital goods was supplied from the stock on which duty was paid by the producer of
such input or capital goods; and
b) Only an amount of such duty on pro rata basis has been indicated in the invoice issued by him.
Note: The provisions of this sub-rule will apply to an importer who issues an invoice on which
CENVAT credit can be taken.
[Effective from 01.03.2015]
MASTER MINDS
Some important circulars issued by CBEC:The CBEC has clarified that Bagasse, Dross and Skimmings of nonferrous metals or any such byproduct or waste, which are nonCircular No.
excisable goods and are cleared for a consideration from the factory
1027/15/2016-CX, dated
need to be treated like exempted goods for the purpose of reversal
25-4-2016
of credit of input and input services, in terms of Rule 6 of the
CENVAT Credit Rules, 2004.
Your mind is a powerful thing when you fill it with positive thoughts
your life will start to change
A.P.J. Abdul Kalam
Verified by: Narasimhulu Sir, Samba siva Sir

Copyrights Reserved
To
Pavan Sir, Raja Shekar Sir

Executed By: Srinivas Sir
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Cell: 98851 25025 / 26

Cell: 98851 25025 / 26

No.1 for CA/CWA & MEC/CEC

AMENDMENTS BY FINANCE ACT 2015

Introduction To Income Tax

10(11A), 10(23FBA / FBB)

10(14) & Rule 2B

Income From House

32(1), 35(2AB), 35(2AA),

47(viab), (vicc), 49(1)

Income From Other Sources

Set off & carry forward of

80C, 80D, 80DD, 80DDB,

Advance Tax & Interest

TDS & TCS

192A, 197A, 194A, 194C,

Tax rates (surcharge rates),

AMENDMENTS AT A GLANCE FINANCE ACT, 2015

IPCC_ Income Tax Amendments Material (For Nov - 2016) ____________________4

Prescribed conditions relating to maintenance of accounts, audit, etc. to

Amount of debt taken into account in computing the income of the

Amount of expenditure incurred by a co-operative society for purchase of

Any transfer of capital asset, being share of a foreign company, referred

Transfer of units by unit holders in consolidation scheme of mutual funds

Cost of acquisition of the capital asset acquired in the scheme of demerger

Cost of acquisition and period of holding of shares acquired on

Deductions from Gross Total Income

Deduction under section 80C to be available in respect of deposit in

Increase in the limit of deduction in respect of contribution to certain

Additional deduction in respect of contribution to NPS of Central

Enhancement of the limit of deduction under section 80D and allowability

IPCC_ Income Tax Amendments Material (For Nov - 2016) ____________________5

No.1 for CA/CWA & MEC/CEC

Provisions concerning Advance Tax and TDS

IPCC_ Income Tax Amendments Material (For Nov - 2016) ____________________6

1) INCOME TAX RATES APPLICABLE FOR THE A.Y. 2016-17

Firm / LLP / Local Authority / Domestic Company @ 30%

Foreign Company @ 40%

C. SURCHARGE: It is a tax on tax.

12% (earlier 10%)

12% (earlier 10%)

IPCC_ Income Tax Amendments Material (For Nov - 2016) ____________________7

No.1 for CA/CWA & MEC/CEC

Date entered into the Continuous

Date entered into Continuous Discharge

IPCC_ Income Tax Amendments Material (For Nov - 2016) ____________________8

Period beginning From

It is an Indian company (or)

ii) Its place of effective management (POEM), in that year, is in India.

Always Resident (irrespective

2. Other companies(foreign company) if place of

IPCC_ Income Tax Amendments Material (For Nov - 2016) ____________________9

No.1 for CA/CWA & MEC/CEC

3) Section 9: explanation 6 to section 9(1)(i): Explanation 5 to section 9(1)(i) inserted vide

3. INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME

CONDITIONS FOR EXEMPTION

IPCC_ Income Tax Amendments Material (For Nov - 2016) ____________________10

Clean Ganga Fund (F- Act-2015, w.e.f. A.Y. 2015 16)

Specified income of core settlement guarantee fund is exempt:

4. INCOME FROM SALARIES

IPCC_ Income Tax Amendments Material (For Nov - 2016) ____________________11

No.1 for CA/CWA & MEC/CEC