Varma & Varma

Chartered Accountants
For Private Circulation Only
Table of Contents
Particulars Page No.
Overview of the economy 3
Policy Initiatives 5
Rupee Comes from & Rupee Goes to 7
Direct Tax Proposals 8
Indirect Tax Proposals 19
 Customs Duty 19
 Excise Duty 24
 Service Tax 27

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advice should be sought with respect to any individual circumstances.
Overview Of The Economy
GDP INTERNATIONAL TRADE
 Slow-down in economic growth was due to  Exports have witnessed a growth of 4.1% while
domestic, structural and external factors. Two imports have reduced over the corresponding
successive years of sub 5% growth was period last year by 8.3% in dollar terms.
witnessed for the first time in 25 years. The slow-
 Forex reserves are US$ 304 Billion as at March
down is mainly led by Mining/Quarrying and
2014. The average exchange rate of US$- ` is
Manufacturing. Agriculture bucking the trend on
seen at `60.50 per US$ as against `54.41 per
account of good monsoons.
US$ in the preceding period, translating to a
 The fiscal deficit of the Centre as a proportion of depreciating rupee of 12% approx. which has
GDP also declined for the 2nd year in a row as per clearly impacted the imports.
the announced medium term policy stands
 India’s share in the world exports has marginally
revised to 4.5% from 4.9%, the revenue deficit is
increased to 1.7% from 1.6%.
also downward pegged at 3.2% from 3.6%.
 Gross Fixed Capital Formation (GFCF) of the
private corporate sector (at constant prices)
declined sharply from growth of 17.94% in
2006-07 to a decline of 3.2% in 2012-13

3
Overview Of The Economy (Contd….)
INFLATION
 Consumer price indices (CPI), CPI inflation has
remained close to double digits at 9.7%(10.4%)
and Whole sale Price Index (WPI) at 6%(7.4%).
Moreover, WPI inflation in food articles that
averaged 12.2% annually in the five years ending
2013-14, was significantly higher than non-food
inflation.
 Moderation of WPI inflation is expected, however,
the major risk arises from expected sub-normal
monsoons during 2014-15 on account of the El-
Nino effect and higher prices of oil due to the geo-
political situation in the Middle East.
INITIATIVES TO REVIVE GROWTH
 Acceleration in project clearances and
streamlining of implementation procedures, apart
from sector-specific investment policies.
 Linked to efforts at investment revival are policies
needed for rejuvenating growth in manufacturing,
which has significant backward and forward
linkages. Simplification of tax policy and
administration, repeal of archaic laws that govern
market access, expansion and entry/exit of firms,
revamp of the dispute resolution mechanism for
commercial disputes, etc.
 Though some measures have been initiated to
this end, reversion to a growth rate of around 7%-
8% can only occur beyond the ongoing and the
next fiscal. For the current year upto March 2015
the economy is expected to grow in the range of
5.5% to 5.9%.
CHALLENGES
 Keeping fiscal deficit in check without
compromising on capital expenditure.
 Maintaining the CAD in the range of 2-2.5% of
GDP.
4
Policy Initiatives
FOREIGN DIRECT INVESTMENT (FDI)
 The composite cap of foreign investment in the
Defence Manufacturing is proposed to be raised
to 49% from 26% with full Indian management
and control under the FIPB route.
 The composite cap in the insurance sector is
proposed to be raised to 49% from 26% with full
Indian management and control under the FIPB
route.
 Manufacturing units are to be allowed to sell their
products in retail including through e-commerce
platforms.
REAL ESTATE
 Tax incentives for Real Estate Investment Trusts
(REITS).
 A modified REITS type structure for infrastructure
projects as the Infrastructure Investment Trusts
(INVITS).
 These two instruments are proposed to attract
long term finance from foreign and domestic
sources including the NRIs

 Requirement of the built up area and capital

conditions for FDI proposed to be reduced from
50,000 sq. mtrs to 20,000 sq. mtrs and from US$
10 million to US$ 5 million respectively for
development of smart cities.

5
Policy Initiatives (Contd….)
URBAN DEVELOPMENT
 500 urban habitations to be provided support for
renewal of infrastructure and services in next 10
years through PPPs.
 Present corpus of Pooled Municipal Debt
Obligation Facility to be enlarged to `50,000 crore HIGHER EDUCATION
from `5,000 crore.
 Proposal for Metro Projects in Lucknow and
Ahmedabad.
 Plan for the Bengaluru-Mumbai Economic
Corridor (BMEC) and Vizag-Chennai corridor with CONVERGENCE WITH IFRS
provision for 20 new industrial clusters.
 Proposal for development of 100 smart cities.
BANKING
 Proposal for banks to permit raising of long term
funds for lending to infrastructure sector with
minimum regulatory pre-emption such as CRR,
SLR and Priority Sector Lending (PSL)
 Several Indian Institutes of Technology (IITs) and
Indian Institutes of Management (IIMs) and All
India Institutes of Medical Sciences (AIIMS) to be
set up.
 Convergence with International Financial
Reporting Standards (IFRS) by Adoption of the
new Indian Accounting Standards (2nd AS) by
Indian Companies from the financial year 2015-16
voluntarily and from the financial year 2016-17 on
a mandatory basis.
6
 ` Comes From ` Goes To

0% 0%
3% 3%
8% 3%
21% 4% 20%
8%
11%

9%
11%
19% 18%
9%

11% 14%
12%
16%

Debt receipts Corporation Tax Central Plan Interest/Debt

Income Tax Resources of Public Enterprises States share of taxes Assistance to States & UT
Service Tax Non Tax Revenue Defence/police Subsidy
Excise Duty Customs Duty Other Non plan Pension
Non Debt receipts Other Taxes Grants to States - non plan Capital expenditure

7
Direct Tax Proposals (Contd….)
PROFITS AND GAINS FROM BUSINESS OR
PROFESSION
Investment allowance to a manufacturing
Company extended
 Deduction of 15% of cost of new plant and
machinery by a manufacturing company under
section 32AC of the Act, if the aggregate actual
cost of such investment exceeds `25 Crore in a
previous year. This benefit will be available for
three years upto 31.03.2017.The deduction under
existing threshold limit of `100 crore shall continue
to exist parallely.
Two New business notified as “Specified
Business” for deduction u/s 35AD
 Proposed to include two new business as
“Specified Business” to avail investment linked
deduction under section 35AD, namely :
• Laying and Operating a slurry pipeline for
transportation of Iron Ore
• Setting up and operating a semiconductor wafer
fabrication manufacturing unit, as notified by the
Board in accordance with prescribed guidelines.
No Parallel claim u/s 10AA if deduction is claimed
u/s 35AD
 If deduction is availed on capital expenditure
incurred for specified business under section
35AD, no parallel deduction shall be available
under section 10AA in respect of such specified
business. Similar amendment is proposed in
section 10AA also.
8
Direct Tax Proposals (Contd….)
Deduction u/s 35 AD to be added back for the
purpose of determining Alternative Minimum Tax
(New clause (iii) inserted u/s 115JC)
 Proposed to add back deduction claimed by
specified business under section 35AD after
reducing depreciation allowable under sec 32
(computed as if no deduction has been allowed in
respect of such assets under 35AD) for the
purpose of computing adjusted total income to
determine Alternative Minimum Tax (AMT).
Corporate Social Responsibility
 It is proposed to clarify that for the purposes of
section 37(1) any expenditure incurred by an
assessee on the activities relating to corporate
social responsibility referred to in section 135 of
the Companies Act, 2013 shall not be deemed to Extension of Sunset Date under section 80IA for
have been incurred for the purpose of business
and hence shall not be allowed as deduction under  Proposed to extend the terminal date under
section 37.
Business Of Plying, Hiring And Leasing Goods
Carriages
 It is proposed to provide for a uniform amount of
presumptive income of `7,500 for every month (or
part of a month) for all types of goods carriage
without any distinction between Heavy Goods
Vehicle and vehicle other than Heavy Goods
Vehicles
Clarification on the carry forward and eligibility
of AMT credit
 AMT credit to be eligible even when no deduction
is claimed under Chapter VI-A /Section 10AA or
Section 35 D and even if the adjusted total income
of the specified tax payer is below `2,000,000/-.
the Power Sector
section 80-IA for setting up a power sector unit to
31 March 2017. 9
Direct Tax Proposals (Contd….)
Losses in Speculative Business
 Explanation to Section 73 is proposed to be
amended to provide that its provisions shall also
not be applicable to a company, the principal
business of which is trading in shares. This is in
addition to the exemption for companies whose
principal business is business of Banking or
granting of loans and advances.
Reduction in Tax Rate in respect of Dividend
received and repatriated from Foreign
Companies
 The benefit of lower rate of taxation @ 15% under
section 115BBD on repatriated dividend earned by
Indian Companies, earlier available until
assessment year 2014-15, has now been
extended to prospective assessment years.

Mode of acceptance or repayment of deposits Change in Method for Computation of

 It is proposed to amend the provisions of sections Dividend/Income Distribution Tax (DDT/IDT)
269SS and 269T to provide that any acceptance or  Dividend declared by a domestic company must be
repayment of any loan or deposit by use of grossed up for applying DDT. Also the rate of
electronic clearing system through a bank account ‘income distribution tax’ payable by mutual fund on
shall not be prohibited under the said sections if distribution of income to unit holders of other than
the other conditions regarding the quantum etc. equity oriented mutual fund to be grossed up
are satisfied. based on prescribed rate of DDT for different
categories.(Effective from 1st October 2014)

10
Direct Tax Proposals (Contd….)
TRANSFER PRICING
 Amendment to Section 271G has been proposed Other Matters
whereby the Transfer Pricing Officer has also been  Introduction of ‘Range concept’ for determination
included as the competent authority to levy penalty of Arm’s Length Price. ‘Arithmetic Mean Concept’
for failure to furnish the relevant document or will continue to apply where number of
st
information.(Effective from 1 October 2014) comparables is inadequate.
Roll Back provision in Advance Pricing  Allowing the use of multiple year data as against
agreement (APA) to prior years only one year for comparable analysis.
 Proposed to amend Section 92CC to facilitate
retrospective applicability of APA by including ‘Roll
Back” provisions .This benefit is available for 4
years preceding the first of the previous year for
which the advance pricing agreement applies.
(Effective from 1st October 2014)

11
Direct Tax Proposals (Contd….)
CAPITAL GAINS Speculative Transaction In Respect of
Transfer of government security by one non- Commodity Derivatives
resident to another (Effective from 1st April, 2014 retrospectively)
 Transfer of a capital asset, being a Government  It is proposed to amend section 43(5) (e) to
Security carrying a periodic payment of provide that eligible transaction in respect of
interest, made outside India through an trading in commodity derivatives carried out in a
intermediary dealing in settlement of securities, by recognised association and chargeable to
a non-resident to another non-resident shall not be commodities transaction tax under Chapter VII of
considered as transfer for the purpose of charging the Finance Act, 2013 shall not be considered to
capital gains. be a speculative transaction.

Capital Gains Arising From Transfer of an Asset

by way of Compulsory Acquisition
 It is proposed to amend section 45(5) to provide
that the amount of compensation received in
pursuance of an interim order of the court, Tribunal
or other authority shall be deemed to be income
chargeable under the head ‘Capital gains’ in the
previous year in which the final order of such
court, Tribunal or other authority is made.
12
Direct Tax Proposals (Contd….)
Tenure for determination of Long Term / Short Clarification on nature of Income earned by
Term nature of Capital gains on sale of Debt Foreign Institutional Investors from sale of
Oriented Mutual funds and Unlisted securities securities
changed  Proposed to provide that, any security held by
 Unlisted security and Debt oriented mutual funds Foreign Portfolio Investor (FPI), in accordance with
to be treated as long term capital assets only if SEBI regulations, would be treated as capital asset
held for more than 36 months instead of 12 months so that any income arising from transfer of such
security by a FPI would be in the nature of capital
Benefit u/s 112 restricted to only listed securities gain.
(other than unit) Capital gains exemption in case of investment in
 Proposed to amend section 112 to the effect that a residential house property
benefit available in the form of concessional rate of  The benefits of Section 54 and 54F were intended
tax @ 10%, where indexation benefit is not for investment in one residential house within
taken, shall no longer be available for mutual fund India. Accordingly, it is proposed to amend the
units and zero coupon bonds sections 54(1) and 54F(1) to provide that the
rollover relief under the said sections is available if
the investment is made in one residential house
situated in India.

13
Direct Tax Proposals (Contd….)
Investment in 54EC Bond INCOME FROM OTHER SOURCES
 In order to do away with the ambiguity contained in Advance received during the course of transfer
proviso to Section 54EC as a result of which of capital assets, forfeited to be taxed
investment in specified asset was made in such a immediately under ‘Income from Other Sources’:
manner, to avail benefit of deduction over two  Proposed to tax advances received and forfeited in
years, it is proposed to insert a proviso in 54EC(1) relation to a transfer of capital asset immediately
to provide that the investment in the long-term under the head “Income from Other Sources”.
specified asset, out of capital gains arising from Such sum cannot be reduced from the cost of
transfer, during the financial year of transfer and in acquisition of the asset under section 51 of the Act.
the subsequent financial year does not exceed fifty Consequential amendment has been made in
lakh rupees. section 2(24) to include such sum in the definition
of the term “Income”.[56(2)(9)]

14
Direct Tax Proposals (Contd….)
INCOME TAX RATES
INDIVIDUALS, HUF, AOP, BOI, AND OTHER
SPECIFIED ARTIFICIAL JURIDICAL PERSONS
Basic Exemption Limit increased:
 Increase in basic exemption limit from `200,000
to `250,000 for Individuals (aged below 60
years), HUF, AOP, BOI, and other specified
artificial juridical persons
 Increase from `250,000 to `300,000 for
Individuals aged 60 years or more but less than
80 years.
 No change in the rates of Surcharge, Education
cess and Secondary and Higher education cess.
Deduction on Income from House Property
enhanced
 The deduction u/s 24(b) for Interest on Borrowed
capital (loan) for self occupied property increased
from `150,000 to `200,000.
Raising the Limit under section 80C
 The limit of deduction allowed under section 80C
raised from `100,000 to `150,000. Consequential
amendments are proposed in section 80CCE and
80CCD of the Act.
Benefit under Section 80CCD
 The provisions of section 80CCD amended to
provide that the condition of the date of joining the
service on or after 1.1.2004 is not applicable to
employees of private sector for the purpose of
deduction, since the date of joining the service is
not relevant for joining the New Pension Scheme
(NPS).
15
Direct Tax Proposals (Contd….)
INCOME TAX RATES (Contd….)
FIRMS, COOPERATIVE SOCIETIES, LOCAL COMPANIES
AUTHORITIES  The tax rates to remain unchanged at 30%.
 The tax rates to remain unchanged at 30%.  No change in the rates of Surcharge, Education
 No change in the rates of Surcharge, Education cess and Secondary and Higher Education cess.
cess and Secondary and Higher education cess.
 Tax shall be increased by a surcharge @10% in
case of person having income exceeding 1 crore
subject to marginal relief.
 The levy of Education Cess and Secondary and
Higher Education Cess are proposed to continue
at the existing rates of 2% and 1% respectively.

16
Direct Tax Proposals (Contd….)
CHARITABLE TRUSTS AND INSTITUTIONS
 No exemption can be claimed under Section 10
[other than relating to agricultural income – 10(1)
and income exempt under Section10(23C)] where
a trust or an institution has been granted
registration under Section 11.
 Educational institutions, universities and hospitals
claiming benefit of exemption under section
10(23C) would not be entitled to claim any benefit
of exemption under other provisions of section10
(except the exemption in respect of agricultural
income)
 Section 11 and Section 10(23C) provides
exemption for income which is applied for
acquiring a capital asset. Depreciation on such
asset shall not be allowed as a deduction while
computing income for the purpose of exemption
under this section as it would result in claiming of
double benefit.
 The benefit of sections 11 and 12 shall be
available in respect of any income of a trust in any
assessment proceeding for an earlier assessment
year which is pending before the Assessing Officer
as on the date of such registration. It is also
proposed that no action for reopening of an
assessment under section 147 shall be taken by
the Assessing Officer in the case of such trust or
institution for any assessment year preceding the
first assessment year for which the registration
applies, merely for the reason that such trust or
institution has not obtained the registration under
section 12AA for the said assessment year.
(Effective from 1st October 2014)
 New Taxation Regime for Real Estate
Investment Trust and Infrastructure Investment
Trust (Business Trusts ) – (Introduced effective
from 1st October 2014)
17
Direct Tax Proposals (Contd….)
TAX DEDUCTED AT SOURCE (TDS)
 Non-deduction or non-payment of TDS on
payments made to residents as specified in section
40(a)(ia) of the Act, the disallowance shall be
restricted to 30% of the amount of expenditure
claimed.
 In order to improve the TDS compliance in respect 
of payments to residents which are currently not
specified in section 40(a)(ia), it is proposed that the
disallowance under section 40(a)(ia) of the Act
shall extend to all expenditure on which tax is
deductible under Chapter XVII-B of the Act .
 It is proposed to amend section 200 and 200A of
the Act to allow the deductor to file correction
statements and enable the processing of
correction statements filed respectively.
 In order to rationalise the time limits provided
under Section 201(3) and 148 of the Act, the time
limit u/s 201(3) shall be extended by 1 year.
 Provisions of Section 271H of the Act is also
proposed to be amended to provide that the
penalty under the section shall be levied by the
Assessing Officer. (Effective from 1st October
2014).
In respect of disallowance for non payment of tax
deducted at source from non-resident, the time
limit for payment of tax to the credit of government
has been extended till date of filing of return.
 Income received by a resident under a life
insurance policy, including bonus thereon shall be
subject to deduction of tax at source at 2% unless
such income is exempt under section 10(10D) of
the Act or if the aggregate sum paid to an
assessee in a financial year is less than `100,000.
(Effective from 1st October 2014)

 18
Indirect Tax Proposals – Customs Duty
 No Change in the general customs duty rate of
10%
 To boost domestic manufacture, address new
investment and capacity addition in chemical and
pertrochemical sectors, BCD has been reduced
on certain items.
 Baggage Rules amended to:
• Increase of free baggage allowance from
`35,000/- to `45,000/-
• Reduce duty free allowance of:
• Cigarettes from 200 to 100
• Cigars from 50 to 25
• Tobacco from 250 gms to 125 gms
 Safeguard Duty on inputs/ raw materials imported
by an EOU and cleared into DTA as such or are
used in the manufacture of final products cleared
into DTA
 Discretionary power of Tribunal to refuse
admission of appeal is increased from `50,000/-
to `2,00,000/-
 Refund of Customs Duty on import of scientific
and technical instruments, apparatus etc. by
public funded and other research institutions
holding a certificate of registration from the DSIR
 Clarification - Aircraft engines and parts thereof
are eligible for duty exemption when imported for
servicing, repair or maintenance of aircrafts used
for scheduled operations
 Duty structure on non-agglomerated coal of
various types is being rationalized at 2.5% BCD
and 2% CVD
19
Indirect Tax Proposals – Customs Duty (Contd….)
EXEMPTION FROM BASIC CUSTOMS DUTY
(BCD):
 On De-oiled soya extract, groundnut oil cake/ oil
cake meal, sunflower oil cake/ oil cake
meal, canola oil cake/ oil cake meal, mustard oil
cake/ oil cake meal, rice bran/ rice bran oil cake
and palm kernel cake, up to 31.12.2014.
 On Specified goods imported for use in the
manufacture of textile garments for export (CVD
also exempt)
 On Wire rolls included in the exempted list of
specified goods required by handicraft
manufacturer-exporters.
 On Flat copper wire used in the manufacture of
PV ribbons (tinned copper interconnect) for solar
PV cells/ modules
 On specified raw materials used in the
manufacture of solar backsheet and EVA sheet.
 On re-gasified LNG for supply to Pakistan
 On specified parts of LCD and LED panels for
TVs
 On Pre-forms of precious and semi-precious
stones
 On Goods imported by National Technical
Research Organisation (NTRO)
 On HIV/AIDS Drugs and Diagnostic Kits imported
under National AIDS Control Programme (NACP)
funded by the Global Fund to Fight AIDS, TB and
Malaria (GFATM)
 For raw materials required for manufacture of
security threads and security fibre (including CVD)
20
Indirect Tax Proposals – Customs Duty (Contd….)
EXEMPTION FROM SPECIAL ADDITIONAL DUTY OTHER CHANGES
(SAD):  Exemption from Counter-vailing Duty (CVD) on
 On Parts and components required for the Portable X-ray machine / system withdrawn
manufacture of wind operated electricity
 Requirement of certification by Road Transport
generators
Ministry (or NHAI) for availing of customs duty
 On Specified inputs (PVC sheet & Ribbon) used exemption on specified goods required for
in the manufacture of smart cards construction of roads is removed
 On Inputs/ components used in the manufacture
of Personal Computers (laptops/ desktops) and
tablet computers subject to actual user condition

21
Indirect Tax Proposals – Customs Duty (Contd….)
OTHER CHANGES (Contd….)
 Exemption has been granted in respect of some
mineral oils extracted or produced in the
continental shelf of India or exclusive economic
zone of India imported prior to the 07-Feb-2002.
No refund shall be granted in respect of duties
already paid on these imports. All pending suits in
this regard shall cease.
 Scope of Settlement Commission widened to
include cases of importation by Post/ Courier.
 Concept of stay of demand done away with.
Appeals to Commissioner/ CESTAT to be
admitted only on payment of specified percentage
of duty as follows:
• At First stage appeal – pay 7.5% fixed pre
deposit of duty/penalty/both (Commissioner or
Tribunal)
• At Second stage appeal – pay 10% of the duty /
penalty / both (Tribunal)
• Subject to a ceiling of `10 crore
22
Indirect Tax Proposals – Customs Duty (Contd….)
CUSTOMS DUTY REDUCED FOR CUSTOMS DUTY INCREASED FOR

New Old Old

Particulars Particulars New Rate
Rate Rate Rate
Reformate 2.5% 10% Coking coal 2.5% Nil
Propane, Ethane, Ethylene, Propylene, Steam coal and Bituminous coal 2.5% 2%
2.5% 5%
Butadiene Stainless Steel flat products (CTH 7219
Ortho Xylene 2.5% 5% 7.5% 5%
& 7220)
Ethyl Alcohol, Methyl Alcohol 5% 7.5% Half-Cut or broken diamonds; 2.5% Nil
Crude Naphthalene 5% 10% Cut & Polished diamonds and
Ships imported for breaking up 2.5% 5% 2.5% 2%
coloured gemstones
Coal tar pitch, Battery waste, Battery Telecom equipments under tariff head
5% 10% 10% Nil
scrap 8517 - 6290 & 6990
LCD & LED TV Panels below 19” Nil 10%
Colour picture tubes for CRT TVs Nil 10%
E-Book readers Nil 7.5%
Equipments & machineries for solar
5% 10%
energy production projects
Equipments & machineries for
5% 10%
compressed Bio-gas plants

 23
Indirect Tax Proposals – Excise Duty
 No Change in the general excise duty rate of
12%.
 Significant incentives to alternative energy
production including solar energy and biogas by
means of exemptions and concessional rates.
 All assessees to compulsorily pay duty
electronically except if the Department specifically
exempts.
 Non- payment of duty for 30 days will result in
penalty of 1% per month. Monthly payment facility
will not be lost.
 Specified assessees and authorities (such as
income tax authorities, registrars of
companies, banks, depositories, electricity
boards) who maintain certain records are to
furnish returns to a prescribed authority for the
purposes of excise law. Penal provisions for non-
compliance also introduced.
 Concept of stay of demand done away with.
Appeals to Commissioner/ CESTAT to be
admitted only on payment of specified percentage
of duty as follows:
• At First stage appeal – pay 7.5% fixed pre
deposit of duty / penalty /both (Commissioner or
Tribunal)
• At Second stage appeal – pay 10% of the duty /
penalty / both (Tribunal)
• Subject to a ceiling of `10 crore
24
Indirect Tax Proposals – Excise Duty (Contd….)
 The time limit for an order of the Committee of the  Articles of various metals covered by Chapter 71
Chief Commissioners of Central Excise directing such as gold, etc. of the Tariff are now exempt
that an adjudication order be appealed against only if they do not bear a brand name.
was three months. The CBEC now has the
 Rates in respect of chewing and other tobacco
power, on sufficient cause being shown, to extend
have been increased by nearly 80%. Significant
this period by a further thirty days.
increases also for cigarettes, cigars, pan
 The CESTAT now has the power to not admit masala, etc.
appeals where the duty involved is up to
 The clean energy cess has been done away with.
`2,00,000/- as against the earlier limit of `50,000/-
 Exemptions for certain
 It has been clarified that questions regarding the
tannings, pigments, catalytic
taxability or excisability of goods for the purpose
preparations, ethylene polymers, etc. used in
of assessment arising from an order of the
making photovoltaic cells.
CESTAT shall lie in appeal before the SC and not
the HC.
 Scope of AAR extended to resident private
companies.

25
Indirect Tax Proposals – Excise Duty (Contd….)
Particulars New Old Particulars New Old
Sports gloves Certain electronic storage media
12% 10%
Writing/ printing paper for Concessional devices, wires, etc.
educational text books rate of 6% (if Certain anti-retroviral drugs, diagnostics
Normal
Polyester yarn made from CENVAT credit and equipments for use in the National Exempt
Normal Rates
plastic waste or scrap claimed) or 2% AIDS Control Programme
Rates
Sewing machines with (if CENVAT Additional excise duty on aerated
motors attachable to body. credit not 5% Nil
waters containing added sugars
PSF & PSY claimed)
Some components for the use in
Recorded smart cards Normal
packaging of agricultural, horticultural, 6%
Branded Petrol ₹2.35/ litre ₹7.5/ litre Rates
etc. products.
Footwear of price exceeding LED and MCPCB for LED lamps & Normal
`500/- per pair but not 6% 12% 6%
fixtures Rates
exceeding `1,000/- per pair.
Parts used in factories that
Exempt Exempt
manufacture tractors

 26
Indirect Tax Proposals – Service Tax
 No change in the Service Tax rate of 12% drugs by a clinical research organization
 Exemption hitherto available for services provided
Services made Taxable now:
by way of renting of immovable property to
 Selling of space for advertisements other than in educational institutions stands withdrawn, with
print media. This will include online and mobile immediate effect. Only specified services to
advertising educational institutions will be exempt
Print media means:  Services such as consultancy, designing etc
• Book – as defined in Press and Registration of provided to Government / local authority etc
Books Act, 1867 (This does not include
business directories, yellow pages and trade
catalogues meant for commercial purposes)
• Newspaper - as defined in Press and
Registration of Books Act, 1867
 Radio Taxis or radio cabs whether or not air
conditioned
 Air conditioned contract carriage (at abated value
of 40%)
 Technical testing or analysis of newly developed

27
Indirect Tax Proposals – Service Tax (Contd….)
Service tax on service portion in works
contracts:
In Rule 2A of the Service Tax (Determination of
Value) Rules, 2006, category B and C of works
contracts are proposed to be merged into one
single category, with service portion being 70%
w.e.f 01-10-2014. (earlier the taxable portion for
“C” category was 60%)
Exemptions/ Reliefs
 Relief granted to transport through coastal
vessels by amendment of Place of Provision for
Service Rules.
 Loading, unloading, storage, etc. of cotton
exempted.
 Micro-insurance schemes where sum assured
does not exceed ₹50,000 per life exempted.
Interest on delayed payment of Service Tax
(w.e.f 1st Oct 2014)
 Up to 6 months – 18%
 More than 6 months and upto one year – 18% for
the first six months and 24% for the balance
period
 More than one year - 18% for the first six
months, 24% for the next six months and 30% for
the balance period
E-payment is made mandatory for all tax payers
w.e.f 1st Oct 2014.
28
Indirect Tax Proposals – Service Tax (Contd….)
Reverse Charge Mechanism (RCM) CENVAT Credit Rules
 Services provided by a Director to a body  Credit to be availed within six months from the
corporate date of invoice, bill or challan (w.e.f 01-09-2014)
 Services provided by Recovery agents to banks, FI  Credit to be allowed for rent-a-cab/ tour operators
and NBFC to promote tourism.
Point of Taxation Rules (POT):  In case of full RCM, the condition of payment of
 In case of RCM, POT is the payment date or the invoice value to the service provider for availing
first day after 3 months from the date of credit is being withdrawn. No change in respect of
invoice, whichever is earlier. Applicable to invoices partial reverse charge
issued after 1st Oct 2014.  Re-credit of CENVAT credit reversed on account of
non-receipt of export proceeds within the specified
period or extended period to be allowed if exports
are received within one year from the period so
specified or extended period based on documents
evidencing receipt of export proceeds

29
Indirect Tax Proposals – Service Tax (Contd….)
Abatement in case of GTA Service
 Condition for non-availment of credit is required to Appeals to Commissioner/ CESTAT to be admitted
be satisfied by the service providers only
Abatement in case of renting of motor vehicle
 If the service provider does not avail
abatement, the portion of service tax payable by
the provider and receiver will be modified as 50%
st
each (w.e.f 1 Oct 2014)
 Resident Private Limited Company can make an
application for advance ruling
 SEZ procedures for claiming exemption from
service tax will be simplified.
 Concept of stay of demand done away with.
only on payment of specified percentage of duty as
follows:
• At First stage appeal – pay 7.5% fixed pre
deposit of duty / penalty /both (Commissioner or
Tribunal)
• At Second stage appeal – pay 10% of the duty /
penalty / both (Tribunal)
• Subject to a ceiling of `10 crore
30
Indirect Tax Proposals – Service Tax (Contd….)
Power to search premises
Search or seizure can be authorized by the
following officials:
• Joint Commissioner of Central Excise
• Additional Commissioner of Central Excise
• Any other officer as notified by the Board
Any Central Excise Officer can be authorized to
search as against only Superintendent of Central
Excise earlier.

The provisions of Central Excise Act, 1944 relating

to furnishing of periodic information by third party
sources will also be made applicable to service tax
law.

 Dues of a predecessor can be recovered from the

assets of a successor transferred or otherwise on
disposal of business or trade in whole or in part or
effect any change in ownership

 31
 Varma & Varma
Chartered Accountants

 KOCHI (Central Office)  THIRUVANANTHAPURAM

‘Sriniketan’ TC.4/647 H.No.17,
Nettipadam Road, Sreevilas Lane, Kowdiar.P.O,
P.B.No.2350, Thiruvananthapuram 695003
Kochi- 682 016 trivandrum@varmaandvarma.com
kochi@varmaandvarma.com

 BANGALORE
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OMBR Layout,Banaswadi,
Bangalore 560043
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 THRISSUR
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Thrissur - 680 001.
thrissur@varmaandvarma.com

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Chennai-600 020 Chalappuram, Kozhikode – 673 002
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 HYDERABAD  KANNUR
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