CORPORATE TAXATION
Table of content
1.0 INTRODUCTION
2.0 CORPORATE INCOME TAX
3.0 MINIMUM ALTERNATE TAX (MAT)
4.0 SECURITIES TRANSACTION TAX (STT)
5.0 CUSTOMS DUTY
6.0 CENTRAL EXCISE DUTY
7.0 SERVICE TAX
Introduction
A Company, whether Indian or foreign, is liable to taxes in India if it is resident in India. A corporation is resident if it is incorporated in India or wholly managed and controlled in India. Residents are taxed on all their income whether earned in India or outside India. Foreign income derived by a resident company is subject to corporation tax in the same way as Indian income. A branch of a foreign corporation is taxed as a foreign corporation.
There are various direct and indirect taxes and duties applicable to a company which will vary from situation to situation, like – Income Tax, Minimum Alternate Tax, Dividend Distribution tax, Securities Transaction Tax, Wealth Tax, Customs duty, Central Excise, Service Tax, Value Added Tax (VAT) etc. These taxes and duties chargeable to Indian Companies are governed by various legislations like – Income-tax Act 1961, Annual Finance Acts; Finance Act, 1994; Customs Act 1962; Central Excise Act 1944; State VAT and Central Sales Tax laws etc.
In India, the tax year is the fiscal year i.e from 1st April to 31st March and Companies are required to submit a final return of tax by 30 September (30 November for companies required to file a certificate on international transactions) of the assessment year, stating income, expenses, taxes paid and taxes due for the preceding tax year. Other than that, Advance Tax has to be paid by the companies during the year on 15 June (15% of total tax payable), 15 September (45% of total tax payable), 15 December (75% of total tax payable) and 15 March (100% of total tax payable).
Rates of Income Tax:
The Income Tax rate is 29% for domestic companies if Turnover/Gross Receipts is upto 5 Crore otherwise rate is 30% and 40% for foreign companies and branches of foreign companies. A Surcharge @ 7% also applies to domestic companies and @ 2% applies for foreign companies if taxable income exceeds Rs.1 Crore but limits upto 10 Crore and if taxable income exceeds Rs. 10 Crore surcharge applies @12% in case of domestic company and 7% in case of foreign company. An additional cess of 3% on income tax (inclusive of surcharge, if any) is payable towards Education and Secondary and Higher Education cess.
Surcharge at 12% is payable on additional taxes levied on distribution of profits by domestic companies / mutual funds / securitization trusts and on buybacks.
Important Changes in the Customs Act, 1962 and other related legislations and regulations vide Budget 2016-2017:
- In respect of benefit of tax holiday under Section 10AA to units in SEZ, no deduction shall be available to new units commencing business on or after 1st April 2020.
- Deduction of 100% for expenditure on Eligible Social Development Projects or Schemes has been withdrawn and no deduction will be available w.e.f. 1st April 2017 under Section 35AC.
- Deduction under Section 35CCD (Skill Development Project) has been reduced from 150 percent to 100 percent This with be effective from 1st April, 2020.
- No deduction shall be available if the specified activity commences on or after 1st April, 2017 under Section 80IA, 80IAB & 80IB. Earlier 100% deduction was available
- Accelerated Depreciation/Weighted Deduction. (Changes applicable from 1st April, 2017)
Section | Current Provision | Proposed Provision |
Accelerated Depreciation | 100% | 40% |
Expenditure on approved scientific research association with scientific research objective and certain specified institutions – Section 35(1)(ii) | 175%
| 150 per cent from 1 April 2017 to 31 March 2020 and 100 per cent from1 April 2020 onwards |
Expenditure on contribution to approved scientific research company-Section 35(1)(iia) | 125% | 100 per cent from 1 April 2017 onwards |
Expenditure on Contribution to an approved research association, university, college, other institution to be used for research in social science or statistical research – Section 35(1)(iii) | 125% |
100 per cent from 1 April 2017 onwards |
Payment to a National Laboratory or a university or an Indian Institute of Technology or a specified person for the purpose of an approved scientific research programme- Section 35(2AA) | 200% | 150 per cent from 1 April 2017 to 31 March 2020 and 100 per cent from 1 April 2020 onwards
|
Expenditure (other than the cost of any land or building) on scientific research in approved in-house research and development facility incurred by the company engaged in the business of biotechnology or manufacture or production of any article or thing except specified items – Section 35(2AB). | 200% | 150 per cent from 1 April 2017 to 31 March 2020 and 100 percent from 1 April 2020 onwards
|
Expenditure on a cold chain facility, warehousing facility for storage of agricultural produce, hospital,affordable housing project and production of fertilizer- Section 35AD | 150% | 100 per cent from 1 April 2017 |
Expenditure on notified agricultural extension project – Section 35CCC | 150% | 100 per cent from 1 April 2017
|
- Tax Incentives to Foreign Investors
- Income accruing or arising to a Foreign company on account of storage of crude oil facility in India and it sale to any resident in India shall be exempt from tax if it is on account of an agreement/ arrangement entered into or approved by the Central Government or is notified by the central government.This amendment is applicable retrospectively from 01.04.2016 (Assessment Year 2016-17)
- Income deem to accrue or arise in India of Foreign Mining Company through or from activities confined to display of uncut and unassorted diamonds in a special zone notified by the central government is Exempt from Tax
This amendment is applicable retrospectively from 01.04.2016 (Assessment Year 2016-17)
- No Minimum Alternate Tax (MAT) will be applicable to Foreign Institutional investors / Foreign Portfolio Investors(FIIs/FPI) if:
- The foreign company is resident of country or specified territory with which India has entered into an agreement/ adopted an agreement u/s 90(1)/ 90A(1) and the assesee does not have a permanent establishment in India, or
- Companies which are tax residents of those countries or territories with whom India has not entered into any agreement and such companies are not required to seek registration under any law for the time being in force
This amendment is applicable retrospectively from 01.04.2001
- Relaxation in eligibility criteria for Offshore Funds in Special Taxation regime u/s 9A.
- The benefits of Section 9A were available only to those investment funds who were a tax resident of a country with whom India had entered into Double Taxation Avoidance Agreement or Tax Information Exchange Agreement. However, the same is now being extended to a country or territory to be notified by the Central Govt.
- The Restriction that fund shall not carry on or control and manage, directly or indirectly any business in India or from India will be applicable only in the context of activities in India.
This amendment is applicable from 01.04.2017 (Assessment Year 2017-18)
- Deduction in respect of bad and doubtful debt in the case of NBFC
Non-banking financial companies (NBFC) engaged in financial lending to different sector of societies are now also eligible for deduction to the extent of 5% of its total income on account of provision for bad and doubtful Debts under Section 36(i)(viia). This amendment is applicable from 01.04.2017(Assessment Year 2017-18
- Additional Condition for Tax Neutral Conversion of company into LLP
An additional condition for tax neutral conversion of a company into Limited Liability Partnership (LLP) has been imposed where the book value of the total assets should not exceed five crore rupees in any of the three preceding years. This amendment is applicable from 01.04.2017(Assessment Year 2017-18)
- Section 80 JJAA – Revision in conditions for Tax incentive for employment generation
- Employee whose total emoluments are less than or equal to twenty-five thousand rupees per month will only be considered for claiming 30% additional wages as a deduction
- No deduction available where Government pays for EPF
- Minimum number of days of employment in a financial year reduced from 300 days to 240 days. Condition of 10% p.a. increase in number removed. This amendment is applicable from 01.04.2017.
A MAT is levied @ 18.5% on the adjusted book profit on those companies whose income tax payable on the taxable income computed according to the normal provisions of the Income tax Act 1961, is less than 18.5% of the book profits.
The MAT credit may be carried forward for offset against income tax payable in the following 10 years.
In case of MAT also, Surcharge as applicable as per the status of the company whether Domestic or Foreign as the case may be and Education cess (2%) and Secondary and Higher Education cess (1%) will be applicable.
STT will be levied on the value of taxable securities transactions as under:
Transactions | Rates | Payable by |
Purchase/Sale of equity shares (delivery based) | 0.1% | Purchaser/Seller |
Purchase of units of equity-oriented mutual fund (delivery based) | NIL | Purchaser |
Sale of units of equity-oriented mutual fund (delivery based) | 0.001% | Seller |
Sale of equity shares, units of equity-oriented mutual fund (non-delivery based) | 0.025 | Seller |
Sale of an option in securities | 0.05% | Seller |
Sale of an option in securities, where option is exercised | 0.125% | Purchaser |
Sale of a futures in securities | 0.01% | Seller |
Sale of unit of equity oriented fund to the Mutual Fund | 0.001% | Seller |
The Customs Act, 1962 is the basic Statute, which empowers the Government to lay down duties to be levied on goods imported into or exported from India. The categories of items and the rates of duties which are to be levied have been incorporated in two schedules to the Customs Tariff Act, 1975.
The first Schedule to the said Act specifies the various categories of import items, in accordance with the ‘harmonized system of commodity classification’ - an international scheme of classification of internationally traded goods. Different rates of duties are prescribed by the legislature on different commodities/group of commodities mentioned in the first Schedule. The duties are levied both on specific and ad-valorem basis, while there are few cases where at times specific-cum-ad valorem duties are also collected on imported items.
The Second Schedule to the Customs Tariff Act, 1975 incorporates items subject to exports duties and rates thereof.
Important Changes in the Customs Act, 1962 and other related legislations and regulations vide Budget 2016-2017:
- Changes in warehousing provisions:
- section 2 Subsection (43) defining meaning of "warehouse" has being amended so as to add a new class of warehouses for enabling storage of specific goods under physical control of the department and omitted Section 2 (45) defining ‘warehousing station’ and CBEC power to declaring warehousing station u/s 9 of Custom Act.
- Section 47 and 51 has been amended so as to empower the Central Government to permit certain class of importers specified by notification to make deferred payment of duty or other charges.
- Section 156 has been amended so as to increase the period of limitation from one year to two years in cases not involving fraud, suppression of facts, wilful misstatement etc.
- Section 53 of the Customs Act is amended to enable the proper officer to allow transit of certain goods and conveyance without payment of duty, subject to the conditions specified by the Board by regulations.
- New section 58A is inserted to provide for a new class of warehouses which require continued physical control and will be licensed for storing goods, as may be specified.
- Section 58B is inserted so as to regulate the process of cancellation of licences which is a necessary concomitant of licensing.
- Warehousing bond amount to be at thrice the duty involved in terms of Sec 59 of Customs Act.
- Owner of Warehouse is not required to pay any rent or warehouse charges in respect of Sec 63 of Customs Act.
- No payment of fees to be paid by warehousing owners for supervision of manufacturing facilities under Bond in respect of Sec 65 of Customs Act.
- New Sec 73A is inserted so as to provide for custody of warehoused goods and responsibilities including the liabilities of warehouse keepers.
- Changes in Baggage Rules:
- The existing Baggage Rules, 1998 are being substituted with the Baggage Rules, 2016, so as to simplify and rationalize multiple slabs of duty free allowance for various categories of passengers. The new Rules are effective from 01.04.2016.
- The Customs Baggage Declaration Regulations, 2013 is amended so as to prescribe filing of Customs declaration only for those passengers who carry dutiable or prohibited goods.
- Increase in free baggage allowance for international passengers. Filing of baggage only for those carrying dutiable goods.
- Changes in other provisions:
- The existing Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 are substituted with the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 with a view to simplify the rules, including allowing duty exemptions to importer/manufacturer based on self-declaration instead of obtaining permissions from the Central Excise authorities. Need for additional registration is also being done away with. The new Rules will be effective from 01.04.2016.
- There have been amendments in the rates of BCD (Basic Customs Duty) / CVD (Additional Duty of Customs) / SAD (Special Additional Duty) / Excise Duty in certain important goods.
Changes in basic custom duty (BCD) rates and effective rates of duty:
Amendment affecting rates of duty | |||
Items | Description | Current Rate | Proposed Rate |
Articles of rubber | Natural latex rubber made balloons falling under specified headings | 10% | 20% |
Metals | Primary aluminium | 5% | 7.5% |
Zinc alloys | 5% | 7.5% | |
Jewellery | Imitation jewellery | 10% | 15% |
Renewable Energy | Industrial solar water heater | 7.5% | 10% |
Capital goods and parts thereof | Increase the tariff rate of BCD for 211 specified tariff lines in Chapters 84, 85 and 90 | 7.5% | 10% |
a) The effective rates for 96 specified tariff lines | 7.5% | 10% | |
b) The effective rate for 115 tariff lines will be maintained | 7.5% | 7.5% | |
Items | |
Ores and concentrates : | |
| Nil rate of duty respectively on Iron ore fines with Fe content below 58%, Iron ore lumps with Fe content below 58% and Chromium ores and concentrates. |
Decrease in rate of Bauxite (natural), not calcined or calcined from 20% to 15%. | |
Food Processing : | |
1. | 5% rate respectively on Cashew nuts in shell, Cold chain including pre-cooling unit, pack houses, sorting and grading lines and ripening chambers and Refrigerated containers |
Other Items | Current Rate | Proposed Rate |
Mineral fuels and Mineral oils : | ||
Coal; briquettes, ovoids and similar solid fuels manufactured from coal | 2.5% / 10% | 2.5% |
Lignit, excluding jet and Peat (including peat litter) | 10% | 2.5% |
Coke and semi-coke of coal, of lignite or of peat | 5% / 10% | 5% |
Coal gas, water gas, producer gas and similar gases, other than petroleum gases and Tar distilled from coal, from lignite or from peat and other mineral tars | 10% | 5% |
Oils and other products of the distillation of high temperature coal tar | 2.5% / 5% /10% | 2.5% |
Pitch and pitch coke, obtained from coal tar or from other mineral tars | 5% / 10% | 5% |
Chemicals & Petrochemicals : | ||
All acyclic hydrocarbons and all cyclic hydrocarbons [other than para-xylene which attracts Nil BCD and styrene which attracts 2% BCD] | 5% / 2.5% | 2.5% |
Denatured ethyl alcohol (Ethanol) subject to actual user condition | 5% | 2.5% |
Orthoxylene for the manufacture of phthalic anhydride subject to actual user condition | SAD – 4% | SAD – 2% |
Electrolysers, membranes and their parts required by caustic soda / potash unit using membrane cell technology | 2.5% | Nil |
Paper, Paperboard and newsprint : | ||
Wood in chips or particles for manufacture of paper, paperboard and news print | 5% | Nil |
Plans, drawings and designs | Nil | 10% |
Textiles : | ||
Specified fibres and yarns | 5% | 2.5% |
Specified fabrics of value equivalent to 1% of FOB value of exports in the preceding financial year subject to the specified conditions.
| Applicable BCD | Nil |
Electronics / Hardware : | ||
Polypropylene granules / resins for manufacture of capacitor grade plastic films | 7.5% | Nil |
E-Readers | Nil | 7.5% |
Parts of E-readers | Applicable BCD | 5% |
Magnetron of capacity of 1 KW to 1.5 KW for use in manufacture of domestic microwave ovens. | 10% | Nil |
Machinery, electrical equipment and instrument and parts thereof (except populated PCBs) for semiconductor wafer fabrication / LCD fabrication unitsimported for Assembly, Test, Marking and Packaging of semiconductor chips (ATMP | Applicable BCD SAD | Nil BCD Nil SAD |
The exemption from basic customs duty, CV duty, SAD on charger / adapter, battery and wired headsets / speakers for manufacture of mobile phone being withdrawn | BCD-Nil CVD - Nil SAD - Nil | Applicable BCD CVD – 12.5% SAD – 4% |
To exclude specified telecommunication equipment from the purview of the other exemption. | Nil BCD | 10% |
Preform of silica for manufacture of telecom grade optical fibre /cables | Nil | 10% |
Neodymium Magnet (before Magnetization) and Magnet Resin for manufacture of BLDC motors | Applicable BCD | 2.5% |
Populated PCBs for manufacture of personal computers (laptop or desktop) | Nil SAD | 4% SAD |
Populated PCBs for manufacture of mobile phone/tablet computer | Nil SAD | 2% SAD |
Metals, glass and ceramics : | ||
Silica sand & Brass scrap | 5% | 2.5% |
Other aluminium products | 7.5% | 10% |
Jewellery : | ||
Gold dore bars. | 8% CVD | 8.75% CVD |
Silver dore. | 7% CVD | 7.75% CVD |
Automobiles : | ||
Golf cars | 10% | 60% |
Specified parts of electric and hybrid vehicles | BCD-Nil CVD – 6% Upto 31.03.2016 | BCD-Nil CVD – 6% Without time limit |
Aluminium Oxide for use in the manufacture of Wash Coat, which is used in the manufacture of catalytic converters, subject to actual user condition | 7.5% | 5% |
Engine for xEV (hybrid electric vehicle) | Applicable BCD and CVD | Nil BCD 6% CVD |
Capital Goods : | ||
Specified machinery required for construction of roads
| CVD – Nil | CVD – 12.5% |
Miscellaneous : | ||
Braille paper | 10% | Nil |
Solar tempered glass / solar tempered (anti-reflective coated) glass, subject to actual user condition | Nil | 5% |
Medical Use Fission Molybdenum-99 imported by Board of Radiation and Isotope Technology (BRIT) for manufacture of radio pharmaceuticals | 7.5% | Nil |
Pulp of wood for manufacture of sanitary pads, napkins & tampons | 5% | 2.5% |
Super Absorbent Polymer when used for the manufacture of sanitary pads, napkins & tampons | 7.5% | 5% |
Applicable rate of BCD, CVD & SAD is reduced to Nil in case of following goods :
- Goods required for exploration & production of hydrocarbon activities undertaken under Petroleum Exploration Licenses (PEL) or Mining Leases (ML) issued or renewed before 1st April 1999.
- Inputs, parts and components, subparts for manufacture of charger / adapter, battery and wired headsets / speakers of mobile phones.
- Parts and components, subparts for manufacture of Routers, broadband Modems, Set-top boxes for gaining access to internet, set top boxes for TV, digital video recorder (DVR) / network video recorder (NVR), CCTV camera / IP camera, lithium ion battery.
- Specified capital goods and inputs for use in manufacture of Micro fuses, Sub-miniature fuses, Resettable fuses, and Thermal fuses
- Tools and tool kits when imported by MROs for maintenance, repair, and overhauling [MRO] of aircraft subject to a certification by the Directorate General of Civil Aviation.
- Capital goods and spare thereof, raw materials, parts, material handling equipment and consumable for repairs of ocean-going vessels by a ship repair unit.
- Disposable sterilized dialyzer and micro barrier of artificial kidney
- Specified goods required for exploration & production of hydrocarbon activities undertaken under Petroleum Exploration Licenses (PEL) or Mining Leases (ML) issued or renewed before 1st April 1999
- “Foreign Satellite data” on storage media when imported by National Remote Sensing Centre (NRSC), Hyderabad.
Excise duty is a tax on manufacture or production of goods. Excise duty on alcohol, alcoholic preparations, narcotic substances and certain hazardous substances is collected by the State Government and is called "State Excise" duty. The Excise duty on rest of goods is called "Central Excise" duty and is collected in terms of Section 3 of the Central Excise Act, 1944. Sales Tax is different from Excise Duty as it is a tax on the act of sale while Excise Duty is a tax on the act of manufacture or production of goods.
There has been no change in the general Excise Duty rate, which is at present 12%.
Important Changes in the Central Excise Act 1944:
- CHANGES IN RATE OF DUTY
- Schedule-1 & 2 : Editorial changes in the Harmonized System of Nomenclature (HSN) in certain chapters are being incorporated, effective w.e.f. 01.01.2017
- Separate Tariff lines for Laboratory grown or manmade or cultured or synthetic diamonds
- CHANGES IN RATE OF DUTY
Food Processing Sector | ||
Category | Current Rate | Proposed Rate |
Refrigerated containers | 12.5% | 6% |
Fertilizers | ||
Category | Current Rate | Proposed Rate |
Micronutrients (Sr. No. 1(f) of Schedule 1 Paert (A) of the Fertlizer Control Order, 1985) | 12.5% | 6% |
Physical Mixture of Fertilizers, manufactured by & to be supplied to members of Co-operative Societies holding certificate to manufacture it under Fertilizer Control Order, 1985, made with excise duty-paid chemical fertilizers for which no cenvat credit has been availed | 1% (Without CENVAT Credit) 6% (With CENVAT Credit) | NIL |
Textiles | ||
Category | Current Rate | Proposed Rate |
Readymade Garments & Articles (Made up of Textiles) | 30% of Retail Sale Price | 60% of Retail Sale Price |
Branded Readymade Garments & Articles (Made up of Textiles) having a Retail Sale Price ≥ Rs. 1000 | NIL (Without CENVAT credit) 6% / 12.5% (With CENVAT Credit) | 2% (Without CENVAT credit) 12.5% (With CENVAT Credit) |
PSF (Polyester Staple Fibre)/PFY (Polyester Filament Yarn) | 2% (Without CENVAT Credit) 6% (With CENVAT Credit) | 2% (Without CENVAT Credit) 12.5% (With CENVAT Credit) |
Electronics/ IT Hardware | ||
Category | Current Rate | Proposed Rate |
Charger / adapter, battery and wired headsets / speakers for supply to mobile phone manufacturers as original equipment manufacturer | NIL | 2% (Without CENVAT Credit) 12.5% (With CENVAT Credit) |
Inputs, parts and components, subparts for manufacture of charger / adapter, battery and wired headsets / speakers of mobile phone, subject to actual user condition | 12.5% / Nil | NIL |
Routers, broadband Modems, Set-top boxes for gaining access to internet, set top boxes for TV, digital video recorder (DVR) / network video recorder (NVR), CCTV camera / IP camera, lithium ion battery [other than those for mobile handsets] | 12.5% | 4% (Without CENVAT Credit) 12.5% (With CENVAT Credit) |
Parts and components, subparts for manufacture of Routers, broadband Modems, Set-top boxes for gaining access to internet, set top boxes for TV, digital video recorder (DVR) / network video recorder (NVR), CCTV camera / IP camera, lithium ion battery [other than those for mobile handsets] | 12.5% | NIL |
Food Processing Sector | ||
Category | Current Rate | Proposed Rate |
Refrigerated containers | 12.5% | 6% |
Fertilizers | ||
Category | Current Rate | Proposed Rate |
Micronutrients (Sr. No. 1(f) of Schedule 1 Paert (A) of the Fertlizer Control Order, 1985) | 12.5% | 6% |
Physical Mixture of Fertilizers, manufactured by & to be supplied to members of Co-operative Societies holding certificate to manufacture it under Fertilizer Control Order, 1985, made with excise duty-paid chemical fertilizers for which no cenvat credit has been availed | 1% (Without CENVAT Credit) 6% (With CENVAT Credit) | NIL |
Textiles | ||
Category | Current Rate | Proposed Rate |
Readymade Garments & Articles (Made up of Textiles) | 30% of Retail Sale Price | 60% of Retail Sale Price |
Branded Readymade Garments & Articles (Made up of Textiles) having a Retail Sale Price ≥ Rs. 1000 | NIL (Without CENVAT credit) 6% / 12.5% (With CENVAT Credit) | 2% (Without CENVAT credit) 12.5% (With CENVAT Credit) |
PSF (Polyester Staple Fibre)/PFY (Polyester Filament Yarn) | 2% (Without CENVAT Credit) 6% (With CENVAT Credit) | 2% (Without CENVAT Credit) 12.5% (With CENVAT Credit) |
Electronics/ IT Hardware | ||
Category | Current Rate | Proposed Rate |
Charger / adapter, battery and wired headsets / speakers for supply to mobile phone manufacturers as original equipment manufacturer | NIL | 2% (Without CENVAT Credit) 12.5% (With CENVAT Credit) |
Inputs, parts and components, subparts for manufacture of charger / adapter, battery and wired headsets / speakers of mobile phone, subject to actual user condition | 12.5% / Nil | NIL |
Routers, broadband Modems, Set-top boxes for gaining access to internet, set top boxes for TV, digital video recorder (DVR) / network video recorder (NVR), CCTV camera / IP camera, lithium ion battery [other than those for mobile handsets] | 12.5% | 4% (Without CENVAT Credit) 12.5% (With CENVAT Credit) |
Parts and components, subparts for manufacture of Routers, broadband Modems, Set-top boxes for gaining access to internet, set top boxes for TV, digital video recorder (DVR) / network video recorder (NVR), CCTV camera / IP camera, lithium ion battery [other than those for mobile handsets] | 12.5% | NIL |
Machinery | ||
Category | Current Rate | Proposed Rate |
Electric motor, shafts, sleeve, chamber, impeller, washer required for the manufacture of centrifugal pump | 12.5% | 6% |
Automobiles | ||
Category | Current Rate | Proposed Rate |
Specified parts of Electric Vehicles and Hybrid Vehicles | 6% Upto 31.03.2016 | 6% Without Time Limit |
Engine for xEV (hybrid electric vehicle) | 12.5% | 6% |
Category | Current Rate | Proposed Rate |
Specified parts of Electric Vehicles and Hybrid Vehicles | 6% Upto 31.03.2016 | 6% Without Time Limit |
Engine for xEV (hybrid electric vehicle) | 12.5% | 6% |
Renewable Energy | ||||
Category | Current Rate | Proposed Rate | ||
Unsaturated Polyester Resin (polyester based infusion resin and hand layup resin), Hardeners/Hardener for adhesive resin, Vinyl Easter Adhesive (VEA) and Epoxy Resin used for manufacture of rotor blades and intermediates, parts and sub parts of rotor blades for wind operated electricity generators | NIL | 6% | ||
Carbon pultrusion used for manufacture of rotor blades and intermediates, parts and sub-parts of rotor blades for wind operated electricity generators | 12.5% | 6% | ||
Solar lamp | 12.5% | NIL | ||
“A valid agreement between importer / producer of power with urban local body for processing of municipal solid waste for not less than ten years from the date of commissioning of project” has been prescribed as an alternative to the condition of “production of valid power purchase agreement between the importer/producer of power and the purchaser, for the sale and purchase of electricity generated using non-conventional materials” for availing concessional customs/excise duty benefits in case of power generation project based on municipal and urban waste. | ||||
Civil Aviation | ||||
Category | Current Rate | Proposed Rate | ||
Aviation Turbine Fuel [ATF] other than for supply to Scheduled Commuter Airlines (SCA) from the Regional Connectivity Scheme airports | 8% | 14% | ||
Precious metals & Jewellery | ||||
Category | Current Rate | Proposed Rate | ||
Refined gold bars manufactured from gold dore bar, silver dore bar, gold ore or concentrate, silver ore or concentrate, copper ore or concentrate; Gold Bars & Coins (Pirurity≥99.5%) produced during copper smelting (Existing Area-Based exemptions on refined gold withdrawn)
| 9% | 9.5% | ||
Refined silver manufactured from silver ore or concentrate, silver dore bar, or gold dore bar; Silver in any form including Silver Coins (Purity≥99.9%) produced during copper smelting or zinc or lead smelting (Existing Area-Based exemptions on refined silver withdrawn)
| 8% | 8.5% | ||
Articles of Jewellery [excluding silver jewellery, other than studded with diamonds or other precious stones namely, ruby, emerald and sapphire] with a higher SSI threshold exemption upto Rs. 6 crore in a year and eligibility limit of Rs.12 crore, along with simplified compliance procedure. For the month of March, 2016, the SSI exemption for such articles of jewellery is being restricted to Rs. 50 lakh. | NIL | 1% (Without CENVAT Credit) 12.5% (With CENVAT Credit) | ||
Optional centralized Registration now allowed to manufacturers of above Articles of Jewellery. | ||||
Maintenance, repair and overhaul [MRO] of aircrafts | ||
Category | Current Rate | Proposed Rate |
Tools and tool kits when procured by MROs for maintenance, repair, and overhauling [MRO] of aircraft subject to a certification by the Directorate General of Civil Aviation | Applicable excise duty | NIL |
Procedure for availing exemption from excise duty on parts, testing equipment, tools and tool-kits for maintenance, repair and overhaul of aircraft based on records has been simplified | ||
The restriction of one year for utilization of duty free parts for maintenance, repair and overhaul of aircraft Has been removed. | ||
Metals | ||
Category | Current Rate | Proposed Rate |
Disposable Containers made of Aluminium foils | 2% (Without CENVAT Credit) 6% (With CENVAT Credit) | 2% (Without CENVAT Credit) 12.5% (With CENVAT Credit) |
Aerated Beverages | ||
Category | Current Rate | Proposed Rate |
Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured. | 18% | 21% |
Tobacco & Tobacco Products | ||
Category | Current Rate | Proposed Rate |
Cigar and cheroots, Cigarillos, Cigarillos and other products of tobacco substitutes. | 12.5% or Rs.3375 per thousand, whichever is higher | 12.5% or Rs.3755 per thousand, whichever is higher |
Cigarettes of tobacco substitutes |
Rs.3375 per thousand | Rs.3755 per thousand |
Gutkha, chewing tobacco (including filter khaini) and jarda scented tobacco | 70% | 81% |
Unmanufactured tobacco | 55% | 64% |
Paper rolled biris [whether handmade or machine made] and other biris [other than handmade biris] However, the effective rate of basic excise duty of Rs.21 per thousand shall remain unchanged. | Rs.30 per thousand | Rs.80 per thousand |
Miscellaneous | ||||||
Category | Current Rate | Proposed Rate | ||||
Sacks and bags of all plastics | 12.5% / 15% | 15% | ||||
Improved cook stoves including smokeless chulhas for burning wood, agro-waste, cow-dung, briquettes, and coal have been unconditionally exempted. | ||||||
Disposable sterilized dialyzer and micro barrier of artificial kidney | 12.5% | NIL | ||||
Ready Mix Concrete manufactured at the site of construction for use in construction work at such site | 2% (Without CENVAT Credit) 6% (With CENVAT Credit) | NIL | ||||
Parts of railway or tramway locomotives or rolling stock and railway or tramway track fixtures and fittings, railway safety or traffic control equipment, etc | 12.5% | 6% | ||||
Remnant kerosene, presently available for manufacture of Linear alkyl Benzene [LAB] and heavy alkylate [HA] to N-paraffin. At present, exemption is restricted to manufacturers of LAB and HA. | 14% | NIL | ||||
Clean Energy Cess / Clean Environment Cess on coal, lignite or peat produced or extracted as per traditional and customary rights enjoyed by local tribals without any license or lease in the State of Nagaland | Rs. 200 per tonne | NIL | ||||
Retail Sale Price (RSP) based assessment of Excise Duty extended to the following categories :
· All goods mentioned under heading 3401 & 3402 like soaps & washing agents, etc. · Aluminium foils of a thickness not exceeding 0.2mm
· Wrist wearable devices (commonly known as smart watches)
· Accessories of motor vehicles and certain other specified goods
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- THE PROCEDURAL CHANGES
- The number of excise returns reduced from 27 to 13 (one annual & 12 monthly returns)
- CBEC to also provide for e-filing of annual return like monthly returns
- Facility for revision of returns to manufacturers
- Manual attestation of copies of digitally signed invoices by transporter now not required
- Interest to be charged from original date of payment of duty in case of finalisation of provisional assessment
Cheif Commisioners of Central Excise to file application to Courts to withdraw prosecution in cases involving duty < 5 lakh & pending for > 15 years
OTHER CHANGES
- Basic Excise Duty is being increased on Pan Masala from 16% to 19%.
- Oil Industries Development Cess levied on domestically produced crude oil under the Oil Industry (Development) Act, 1974 is being reduced from Rs.4500 PMT to 20% ad valorem. This change will come into force with effect from the date of assent to the Finance Bill, 2016. Till the enactment of the Finance Bill, 2016, Notification prescribing 20% effective rate of OID Cess will be issued by Ministry of Petroleum & Natural Gas.
- The Schedule Rate of Clean Energy Cess, levied on coal, lignite and peat, is being increased from Rs.300 per tonne to Rs.400 per tonne (The increase in rate of Clean Energy Cess will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931). Further, the Clean Energy Cess is being renamed as Clean Environment Cess. This change will come into force with effect from the date of enactment of the Finance Bill, 2016.
- Interest rate on delayed payment of Excise Duty has been slashed by 3%, i.e., brought down to 15% from 18%.
- An Infrastructure Cess, (the proceeds of which will belong to Union) is being levied on following motor vehicles:
- Rate @ 1% on Petrol/LPG/CNG driven motor vehicles of length upto 4m & engine capacity upto 1200cc
- Rate @ 2.5% on Diesel driven motor vehicles of length upto 4m & engine capacity upto 1500cc
- Rate @ 4% on Other higher engine capacity vehicles & SUVs and bigger sedans.
Three wheeled vehicles, electrically operated vehicles, Hybrid vehicles, Hydrogen vehicles based on fuel cell technology, Motor vehicles which after clearance have been registered for use solely as taxi, Cars for physically handicapped persons and Motor vehicles cleared as ambulances or registered for use solely as ambulance will be exempt from this Cess. No credit of this Cess will be available, and credit of no other duty can be utilized for payment of this Infrastructure Cess. The cess will attract the same provisions as applicable to any duty under the Central Excise Act, 1944.
- Excise duty on Capital goods and spare thereof, raw materials, parts, material handling equipment and consumable for repairs of ocean-going vessels by a ship repair unit is being exempted subject to actual user condition.
- CHANGES IN SOME RULES
Old Rule | Revised Rule | Purpose |
Baggage Rules, 1998 | Baggage Rules, 2016 | Simplifying and rationalizing multiple slabs of duty-free allowance for various passenger categories (effective 01.04.2016) |
Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 | Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 | Simplifying the rules, including allowing duty exemptions to importer/manufacturer based on self-declaration instead of obtaining permissions from the Central Excise authorities. Now, Additional registration is not required. The new Rules will be effective from 01.04.2016. |
Customs Baggage Declaration Regulations, 2013 | Amended | To prescribe filing of Customs declaration only for those passengers who carry dutiable or prohibited goods. |
CENVAT Credit Rules, 2004 | Amended | Improving credit flow, reducing compliance burded and introducing credit distribution measures. |
Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable and Other Goods) Rules, 2001 | Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable and Other Goods) Rules, 2016 | Simplifying the procedure for availing duty exemptions by importers/ manufacturers.
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Service Tax is the tax payable on services provided. Although it is a tax which is payable by the provider of service, however, it can be collected from the recipient of service. The Central Board of Excise & Customs (CBEC), Department of Revenue, Ministry of Finance, deals with the task of formulation of policy concerning levy and collection of Service Tax. The rate of Service Tax is being increased from 14.5% to 15% (inclusive of krishi kalyan cess) effective from 01st June 2016.
Certain changes have been made in the service tax provisions upon the enactment of the Finance Bill 2016. These are as follows:
- Scope of Service Tax expanded by shrinking the Negative List (Effective from 1stJune 2016)
- Education Services are being omitted
- Services of Transportation of passengers by a stage carriage is being omitted.
- The following new Exemptions have been included in Mega Exemption effective from 1st April 2016, except otherwise provided
- Service by way of construction etc. in respect of the following effective from 1st March 2016
- Housing project under housing for all mission/Pradhan Mantri Awas Yojana.
- Low cost houses up to a carpet area of 60 square meters in a housing project “affordable housing in partnership component of PMAY.
- Low cost houses up to a carpet area of 60 square meters in a housing project under any scheme of the state Government.
- Service of life insurance business provided by way of annuity under National Pension system (NPS).
- Service provided by IRDA, SEBI & EPFO.
- General insurance services provided under ‘Niramaya’ Health Insurance scheme.
- Services Provided by National Centre for Cold Chain Development under department of agriculture, cooperation & farmer’s welfare by way of knowledge dissemination.
- Services Provided by Biotechnology Industry Research Assistance Council approved biotechnology incubators to incubatees.
- Services by way of skill/vocational training partners under Deen Dayal Upadhyay Grameen Kaushalya Yojana.
- Services of assessing body empanelled centrally by directorate general of training, Ministry of skill development & entrepreneurship.
- Service of Construction of govt. schools, hospitals, port, airport etc. to the government with retrospective effect form 01.04.2015.(which were withdrawn with effect from 1st April 2015) are being restored in respect of services provided under contracts which had been entered into prior to 01.03.2015 on payment of applicable stamp duty ,with retrospective effect from 01.04.2015
- Services of Construction, maintenance etc. of canal, dam or other irrigation works from 1st July 2012 to 29th January, 2014 with consequential refunds.
- Service provided by IIM by way of 2 year full time PGPM, Fellowship programme in management & integrated programme in management (effective from 1st March 2016).
- Exemption Withdrawn and hence now would be taxable at General Rate & effective from 1st April 2016 except otherwise provided :-
- Senior advocate services to an advocate or partnership firm of advocates.
- Services of a person represented on an arbitral tribunal to an arbitral tribunal.
- Services of transportation of passengers by ropeway, cable car or aerial tramway.
- Construction, erection, commissioning or installation of original work pertaining to monorail or metro is now taxable @ 5.6% (effective from 1st March 2016).
- Rationalization of Abatements effective from April 1, 2016:
- Cenvat Credit of input services is allowed which was not available earlier :-
- Transportation of passenger by rail at the existing rate of 4.2% (Abatement of 70%)
- Transportation of goods by rail at the existing rate of 4.2% (Abatement of 70%)
- Transportation of goods by vessel at the existing rate of 4.2% (Abatement of 70%)
- No Cenvat credit is allowed which was earlier available on (effective from 1st April 2016 except otherwise provided) :-
- GTA Service by way of shifting of used household goods.
- Services of a foreman to a chit fund.
- Transportation of stage carriage (effective from 1st June 2016)
- Changes in abatement (effective from 1st April 2016 except otherwise provided):-
Services relating to:- | Service Tax Rate | |
Existing | Proposed | |
Construction of residential complex, civil structure or a part thereof | 3.5%/4.2% | 4.2% |
Tour operator Services
| 3.5%/5.6% of amount charged | 4.2% of amount charged |
Shifting of used household goods by GTA | 4.2% | 5.6% |
Foreman services to a chit fund | 14% | 9.8% |
Transportation of passenger by AC stage carriage w.e.f 1STJune,2016 | Nil | 5.6% |
Service tax on single premium annuity policies | 3.5% | 1.4% |
Transportation of goods in container by rail | 4.2% | 5.6% |
- Amendments in Cenvat Credit Rules (effective from 1st April 2016)
- Invoice issued by Service provider for removal of inputs and capital goods shall be a valid document.
- To give option to banking company, a financial institution including non-banking financial company for Cenvat
Credit reversal under sub-rule (1), (2) and (3) of the Rule 6 along with rule 6(3B) of the Cenvat Credit Rules,
2004.
- Cenvat credit of service tax paid on upfront charges for assignment of spectrum/ mining rights etc.
- Reversal of Cenvat Credit of inputs/input services which have been commonly used in a taxable output service
as well as an activity which is not a “service‟.
- Reverse Charge Mechanism:-
- Mutual fund agent/distributor service to AMC under NCM.
- Services provided by government or local authorities to business entities shall be on the services recipient
- Services of senior advocate are being excluded from reverse charge – Hence, senior advocates would be liable to charge service tax on their services.
- Other Amendments (effective from 1st April 2016, except otherwise provided)
- Quarterly Payment of service is extended to OPC & HUF.
- Payment of service tax on receipt basis is extended to OPC.
- Section 73 is amended so as to increase the limitation period from 18 months to 30 months for any default in service tax provision.
- Threshold exemption to services provided by a performing artist in folk or classical art forms of music, dance or theatre is being enhanced from Rs 1 lakh to Rs 1.5 lakh charged per event.
- Threshold limit relating to power to arrest is being increased from One Crore to Two Crore.
- Application for refund of Cenvat credit in case of Export services is 1 year from the date of Receipt of payment, where completion of services is done or Issue of invoice, where payment received in advance.
- Transportation of goods by vessel from custom station of clearance in India to place outside India excluded
- from ‘exempted service’ definition, thus, allowing shipping lines to take credit (w.e.f. 1st March 2016) on
- inputs/input services used in providing said service, which may be used by them to pay service tax on said
- services of transportation which would become taxable (effective from 1st June 2016)
- Retrospective allowance (from July 01, 2012) of refund of service tax on services used beyond factory or any
- other place or premises of production or manufacture of said goods, for export of the said goods.
- Service tax assesses, above a certain threshold, shall have to file one annual return along with half year return.
- Interest Rate on Indirect tax made uniform at 15%(Benefit to small service providers is available) except in case service tax collected but not deposited to the revenue in such case the rate will be 24%
- Right to use the radio frequency spectrum and subsequent transfer is declared as service and leviable to tax
- Services of IT software on media bearing RSP is exempted from service tax.
- Services of IT software recorded on media “NOT FOR RETAIL SALE” is a service and leviable to tax.
- Service relating to lottery of the state government is leviable to tax.
- INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016(effective from 1st June 2016)
- Dispute Resolution scheme aims to reduce the pending litigation before commissioner (Appeal) and the assessee shall get the immunity from all the proceedings under the Act.
- The person desirous of applying under this shall apply by 31.12.2016. The said scheme can be applied only in cases where order is in challenge and is pending before the commissioner (appeal) as on 31.03.2016 on receipt of the declaration, the designated authority shall acknowledge in such manner as may be prescribed.
- The declarent thereafter shall pay tax due along with the interest and penalty equivalent to 25% of the penalty within 15 days of the receipt of acknowledgement and intimate the same with payment details within 7 days of making payment along with the proof of payment.
- The designated authority upon receipt of intimation of payment shall pass an order of discharge of dues in such form as may be prescribed. Once the order is passed by the designated authority, the appeal pending before the Commissioner (Appeal) shall stand disposed and the declarent shall get immunity from all proceedings under respective Act.
- The order so passed by the designated authority shall result in conclusion of proceedings and no matter relating to such order can be reopened thereafter before any authority or court. Further, the issue shall not be deemed to be decided on merits and does not have any binding effect.
- Moreover, the amount paid under such declaration shall not be allowed to be refunded. However, this scheme will not apply in cases:
- Where prosecution has already been launched.
- Involving narcotics & psychotropic substances.
- Involving detention under COFEPOSA.
