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India Budget 2016 Indirect Tax Proposals Sanjay Dwivedi
Advocate
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Duty Imposed
• Infrastructure Cess on Motor Vehicles (8703) – upto 4%
• Branded readymade garments having MRP of Rs. 1000 or more – 2% without Credit; 12.5% with Credit.
• Jewellery Articles – 1% without Credit; 12.5% with Credit
• Charger/adapter, battery and wired headsets/speakers for use in manufacture of mobile handsets – 2% without credit, 12.5% with Credit
• Routers, modems, set-top boxes, Video recorder, CCTV Camera, Lithium-ion batteries – 4% without credit, 12.5% with credit
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Duty Increased
• Clean Environment Cess increased from Rs. 200 to Rs. 400 pmt
• Pan masala – from 16% to 19% • Tobacco Products • Aerated water (2202 10) – from 18% to 21% • Plastic bags/ sacs – duty @15% • PSF / PFY manufactured from waste or scrap (including
waste PET bottles) – from 6% to 12.5% (with Cenvat); remains 2% without Cenvat
• Silver Bar – from 8% to 8.5%; Gold Bars/ coins - 9% to 9.5%
• Disposable Aluminium foil containers – from 6% to 12.5% (with Cenvat); remains 2% without Cenvat
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Duty Reduced
• Micronutrients [Schedule 1, Part A, Sr. 1(f) of FCO] – reduced from 12.5% to 6%
• Ready Concrete Mix – at site – Wholly exempted
• Specified parts required for the manufacture of centrifugal pump reduced from 12.5% to 6%, subject to actual user condition
• Tools and tool kits for maintenance, repair, and overhauling of aircraft - exempted.
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MRP Based Assessment
Description Classification Abatemen
t
Soap; OSAA; Paper Soap 3401, 3402 30%
Aluminium foils of thickness up to 0.2
mm)
7607 25%
Smart Watches 851762 35%
Accessories of Vehicles etc. Any Chapter 30%
Parts, components & accessories of Vehicles were already covered. Relates to
certain products of ch. 87, 8426, 8427, 8429, 8430. See sr. 108 & 109 of
notification 49/2008-CE (NT).
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Footwear – abatement increased from 25% to 30%
C. Excise – Law & Procedures
• Limitation to issue Show Cause Notice increased (cases not involving intentional evasion):
• C. Excise – 2 Years
• Service Tax - 30 months (effectively three years)
• End use based exemptions (Annexure II procedure) – Self Certification Allowed
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C. Excise Procedures
• Digitally signed invoice – Authenticated physical copy not required
• Revision of Returns allowed – ER-1 (same month); ER-4 (within one month)
• ER-5, ER-6 and ER-7 abolished
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Ready-Made Garments
• Duty imposed if:
• The goods bear a brand name (or are sold under a brand name); and
• Have RSP Rs. 1000 or more
• Rate 2% (without credit); 12.5% with credit
• Value = 60% of MRP
• Liability is of brand owner – who gets goods manufactured
• SSI Exemption – available (March 16 – Rs. 12.5 lakh)
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Jewellery (Except Silver …)
• Rate 1% (with credit); 12.5% without credit
• Liability: One who gets manufactured
• Registration – Centralised registration permitted
• SSI Exemption: 6 Crore in a year (Previous year 12 Cr)
• SSI Exemption in March 16: 50 Lakh
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Cenvat Credit
• Rule 6 revamped
• ISD provisions (rule 7) redrafted
• Credit can be distributed to ‘outsourced manufacturer’
• Removal of goods directly from job-worker’s premises – fresh permission to be valid for 3 years
• Tools can also be sent to job-worker – without bringing to factory.
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Capital Goods
• Railway Wagons (860692)
• ‘Equipments or appliance used in an office’
• Capital Goods used for pumping of water - even if the capital goods used ‘outside the factory’.
• Capital Goods having value upto Rs. 10,000/- per piece – shifted to ‘input’
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Rule 6
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Dutiable
Exempted
Based on item published at - http://www.taxindiaonline.com/RC2/print_story.php?newsid=25468
Sales
Rs. 2,000 (i.e. 20%)
Rs. 8,000 (i.e. 80%)
Rs. 10,000
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Cenvat Credit
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500
100
500
400
Rule 6 - Old System
• Don’t take credit on Tea Powder
• Pay back 20% of {Milk + Sugar}
• Also pay 20% of Coffee Powder
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Rule 6 - New System
• Take full credit: Rs. 1500
• Payback – Credit on Tea Powder: Rs. 100
• Credit on Coffee – Rs. 400 – fully eligible
• Common Credits {Milk + Sugar}: Rs. 500
• Divide it into ratio: Exempted/Total i.e. 1000/5000x500=100.
• Pay bak Rs. 100.
• Total paid back: Rs. 200
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Input Service Distribution
• Bills on office address
• Take entire credit & distribute
• Distribution would be vide Challans
• Apply rule 6 at unit’s location
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Example: Company having 3 Units
Unit X
• Dutiable • Exempted
Unit Y
• Outsourced manufacturing (job-worker)
Unit Z
• Trading • Taxable
Service
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Manner of Distribution
• If service relates to unit X – credit should be distributed only to X
• If service relates to units X & Y – Credit should be distributed to X & Y in the ratio of their turnover
• If the service relates to all – distribute to all
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Outsourced Manufacturer
• Separate record of credits received from each principle
• Credit of a principle – use only for that principle
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Service Tax – Effective immediately
• IT Software on media – if value determined on MRP basis (Sec 4A), Ser. Tax exempted.
• Construction for government – exempted if contract entered before 01/03/2015
• Housing Sector – Exemptions to various constructions under
• Housing for All (Urban) Mission
• Pradhan Mantri Awas Yojana
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Service Tax – Abatement (w.e.f. 01/04/2016) • Credit on input services allowed:
• Transport of Goods by rail
• Rail Container Operators – Abatement reduced to 60%
• Transport of passengers
• Transport of goods in Vessel
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Services received from Government
• Tax payable on all services (word ‘support’ deleted) except: Services by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution i.e.
(i) the preparation of plans for economic development and social justice;
(ii) Twelfth Schedule of constitution
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Service Tax (w.e.f. 01/06/2016) • Krishi Kalyan Cess @0.5% on all taxable services (making
effective rate as 15%)
• Assignment/ Trading of spectrum – declared to be a service.
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Value 1000
Service Tax @14% 140
Swachh Bharat Cess @0.5% 5
Krishi Kalyan Cess @0.5% 5
Total 1150
Lottery Distributors
• Third attempt
• [Future Gaming Pvt. Ltd. vs. U.O.I. ]
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Interest Rate: Service Tax
• Tax collected – but not paid: 24%
• Other cases: 15%
• 3% reduction – if turnover did not exceed Rs. 60 lakh
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Thank You
Sanjay Dwivedi
Advocate
9320 456 555
sanjay@srdlegal.in
512, Business Park, Citi of Joy,
Mulund (W), Mumbai - 80
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