Vinodh & Muthu Chartered Accountants

www.vmca.co 2

Foreword

The FM presented his fifth budget, for the first time

after implementation of GST and last time before the

next elections in 2019. So there were huge

expectations from this Budget.

While India was recovering from dampened demand

and hampered production that demonetisation had

created, India braced up with another major reform

in the name of GST in July 2017. However, it could

be seen that demonetisation resulted in over 1.8

million new individual tax filers and GST resulted in

over 3 million new registrants. The year also saw

through Indian Bankruptcy Code that provided a

resolution framework that will help corporates clean

up their balance sheet and reduce their debts.

The Economic Survey 2017-18 projects GDP

growth for 2017-18 to be close to 6.75 percent and

forecast of 7 to 7.5 percent in 2018-19.

The Budget’s focus was on strengthening agriculture

and rural economy, provision of healthcare,

infrastructure creation and improving quality of

education in the country.

The highlights of policy reforms in the budget are:

• Agriculture - MSP of 1.5 times the cost to all

crops.

• Education - Establish Ekalavya Model

Residential School on par with Navodya

Vidyalayas.

• Healthcare - Provide coverage up to Rs.5 Lakhs

per family per year for secondary and tertiary

care hospitalisation.

Government emphasis on digital India by through

various reform measures such as - ‘black board to

digital board’ in education, e-NAM in agriculture, e-

Audits in Income-tax and 5G research in

Technology,

On tax rates, corporate tax payers with up to Rs.250

Crores turnover will have a lower tax rate of 25

percent. Education Cess collected at 3 percent will

now be ‘Health & Education Cess’ at 4 percent.

LTCG exempt will now be taxable at 10 percent

where such income exceeds Rs.1 Lakh.

In international tax, FM took a step further to align

with BEPS Action plans of OECD by widening the

concept of ‘business connection’ and introducing the

concept of ‘Significant Economic Presence’.

On Indirect tax side, customs duty of various

electronic items have been increased to attract

manufacturers to make in India.

To summarise, the Government’s focus on poverty,

agriculture, healthcare, infrastructure, education,

employment and digital India and has made it very

clear that pre-election budgets are not always filled

with sops and subsidies.

Table of Contents

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State of Economy

Major reforms were undertaken over the last year -

GST was launched from 1st July 2017, new Indian

Bankruptcy Coe was introduced and major

recapitalisation package to strengthen public sector

banks were introduced.

The CSO has forecast real GDP growth for 2017-18

at 6.5 percent, while the Government expects it to be

close to 6.75 percent. A pick-up in growth to

between 7 and 7.50 percent in 2018-19 is forecasted.

CPI-C declined to 3.3 per cent in 2017-18 (Apr-Dec)

from 4.8 per cent in the corresponding period of

2016-17. Average inflation based on the WPI stood

at 2.9 per cent in 2017-18 (Apr-Dec) as compared to

0.7 per cent in 201617 (Apr-Dec).

The CAD has also widened in 2017-18 and is

expected to average about 1.50 to 2 percent of GDP

for the year as a whole. The fiscal deficit for the first

eight months of 2017-18 reached 112 percent of the

total for the year , far above 89 percent (being

average of last 5 years).

The agriculture sector registered significantly higher

growth in 2016-17 than the previous two years on

the back of normal monsoon. However, growth of

industry sector declined by over 3 percentage points

in the last financial year. The implicit growth in H2

of all three major sectors of the economy viz.

agriculture & allied, industries, and services sectors

being 2.2 per cent, 5.1 per cent and 8.7 per cent

respectively is better than H1 of 2017-18. The

growth of manufacturing sector is expected to

improve from 4.0 per cent in H1 to 5.1 per cent in

H2 of 2017-18. ‘Trade, transport, hotels, storage,

communications and services relating to

broadcasting’, which is a part of services sector is

the only sector that is likely to register a decline in

growth in H2 vis-à-vis H1 of 2017-18.

Over the past two fiscal years, the Indian stock

market has soared, outperforming many other major

markets. The S&P index has surged 45 percent,

while the Sensex has surged 46 percent in rupee

terms and 52 percent in dollar terms. This has led to

a convergence in the price-earnings ratios of the

Indian stock market to that of the US at a lofty level

of about 26.

The rupee strengthened by 2.5 per cent to a level of

Rs. 64.24 per US dollar during December 2017 from

the level of Rs. 65.88 per US dollar during March

2017 on the back of significant capital flows.

India’s foreign exchange reserves reached US$

409.4 billion on December 29, 2017, with a growth

of 14.1 per cent on a YoY basis from end-December

2016 and growth of 10.7 per cent from end-March

2017. The foreign exchange reserves were US$

413.8 billion on 12th January 2018.

The biggest source of upside potential in 2018-19

will be exports. On the other side, high oil prices

would remain a key risk. This would affect inflation,

the current account, the fiscal position and growth,

and force macroeconomic policies to be tighter than

otherwise.

Against this overall economic and political

background, economic management will be

challenging in the coming year. If the obvious

pitfalls (such as fiscal expansion) are avoided and

the looming risks are averted that would be no mean

achievement.

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Policy Proposals

Agriculture:

• MSP which is atleast one and half times of cost

introduced for rabi crops is now extended to all

crops.

• Expand coverage of e-NAM to 585 APMCs

and upgrade existing 22,000 rural haats into

GrAMs with a corpus fund of ₹2,000 crore.

• Allocate ₹200 crore or support in highly

specialised medicinal and aromatic plants.

• Promote establishment of specialized agro-

processing financial institutions in food

processing with an allocation of ₹1,400 crore.

• ‘‘Operation Greens’’ shall promote Farmer

Producers Organizations, agri-logistics,

processing facilities and professional

management with an allocation of ₹500 crore.

• Facility of Kisan Credit Cards to fisheries and

animal husbandry farmers to help them meet

their working capital needs.

• Re-structured National Bamboo Mission with

an outlay of ₹1290 crore to promote bamboo

sector in a holistic manner.

• Setting up FAIDF for fisheries sector and an

AHIDF for financing infrastructure requirement

of animal husbandry sector with a Corpus of

these two new Funds would be ₹10,000 crore.

Education:

• By the year 2022, every block with more than

50% ST population and at least 20,000 tribal

persons, will have an Ekalavya Model

Residential School.

• ‘‘Revitalising Infrastructure and Systems in

Education (RISE) by 2022’’ with a total

investment of ₹1,00,000 crore in next four

years to step up investments in research and

related infrastructure in premier educational

institutions, including health institutions.

• Set up a specialized Railways University at

Vadodara and two new full-fledged Schools of

Planning and Architecture, to be selected on

challenge mode.

• PMRF Scheme would identify 1,000 best

B.Tech students each year from premier

institutions and provide them facilities to do

Ph.D in IITs and IISc, with a handsome

fellowship.

Healthcare:

• ₹1,200 crore for 1.5 lakh centres will provide

comprehensive health care, including for

noncommunicable diseases and maternal and

child health services. These centres will also

provide free essential drugs and diagnostic

services.

• Launch a flagship National Health Protection

Scheme to cover over 10 crore poor and

vulnerable families (approximately 50 crore

beneficiaries) providing coverage up to ₹5 lakh

per family per year for secondary and tertiary

care hospitalization.

• Allocate additional ₹600 crore to provide

nutritional support to all TB patients at the rate

of ₹500 per month for the duration of their

treatment.

Employment:

• Government will contribute 12% of the wages

of the new employees in the EPF for all the

sectors for next three years.

• The facility of fixed term employment

announced to apparel and footwear sector will

now be extended to all sectors.

• To incentivize employment of more women in

the formal sector, FM proposes to reduce

women employees' contribution to 8% for first

three years of their employment against existing

rate of 12% or 10% with no change in

employers' contribution.

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Policy Proposals (Contd.)

Infrastructure:

• Proposed to develop ten prominent tourist sites

into Iconic Tourism destinations by following a

holistic approach involving infrastructure and

skill development, development of technology,

attracting private investment, branding and

marketing.

• Tourist amenities at 100 Adarsh monuments of

the Archaeological Survey of India will be

upgraded to enhance visitor experience.

• Mumbai’s transport system is being expanded

and augmented to add 90 kilometres of double

line tracks at a cost of over ₹11,000 crore.

• Allocation for developing suburban network of

Mumbai with over ₹40,000 crore and over

₹17,000 crore for Bengaluru metropolis.

Financial Market:

• SEBI will also consider mandating, beginning

with large Corporates, to meet about one-fourth

of their financing needs from the bond market.

• Corporate bonds rated ‘BBB’ or equivalent are

investment grade. In India, most regulators

permit bonds with the ‘AA’ rating only as

eligible for investment. It is now time to move

from ‘AA’ to ‘A’ grade ratings. The

government and concerned regulators will take

necessary action.

Digital India:

• Propose to increase the digital intensity in

education and move gradually from ‘‘black

board’’ to ‘‘digital board’’. Technology will

also be used to upgrade the skills of teachers

through the recently launched digital portal

‘‘DIKSHA’’.

• Initiatives such as Digital India, Start Up India,

Make in India would help India establish itself

as a knowledge and digital society.

• NITI Aayog will initiate a national program to

direct our efforts in the area of artificial

intelligence, including research and

development of its applications.

• To setup five lakh wi-fi hotspots which will

provide broadband access to five crore rural

citizens.

• The Department of Telecom will support

establishment of an indigenous 5G Test Bed at

IIT, Chennai.

• The Government does not consider crypto-

currencies legal tender or coin and will take all

measures to eliminate use of these crypto-assets

in financing illegitimate activities or as part of

the payment system.

• The Government proposes to issue a new

scheme to roll out e-assessment across country

to impart transparency.

Public Service Delivery:

• The Government will evolve a Scheme to

assign every individual enterprise in India a

unique ID.

• The Government has also initiated the process

of strategic disinvestment in 24 CPSEs, that

includes Air India

• Three public sector general insurance

companies National Insurance Company Ltd.,

United India Assurance Company Limited and

Oriental India Insurance Company Limited will

be merged into a single insurance entity and

will be subsequently listed.

• The Government will evolve a separate policy

for the hybrid instruments for attracting foreign

investments, especially for start-up.

www.vmca.co 7

Tax Rates

Direct Tax Rates :

Individuals / HUF \ Association of

Persons / Body of Individuals /

Artificial Judicial Persons

• For resident senior citizens (60 years but less

than 80 years) and very senior citizens (80

years or more), the basic exemption limit

remains unchanged at ₹ 300,000 and ₹ 500,000,

respectively.

• Surcharge at 10% on taxable income between

₹50 lakhs and ₹1 crore and 15% on taxable

income above ₹ 1 crore remains unchanged.

• Rebate u/s 87A is unchanged and is eligible

only for resident with taxable income less than

₹3.5 Lakhs, limited to ₹2,500.

Firm / Local Authority

Tax rates to remain at 30% for firm / local

authority. Surcharge to be chargeable at 12% where

total income exceeds ₹ 1 Crore.

Domestic Companies

• The subsidised corporate tax rate of 25% is now

extended to companies with a turnover of up to

₹250 Crores.

• Companies set-up and registered on or after 1st

March 2016 engaged solely in the business of

manufacture or production of article or thing

may at their option be taxable at 25% provided

they do not claim any specified deductions or

set-off relevant carry forward loss. This

provision is now subject to Chapter XII -

Determination of tax in certain special cases.

Effective 1st April 2017.

• Foreign companies continued to be taxed at

40%.

• MAT / AMT:

MAT continues to remain at 18.50% on

adjusted book profits where income-tax

payable on the total income in accordance

in provisions of the Act is lower.

If a person is a unit located in an IFSC and

derives its income solely in convertible

foreign exchange then the alternate tax

payable shall be 9% on adjusted total

income

MAT provisions were never deemed to be

applicable for foreign companies referred

to in Sec. 44B, 44BB, 44BBA or 44BBB

• Surcharge:

Domestic companies - 7% on taxable

income above ₹ 1 crore but up to ₹ 10

crores and 12% on taxable income above ₹

10 crores.

Foreign Companies - 2% on taxable

income above ₹ 1 crore but up to ₹ 10

crores and 5% on taxable income above ₹

10 crores.

Education Cess

• Education cess at 3% will now be Health &

Education Cess at 4% of Income Tax (including

surcharge)

Income Slabs (Rs.) Rate of tax (%)

Up to 250,000 Nil

250,001 – 500,000 5%

500,001 – 10,00,000 20%

10,00,001 and above 30%

Income (Rs.) Rate of tax (%)

Up to 250 Crores 25%

Above 250 Crores 30%

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Tax Proposals - Direct

Business Income :

Income Computation Disclosure

Standard :

• The Government notified ICDS u/s 145(2) and

was effective from AY 2017-18. ICDS were

introduced to bring uniformity in accounting

policies with respect to income-tax provisions.

• FM in this budget has amended several

provisions to align tax provisions with ICDS

giving retrospective effect from AY 2017-18.

• Marked to market loss or other expected loss

computed in accordance with ICDS is proposed

to be claimed as a deduction u/s 36 of the Act.

• Foreign Exchange gain or loss computed in

accordance with ICDS is proposed to be treated

as income / loss u/s 43AA of the Act.

• Income recognition of certain business u/s

43CB of the Act:

The profits arising from a construction contract

or a contract for providing services shall be

determined on the basis of percentage of

completion method in accordance with the

ICDS.

If a contract for providing services:

with a duration of not more than 90 days

project completion method is to be applied;

involving indeterminate number of acts then

apply straight line method.

For any purpose:

Contract revenue shall include retention

money;

Contract costs shall not be reduced by any

incidental income in the nature of interest,

dividend or capital gains.

• Valuation of Inventory u/s 145A of the Act:

The valuation of inventory shall be made at

lower of actual cost or NRV computed in

accordance with ICDS;

The valuation of purchase and sale of goods

or services and of inventory shall include

the amount of any tax, duty, cess or fee

actually paid or incurred by the taxpayer to

bring the goods or services to the place of

its location and condition as on the date of

valuation ;

The inventory being unlisted securities, or

listed but not regularly quoted on a

recognised stock exchange, shall be valued

at actual cost initially recognised in

accordance with ICDS;

The inventory being securities other than

those referred to in clause (iii), shall be

valued at lower of actual cost or NRV in

accordance with the ICDS. The comparison

of actual cost and NRV shall be done

category wise.

• The interest received by an assessee on any

compensation or on enhanced compensation, as

the case may be, shall be deemed to be the

income of the previous year in which it is

received.

• Any claim for escalation of price in a contract

or export incentives shall be deemed to be the

income of the previous year in which

reasonable certainty of its realisation is

achieved.

• Government subsidy or grant or cash incentive

or duty drawback shall be taxed on receipt basis

if not taxed in earlier years

Trust :

• 30% disallowance on non-compliance of tax

deducted at source u/s 40(a)(ia) and

disallowance on cash payments exceeding

₹10,000 per day u/s 40A(3) and 40A(3A) is

now extended to trusts / educational

institutions and hospitals.

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Tax Proposals - Direct

Insolvency Bankruptcy Code :

• Carry forward shall be allowed to be adjusted in

spite of change in the shareholding takes,

provided the change is pursuant to a resolution

plan approved under IBC after affording a

reasonable opportunity of being heard to the

jurisdictional Principal Commissioner or

Commissioner.

• To compute book profits under MAT the

aggregate amount of unabsorbed depreciation

and brought forward loss can be reduced, in

case of a company against whom an application

for corporate insolvency resolution has been

filed and admitted IBC.

• In case of companies in the process of corporate

insolvency resolution under IBC, the return

shall be verified by the insolvency professional

appointed by adjudicating authority.

Taxation on conversion of

inventory to capital asset :

• Tax provisions are currently available for

capital assets converted as inventory, however

there are no provision for the reverse. In this

aspect, it is proposed to tax profit or gains

arising from conversion of inventory into

capital asset.

• The FMV of inventory as on the date on which

it is converted into, or treated as, a capital asset

to be determined in the prescribed manner.

• The date of acquisition of such capital asset

shall be the date of conversion or treatment.

Start-up :

• Start-up companies incorporated up to 31st

March 2020 shall be eligible for deduction u/s

80-IAC of the Act.

• Turnover eligibility criteria to not exceed ₹25

Crores is now for a period of 7 previous years

commencing from incorporation date.

• Definition of 'Eligible Business' widened to

include start up engaged in innovation,

development or improvement of products or

processes or services or a scalable business

model with a high potential of employment

generation or wealth creation.

Others :

• Any compensation or other payment due to or

received by, any person at or in connection with

the termination or modification of the terms and

conditions, of any contract relating to his

business shall be treated as business income.

• Presumptive income for plying, hiring or

leasing goods carriages of Rs.7,500 per month

is now limited only to other than heavy goods

vehicle. For heavy goods vehicle the income

shall be Rs.1,000 per ton of gross vehicle

weight or unladen weight for every month.

• For the business manufacturing of apparel, an

employee employed for a period less than 150

days shall not be considered as an additional

employee for the purpose of 30% deduction on

additional employee cost u/s 80JJAA of the

Act. The benefit is now extended to include

footwear and leather products also.

• If an employee employed in the previous year

who has been employed for less than 240 or

150 days but has worked more than 240 or 150

days in succeeding year, then the employee

shall deemed to be employed in the succeeding

year u/s 80JJAA of the Act.

• Producer Company having turnover less than

100 crores includes income from eligible

business, then a deduction of 100% of income

from eligible business shall be claimed from

AY 2019-20 to AY 2025-26 u/s 80PA

• Deduction in respect of heading C of chapter

VIA of the Act (Sec. 80H to 80TT) is not

eligible if the return is not filed within due date.

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Tax Proposals - Direct

Capital Gain / IFOS :

New tax on LTCG from certain

securities :

• The exemption from capital gains arising from

the transfer of a long-term capital asset being an

equity share in a company or a unit of an equity

oriented fund or a unit of a business trust that is

subject to STT is withdrawn and shall be taxed

at 10% without indexation u/s 112A of the Act

if such income exceeds Rs.1 Lakh.

• The cost of acquisition of such asset shall be

higher of actual cost of acquisition and fair

market value as on 31st January 2018.

• A consequential amendment has been proposed

in section 115AD of the Act to tax such LTCG

in the hands of Foreign Institutional Investors.

Investment in long term specified

assets :

• Exemption u/s 54EC available on sale of any

long term capital asset is now restricted only to

land or building or both.

• Exemption will pertains to, investment in long-

term specified assets, being bond which is

redeemable after five years (earlier it was three

years) and issued on or after 01 April, 2018 by

NHAI or RECL, or any other bond notified by

the Central Government in this behalf.

Valuation of immovable

property :

• Income from transfer of immovable property

covered under capital gain (50C), business

profits (43CA) and other sources (56), is taxed

on the basis of sale consideration or stamp duty

value, whichever is higher.

• It is proposed that no adjustment shall be made

where the value of stamp duty does not exceed

105% of the consideration received / accrued.

Dividend :

• Scope of DDT extended to deemed dividend u/s

2(22)(e) of the Act and the rate has been

prescribed at 30% (plus applicable surcharge

and cess). Grossing up of DDT is not applicable

for DDT on deemed dividend.

• Assessee shall be deemed to be default if tax is

not paid on deemed dividend.

• Accumulated profits shall of amalgamated

company shall be increased by the accumulated

profits of the amalgamating company on the

date of amalgamation.

• 10% on income distributed to any person by an

equity oriented fund which was earlier 25% for

individuals / HUF and 30% for others.

Beyond Employment :

• Any compensation or other payment, due to or

received by any person, by whatever name

called, in connection with the termination of his

employment or the modification of the terms

and conditions relating thereto shall be treated

as income.

• Income from NPS fund was exempt up to 40%

for salaried employees. Now the benefit is

extended to all assessee.

Others :

• Any transfer of capital asset being bond or

GDR; or rupee denominated bond of an Indian

company; or derivative made by a non-resident

on a recognised stock exchange located in any

IFSC and where the consideration for such

transaction is paid or payable in foreign

currency shall not be treated as transfer u/s 47

for the purpose of capital gain.

• Any income arising to a non-resident, not being

a company, or a foreign company, by way of

royalty from, or fees for technical services

rendered in or outside India to, the National

Technical Research Organisation shall now be

exempt.

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Tax Proposals - Direct

International Taxation :

Business Connection :

• Following the recommendations under BEPS

Action 7 of OECD, the FM has proposed to

widen the definition of ‘business connection’ to

include an agent habitually concluding

contracts or habitually playing the principal role

leading to conclusion of contracts.

• Further it is proposed that ‘significant economic

presence’ of a non-resident in India shall

constitute ‘business connection’ in India.

• Significant economic presence of a non-

resident in India shall mean:

(a) transaction in respect of any goods,

services or property carried out by a non-

resident in India including provision of

download of data or software in India, if the

aggregate of payments arising from such

transaction or transactions during the

previous year exceeds such amount as may

be prescribed; or

(b) systematic and continuous soliciting of

business activities or engaging in

interaction with such number of users as

may be prescribed, in India through digital

means.

The transactions or activities shall constitute

significant economic presence in India,

whether or not the non-resident has a residence

or place of business in India or renders

services in India: Further, only so much of

income as is attributable to the transactions or

activities referred to in clause (a) or clause (b)

shall be deemed to accrue or arise in India.

Transfer Pricing :

• In lines of recommendation from BEPS Action

Plan of OECD, India introduced three tier

reporting structure from AY 2017-18 - CbCR,

Master File and Local File.

• To further align, it is proposed that the time

limit for furnishing the CbCR shall be 12

months from the end of the reporting

accounting year, as compared to earlier

deadline of filing on or before the return filing

due date.

• CbCR shall also be required to be filed by

entity resident in India of an international

group, if there is no obligation to file CbCR in

the home jurisdiction and the parent entity has

not designated any alternate reporting entity

outside India.

Sale of crude oil :

• Sale of leftover stock of crude oil by a foreign

company to a resident in India is exempt after

the expiry of agreement is now extended to

termination of agreement in accordance to the

terms and conditions provided therein.

MAT for foreign companies :

• It is proposed to clarify retrospectively that

provisions of MAT u/s 115JB shall not apply or

never have been deemed to apply, to foreign

companies opting for presumptive taxation u/s

44B or 44BB or 44BBA or 44BBB of the Act.

• Subsequently the amendment shall be

applicable from AY 2001-02 onwards.

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Tax Proposals - Direct

Personal Taxation :

Salary :

• Standard deduction is proposed to be

introduced to all salaried employees at ₹40,000.

• The standard deduction would replace transport

allowance of up to ₹19,200 and medical

allowance of up to ₹15,000.

Senior Citizens :

• Deduction under health insurance premium u/s

80D has been increased to ₹50,000 from

₹30,000.

• Deduction for treatment of specified ailments u/

s 80DDB has been increased to ₹100,000 from

₹60,000 (₹80,000 for very senior citizen).

• New section 80TTB is introduced for senior

citizens to exempt interest income (including

time deposits) from banks and post office up to

₹50,000.

Compliance :

Tax Deduction at Source :

• TDS u/s 193 is currently applicable on .8%

Savings (Taxable) Bonds, 2003 only if interest

on such bonds exceeds ₹10,000. The benefit is

now extended to 7.75% Savings (Taxable)

Bonds, 2018.

• TDS on interest other than securities u/s 194A

is to be deducted for senior citizens only if the

interest payment exceeds ₹50,000.

PAN Requirement :

• An organisation which enters into a financial

transaction of an amount aggregating to

Rs.250,000 and all directors / partners /

trustees / members / author / founder / CEO /

Karta of such organisation shall obtain PAN.

Penalty :

Penalty for failure to file AIR:

• Penalty for a person who fails to furnish an

annual information return u/s 285BA within the

prescribed due date shall pay a sum of ₹500 per

day for non-compliance (earlier ₹100 per day)

and ₹1,000 per day (earlier ₹500 per day) for

failure to furnish the return within the period

specified in the notice.

Prosecution for failure to furnish return:

• Section 276CC provides for imprisonment from

three months to seven years in case of failure to

file the return of income u/s 139(1) or 142(1)(i)

or 153A.

• The prosecution shall not apply where tax

payable by him on total income determined on

regular assessment as reduced by advance tax

and TDS does not exceed ₹3,000.

• To prevent abuse of this provision by shell

companies and companies holding benami

properties, it is proposed that the threshold shall

not apply in respect of companies.

Assessment Procedures :

• No adjustment u/s 143(1) shall be made with

respect to difference of income reported in

return vis-à-vis appearing in Form 26AS (or)

Form 16A (or) Form 16.

• It is proposed to amend the provisions of the

Act to enable e-assessment across country. It

proposes the Central Government to notify a

new scheme for scrutiny assessments.

• No deduction in respect of any expenditure or

allowance shall be allowed for income

determined by assessing officer u/s 68 - Cash

Credits, 69 - Unexplained Investments, 69A -

Unexplained Money, 69B - Investment not

fully disclosed in books, 69C - Unexplained

expenditure and 69D - Amount borrowed or

repaid on hundi.

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Tax Proposals - Indirect

Customs :

• Basic customs duty retained at 10%

• Education cess of 3% is replaced by social

welfare cess of 10%. 3% cess to remain for

high speed diesel, petrol, gold and silver. No

cess on specified goods.

• The limit of ‘Indian Customs Water’ extended

from ‘Contiguous Zone of India’ to the

‘Exclusive Zone of India’

• Advance Ruling can now be applied by all

importer or exporter of goods from / to India.

Time limit for ruling reduced from six months

to three months.

• Facility of electronic ledger introduced for

payment of duty, interest, penalty, fee etc.

• The Government to be empowered to sign

agreements with other countries for exchange

of information, facilitation of trade and

enforcement.

• To encourage ‘Make in India’, Customs Duty

has been increased for several products:

Specified parts or sub-parts or accessories

of cellular mobile phones increased from

7.50%/10% to 15%. Telephone for cellular

networks or for other wireless networks

increased from 15% to 20%.

Smart watches increased from 10% to 20%

LCD/LED//OLED panels and other parts of

TV increased from 7.50%/10% to 15%

Specified parts of LCD and LED TV panels

is now taxed at 10%

Buses, cars, trucks and motorcycles in CKD

condition increased from 10% to 15%.

Buses and trucks in CBU increased from

20% to 25%.

Parts and accessories of automobiles

increased from 10% to 15%

Spark and compression ignition engines for

automobiles and crank shaft for specified

engines increased from 7.50% to 15%

Excise Duty :

• No change in rate of special additional excise

duty.

• Additional excise duty on petrol and high-speed

diesel of ₹6 per litre abolished. Basic excise

duty on those reduced by ₹2 per litre. Road and

infrastructure cess on petrol and high-speed

diesel at ₹8 per litre.

• In lieu of levy of road and infrastructure cess of

₹8 per litre, following exemption is notified:

5% ethanol blended petrol.

10% ethanol blended petrol.

Bio-diesel, up to 20% volume.

• In lieu of levy of road and infrastructure cess of

₹8 per litre, 50% exemption from excise duty

on petrol and high speed diesel manufactured

and cleared from four oil refineries in north-

east India.

Service Tax

• Retrospective exemption has been accorded to

certain services from levy of service tax.

Life insurance services provided by the

Naval Group Insurance Fund to personnel

of coast guard for the period 10th

September 2004 to 30th June 2017.

Services provided by the GST network to

the Central or State Governments or the

Union Territory administration exempt from

28 March, 2013 to 30th June 2017.

Consideration paid to Government in the

form of its profit on petroleum share in

respect of services provided by Government

by way of grant or license or lease to

explore or mine petroleum crude or natural

gas or both.

www.vmca.co 14

Glossary

Act Income-tax Act, 1961

AHIDF Animal Husbandry Infrastructure Development Fund

APMCs Agriculture Produce Market Committee

AY Assessment Year

BEPS Base Erosion & Profit Shifting

CAD Current Account Deficit

CbCR Country by Country Reporting

CKD Completely Knock Down

CPI Consumer Price Index

CSO Central Statistics Office

DDT Dividend Distribution Tax

e-NAM Electronic National Agriculture Market

FAIDF Fisheries and Aquaculture Infrastructure Development Fund

FM Finance Minister

GDP Gross Domestic Product

GrAMs Gramin Agricultural Markets

GST Goods & Services Tax

IBC Insolvency Bankruptcy Code, 2016

ICDS Income Computation and Disclosure Standards

IFSC International Financial Services Centre

LTCG Long Term Capital Gain

MSP Minimum Support Price

NPS National Pension Scheme

NRV Net Realisable Value

OECD Organisation of Economic Cooperation and Development

PAN Permanent Account Number

PMRF Prime Minister’s Research Fellows

TDS Tax Deducted at Source

WPI Wholesale Price Index

www.vmca.co 15

Chennai

New No. 23 I Floor, 92nd Street,

18th Avenue, Ashok Nagar,

Chennai - 600083.

+91 44 4858 8384

Madurai

No. 634 I Floor,

14th East Cross Street,

Anna Nagar, Madurai - 625020.

+91 452 498 0014

Vinodh & Muthu

The information contained in this bulletin is to update on the financial budget 2018 and cannot be exercised as a professional advice.

We will not be liable in respect of any special, indirect or consequential loss or damage.

C. Muthu Palaniappan

Partner

+91 8015 000084

muthuc@vmca.co

C. Vinodh Kumar

Partner

+91 8015 000083

vinodhcc@vmca.co

Contact Information

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