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Budget PLUS 2012Key features of India’s Union Budget 2012-13
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March 2012 Budget PLUS 2012Page 2
Presenters
Pranav has been
rated as one of the leading
tax advisors
in India by International
Tax Review & by the
Legal Media Group Guide
to the World’s Leading
Tax Advisers. His area of expertise lies in
international
tax matters, cross border
and domestic mergers,
acquisitions & joint
ventures
Direct Tax
Pranav Sayta
Harishanker (Hari) is
a licensed customs broker.
His domain
of expertise lies in advising
companies
on resolution of
import pricing at
arm’s length on customsspecial valuation
representations, export
incentive programs, cross
border transactions, tax
structuring, and
tax efficient supply chains
Indirect Tax
Harishanker
Subramaniam
Ajay Lalvani is a
Chartered Accountant with
over 25 years of industry
experience. Currently, he
is the Head of Taxation
with Hindustan Unilever
Ltd. responsible for both
Direct and Indirect taxes. Ajay is a regular speaker
on tax & policy issues and
has represented industry
bodies at various
platforms
Industry
Ajay Lalvani
Sudhir has a rich
experience of more than
two decades in advising
multinational companies in
inbound investment
strategies and domestic
companies in relation to
their outbound investmentstrategies, including tax
efficient supply chain and
transfer pricing
Moderator
Sudhir Kapadia
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1. Budget backdrop
2. Budget Snapshot
3. Budget 2012
► Key policy
announcements
► Direct Tax proposals
► Indirect Tax proposals
B u
d g e t P L U
S 2
0 1 2Contents
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B u
d g e t P L U
S 2
0 1 2
Budget backdrop
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March 2012 Budget PLUS 2012Page 5
Budget backdrop
► Economy expected to grow at 6.9% in FY 2011-12► Agriculture – 2.5%
► Industry – 3.9%
► Services – 9.4%
► Growth in next fiscal expected to be 7.6%
► Gross fiscal deficit stands at 5.9% of GDP (5.1% last
year)
► Revenue deficit to be 1.8% of GDP in FY 2012-13 (3.4%last year)
► Direct tax revenue expected to go up by 13.84% and
indirect tax revenue to go up by 26.67%
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B u
d g e t P L U
S 2
0 1 2
Budget snapshot
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March 2012 Budget PLUS 2012Page 7
Budget snapshot
Particulars BEFY 2011-12
REFY 2011-12
BEFY 2012-13
Variance(%)
Particulars (a) (b) (c) of (c)
over (b)
Total Tax Revenues 932,440 901,664 1,077,611 19.51
- Direct Tax Receipts 534,624 502,968 572,567 13.84
- Indirect Tax Receipts 397,816 398,696 505,044 26.67
Non-tax revenues 125,435 124,737 164,614 31.97
Total Expenditure 1,257,729 1,318,720 1,490,925 13.06
- Plan expenditure 441,547 426,604 521,025 22.13- Non-plan expenditure 816,182 892,116 969,900 8.72
Amounts in crores of INR
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B u
d g e t P L U
S 2
0 1 2
Budget 2012► Key policy announcements► Direct Tax proposals
► Indirect Tax proposals
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B u
d g e t P L U
S 2
0 1 2
Budget 2012► Key policy announcements► Direct Tax proposals
► Indirect Tax proposals
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March 2012 Budget PLUS 2012Page 10
Key policy announcements
► Tax reforms► Direct tax code to be enacted at the earliest
► Expeditious examination of the Parliamentary Standing Committee
report expected
► Plan to introduce GST on course
► Drafting of model legislation for Centre and State GST under progress
► Structure of GST IT enabled Network (GSTN) approved - GSTN will
be operational by August 2012
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March 2012 Budget PLUS 2012Page 11
Key policy announcements
► Foreign Direct Investment reforms► Efforts to arrive on consensus on FDI in multi-brand retail trade
upto 51%
► Active consideration to allow foreign airlines to participate upto
49% in air transport
► ECB to be allowed for
► financing rupee debt of existing power projects
► capital expenditure for maintenance and operations of toll systems for
roads and highways
► working capital for airline industry► low cost affordable housing projects
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March 2012 Budget PLUS 2012Page 12
Key policy announcements
► Financial reforms► Allowing QFIs to access Indian corporate bond market
► IPOs above INR 100 million to be mandatorily issued in electronic
form through stock exchanges
► Permitting two way fungibility in Indian Depository Receipts
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March 2012 Budget PLUS 2012Page 13
Key policy announcements
► Other reforms► Amendments to the following bills to be moved during current
session
► Banking Laws (Amendment) Bill
► Insurance Laws (Amendment) Bill
► Following bills to be introduced shortly
► Micro Finance Institutions Bill
► Indian Stamp (Amendment) Bill
► White paper to tackle Black Money to be introduced
► Central KYC depository to be developed
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B u
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0 1 2
Budget 2012► Key policy announcements► Direct Tax proposals
► Indirect Tax proposals
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March 2012 Budget PLUS 2012Page 15
Rates of tax
► No change in tax rates of individuals► Non taxable threshold limit for individuals enhanced to INR
200,000
► Non taxable threshold limit has now been aligned for
resident women and individuals (other than senior citizens)► Taxable slab of 20% enhanced to INR 1,000,000
Present Proposed
Income slab ( ) Rate Income slab ( ) Rate
Up to 180,000 Nil Up to 200,000 Nil
180,001 – 500,000 10% 200,001 – 500,000 10%
500,001 – 800,000 20% 500,001 – 1,000,000 20%
Above 800,000 30% Above 1,000,000 30%
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March 2012 Budget PLUS 2012Page 16
Rates of tax
► No change in Corporate tax rates
► Securities Transaction Tax on delivery based transactions
of equity shares and mutual fund units reduced to 0.1%
from 0.125%
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March 2012 Budget PLUS 2012Page 17
Rates of tax
► Dividend Distribution Tax (DDT)► DDT payable by holding company to be reduced by DDT paid by
subsidiary – now available in multi-tier corporate structure
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March 2012 Budget PLUS 2012Page 18
Key international tax proposals
► Indirect transfers► Income deemed to accrue or arise in India ‘through’ transfer of a
capital asset situate in India to include, inter-alia:
► Income deemed to accrue or arise:
► ‘by means of’;
► ‘in consequence of’; or
► ‘by reason of’ transfer of that capital asset
► Share or interest in a company or entity registered or incorporated
outside India deemed to be situated in India
► If it derives its value, directly or indirectly, substantially from Indian
assets
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March 2012 Budget PLUS 2012Page 19
Key international tax proposals
► Capital asset definition amended to include► Rights in or in relation to an Indian company, including rights of
management or control or any rights whatsoever
► Transfer definition proposed to be amended to include:
► Disposal of an asset or creating any rights therein
► Directly or indirectly
► Absolutely or conditionally
► Voluntarily or involuntarily
► By way of an agreement (whether entered into or outside India) or
otherwise
► Notwithstanding that the transfer of rights are characterized as beingeffected or dependent upon or flowing from transfer of shares of a
company registered or incorporated outside India
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March 2012 Budget PLUS 2012Page 20
Key international tax proposals
► Validation clause proposed to be inserted► To validate all demands raised/ notices sent or purporting to have
been sent prior to coming into force of the validating clause
notwithstanding any judgment or decree of a court / tribunal / other
authority
► Amendments referred to as clarificatory and proposed
with retrospective effect from FY 1961-62
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March 2012 Budget PLUS 2012Page 21
Key international tax proposals
► Obligation to withhold tax from payment to non residentsproposed to be made applicable to all persons, resident or
non-resident, irrespective of whether the non resident
payer has
► Residence or place of business or business connection in India;► Any other presence in any other manner whatsoever in India
► Amendments referred to as clarificatory and proposed
with retrospective effect from 1 April 1962
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March 2012 Budget PLUS 2012Page 22
Key international tax proposals
► Foreign dividend► Beneficial tax rate of 15% on dividends declared, distributed or
paid by specified foreign company extended for one more year
► Tax Residency Certificate
► Submission of tax residency certificate made a mandatorycondition for availing benefits under any tax treaty
► Meaning of treaty terms
► Terms of treaty clarified through subsequent notifications deemed
to be effective retroactively from later of 1 October 2009 or cominginto force of the tax treaty
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March 2012 Budget PLUS 2012Page 23
Key international tax proposals
► It is clarified with retrospective effect that DRP shall havepowers to enhance the variation on matters raised or not
by the assessee
► Direction of the DRP now appealable by the tax authority
with effect from 1 July 2012
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March 2012 Budget PLUS 2012Page 24
Anti-avoidance measures
► General Anti-Avoidance Rule (GAAR) to be introduced todeal with aggressive tax planning involving use of
sophisticated structures
► Codification of anti-abuse rules which permit declaration
of an arrangement as an “impermissible avoidancearrangement”
► Impermissible avoidance arrangement is one where the main
purpose or one of the main purposes is to obtain a tax benefit and
satisfy atleast one of the following conditions
► Is not for bona fide business purpose
► Creates rights and obligations which are not normally created between
persons dealing at Arm’s Length Price (ALP)
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March 2012 Budget PLUS 2012Page 25
Anti-avoidance measures
► Results, in misuse or abuse of the provisions of the tax law► Lacks commercial substance or is deemed to lack commercial
substance
► “Tax benefit” widely defined to mean
► A reduction, avoidance or deferral of tax, increase in refund of tax
(even if it as a result of a tax treaty), reduction, avoidance or
deferral of tax due to a tax treaty, reduction in tax bases including
increase in loss
► Illustrations of consequences if arrangement is held to be
impermissible avoidance arrangement provided for
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March 2012 Budget PLUS 2012Page 26
Anti-avoidance measures
► Onus on the taxpayer to prove that obtaining tax benefit isnot the main purpose
► Tax treaty will not apply once GAAR applies
► Definition of “deemed to lack commercial substance”
introduced
► GAAR applicable prospectively
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March 2012 Budget PLUS 2012Page 27
Anti-avoidance measures
If CIT is of the opinion
that GAAR provisions
to be invoked, he shall
refer matter to Approval
Panel
AO to make reference to
CITCIT to hear taxpayer
AO to determine
consequences of impermissible
avoidance arrangement
Approval Panel* shall
either declare the
arrangement to beimpermissible
avoidance arrangement
or otherwise
Final order invoking
GAAR to be passed by
AO after approval of CIT and such order is
appealable directly to
ITAT
* Approval Panel to dispose off the reference within 6 months from the end of the
month in which the reference was made by CIT
Proposed process of applying GAAR
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March 2012 Budget PLUS 2012Page 28
Key transfer pricing provisions
► Advance Pricing Agreements (APA)
► APAs to be introduced with effect from 1 July 2012
► CBDT empowered to enter into an APA with any person,
determining the ALP or specifying the manner in which ALP is to
be determined in relation to an international transaction
► APA shall be binding on both the taxpayer and the tax authority for a period not exceeding five years except
► If there is a change in law or facts or where APA obtained by fraud or
misrepresentation
► Appropriate provisions made for modification of return,
assessment, extension of period of limitation, etc. consequent toconclusion of APA
► CBDT given the powers to prescribe a scheme specifying the
manner, form, procedure and any other matters in respect of APA
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March 2012 Budget PLUS 2012Page 29
Key transfer pricing provisions
► Scope of transfer pricing provisions to be expanded with
effect from 1 April 2013 by including “specified domestictransaction” if aggregate value of such transactions
exceeds INR 50 million. Specific compliance provisions
introduced
►
International transactions to include transactions inrelation to tangible / intangible property, financing
including debt arising in course of business, provision of
services and business restructuring (irrespective whether
such restructuring has effect on income in year of the
transaction)► Intangible property widely defined to include intangibles in
relation to marketing, technology, artistic, data processing,
engineering, customer, contract, etc.
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March 2012 Budget PLUS 2012Page 30
Key transfer pricing provisions
► Determination of ALP
► Upper ceiling of 3% to apply to percentage of allowable variation
between the ALP and the transfer price
► New allowable variation is yet to be notified
► Earlier allowable variation of 5% to apply to all the assessment or
reassessment proceedings pending before assessing officer as on1 October 2009
► Clarified with retrospective effect that assessee not entitled to the
benefit of the earlier allowable variation of 5% as a standard
deduction
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March 2012 Budget PLUS 2012Page 31
Key transfer pricing provisions
► With effect from 1 June 2002 TPO empowered to examineany international transaction whether or not referred by
the AO
► No reopening of any proceedings to be triggered only on account
of such adjustment
► Penalty @ 2% to apply for non-reporting of transactions in
accountants report in Form 3CEB
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March 2012 Budget PLUS 2012Page 32
Widening of tax net
► Tax withholding on transfer of immovable properties► Tax to be withheld at the rate of 1% in case of transfer of
immovable property after 30 September 2012, if the consideration
exceeds
► INR 5 million for property in an urban agglomeration
► INR 2 million for property in any other area
► Stamp duty value to be deemed as consideration, if actual
consideration is lower
► Registration of transaction only after submission of proof of
payment of tax
f
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March 2012 Budget PLUS 2012Page 33
Widening of tax net
► Definition of royalty expanded► Definition of royalty expanded to cover:
► right for use of or right to use a, computer software (including granting
of a licence) irrespective of the medium through which such right is
transferred
► right, property or information, whether or not (i) the possession or control of it is with the payer, or (ii) it is used directly by the payer, or
(iii) the location is in India
► transmission by satellite (including up-linking, amplification, conversion
for down-linking of any signal), cable, optic fibre or by any other similar
technology
Wid i f t t
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March 2012 Budget PLUS 2012Page 34
Widening of tax net
► Scope of levy of Alternate Minimum Tax (AMT) of 18.5%extended to all persons other than companies (earlier
applicable only to Limited Liability Partnerships)
► AMT levy not applicable to individuals / HUFs whose
Adjusted Total Income does not exceed INR 2 million
Wid i f t t
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March 2012 Budget PLUS 2012Page 35
Widening of tax net
► Minimum Alternate Tax (MAT)► On disposal of revalued asset, revaluation reserve taken directly to
general reserve to form part of book profits
► Financial accounts prepared by certain companies (for example
insurance, banking, electricity) as per the applicable regulatory
Acts to be taken as basis for computing book profits for MATpurpose
► Fair market value of asset to be taken as full value of
consideration where consideration for transfer of a capital
asset it not attributable or determinable
Wid i f t t
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March 2012 Budget PLUS 2012Page 36
Widening of tax net
► Upward revision of daily tonnage income for qualifyingships
Qualifying ship having
net tonnage
Present Proposed
Up to 1,000 Rs 46 for each 100 tons Rs 70 for each 100 tons
1,001 to 10,000 Rs 460 plus Rs 35 for each
100 tons exceeding 1,000
Rs 700 plus Rs 53 for each
100 tons exceeding 1,000
10,001 to 25,000 Rs 3,610 plus Rs 28 for each
100 tons exceeding 10,000
Rs 5,470 plus Rs 42 for each
100 tons exceeding 10,000
Exceeding 25,000 Rs 7,810 plus Rs 19 for each
100 tons exceeding 25,000
Rs 11,770 plus Rs 29 for each
100 tons exceeding 25,000
E ti d d d ti
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March 2012 Budget PLUS 2012Page 37
Exemptions and deductions
► Conversion of sole proprietorship/ partnership intocompany
► Cost of acquisition of assets in the hands of successor company
proposed to be that of sole proprietorship or firm in case of tax
exempt conversion with retrospective effect from 1 April 1999
► No requirement for the parent company to issue shares to
itself for amalgamation / demerger transaction to be tax
neutral
E ti d d d ti
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March 2012 Budget PLUS 2012Page 38
Exemptions and deductions
► Investment –linked tax incentive of 100% deduction of capital expenditure (other than on land, goodwill and
financial instrument) also extended to :
► Setting up and operating an inland container depot or a container
freight station, a warehousing facility for storage of sugar
► Bee-keeping and production of honey and beeswax
► Incentive increased from 100% to 150% of capital expenditure :
► Setting up and operating a cold chain facility, a warehousing
facility for storage of agricultural produce, a hospital with at least
100 beds for patients
► Developing and building a housing project under a scheme for
affordable housing and Production of fertilizer in India
E ti d d d ti
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March 2012 Budget PLUS 2012Page 39
Exemptions and deductions
► Relief from long term capital gains on transfer of residential property (house or plot of land) if
► invested in equity of new start up SME company in the
manufacturing sector ;
► the company utilizes the funds for purchase of new plant &
machinery and
► subject to fulfillment of other conditions
E ti d d d ti
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March 2012 Budget PLUS 2012Page 40
Exemptions and deductions
► Weighted deduction benefit at 200% of expenditureincurred on approved in-house scientific research and
development facilities extended for a further period of 5
years i.e up to 31 March 2017
E ti d d d ti
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March 2012 Budget PLUS 2012Page 41
Exemptions and deductions
► Exemption of income of SEBI registered Venture CapitalFund (VCF)/Venture Capital Company (VCC)
► Restriction on business of Venture Capital Undertaking (VCU)
removed
► Definition of VCU aligned to SEBI definition
► Income accrual to VCF/VCC now taxable in hands of
investors on accrual basis
► Exemption from applicability of TDS on income paid by
VCF/VCC to investors withdrawn
E emptions and ded ctions
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March 2012 Budget PLUS 2012Page 42
Exemptions and deductions
► Tax incentive for funding of certain Infrastructure sectors► Tax rate reduced to 5% for interest received by a non-resident
from companies engaged in the following sectors
► Construction of (i) dam, (ii) port (including inland port), (iii) road, toll
road or bridge, (iv) ships (in a shipyard)
► Operation of aircraft
► Manufacture or production of fertilizers
► Generation, transmission or distribution of power
► Developing an affordable housing project in accordance with the
notified scheme
► Loan should be in foreign currency and may be taken between 1
July 2012 to 1 July 2015 with the previous approval of the Central
Government
Exemptions and deductions
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Exemptions and deductions
► Additional depreciation for power projects► Benefit of 20% additional initial depreciation extended to new
machinery or plant (other than ships and aircraft) acquired by
entities engaged in the business of generation or generation and
distribution of power
► Deduction in respect of generation, distribution and
transmission of power
► Sunset clause extended to 31 March 2013
►
Insurance policies issued after 1st April, 2012 whereinpremium payable exceeds 10% (formerly 20%) of “capital
sum assured” will not be eligible for deduction/exemption
Measures to counter unaccounted money
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Measures to counter unaccounted money
► Cash credits► Share application money, share capital, share premium, or other
sum credited in the books of a closely held company to be taxed in
its hands unless the resident shareholder/ subscriber (other than a
registered venture capital fund) explains the nature and source of
the investment
► Taxation of cash credits, unexplained money and
investments, etc.
► Income of such nature to be taxed on a gross basis at the rate of
30%
Measures to counter unaccounted money
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Measures to counter unaccounted money
► Consideration exceeding fair value of shares► Consideration in excess of fair value received by a closely held
company on issue of shares at a premium to a resident (other than
a registered venture capital fund) to be taxed as income from other
sources
► Fair value to be reckoned based on the higher of the value determinedas per a method to be prescribed or as substantiated by the company
to the assessing officer having regard to the value of the company’s
assets including intangible assets
► Mandatory tax return filing in relation to foreign assets
► Resident taxpayers having any asset (including any financial
interest in any entity) located outside India or signing authority in
any account located outside India mandatorily required to file a
return of income
Measures to counter unaccounted money
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Measures to counter unaccounted money
► Time limitation for reassessment► Time limit for initiation of reassessment of income/ wealth in a
case where income/ wealth in relation to any asset (including
financial interest in any entity) located outside India has escaped
assessment extended to 17 years from the end of the relevant
financial year ► Provision to be effective retrospectively
Measures to counter unaccounted money
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Measures to counter unaccounted money
► Penalty on undisclosed income found in search cases► Penalty on undisclosed income in a search initiated on or after
1 July 2012 revised as follows, subject to conditions:
► If undisclosed income is admitted during the search – 10%
► If undisclosed income is not admitted during the course of search but
disclosed in the return of income filed after the search – 20%
► In other cases - 30% to 90%
Rationalization of TDS/ TCS provisions
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Rationalization of TDS/ TCS provisions
► Deemed date of payment of tax by the resident payee► W.e.f 1 July 2012, deductor who fails to deduct whole or any part
of the tax on payment to resident deductee shall not be deemed to
be an assessee in default if the resident deductee has:
► furnished his return of income under section 139
► taken into account such sum for computing his taxable income in histax return
► paid tax due on the above income
► Deductor to furnish a certificate from an accountant in the
prescribed form for the above
► Interest under section 201(1A) payable from the date on which tax
was deductible to the date of furnishing the tax return by the
resident deductee
Rationalization of TDS/ TCS provisions
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Rationalization of TDS/ TCS provisions
► Similar amendments for TCS provisions to clarify the deemed dateof discharge of tax liablity by the buyer/ licensee/ lessee
► Date of furnishing tax return by the resident deductee
deemed to be the date of deduction and payment of tax
by the deductor for the purpose of allowance of business
expenditure under section 40(a)(ia) for the relevant FY
► Fee/ penalty for delay in furnishing TDS/TCS statement
and incorrect information enhanced/ introduced (with
effect from 1 July 2012)
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B u d g e t P L U S 2
0 1 2
Budget 2012► Key policy announcements► Direct Tax proposals
► Indirect Tax proposals
Service tax
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Service tax
► Service tax rate increased to 12% (with effect from 1 April2012)
► Other key changes in composition tax rates (with effect
from 1 April 2012)
► Life insurance – 3% on first year premia and 1.5% for subsequentyears
► Money changing – rate increase by 20%
► Works Contract – 4% to 4.8%
► Air transportation amended to ad valorem with abatement of 60%
Service tax
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Service tax
► Proposal to introduce Negative List basis of levy of service tax► Any service now taxable unless included in Negative List or
exempt
► Deeming fiction – 9 declared services included such as renting of
immovable property, construction of complex, temporary transfer of IPR, agreeing to an obligation to refrain from an act or tolerate an act
► List of 17 services to be included in the Negative List, such as:
► Services provided by Government, RBI, local authority
► Trading of goods
► Services relating to agriculture► Process amounting to manufacture
► Selling of time and space for advertisements (other than radio/
television)
► Access to road/ bridge
Service tax
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Service tax
► Admission to entertainment events or access to amusement facilities
► Renting of residential property
► Interest or discount on loans, advances and deposits
► Specific exemptions also proposed to be introduced, such as:
► Health care services
► Services provided by individual advocates and journalists
► Construction of specific infrastructure such as roads
► Copyright to cinematographic films
► Services of sports persons, folk and classical arts, etc.
► Rules of interpretation for determining taxability under NegativeList
► Existing exemptions to be removed (limited to 10)
► Detailed guidance note on Negative List issued
Service tax
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Service tax
► Proposal to introduce the Place of Provision of ServiceRules (PoS Rules)
► Will provide basis for taxation of inter-state services under the GST
regime
► Export Rules and Import Rules to be rescinded on implementation
of PoS Rules
► Service Tax Rules to be amended for:
► Services provided from non-taxable territory
► Services provided by GTA
► Deletion of all services that are exempt such as mutual funddistribution
► PoS Rules to apply on services provided inside the taxable
territory irrespective of location of service provider and recipient
Service tax
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Service tax
► Impact on export of services on introduction of PoS Rules► Provisions relating to export to form part of Service Tax Rules
► Conditions of export
► Service provider located in taxable territory
► Service recipient located outside India
► Service not included in negative List
► PoS outside India
► Payment received in convertible foreign exchange
► To be notified from a date post assent of Finance Bill
Service tax
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Service tax
► Impact on import of services on introduction of PoS Rules► Definition of taxable territory – services tax applicable on services
provided in taxable territory
► Jammu & Kashmir (J&K) excluded
► Services received from J&K into taxable territory taxable under reverse
charge
► For specified services the reverse charge liability to be shared by
service provider and service recipient
► Supply of manpower
► Works contract services
► Hiring of motor vehicles
► To be notified from a date post assent of Finance Bill
Service tax
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Service tax
► Impact on Valuation Rules► New valuation rules for works contract services
► 40% original works i.e. new contructions and all types of additions/
alterations to make damaged structures workable
► 60% for other work contracts
► 25% for construction contracts where consideration received beforeconsideration
► Total value to include gross amount plus value of material supplied
under same or separate contract
► Credit on goods forming part of property not available
► New rates of abatement on services, such as:
► Coastal shipping (50%)
► Railway passengers (new levy – 70%)
► Outdoor catering (40%) and restaurant services (60%)
Service tax
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Service tax
► Inclusions in the value of taxable service:► Any amounts realised for service beyond period originally
contracted such as demurrage
► Exclusions from value of taxable service:
► Interest on deposits and delayed payment (interest on loans to beexempt – credit available on actual basis in lieu of current adhoc
50%)
► Charges towards accidental damage due to unforseen actions not
relatable to the service
Service tax
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Service tax
► Amendments to the Point of Taxation Rules, 2011 (PoTRules) (effective 1 April 2012)
► Time period for raising invoice extended to 30 days
► 45 day relaxation for banks and financial institutions
► PoT for exported services and 8 specified services provided by
individuals/ firms shifted to payment basis (up to turnover of INR 5
million)
► Amendment to definition of ‘continuous supply’
► Rationailisation of provision on rate of tax applicable on continuous
supply► Specific rule for determining PoT in case of proposed change in
rate with effect from 1 April 2012
► Provision to determine PoT based on best judgment introduced
Service tax
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Service tax
► Amendments to Service Tax Rules, 1994► Alignment of service tax and excise procedures (with effect from
from date to be notified)
► Common PAN based tax code
► Common registration format
► Common returns
► Simplification of return format (Form EST-1)
► Monthly service tax returns for large assessees
► Adjustment of excess service tax paid allowed without limits (with
effect from 1 April 2012)
Service tax
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Service tax
► Amendments to assessment procedures► Special audit provisions proposed
► Time period to issue notice increased 18 months (from 12 months)
► Limitation period for appeals aligned with central excise
► Provisions relating to settlement commission introduced
► Provisions for revision mechanism introduced in alignment
with central excise
Service tax
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Service tax
► Amnesty from 100% penalty for renting of immovableproperty services (enactment of Finance Bill)
► If tax along with interest up to 6 March 2012 paid within 6 months
from enactment of the Finance Bill
► Retrospective effect to exemption notifications (enactmentof Finance Bill)
► Repair of roads with effect from 16 June 2005 (earlier from July
2009)
► Management, maintenance or repair of non-commercial
Government building with effect from 16 June 2005 (tillintroduction of Negative List)
Customs duty
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Customs duty
► Rates effective from 17 March 2012► Peak rate maintained at 10%
► CVD enhanced from 10% to 12% due to increase in central excise
levy
► Education Cess and Secondary and Higher Education Cess on
CVD exempted
► Effective peak rate of customs duty enhanced to 28.85%
from 26.85%
► Duty free baggage allowances enhanced► Adults - INR 25000 to INR 35000
► Children (upto 10 years) – INR 12000 to INR 15000
Customs duty – effective 17 March 2012
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Customs duty effective 17 March 2012
► BCD increased on certain products such asPresent Proposed
Products Rate Rate
Large cars, MUVs, SUVs 60% 75%
Flat rolled products of non-alloy steel 5% 7.5%
Cut and polished coloured gems NIL 2%
Digital Still Cameras NIL 10%
Standard gold / platinum bars 2% 4%
► BCD reduced on certain products such asPresent Proposed
Products Rate Rate
Isolated soya protein 15% 10%
Specified life saving drugs/ vaccines
and their bulk drugs
10% 5%
Customs duty – effective 17 March 2012
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Custo s duty e ect e a c 0
► BCD fully exempted on certain products such as► Initial setting up and substantial expansion of fertilizer projects –
valid till 31 March 2015
► Steam Coal – valid till 31 March 2014
► Natural gas / LNG imported for power generation by a power
generating company► Equipment imported for road construction projects awarded by
Metropolitan Development Authorities
► Goods for Coal mining under Project Imports
► Parts of aircraft and testing equipment imported for maintenance
and repair of aircraft by third party MRO units► CVD exempted on foreign going vessels imported into
India subject to payment of duty if converted for coastal
run
Customs duty
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y
► Amendments from date of enactment of Finance Bill
► ‘Courier services’ recognised for serving demand notices/ orders/
summons under Customs law
► Retrospective amendment for CVD exemption provided to ‘foreign going
vessels’ for the period 1 March 2011 to 16 March 2012
► Central Government to notify specific class or classes of importers to paycustoms duty electronically
► Offences under Customs Act punishable with the terms of three years or
more imprisonment made cognizable
► No bail to be granted by Court without Public Prosecutor presenting the case
on behalf of department
► Importer to declare State in which imported goods would be first sold
and corresponding State VAT registration number to claim SAD
exemption on identified goods with effect from 1 May 2012
Cenvat credit
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► Input credit allowed for excise duty/ CVD on specifiedmotor vehicles
► Refund scheme for service exporters simplified
► Rules to determine the manner of distribution of credit by
Input Service distributors specified
► Manufacturer entitled to transfer the unutilized credit of
SAD to other premises on a quarterly basis
► Interest payable only on wrong utilisation of credit
Central excise
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► Median rate of Central Excise Duty enhanced from 10.3%to 12.36% with effect from 17 March 2012
► Duty increases across the board, including products liable
to lower rates (1 to 2%, 5 to 6%)
► Key products being cars, foodstuff, computer parts,foreign going vessels, etc.
► Cess on indigenous crude increased to Rs 4500 per tonne
► Excise duty reduced on branded textile articles, parts of
hybrid vehicles, memory cards, etc.
► Offences punishable for more than 3 years imprisonment
to be cognizable
Goods and Service Tax (GST) and Central
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( )Sales Tax (CST)
► GST► No announcement about GST implementation date
► Recommendations awaited from the Parliamentary Standing
Committee on the Constitution Amendment Bill
► GST Network (‘GSTN’) proposed to be operational from August
2012
► GSTN will implement common PAN-based registrations, returns,
payments processing for all States on a shared platform
► CST
► CST Rate - No amendment proposed (2% continues against Form
C)
► Excise Duty rate on Declared goods increased from 5 to 6% - No
enabling provision in CST
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Questions?
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therefore intended for general guidance only. It is not intended to
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professional judgment. Neither Ernst & Young Pvt. Ltd. nor any
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accept any responsibility for loss occasioned to any person acting
or refraining from action as a result of any material in this
publication. On any specific matter, reference should be made to
the appropriate advisor.
Visit our India Budget 2012 webpage to read our
published thought leadership series on the Union
Budget 2012-13.
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webpage to know more about our services.
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