KSAiyar India Budget 2013 F

7/30/2019 KSAiyar India Budget 2013 F

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BUDGET2013

An Overview

K. S. Aiyar & Co

BTA Consultants India Pvt. Ltd

India Law Alliance



BUDGET 2013

Index Page # 2

K. S. AIYAR & COC H A R T E R E D A C C O U N T A N T S

I N D E X

2. EXECUTIVE SUMMARY

Do we need these annual fairs called Railway & Union Budgets?

Are the budgets based on economic needs, as they should be, or onpolitical populism, where survival is at the forefront?

There could be many more such questions which may come to mind after witnessing the fate of Railway Minister at the hands of political bigwigs. Itis a show window to the fact that how ineffective and helpless a personcan be even after being in seat of authority.

Idea of how un-realistic is the budget can be had from following data inrespect of Union Budget 2011-12:(Source : Report in The Economic Times, Bangalore 13

thMarch 2012):

Budget Expected ActualsNet Tax Revenue 664457 Crore 550280 CroreSubsidies 143570 -“ - 243570 -“ -Selloff Receipts 40000 -“ - 25000 -” -Growth in Spend (%) 3.4 13.4Real GDP Growth (%) 9.0 6.9

The reason for above variance are economic activities being slow, assistancegrossly underestimated, markets hit by slow down, spending went out of control and projections being too optimistic respectively for each of the above.

Another year has gone by where the targeted timeline for introducingDTC, GST and Companies Bill have been missed.

This year has been probably the worst year for United Progressive

S.

NO.

CONTENTS PAGE

NOS.

1 INTRODUCTION 3

2 EXECUTIVE SUMMARY 5

3 DIRECT TAX PROPOSALS

3.1 TAX RATES 8

3.2 NEW TAX INCENTIVES AND

RELIEFS 9

3.3 ADDITIONAL TAX BURDEN 12

3.4 PROCEDURAL CHANGES 16

4 INDIRECT TAX PROPOSALS

4.1 CUSTOMS 18

4.2 EXCISE DUTY 20

4.3 SERVICE TAX 22

5 OTHER MAJOR POLICY INITIATIVES 24



BUDGET 2013

Introduction Page # 3


1. INTRODUCTION

The Hon‟ble Finance Minister (FM) P. Chidambaram came back to present the UnionBudget, on the 28th of February, 2013 in the Parliament.

This Budget had to be presented under a tight-rope-walk-like-situation for the FM withone eye on Central Elections scheduled for next year, rising expectations from thegeneral public, and the other eye on spiraling prices of food items and the downturn inindustries across sectors, and worldwide. Scams have continued to fall out at regular intervals challenging the credibility of the Government.

Nothing positive happened in terms of bringing in the Direct Tax Code or the Goods andServices Tax, both of which were expected much earlier. Perhaps the proposed newCompanies Bill will see the light of day during this Budget Session.

The Finance Minister purports to bring back the culture of investment in the recession-hitmanufacturing sector, and has proposed to give incentive for acquisition and installationof new plant or machinery by a manufacturing company. Limiting this only to investmentsover Rs 100 Crore is regressive.

The Finance Minister also proposes extending tax holidays to March 31, 2014, to thebeleaguered power sector which will be positive.

India has tax treaties with 84 countries with tax on gross amount of royalty and fees for technical services at rates ranging from 10% to 25%, compared to the present 10% under the Income Tax Act. It is proposed to correct this anomaly. This tax on Non Residents willmake Foreign Direct Investment dearer.

The monetary and fiscal policies need to have long term view and consistency, to someextent, to protect the economy from inflation and to get back to fiscal consolidation. Itcalled for some bold measures which were taken earlier by way of increase in price of diesel and petrol, freight by railways, attempts to minimise other subsidiaries. Under such a situation few changes were expected in this Budget.

In the Economic Survey of 2012-13 presented to Parliament on 27th February 2013, 5%GDP growth is indicated and projected at 6.1. to 6.7% for 2013-14. Indications have alsobeen made to suggest raise of prices of LPG/ Petrol/ Diesel, curb gold import, plugleakages of subsidies, improve infrastructure which is effecting industrial performance. Average minimum tax rates in India are high at 33+ % as compared to 22% incomparable emerging markets.

The Indian Stock markets have witnessed fairly steady trends during last one year but theresponse given by the market during and after the speech of finance minister, in the formof drop in Sensex, may be on account of this Budget not meeting market expectations.

The Budget Estimates for 2013-14 project a revenue deficit of 3.3% of GDP and a fiscaldeficit of 4.8% of GDP as against 3.9% & 5.2% respectively, based on the provisionalaccounts for 2012-13.



BUDGET 2013

Introduction Page # 4


The Finance Minister emphasized the importance of education, infrastructure andagriculture sectors.

This booklet is meant to apprise our esteemed clients of the important budget proposalsand offers a broad outline of the major proposals.

The changes proposed in the Finance Bill, 2013 on direct taxes become effective fromthe Assessment year 2014-15 relating to Financial year 2013-14, unless otherwisestated.



BUDGET 2013

Executive Summary Page # 5


2. EXECUTIVE SUMMARY

DIRECT TAXES

No change in tax slab rates.

Marginal relief of Rs.2,000/- for resident individual with total income upto Rs.5 lakhs.

Surcharge of 10% on persons (other than companies) whose taxable income exceedRs. 1 crore.

Increase of surcharge from 5% to 10% on domestic companies, if taxable incomeexceeds Rs. 10 crore.

Increase of surcharge from 2% to 5% on foreign companies, if the taxable incomeexceeds Rs. 10 crore.

Additional surcharges to be in force for only one year.

Donations made to National Children Fund eligible for 100 percent deduction.

Investment allowance at the rate of 15% to companies investing more than Rs. 100crore in plant and machinery during next two financial years.

One year extension to power sector to avail benefit under Section 80-IA.

Concessional rate of tax of 15 percent on dividend received by an Indian companyfrom its foreign subsidiary proposed to continue for one more year.

Tax Deduction by the transferee on purchase of immovable property, other thanagricultural land, above Rs.50,00,000.

A final withholding tax at the rate of 20 % on profits distributed by unlisted companiesto shareholders by way of buyback of shares.

Increase of rate of with holding tax on payments by way of royalty and fees for technical services to non-residents from 10% to 25%.

Reductions made in rates of Securities Transaction Tax in respect of all types of transactions.

Proposal to introduce Commodity Transaction Tax (CTT) in a limited way.

Modified provisions of GAAR will come into effect from 1.4.2016.

Fifth large tax payer unit to open at Kolkata shortly.



BUDGET 2013



INDIRECT TAXES

Custom Duty

Electronic Filing of import manifest and export manifest

Interest free period for payment of import duty reduced

Period of storage of imported goods, pending clearance in a public or privatewarehouse restricted to thirty days

Extension for the period of stay by the tribunal when the delay in disposing of theappeal is not attributable to the appellant

Limit for Duty Free baggage allowance increased for jewellery for IndianPassengers

Tariff Changes and Consolidation in Major Sectors

AutomobilesMetalsPrecious MetalsCapital Goods/ Infrastructure Aircrafts & ShipsEnvironment ProtectionTextilesElectronics/Hardware

Excise Duty

Service of Statement of excise duty to not levied, short levied or erroneouslyrefunded deemed to be the service of notice

Scope of the definition of „activity‟ under advance ruling enhanced.

Scope of admissibility for application of advance ruling has been expanded to includecredit of service tax paid or deemed to have been paid on input services

Tariff Changes and Consolidation in Major Sectors:

AutomobilesMetals Aircrafts & ShipsTextilesHealthElectronics / HardwareMiscellaneous



BUDGET 2013



Service Tax

Rate of service tax of 12% remains unchanged. Vocational courses offered by institutes affiliated to the State Council of Vocational

Training and testing activities in relation to agricultural produce now included in thenegative list for service tax. Proposals to levy Service Tax on all air conditioned restaurant. Exemption of Service Tax on copyright on cinematography limited to films exhibited

in cinema halls. Abatement from value for levy of service tax reduced from 75% to 70% in case of

residential apartments of 2000 square feet or more or of value one crore rupees or more.

Onetime Amnesty scheme called “Service Tax Voluntary ComplianceEncouragement Scheme, 2013” to be provided to encourage voluntary compliance.

Scope of advance ruling is being extended to cover resident public limitedcompanies.



BUDGET 2013

Direct Tax Proposals Page # 8


3. DIRECT TAX PROPOSALS

3.1 TAX RATES

The Finance Bill 2013 does not propose any change in threshhold limit in personaltaxation except for maximum rebate upto Rs. 2,000 for an resident individual havingincome up to Rs. 5,00,000. This effectively means there will be no tax payable up to anincome of Rs,2,20,000.

There is no change in tax rates for other assesses.

A. Income Tax

For Individuals, HUF, AOP & BOI

EXISTING RATES PROPOSED RATES

For FY 2012 – 13

(AY*2013-14)

For FY 2013 – 14

(AY 2014-15)

Up to Rs.2,00,000Rs.2,00,001 – Rs. 5,00,000Rs.5,00,001 – Rs. 10,00,000 Above Rs.10,00,000

NIL10%20%30%


NIL10%20%30%

TThheer r ee iiss aa mmaaxxiimmuumm ttaaxx r r eebbaattee uupp ttoo RRss..22,,000000//-- f f oor r r r eessiiddeenntt iinnddiivviidduuaallss hhaavviinngg iinnccoommee

uuppttoo RRss..55,,0000,,000000 //==

* AY-Assessment Year

For Individuals who are of age of 60 years and above (Senior Citizens):


For FY 2012 – 13

(AY 2013-14)

For FY 2013 – 14

(AY 2014-15)


NIL10%20%30%


NIL10%20%30%




BUDGET 2013



For Individuals who are of age of 80 years and above (Very Senior Citizens):


For FY 2012 – 13

(AY 2013-14)

For FY 2013 – 14

(AY 2014-15)

Up to Rs.5,00,000Rs.5,00,001 – Rs. 10,00,000 Above Rs.10,00,000

NIL20%30%

Up to Rs.5,00,000Rs.5,00,001 – Rs. 10,00,000 Above Rs.10,00,000

NIL20%30%

No change is proposed in corporate tax rates.


B. Surcharge:

The Surcharge on Income Tax in the case of Individuals, HUF, AOP, BOI, ArtificialJuridical person is 10% if the income exceeds rupees one crore (10 mn INR).

The Surcharge in the case of firms, co-operative society, local authorities is 10% if theincome exceeds one crore (10 mn INR)

For Company:

If net income exceeds Rs.1crore and up to Rs. 10 crore

If net income exceeds Rs. 10crore

Domestic Company 5 % 10%

Non Domestic company 2 % 5 %

3.2 NEW TAX INCENTIVES AND RELIEFS

A. Limits of percentage of eligible premium for LIC – Sec. 10(10D):

Under the existing provision, any sum received under a life insurance policy includingbonus on such policy is exempt, if the premium paid for such policy during the any of the

year does not exceed 10% of the actual capital sum assured.



BUDGET 2013



It is proposed to increase the limit of percentage of eligible premium from10% to 15% incase of insurance policies for persons with disability or severe disability referred to insection 80U, or suffering from specified diseases as specified in section 80DDB.

The above benefit will be available only in case of insurance policies issued on or after 01/04/2013.

B. Incentive for acquisition and installation of new plant or manufacturing companyunder Section 32AC

It is proposed to insert Section 32AC and give incentive to an assessee who is engagedin the business of manufacture of an article or thing and has made investment of over Rs.100 crores (INR 1000 Millions) in new plant and machinery during 1st April 2013 to 31stMarch 2015.

Deduction will be allowed u/s 32AC amounting to

15% of aggregate actual cost of new asset acquired and installed during financial

year 2013-14; and

15% of aggregate actual cost of new asset acquired and installed during period

2013-14 and 2014-15 as reduced by deduction allowed for previous year 2013-14.

The term “new asset” is defined therein.

C. Limit of percentage of eligible premium for LIC for the purpose of deduction – Sec.80C(3A):

It is also proposed to amend the section 80C(3A) so as to provide that the deductionunder the said section on account of premium paid in respect of a policy issued on or

after 01/04/2013 for insurance on the life of a person with disability or severe disabilityreferred to in section 80U, or suffering from specified diseases as specified in section80DDB is 15% of the actual capital sum assured.

D. Extension of deduction Under Section 80 CCG

Presently individual having income less than Rs.10 lacs are eligible for fifty percentdeduction on investment made in Rajiv Gandhi Equity Savings Scheme up to Rs.25,000for one assessment year. It is proposed to amend the provision that the investmentsmade will be eligible for deduction in three consecutive assessment years for assesseewhose income is less than Rs.12 lacs The Investment shall be made in Equity Orientedfunds as defined under section 10 (38) of the Act.

E. Deduction in respect of interest on housing loan – Section 80EE:

Existing provision of section 24 provides deduction in respect of interest on loan inrespect of residential house property.



BUDGET 2013



A new section 80EE is inserted to provide deduction to Individuals, who are first homebuyers, in respect of interest on loan taken from financial institutions for acquisition of residential house property.

The deduction available under this section is limited to Rs.1,00,000/-. Further, if the

amount of interest payable for the previous year is less than Rs. Rs.1,00,000/-, then thebalance amount will be allowed in the next assessment years.

Following are the conditions for claiming the deduction:

The loan should be sanctioned during the period 01/04/2013 to 31/03/2014.The amount of loan sanctioned does not exceed Rs.25,00,000/-.The value of residential house property does not exceed Rs.40,00,000/-.The assessee does not own any residential house property on the date of sanction of loan.

F. Extension of benefit of Section 80IA to power sector:

It is proposed to extend the terminal date from 31st March 2013 to 31st March, 2014 for commencing the eligible activity and availing the tax incentive under Section 80IA (4)(iv).

G. National Children’s Fund - Deduction u/s 80 G

Presently the contributions made to National Children‟s fund are only eligible for 50 % of the amount of donation. It has been proposed amend that the contributions made toNational Children‟s fund is eligible for 100 % of the amount of donation.

H. Rebate upto Rs.2,000 for individuals having total income upto Rs.5 Lakh – Sec. 87:

It is proposed to provide tax rebate to the resident individuals who are in lower incomebracket, whose total income does not exceed Rs.5,00,000/-.

The amount of rebate will be lower of:The amount of income tax payable on the total income of an assessee, or Rs.2,000/-.

I. Taxation of Dividends from Foreign Companies – Extension to A.Y 2014-15

Section 115 BBD provides for a concessional tax of 15 % for dividends from foreigncompanies in which the Indian company has 26 % or more. This incentive was restrictedto 2013-14 and has now been extended for the AY 2014-15 as well.

J. Dividend Distribution Tax (DDT) – Removal of Cascading Effect

Section 115 O provides for taxation of dividend distribution of domestic companies at therate of 15 %. It also provides that tax base for DDT is reduced by the amount of thedividend received from an Indian Subsidiary. It is proposed to exclude the dividendreceived from the foreign subsidiary which is subject to tax under section 115 BBD, if theIndian company holds more than 50 % of the share capital of the subsidiary companywhile the calculating the tax base under DDT under section 115 O. This amendmentcomes into effect from June 2013.



BUDGET 2013



K. Securities Transaction Tax:

It is proposed to amend Section 98 of the Finance (No. 2) Act, 2004 relating to SecuritiesTransaction Tax (STT):

There is reduction in transaction tax on specified securities as under:

SRNo.

Type Payableby

ExistingRate %

NewRate

%

1 Delivery based purchase of equity sharesin a company* entered in to recognisedstock exchange

Purchaser 0.1 Nil

2 Delivery based sales of equity shares of the company** entered into in arecognized Stock exchange

Seller 0.1 0.1

2A Delivery based sales of equity orientedfund entered into in a recognized Stock

exchange

Seller 0.1 0.001

3 Sale of futures in securities Seller 0.017 0.014 Sale of a unit of an equity oriented fund to

the mutual fundSeller 0.25 0.001

Note:*In the above table, in serial number. 1 the word “or unit of equity oriented fund” isremoved by Finance Act, 2013.**In the above table, in serial number. 2 the word “or unit of equity oriented fund” isremoved and same has been inserted in serial number 2A as mentioned above.

3.3 ADDITIONAL TAX BURDEN

A. Definition of “Capital Asset” – Section 2(14):

The existing definition of “Capital Asset” excludes Agricultural land. For this purpose,agricultural land excludes agricultural land situated in any area within the distance of 8kms from local limits of any municipality or cantonment board.

It is proposed to amend the scope of Agricultural land. As per amended provision,agricultural land excludes any land situated in any area within the distance, measuredaerially,

Distance from local limits local limits of any municipality or cantonment board

Population

2 km or less 10,001 – 1,00,0006 km or less 1,00,001 – 10,00,0008 km or less More than 10,00,000

Similar amendments are also proposed in the definition of “agricultural income” in clause(1A) of section 2.



BUDGET 2013



B. Keyman Insurance Policy – Sec. 10(10D):

Existing provision exempts any sum received under a life insurance policy other than akeyman insurance policy. Key man insurance policy is defined to mean a life insurancepolicy taken by a person on life of another person, who is or was his/its employee was

connected in any manner whatsoever with the his/its business.

It is now proposed to amend the provision to provide that a keyman insurance policy,which has been assigned to any person during its term, with or without consideration,shall continue to be treated as a keyman insurance policy.

C. Full Value of consideration in case for transfer of asset other than capital asset – Sec. 43CA:

In case of transfer of a capital asset, being immovable property, for a value, less thanstamp duty value, then such value is taken as full value of consideration under theexisting provision of section 50C.

It is proposed to extend the scope of above to immovable property, which is not a capitalasset i.e. stock-in trade, by inserting section 43CA.

As per the said section, where the consideration of transfer of an asset (other than capitalasset), being land or building or both, is less than stamp duty value, then stamp dutyvalue will be deemed to be the full value of consideration for the purpose of computingincome under the head “ Profits & gains o business or profession”.

It is further proposed that the stamp duty value as on the date of agreement for transfer of asset should be taken in case the date of agreement & date of registration of suchtransfer are not same. However, this exception will apply only in case of where any partof consideration for transfer has been received by any mode other than cash on or beforethe date of agreement.

D. Taxation of income by way of royalty or fees for technical services

It is proposed to increase the tax payable under Section 115A by a non-resident inrespect of income from royalty or fees for technical services received under anagreement entered after 31st March, 1976 from 10% to 25%.

E. Tax to be withheld by specified companies on payment of interest to non resident.

It is proposed to amend Section 194LC by extending concessional rate of 5% onsubscription by a non-resident, not being company or to a foreign company depositingforeign currency in a designated account through which such sum as converted in rupeesand are utilized to subscribe in any long term infrastructure bonds.

This amendment is proposed to take effect from 1st June 2013.



BUDGET 2013



F. Tax to be withheld on sale of immovable property

It is proposed to insert section 194IA whereby transferee has to deduct tax at source at1% of the consideration paid or payable to the resident transferor for transfer of anyimmovable property, other than agricultural property. However, no tax is required to be

deducted if the amount of consideration doesn‟t exceed Rs. 50,00,000 .These amendments are proposed to take effect from 1st June, 2013.

G. Liability of directors of private company in liquidation

It is proposed to amend definition of „tax due‟ in Section 167 and 179 whereby now itwould include interest, penalty or any other sum payable under the Act in the definition of tax.

These amendments are proposed to take effect from 1st June, 2013.

H. Penalty for failure to furnish Annual Information Return

It is proposed to amend Section 271FA whereby an assessee fails to furnish annualinformation return within the prescribed time limit under sub section (2) of Section 285, apenalty of Rs. 100 for every day during which such failure continues. Further, if anassessee fails to furnish return with the time prescribed under sub section 5 of Section285, a penalty would Rs. 500 for everyday till the failure continues.

I. Commodity Transaction Tax (CTT)

The Finance Act 2013 has introduced Commodity Transaction Tax (CTT) with insertion of Chapter VII. CTT is a tax on sale of commodity derivatives other than agriculturecommodities traded on recognised association. The brief description of CTT is as follows:

1. Rate:

CTT will be applicable at the rate of 0.01% on every taxable commodities transaction,being sale of commodity derivatives. (Section 107)

2. Collection and payment:

Every recognised association (assessee) shall collect the CTT from the seller whoenters into the taxable commodities transaction. Tax collected by recognisedassociation during any of the calendar month shall be paid by the seventh day of themonth immediately following the said calendar month. Failure to pay tax will lead tothe simple interest under section 113 at the rate of one percent per month or part of the month for the delayed period and penalty of Rs. 1000 per day during the periodwhich the failure continues subject to limit of actual amount of CTT. Failures todeduct tax will leads to interest as per section 113 and penalty of actual amount of CTT that assessee failed to collect.



BUDGET 2013



3. Furnishing of Return:

Every assessee shall be liable to furnish Return within prescribed time limit. Failure towhich leads to penalty of Rs. 100 per day during which failure continues. Theassessing officer may serve a notice for the scrutiny assessment of such return within

the time limit of two years from the end of relevant financial year. During theassessment, if assessee receives any refund, such refund shall be given back to theseller from whom it was collected.

4. Punishment for false statement:

If a person makes a false statement in any verification under this chapter or any or any rule made there under, or delivers an account of statement, which is false, thenhe shall be punishable with imprisonment for a term which may extend to three yearsand with fine.

5. Allow ability of deduction:

A new clause has been inserted that is clause (xvi) of section 36 which states thatThe CTT paid will be allowed as a deduction where income has been offered to taxas income from “profits & gains of business”.

J. Tax on buy back of shares by unlisted company:

It is proposed to introduce a new chapter XII-DA consisting of sections 115QA to 115 QC,in addition to income tax chargeable in respect of the total income, a domestic companyis required to pay additional tax @ 20% on any amount of distributed income by thecompany on buy back of shares, not listed on stock exchange, from a shareholder even if no tax is payable on its total income. The amount is required to be paid within 14 daysfrom the date of payment to shareholder for buy back and no deduction for such tax willbe available either to the company or shareholder.

Further requisite non- compliance implications have been provided therein.

This amendment will come in to effect from 1st June 2013.

K. Tax on distributed income by the Mutual Funds:

Present tax rates u/s 115R on distributed income have been made uniform @ 25% in allcases where distribution is made to an Individual or HUF as against 30% for other thanIndividual/HUF and 12.5 to 25% for Individual and HUF depending on nature of fund.Further rate @ 5% is now made applicable on income distributed by a Mutual Fund under an IDF scheme to a non-resident Investor.


L. Taxability of immoveable property received for inadequate consideration

The existing provisions of section 56 (2)(vii)(b) which are applicable for transfer of immovable property without consideration have now also been made applicable inrespect of transactions of inadequate consideration, which is less than stamp dutyvaluation. If the amount of stamp duty value of the property exceeds Rs. 50,000 of theconsideration then the receiver would be liable to tax.



BUDGET 2013



However if part/full consideration is received by any mode other than cash on or beforethe date of agreement and the dates of agreement and registration are not same, then

the stamp duty valuation as on date of agreement will be considered for such purpose.

M. Taxation of Securitisation Trusts

It is proposed to amend section 10 and insert a new chapter XII EA for special taxregime. A new Section 115TA has been inserted whereby the amount of incomedistributed by the securitisation trust to its investors shall be chargeable to tax. It wouldbe an additional tax liability on the trust.

In case of individual and HUF, it would be 25% and for others it is 30%. However, there isexemption to a person who is exempt from tax on his income. Further, consequent to thelevy of distribution tax, the distributed income in the hands of investor would be exemptfrom tax.

The trust would be liable to pay interest if it does not deposit the additional tax within thetime prescribed under the Act. The person responsible for the payment would beconsidered as the person in default for non payment of additional tax.

3.4 PROCEDURAL CHANGES

A. Return of Income filed without payment of tax to be treated as defective return – Section 139 ( 9 ) .

Presently the assesses have the option of filing Returns without payment of taxes andInterest dues without payment. The Budget proposed to amend the Section 139 byinserting clause aa to Sub Section 9 to treat a return as a defective return in case thereturn is filed with out payment of taxes due along with interest under section 140 A of Act. This amendment comes to effect from 1st June 2013.

B. Special Audit Under Section 142 ( 2A)

The assessing authority has the power to seek the audit of the accounts of an assesseeby an accountant and seek a report after the approval of the Commissioner consideringthe nature and complexity of the transactions. The budget propose to amend the sectionby providing additional reasons for calling for audit by including volume of transactions,multiplicity of the transactions or specialized nature of the business activity of theassesse and doubts about the correctness of the accounts. This amendment comes intoeffect from 1st June 2013.

C. Advance tax liability on Seized Assets – Section 132 B

The assets seized under a search and seizure procedure are adjusted against the taxliability of the assessee under the Income tax, Wealth tax, Expenditure Tax and Gift taxincluding penalty and interest. However the provisions were not clear about the existingliability towards the advance tax. The amended seeks to clarify the term existing liabilitydoes not include advance tax payable under the provisions of chapter XVII of the Act.This amendment comes into effect from 1st June 2013.



BUDGET 2013



D. Tax Residuary Certificate.

The Budget Proposed to insert a sub section 2A to section 90 that the provisions of chapter XA ( GAAR ) will apply from assessment year 2016 -17 even if it is not beneficialto the assessee. The Assessees were enjoying the interplay between DTAA and local

legislation and the Finance Act 2012 made it mandatory to claim benefits under theDTAA. It propose to insert a new subsection 5 to section 90 that the submission of residuary certificate is mandatory but it is not a sufficient condition for claiming relief under DTAA. This will for the assessment year 2013-14.

E. No Cash Contributions to political parties

Under the present provision of Section 80 GGB and 80 GGC contributions to politicalparties is allowed as deduction immaterial of the mode of contribution. It proposed toamend that no cash contribution will be allowed deduction under section 80 GGB and 80GGC.

F. Introduction of Modified General Anti Avoidance Rule (GAAR):

The provisions proposed in the previous year budget in respect of GAAR have now beenmodified after considering the suggestions received from various quarters under Chapter X-A under sections 95 to 102 and are now propos ed to be introduced wi th effect from

1 st Apr i l 2016 and wil l be app l icable for assessm ent year 2016-17 onw ards .

G. Restriction of deduction on Additional Wages

The Provision of Section 80 JJAA has been amended to restrict the claim of additionaldeduction of 30 % of wages paid to new regular blue collar work men in factories for 3consecutive assessment years. It shall not be available in case the factory is hived off or transferred or hived off or acquired by another company as result of amalgamation.

H. Computing the period of limitation for completion of assessments andreassessments:

It is proposed to amend clause (viii) of section 153 for computing period of limitation. Theperiod commencing from the date on which a reference or first of the references for exchange of information is made by competent authority and ending with the date onwhich the information requested is last received by the Commissioner or a period of oneyear, whichever is less, shall be excluded.


Wealth Tax:

I. Electronic filing of annexure-less return of net wealth (Sec. 14 of wealth tax Act) :

As under Income-tax Act filing of annexure-less return of wealth in electronic form bycertain class of wealth-tax assesses is proposed under new sections 14A & 14B of Wealth Tax Act on similar lines.




BUDGET 2013

Indirect Tax Proposals Page # 18


4. INDIRECT TAX PROPOSALS

4.1 CUSTOM DUTY

A. Section 30 is being amended to provide for electronic filing of import manifest and theCommissioner of Customs may, in cases where it is not feasible to deliver the importmanifest by presenting electronically, allow the same to be delivered in any other manner.

B. Section 41 is being amended to provide for electronic filing of export manifest and theCommissioner of Customs may, in cases where it is not feasible to deliver the exportmanifest by presenting electronically, allow the same to be delivered in any other manner.

C. Sub-section (2) of section 47 is being amended to reduce the interest free period for

payment of import duty from five days to two days

D. Section 49 is being amended to restrict the period of storage of imported goods, pendingclearance in a public or private warehouse to thirty days and to provide that theCommissioner of Customs may extend the period of storage for further period notexceeding thirty days at a time.

E. A proviso is being inserted in sub-section (2A) of section 129B to provide that in caseswhere the delay in disposing of the appeal is not attributable to the appellant, the Tribunalmay extend the period of stay by a period not exceeding 185 days subject to thecondition that if the appeal is not disposed of within the total period of 365 days from thedate of order, the stay order shall stand vacated

F. Baggage Rules are being amended to raise the duty free allowance in respect of jewellery for an Indian passenger who has been residing abroad for over one year or aperson who is transferring his residence to India from Rs.10,000 to Rs.50,000 in case of a gentleman passenger and from Rs.20,000 to Rs.1,00,000 in case of a lady passenger

G. Industry Wise Major Tariff Changes

Automobiles:

Basic customs duty on new passenger cars and other motor vehicles (high end cars) withCIF value more than US$ 40,000 and/or engine capacity exceeding 3000cc for petrol runvehicles and exceeding 2500 cc for diesel run vehicles is being increased from 75% to100%.

Basic customs duty on motor cycle with engine capacity of 800cc or more is beingincreased from 60% to 75%.



BUDGET 2013



Metals

Export duty is being levied on ilmenite unprocessed at 10% and on ilmenite, upgraded at5%.

Export duty is being levied on bauxite at 10%.

Basic customs duty is being reduced from 10% to 5% on stainless steel wire cloth stripeand from 7.5% to 5% on wash coat for use in the manufacture of catalytic convertors andtheir parts.

Full exemption from export duty is being provided to galvanized steel sheets falling under certain sub-headings, retrospectively w.e.f. 01.03.2011.

Precious Metals

Basic customs duty is being reduced from 10% to 2% on pre-forms of precious and semi-precious stones

Capital Goods/ Infrastructure

Basic customs duty on steam coal is being increased from Nil to 2% and CVD from 1% to2%.

Basic customs duty on bituminous coal is being reduced from 5% to 2% and CVD from6% to 2%.

Basic customs duty is being reduced from 7.5% to 5% on 20 specified machinery for usein leather and footwear industry.

Aircrafts & Ships

Basic Customs Duty on yachts and motor boats is being increased from 10% to 25%.

Time limit for consumption of imported goods by ship repair units is being extended from3 months to 1 year.

Time period for consumption/installation of parts and testing equipments imported for maintenance, repair and overhaul (MRO) of aircrafts by units engaged in such activities isbeing extended from 3 months to 1 year.

Presently, the basic customs duty exemption is available to parts and testing equipmentsfor maintenance, repair and overhaul of aircrafts. This exemption is now being extendedto parts and testing equipments for maintenance, repair and overhaul of aircrafts andparts thereof.

Environment Protection:

Full exemption from basic customs duty is being provided to lithium ion automotivebattery for manufacture of lithium ion battery packs for supply to the manufacturers of hybrid and electric vehicles.‟



BUDGET 2013



Time period of exemption (Nil BCD, CVD of 6% and Nil SAD) for the specified parts of electric and hybrid vehicles is being extended by 2 more years up to 31st March, 2015.

Textiles:

Basic customs duty on raw silk (not thrown), of all grades is being increased from 5% to15%.

Basic customs duty is being reduced from 7.5% to 5% on textile machinery & parts.

Electronics/hardware:

Basic customs duty on Set Top Boxes for TV is being increased from 5% to 10%

4.2 EXCISE DUTY

A. Section 11A is being amended to insert sub-section (7A) providing that service of astatement containing details of duty not paid, short levied or erroneously refunded shallbe deemed to be a service of notice under sub-section (1) or (3) or (4) or (5) of thissection.

B. Clause (a) of section 23A is being amended to expand the definition of the term "activity"within the purview of Advance Ruling to include any new business of production or manufacture proposed to be undertaken by the existing producer or manufacturer.

C. The existing sub-section (2) of section 23C provides for the admissibility of application for advance ruling, inter alia, for credit of excise duty paid or deemed to have been paid. Thescope of admissibility has been expanded to include credit of service tax paid or deemedto have been paid on input services

D. Industry Wise Major Tariff Changes

Automobiles

Excise duty on Sports Utility Vehicles („SUVs‟) is being increased from 27% to 30%.

SUVs registered solely for use as taxis will not suffer additional excise duty consequentto the increase in excise duty on SUVs from 27% to 30%. Taxi refund in respect of SUVsis being adjusted accordingly.

Metals

Excise duty of 4% is being levied on silver manufactured from zinc/lead smelting.

Compounded levy on stainless steel "Patta Patti" is being increased from Rs 30,000 per machine per month to Rs 40,000 per machine per month



BUDGET 2013



Aircrafts & Ships

Full exemption from excise duty is being provided on ships and other vessels.Consequently, there will be no CVD on these ships and vessels when imported.

Textiles

Full exemption from excise duty is being provided on hand made carpets and carpets andother textile floor coverings of coir or jute, whether or not handmade.

'Zero excise duty route', as existed prior to Budget 2011-12, is being restored in respectof branded readymade garments and made ups. In the case of cotton there will be zeroduty at the fibre stage and, in the case of spun yarn of man made fibres, there will be aduty of 12% at the fibre stage. The 'Zero excise duty route' will be in addition to theCENVAT route now available.

Health

Branded Ayurvedic medicaments and medicaments of Unani, Siddha, Homeopathic or bio-chemic system are being brought under MRP based assessment with abatement of 35% from MRP.

Electronics/Hardware

Excise duty on mobile phones of retail sale price exceeding Rs 2000/- is being increasedfrom 1% to 6%.

Miscellaneous

Excise duty on cigarettes is being increased by about 18% on all cigarettes exceptcigarettes of length not exceeding 65 mm. Cigars and cigarillos duty is also beingsimilarly raised.

Excise duty on marble tiles and slabs is being increased from Rs 30 per sq. mtr to Rs 60per sq. mtr.



BUDGET 2013



4.3 SERVICE TAX

A. Rate of Tax

No change in rate of service tax of 12%.

B. Included in the Negative List

Definition of “approved vocational education course” has been amended to include thewords “or State Council of Vocational Training”. After the proposed amendment takeseffect, courses in “designated trades” offered by Industrial Training Inst itute or IndustrialTraining Center affiliated to State Council of Vocational Training will also be covered bythe negative list. Testing activities directly related to production of any agriculturalproduce like soil testing, animal feed testing, testing of samples from plants or animals,for pests and disease causing microbes will be covered by the negative list.

C. Exemptions rationalized

The following exemptions are being rationalized:

Rationalization of exemption limit prescribed for charitable organizations, providingservices towards any other object of general public utility. So far, the limit was Rs. 25Lakh Rupees per annum. Now, they will be covered by the threshold exemption.

Exemption provided to restaurants other than those having (i) air-conditioning and (ii)license to serve liquor, is being rationalized. From 1st April, 2013, service tax will beleviable on taxable service provided in restaurants with air-conditioning or central air heating in any part of the establishment at any time during the year.

D. Exemptions withdrawn

The following exemptions are being withdrawn:

Services provided by an educational institution by way of renting of immovableproperty.

Temporary transfer or permitting the use or enjoyment of a copyright relating tocinematographic films was fully exempt so far; now, this exemption will be restricted toexhibition of cinematograph films in a cinema hall or a cinema theatre.

Services by way of vehicle parking to general public.

Services provided to Government, a local authority or a governmental authority, by way

of repair or maintenance of aircraft



BUDGET 2013



E. Rationalization of Abatement

At present taxable portion for service tax purpose is prescribed as 25% uniformly for constructions where value of land is included in the amount charged from the servicerecipient. This is being rationalized. Accordingly, where the carpet area of residential unit

is upto 2000 square feet or the amount charged is less than One Crore Rupees, in thecase of 'construction of complex, building or civil structure, or a part thereof, intended for sale to a buyer, wholly or partly except where the entire consideration is received after issuance of completion certificate by the competent authority', taxable portion for servicetax purpose will remain as 25%; in all other cases taxable portion for service tax purposewill be 30%. This change will come into effect from the 1

stday of March, 2013.

F. Amnesty Scheme for Non filers of returns and Stop filers of returns

To encourage voluntary compliance and broaden the tax base, it is proposed to provideone time amnesty by way of (i) waiver of interest and penalty; and (ii) immunity fromprosecution, to stop filers, non-filers or non-registrants or service providers (who have notdisclosed true liability in the returns filed by them during the period from October 2007 toDecember 2012) who pay the “tax dues”.

G. Advance Ruling

Scope of advance ruling is being extended to cover resident public limited companies.



BUDGET 2013

Other Major Policy Initiatives Page # 24


5. OTHER MAJOR POLICY INITIATIVES

It is proposed to set up a first women‟s bank as a public sector bank with a initialcapital of Rs.1000 crores.

It is proposed to amend SEBI Act to strengthen the Regulator.

To establish National Skill Development Corporation with a target to skill 50 millionpeople in the 12th plan period.

Proposal to set up funds of Rs.1000 crore each towards women development,voluntary skilled development programme for youth and Direct Benefit Transfer topoor.

Proposal to set up industrial corridors in Tamil Nadu, Andhra Pradesh, Karnataka and

Maharashtra during 2013-14.



BUDGET 2013

Contact Information Page # 25


CONTACT INFORMATION

CVCCVCVC

CVCVCMUMBAI (BOMBAY)

#F-7 Laxmi Mills,Shakti Mills Lane (Off Dr. E. Moses Rd),Mahalaxmi,Mumbai – 400 011.

T 91-22- 6655-177091-22- 2493-250291-22- 6655-1790

F 91-22- 6655-1774E [email protected]

[email protected] Verify:Mumbai

www.ksaiyar.comwww.bta-india.comwww.indialawalliance.com

CHENNAI (MADRAS)

54/2, Paulwells Road,St. Thomas Mount,Chennai - 600 016

T 91-44 22330206

F 91-44 22330207

KOLKATA (CALCUTTA)

9, Syed Amir Ali AvenueFlat – 2, 4

thFloor,

Kolkata - 700 017.

T 91-33-2281-7652, 2281-7653T/F 91-33-2281-7654

GOA

102, "Govinda", M.G.Road,Panaji -403 001, Goa(Please contact Mumbai officein first instance)

BENGALURU (BANGALORE)

19/1, 1st Floor, 2nd Cross,Lower Palace Orchards,Bangalore – 560 003.

T 91-80-2334 -7171 / 2336-7171F 91-80-2331-1221

COIMBATORE

„Kalpatharu‟, 4th Floor,New No. 57,East Sambandam RoadR. S. Puram, Coimbatore – 641 002

T 91-422 – 254-0972F 91-422 – 254-4690

This booklet is for the exclusive use of clients and staff of K. S. Aiyar & Co, BTA Consultants India Pvt. Ltd., India Law Alliance and their associate firms and is available only upon request. While all due care has been taken for accuracy in

preparing this booklet, the contents of this booklet cannot substitute any

professional advice, and therefore, the

readers are advised not to take any decision based on the contents of this booklet, without proper professional advice.

mailto:[email protected]


http://www.ksaiyar.com/

http://www.bta-india.com/

http://www.indialawalliance.com/

http://www.indialawalliance.com/

http://www.bta-india.com/

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