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UNION BUDGET 2015-16KEY TAX PROPOSALS
New Delhi, Ambassade de France, 12th March 2015
1
IFCCI seminar organized under the patronage of Embassy of France
• Proposal to abolish the existing Wealth Tax Act, 1957
• Information relating to the assets will be required to be captured in the Income Tax Return
Wealth Tax
BUDGET HIGHLIGHTS – DIRECT TAX
• No change in the applicable tax rates
• Corporate tax rate to be reduced in phased manner from existing 30% to 25% over the next four years
• Surcharge on income tax to be increased by 2% for all the eligible assessees except for non-domestic companies
Tax Rates
BUDGET HIGHLIGHTS – DIRECT TAX
• The existing provisions of the GAAR were to be implemented w.e.f. Financial Year 2015-16
• It is proposed to defer the applicability of GAAR provisions by two years to Financial Year 2017-18
General Anti Avoidance
Rule (GAAR)
BUDGET HIGHLIGHTS – DIRECT TAX
• Proposal to increase the threshold limit for applicability of Specified Domestic Transactions from existing INR 50 million to INR 200 million
Domestic Transfer Pricing
BUDGET HIGHLIGHTS – DIRECT TAX
• Proposal to reduce the tax rate for income earned by non-residents from Royalty and FTS, from the existing 25% to 10%
Royalty and Fees For Technical Service (FTS)
BUDGET HIGHLIGHTS – DIRECT TAX
• “Place of effective management” (POEM) at “any time” as contrary to existing “control and management” situated “wholly” in India
• Proposal to bring the provision in parity with Double Taxation Avoidance Agreements (DTAA) and international standards
New criteria for qualifying a company to be Resident
BUDGET HIGHLIGHTS – DIRECT TAX
• Measure to curb black money generated by way of dealing in immovable properties
• Transfer of immovable property in cash of INR 20,000 or more are now subject to penalty like the existing provisions for similar cash loans and deposits
Measure to Curb Black
Money
BUDGET HIGHLIGHTS – DIRECT TAX
• Additional investment allowance of 15% (in addition to existing 15%) of the cost of new asset acquired and installed by an assessee, subject to manufacturing specified articles in notified backward areas during specified period (1st April, 2015 to 31st March, 2020)
• Higher additional depreciation of 35% (instead of existing 20%) in respect of the actual cost of new machinery or plant (other than a ship and aircraft) acquired and installed for manufacturing
Incentives for development of
Andhra Pradesh and Telangana
BUDGET HIGHLIGHTS – DIRECT TAX
• In the case of plant and machinery acquired after 30 September, additional depreciation was being allowed at 25% of the normal rate, while the eligibility is for 50%
• To remove the hardship, balance 25% will be allowed in the next year
Widening Benefit of Additional
Depreciation
BUDGET HIGHLIGHTS – DIRECT TAX
• Existing provisions,- Deduction to an Indian Company, deriving profits from manufacture of goods in a factory, is allowed for 30% of additional wages paid to new regular workmen employed by the taxpayer
• Propose to extend the benefits to all taxpayers having manufacturing units rather than restricting it to corporate taxpayers
• To extend the benefit to units employing even 50 workmen instead of earlier 100 regular workmen
Deduction For Employing
New Workmen
BUDGET HIGHLIGHTS – DIRECT TAX
• 2% Deduction of tax at source on life insurance policy payments will not be made, if the recipient of the payment furnishes a self-declaration that the tax on his estimated total income would be Nil
Withholding Tax – Life Insurance
Policy Payments
BUDGET HIGHLIGHTS – DIRECT TAX
• No tax will be deducted at source while making the payment to a transporter, who is eligible to compute income under presumptive taxation provisions and who furnishes a prescribed declaration along with its Permanent Account Number (PAN)
Withholding Tax –
Transporters
BUDGET HIGHLIGHTS – DIRECT TAX
• Existing provisions - A person making a payment to non-resident has to furnish certain information in relation to the payment. Form 15CA (declaration by the payee) and Form 15CB (CA certificate) have been prescribed detailing the information required
• The provision in its present form read as if the requisite information was required only in cases where the payment is subject to withholding of tax
• Now it is proposed to amend to provide that a person making a payment to a non-resident shall furnish the prescribed information whether or not the tax is deductible at source from such payment
Furnishing of Information for Payments to
Non-Residents
BUDGET HIGHLIGHTS – DIRECT TAX
• Central Board of Direct Taxes may make rules to provide the procedure for granting relief or deduction of any income tax paid outside India against the tax payable in India
Rules for Tax Credit
BUDGET HIGHLIGHTS – DIRECT TAX
CONTENTS
1 Service tax
4 Other procedural changes
2 Customs duty
3 Excise duty
5 Goods and Services tax
• Rate of service tax increased to 14% from 12.36%.
• Education cess of 2% and Secondary and Higher Education cess of 1% subsumed in the rate.
• The new rate to apply from a date to be notified after the enactment of the Finance Bill.
Rate of Service Tax
• ‘Swachh Bharat Cess’ may be levied at 2% on value of specified taxable services.
• Cess to be levied from a date which Central Government may notify.
• Effective rate of cess may vary between 0.5% to 2%.
Swachh Bharat Cess
BUDGET HIGHLIGHTS - SERVICE TAX
• Service Provided by way of amusement facilities.
• Contract manufacturing or job work for alcoholic liquor.
• All services provided by Government or local authorities to business entities.
• Service provided by E-commerce portals (aggregators). (with effect from March 1, 2015)
New Services made taxable
(from the notified date)
• Common Effluent Treatment Plant operator for Effluent treatment.
• Pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables.
• Road transport of export goods from place of removal to a Land Customs Station.
New Services Exempted
(With effect from March 1, 2015)
BUDGET HIGHLIGHTS - SERVICE TAX
BUDGET HIGHLIGHTS – SERVICE TAX
Exemptions withdrawn
(with effect from April 1, 2015)
Services to Government / local authority for construction, repair, commissioning, installation,
completion, fitting out, maintenance, renovation or alteration of civil structure or original works for
commercial or other use.
Construction, erection, commissioning or installation services for original works pertaining to Ports and
Airports.
Services provided by a mutual fund agent and distributor to mutual funds or Asset Management
Company (‘AMC’)
• Uniform abated value of 30% for goods transport by rail, road and vessel subject to non-availment of Cenvat credit.
• Abated value of 60% for air travel by other than economy class. Air travel by economy class would continue to be taxed at an abated value of 40%.
• Alternate composition rates for specific service providers amended accordingly from a date to be notified.
Changes in the rates of abatement
(with effect from April 1, 2015)
• Manpower supply and security services provided by an individual, HUF or a Partnership Firm to a Body Corporate.
• Service provide by a mutual fund agent to the AMC.
Services to be taxed fully under reverse
charge
(with effect from April 1, 2015)
BUDGET HIGHLIGHTS - SERVICE TAX
• No change in the peak rate of Basic Custom Duty (‘BCD’) at 10%.
• The rate of Countervailing Duty (‘CVD’) changes to 12.50% due to change in the Excise duty rates.
• No change in the rate of cess applicable on Customs duties.
Rates of Customs Duty
• BCD exempted on Organic LED Televisions Panels.
• BCD exempted on digital still image video cameras.
• BCD and CVD exempted on parts, components and accessories for manufacture of tablet computer.
• BCD exempted on High Density Poly Ethylene (‘HDPE’) for manufacture of telecommunication grade optical fibreor optical fibre cables.
Full exemption from BCD / CVD
BUDGET HIGHLIGHTS – CUSTOMS DUTY
Reduction in the rate of BCD
BUDGET HIGHLIGHTS – CUSTOMS DUTY
Product Old Rate New Rate
Liquefied butane, Isoprene;
Antimony metal, including antimony waste and scrap and specified inputs for manufacture of
flexible medical video endoscope.
5% 2.5%
Butyl acrylate;
Sulphuric acid for use in manufacture of fertilizers;
C-Block compressor, Crank shaft and Over load Protector & Positive thermal co-efficient for
manufacture of Refrigerator compressors;
Ceria zirconia compounds, Cerium compounds and Zeolite for use in manufacture of
washcoat used in catalytic converters.
7.5% 5%
Styrene, Ethylene dichloride (EDC) and Vinyl chloride monomer (‘VCM’). 2.5% 2%
Anthraquinone;
Specified components of CNC Lathe machines and Machining Centres.
7.5% 2.5%
Metal parts used in manufacture of electrical insulators;
Water blocking tape, Ethylene-propylene-non-conjugated diene rubber (EPDM) and Mica
glass tape for manufacture of insulated wires and cables.
10% 7.5%
Increase in the rate of BCD
Product Old Rate New Rate
Metallurgical coke 2.5% 5%
Commercial motor vehicles (other than in Completely Knocked Down (‘CKD’) condition) 10% 20%
BUDGET HIGHLIGHTS – CUSTOMS DUTY
Special Additional Duty (‘SAD’) reduced to avoid Cenvat credit
accumulation
Goods (except populated Printed CircuitBoards) for use in the manufacture ofInformation Technology Agreements(‘ITA’) bound goods exempted.
Inputs for use in manufacture of LEDdriver and lights, lamps and fixturesexempted.
SAD on Naphtha, EDC, VCM and styrenemonomer for manufacture of excisablegoods reduced from 4% to 2%.
SAD on Melting scrap of iron & steel,copper, brass and aluminum reducedfrom 4% to 2%.
BUDGET HIGHLIGHTS – CUSTOMS DUTY
Miscellaneous changes
Exemption to specified goods used in manufactureof hybrid and electrically operated vehiclesextended up to March 31, 2016.
Additional Duty of Customs (Road Cess) onimported Motor Spirit (Petrol) and High SpeedDiesel Oil increased from INR 2 per litre to INR 6per litre.
Export duty on beneficiated Ilmenite (includingIlmenite ground) reduced from 5% to 2.5%.
• Rate of Excise duty increased from 12.36% to 12.50%.
• Education cess and Secondary and Higher Education cess subsumed in the rate of Excise duty.
Rates of Excise Duty
• Excise duty exempted on specified raw materials for manufacture of pacemakers .
• Excise duty fully exempted on parts, sub-parts, components and accessories for manufacture of tablet computer.
• Pig iron SG grade and ferro-silicon magnesium for manufacture of cast components of Wind Electricity Generators.
• Round copper wire and tin alloys for use in manufacture of Photo Voltaic (‘PV’) ribbon used in solar PV cells and modules.
Exemption from Excise Duty
BUDGET HIGHLIGHTS – EXCISE DUTY
Reduction in Excise Duty
BUDGET HIGHLIGHTS – EXCISE DUTY
Product Old Rate* New
Rate
Chassis for ambulances 24% 12.5%
Wafers of Integrated Circuit (‘IC’) modules for use in manufacture
of smart cards
12% 6%
LED Drivers and Metal Core Printed Circuit Boards (‘MCPCB’) for
LED lights, fixtures and lamps
12% 6%**
Leather footwear (having uppers of leather) of Retail Sale Price
exceeding 1,000 per pair
12% 6%***
* Old rates subject to Education cess and Secondary and Higher Education cess at 3%.
** Subject to MRP abatement of 35%.
*** MRP abatement on all footwear decreased from 35% to 25%.
Increase in Excise Duty
BUDGET HIGHLIGHTS – EXCISE DUTY
Product Old Rate* New Rate
Packaged Portland cement manufactured and cleared:
• From a mini cement plant 6%+ INR 120/MT 6%+ INR 125/MT
• Other than from a cement plant 12%+ INR 120/MT 12.5%+ INR 125/MT
Clean energy cess on coal, lignite and
peat
INR 100 per tonne INR 200 per tonne
Mobile handsets including cellular
phones
1% (if Cenvat credit not
availed)
6% (if Cenvat credit
availed)
1% (if Cenvat credit not availed)
12.5% (if Cenvat credit availed)
Solar water heater systems Nil 12.5% (if Cenvat credit availed)
Nil (if Cenvat credit not availed)
Tablet Computer 10% 12.5% (if Cenvat credit availed)
2% (if Cenvat credit not availed)
* Old rates subject to Education cess and Secondary and Higher Education cess of 3%.
BUDGET HIGHLIGHTS – EXCISE DUTY
Miscellaneous changes
Concessional rate of duty at 6% on specified goods for manufactureof electrically operated vehicles and hybrid vehicles extended tillMarch 31, 2016
Excise duty increased on cigarettes by 25% (for length notexceeding 65 mm), and by 15% (for other cigarettes).
Compounded Levy Scheme for Pan Masala, Gutkha and Chewingtobacco amended to specify the maximum speed of packingmachines as a relevant factor for computation of duty.
Time limit for taking Cenvat credit on inputs and input services has been increased to
one year from the date of the invoice.
Credit allowed even if inputs and capital goods are despatched directly to the job
worker.
The time limit for receiving such goods back in the factory increased to 2 years for
capital goods. Period for receiving the inputs back remains unchanged at 180 days. The
period shall be counted from the date of receipt of such inputs or the capital goods in
the premises of the job worker.
In case of services where Service tax is required to be paid under the reverse charge,
the recipient of the services can avail the credit after payment of Service tax without
discharge of payment obligation in respect of value of the services.
Rule 6 of the Credit Rules to include non-excisable goods cleared for a consideration.
The valuation to be based on Invoice value.
Rule 14 amended to provide for recovery of credits wrongly availed but not utilized.
BUDGET HIGHLIGHTS – CENVAT CREDIT RULES
Case Quantum of Penalty Maximum Penalty
In case duty and
interest is paid
within 30 days of
receipt of notice
In case duty and
interest is paid
within 30 days of
receipt of order
In case not involving fraud/
suppression of facts
Nil 25% of the penalty
imposed*
10% of the duty evaded
(Minimum penalty of INR
5,000/- except for service tax
cases)
In case involving fraud/
suppression of facts
15% of the duty/
service tax
demanded*.
25% of the duty/
service tax evaded*.
An amount equal to the duty or
tax determined/ evaded.
50% of the Excise duty and
Service tax, in case of disputes
for the period April 8, 2011, till
the assent of Finance Bill 2015.
* Reduced penalty has to be paid within 30 days of communication of Notice / Order, as the case may be.
Rationalization of penal provisions
Penal provisions under the Customs, Excise and Service tax laws have been relaxed to encourage
voluntary compliances and reduce the litigation.
Accordingly, suitable changes have been made under the respective Acts to provide as follows:
BUDGET HIGHLIGHTS – PROCEDURAL CHANGES
Excise duty / Service tax self-assessed and declared in the Return but not paid, may be
recovered without issuance of Notice.
The term ‘export’ defined under the Central Excise and Cenvat Credit Rules to generally
mean, ‘taking goods out of India to a place outside India’, for granting rebates and refund
of Cenvat credit.
‘Place of removal’ for determining the eligibility for Cenvat credit shall be:
The Port/ ICD / CFS in case of exports by the manufacturer-exporter.
Place of transfer of title in property from the manufacturer to the merchant exporter,
in case of exports by the merchant-exporter
Section 67 of the Finance Act proposed to be amended to specifically provide that
reimbursement of expenditure or costs incurred and charged by the service provider to
be included in the gross value.
BUDGET HIGHLIGHTS – PROCEDURAL CHANGES
Proceedings remanded for de-novo adjudication, cannot be filed before the Settlement Commission.
Facility of obtaining Advance rulings extended to all resident firms.
Simplification of registration process under Central Excise and Service tax.
Provisions created in the Central Excise and Service tax Rules for authentication of documents by
digital signature and preservation of records in electronic forms.
Validity period of Bank Guarantee (‘BG’) or Fixed Deposit Receipts (‘FDR’), for MPP (‘Mega Power
Projects’) with provisional status, increased from 36 to 66 months for claiming Customs and Excise
duty exemptions.
For Ultra Mega Power Projects (‘UMPP’), with provisional status for the purposes of claiming Excise
duty exemptions the BG/FDR needs to have a validity period of 42 months, instead of 36 months as
prescribed earlier.
BUDGET HIGHLIGHTS – PROCEDURAL CHANGES
Government committed for implementation of GST with effect from April1,
2016.
Increase in the rate of Service tax a step in the direction of aligning the GST
rates.
Consensus reached with the States on the revenue sharing mechanism.
Constitution amendment bill pending before the Parliament and is expected to
be cleared soon.
Alcohol and Petroleum products expected to be kept outside the purview of
GST.
BUDGET HIGHLIGHTS – GST
GST to be made applicable to all transactions of goods and services made for a
consideration.
Concurrent jurisdiction of Centre and States to tax entire value chain and all taxpayers.
GST to consist of two components, namely, GST levied by the Centre(‘CGST’) and GST levied by
the States (‘SGST’). Integrated GST (‘IGST’) to be adopted for inter-state transactions by
appropriately aligning and integrating CGST and SGST.
Credits of taxes paid on procurement of goods and services to be made available across the value
chain.
GST implementation through multiple statutes, one for CGST and a SGST statute for each State,
with uniform basic provisions covering, inter-alia including:
Chargeability
Definition of taxable event and taxable person
Valuation provisions
Basis of classification etc.
GST –taxes to be subsumed
Central Taxes – Excise duty, Additional Excise duty, CVD in lieu of Excise duty, SAD in lieu of
VAT, Service tax, cesses and surcharges
State Taxes – Value Added Tax (VAT), Entertainment tax, Luxury tax, Tax on lottery, betting
and gambling, Entry taxes, State cesses and surcharges,
CONCEPT OF GST
GST – PERCEIVED BENEFITS
GST
Broader
Tax base
Seamless
National
Market
Cheaper
Exports
No
cascading
of taxes
Spend
less to
comply
Ease of
doing
Business
/ planning
projects
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www.mazars.co.in
Date44 Titre de la présentation
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CONTACT
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Nicolas Ribollet
Partner & National Leader, Transaction Advisory Services
Email : [email protected]
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