http://www.cadelhi.com/forums/ Mon, 06 Feb 2012 09:24:56 +0000 MyBB http://www.cadelhi.com/forums/showthread.php?tid=81 Tue, 17 May 2011 04:18:17 -0500 http://www.cadelhi.com/forums/showthread.php?tid=81 http://www.cadelhi.com/forums/showthread.php?tid=80 Mon, 02 May 2011 03:04:00 -0500 http://www.cadelhi.com/forums/showthread.php?tid=80 W.e.f 01.05.2011 the following notification stands withdrawn. Therefore the service provided by the professional is now taxable.
13th July, 2006.
Notification No. 25 / 2006-Service Tax

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services falling under sub-clauses (s), (t) and (u) of clause (105) of section 65 of the Finance Act, provided or to be provided by a practicing chartered accountant, a practicing cost accountant and a practicing company secretary respectively, in his professional capacity, to a client, relating to representing the client before any statutory authority in the course of proceedings initiated under any law for the time being in force, by way of issue of notice, from the whole of service tax leviable thereon under section 66 of the said Finance Act.]]> W.e.f 01.05.2011 the following notification stands withdrawn. Therefore the service provided by the professional is now taxable.
13th July, 2006.
Notification No. 25 / 2006-Service Tax

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services falling under sub-clauses (s), (t) and (u) of clause (105) of section 65 of the Finance Act, provided or to be provided by a practicing chartered accountant, a practicing cost accountant and a practicing company secretary respectively, in his professional capacity, to a client, relating to representing the client before any statutory authority in the course of proceedings initiated under any law for the time being in force, by way of issue of notice, from the whole of service tax leviable thereon under section 66 of the said Finance Act.]]> http://www.cadelhi.com/forums/showthread.php?tid=79 Sat, 30 Apr 2011 08:03:50 -0500 http://www.cadelhi.com/forums/showthread.php?tid=79 http://www.cadelhi.com/forums/showthread.php?tid=78 Tue, 15 Mar 2011 02:50:51 -0500 http://www.cadelhi.com/forums/showthread.php?tid=78
Please find the attached Document that will help us in conducting Bank Audit.

Regards

Raghvendera Sharma]]>
Please find the attached Document that will help us in conducting Bank Audit.

Regards

Raghvendera Sharma]]> http://www.cadelhi.com/forums/showthread.php?tid=77 Wed, 09 Mar 2011 22:56:54 -0600 http://www.cadelhi.com/forums/showthread.php?tid=77
"Salaried people, may be up to Rs 5 lakh...they need not file the (income tax) return," CBDT chairman Sudhir Chandra told reporters at the customary post-Budget press conference.

The exemption from filing tax returns come into effect from the assessment year 2011-12.

In case such a salary earner has income from other sources like dividend, interest etc. and does not want to file returns, he will have to disclose such income to his employer for tax deduction, Chandra said.

The government, he said, is working out a scheme and will notify it "very soon".

The Form 16 issued to salaried employees will be treated as Income Tax Return, he added.]]>
"Salaried people, may be up to Rs 5 lakh...they need not file the (income tax) return," CBDT chairman Sudhir Chandra told reporters at the customary post-Budget press conference.

The exemption from filing tax returns come into effect from the assessment year 2011-12.

In case such a salary earner has income from other sources like dividend, interest etc. and does not want to file returns, he will have to disclose such income to his employer for tax deduction, Chandra said.

The government, he said, is working out a scheme and will notify it "very soon".

The Form 16 issued to salaried employees will be treated as Income Tax Return, he added.]]> http://www.cadelhi.com/forums/showthread.php?tid=76 Wed, 09 Mar 2011 07:27:55 -0600 http://www.cadelhi.com/forums/showthread.php?tid=76
Pls find attached the personal organiser. Keep your reoutine data in soft copy now. A very useful file for all.]]>
Pls find attached the personal organiser. Keep your reoutine data in soft copy now. A very useful file for all.]]> http://www.cadelhi.com/forums/showthread.php?tid=75 Sat, 05 Mar 2011 04:25:46 -0600 http://www.cadelhi.com/forums/showthread.php?tid=75



CA. Raghvendera Sharma]]>



CA. Raghvendera Sharma]]> http://www.cadelhi.com/forums/showthread.php?tid=72 Sat, 05 Mar 2011 00:34:41 -0600 http://www.cadelhi.com/forums/showthread.php?tid=72
• Direct Taxes Code (DTC) to be finalised for enactment during 2011-12. DTC proposed to be effective from April 1, 2012.

• For roll out of GST, Constitution Amendment Bill proposed to be introduced in this session of Parliament. Significant progress in establishing GST Network (GSTN), which will serve as IT infrastructure for introduction of GST.



Housing Sector Finance

• Existing scheme of interest subvention of 1% on housing loan further liberalised.

• Existing housing loan limit enhanced to ` 25 lakh for dwelling units under priority sector lending.

• Central Electronic Registry to prevent frauds involving multiple lending on the same immovable property to become operational by March 31, 2011.

Exports
• Self assessment to be introduced in Customs to modernize the Customs administration.
• Proposal to introduce scheme for refund of taxes paid on services used for export of goods.
• Jodhpur to be included for the development of a handicraft mega cluster.

MGNREGA

• To provide a real wage of ` 100 per day, the Government has decided to index the wage rates notified under the MGNREGA to the Consumer Price Index for Agricultural Labour.


INCOME TAX

Income tax threshold maintained at `1,80,000/-.

Male Female Senior Citizens Tax Rate %
(Age above 60 and less than 80 years) Age above 80 years
0 – 180000 0 – 190000 0 - 250000 0 – 500000 0
180001 – 500000 190001 - 500000 250001 - 500000 500001-800000 10
500001 – 800000 500001 - 800000 500001 - 800000 - 20
800001 and above 800001 and above 800001 and above 800001 and above 30

• Exemption limit for the general category of individual taxpayers enhanced from ` 1,60,000 to ` 1,80,000

• Exemption limit enhanced to ` 2,50,000 and qualifying age reduced to 60 years for senior citizens. Higher exemption limit of ` 5 lacs for Very Senior Citizens, who are 80 years or above.

• Women’s basic exemption slab retained at ` 1,90,000.

• Current surcharge of 7.5 % on domestic companies proposed to be reduced to 5%. For other companies, surcharge has been reduced to 2% from 2.5%.

• Rate of Minimum Alternative Tax proposed to be increased from 18% to 18.5% of book profits. A.Y. 2012-13

• The definition of charitable purpose u/s 2 (15) includes “the advancement of any other object of general public utility”. The monetary limit in respect of such activities has been enhanced from ` 10.00 lacs ` 25.00 lacs.

• The amount paid by an assessee as an employer by way of contribution towards pension scheme, as referred to in sec 80CCD(2) on account of an employee to the extent it doesn’t exceed 10% of the salary of employee in the previous year, shall be allowed as a deduction u/s 36 in computing the income under the head profit and gains of business or profession

• Tax incentives extended to attract foreign funds for financing of infrastructure.

• Additional deduction of ` 20,000 for investment in long-term infrastructure bonds proposed to be extended for one more year. Section 80CCF

• Lower rate of 15% tax on dividends received by an Indian company from its foreign subsidiary

• In respect of SEZ unit, dividend distribution tax is now applicable after 1.6.2011. Their income will be subject to MAT from AY 2012-13.
• Provisions of transfer pricing norms amended so as to provide the price variation at Arm’s Length to be different from fixed 5%, variance rate to be announced later on.

• All the transactions done with parties located in such notified countries (notified jurisdictional area), which do not co-operate on exchange of information, will be treated as transactions with associated enterprises and would be dealt with under Transfer Pricing norms.

• In respect of Investment linked deduction under 35AD allowing deduction of capital expenditure incurred on specified business, two more activities included in the specified business, namely Affordable Housing Project & Fertilizer manufacturing units. It already includes cold chain facility, hotel of 2 star or above category, 100 bed hospital and warehousing facility etc.
• Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200%.

• System of collection of information from foreign tax jurisdictions to be strengthened.

• Due date of filing of Form No. 3CEB, Auditors’ report for Transfer Pricing has been extended to 30th November from existing 30th September.

• Any receipt of money without an adequate explanation of source from a person located in notified jurisdictional area may be treated as an income of the assessee, if so opined by the assessing officer.

• Any sum or income which is to be received by a person located in notified jurisdictional area and that amount is liable to TDS, in that case, TDS will be deducted at the maximum rate of 30%

• Limited Liability Partnerships are now liable to MAT at the rate of 18.5% AY 2012-13. The MAT Credit is allowed to be carried forward to 10 years.

• Higher distribution tax rate on units others than open ended equity funds of UTI from 1st June, 2011.

• To reduce compliance burden upon small tax payers, any class of persons may be exempted from requirement of filing of return of income. Such class of persons will be notified by Central Government later on.

• Liaison offices of a company will be required to file Annual Information in the prescribed form with in the 60 days from the end of the financial year.


Indirect Taxes

• To stay on course for transition to GST.

• Central Excise Duty to be maintained at standard rate of 10 %. Reduction in number of exemptions in Central Excise rate structure.


• Nominal Central Excise Duty of 1 % imposed on 130 items entering in the tax net.

• Lower rate of Central Excise Duty enhanced from 4 % to 5 %.

• Peak rate of Custom Duty held at its current level.



Service Tax

• Standard rate of Service Tax retained at 10 %.

• Hotel accommodation in excess of ` 1,000 per day and service provided by air conditioned restaurants that have license to serve liquor added as new services for levying Service Tax.

• Tax on all services provided by hospitals with 25 or more beds with facility of central air conditioning.

• Service Tax on air travel both domestic and international raised.

• Services provided by life insurance companies in the area of investment and some more legal services proposed to be brought into tax net.

• Scope of legal consultancy service is expanded to that Services provided by a business entity to individual and representational service provided by any person to any business entity ( except service provided to individual)]]>
• Direct Taxes Code (DTC) to be finalised for enactment during 2011-12. DTC proposed to be effective from April 1, 2012.

• For roll out of GST, Constitution Amendment Bill proposed to be introduced in this session of Parliament. Significant progress in establishing GST Network (GSTN), which will serve as IT infrastructure for introduction of GST.



Housing Sector Finance

• Existing scheme of interest subvention of 1% on housing loan further liberalised.

• Existing housing loan limit enhanced to ` 25 lakh for dwelling units under priority sector lending.

• Central Electronic Registry to prevent frauds involving multiple lending on the same immovable property to become operational by March 31, 2011.

Exports
• Self assessment to be introduced in Customs to modernize the Customs administration.
• Proposal to introduce scheme for refund of taxes paid on services used for export of goods.
• Jodhpur to be included for the development of a handicraft mega cluster.

MGNREGA

• To provide a real wage of ` 100 per day, the Government has decided to index the wage rates notified under the MGNREGA to the Consumer Price Index for Agricultural Labour.


INCOME TAX

Income tax threshold maintained at `1,80,000/-.

Male Female Senior Citizens Tax Rate %
(Age above 60 and less than 80 years) Age above 80 years
0 – 180000 0 – 190000 0 - 250000 0 – 500000 0
180001 – 500000 190001 - 500000 250001 - 500000 500001-800000 10
500001 – 800000 500001 - 800000 500001 - 800000 - 20
800001 and above 800001 and above 800001 and above 800001 and above 30

• Exemption limit for the general category of individual taxpayers enhanced from ` 1,60,000 to ` 1,80,000

• Exemption limit enhanced to ` 2,50,000 and qualifying age reduced to 60 years for senior citizens. Higher exemption limit of ` 5 lacs for Very Senior Citizens, who are 80 years or above.

• Women’s basic exemption slab retained at ` 1,90,000.

• Current surcharge of 7.5 % on domestic companies proposed to be reduced to 5%. For other companies, surcharge has been reduced to 2% from 2.5%.

• Rate of Minimum Alternative Tax proposed to be increased from 18% to 18.5% of book profits. A.Y. 2012-13

• The definition of charitable purpose u/s 2 (15) includes “the advancement of any other object of general public utility”. The monetary limit in respect of such activities has been enhanced from ` 10.00 lacs ` 25.00 lacs.

• The amount paid by an assessee as an employer by way of contribution towards pension scheme, as referred to in sec 80CCD(2) on account of an employee to the extent it doesn’t exceed 10% of the salary of employee in the previous year, shall be allowed as a deduction u/s 36 in computing the income under the head profit and gains of business or profession

• Tax incentives extended to attract foreign funds for financing of infrastructure.

• Additional deduction of ` 20,000 for investment in long-term infrastructure bonds proposed to be extended for one more year. Section 80CCF

• Lower rate of 15% tax on dividends received by an Indian company from its foreign subsidiary

• In respect of SEZ unit, dividend distribution tax is now applicable after 1.6.2011. Their income will be subject to MAT from AY 2012-13.
• Provisions of transfer pricing norms amended so as to provide the price variation at Arm’s Length to be different from fixed 5%, variance rate to be announced later on.

• All the transactions done with parties located in such notified countries (notified jurisdictional area), which do not co-operate on exchange of information, will be treated as transactions with associated enterprises and would be dealt with under Transfer Pricing norms.

• In respect of Investment linked deduction under 35AD allowing deduction of capital expenditure incurred on specified business, two more activities included in the specified business, namely Affordable Housing Project & Fertilizer manufacturing units. It already includes cold chain facility, hotel of 2 star or above category, 100 bed hospital and warehousing facility etc.
• Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200%.

• System of collection of information from foreign tax jurisdictions to be strengthened.

• Due date of filing of Form No. 3CEB, Auditors’ report for Transfer Pricing has been extended to 30th November from existing 30th September.

• Any receipt of money without an adequate explanation of source from a person located in notified jurisdictional area may be treated as an income of the assessee, if so opined by the assessing officer.

• Any sum or income which is to be received by a person located in notified jurisdictional area and that amount is liable to TDS, in that case, TDS will be deducted at the maximum rate of 30%

• Limited Liability Partnerships are now liable to MAT at the rate of 18.5% AY 2012-13. The MAT Credit is allowed to be carried forward to 10 years.

• Higher distribution tax rate on units others than open ended equity funds of UTI from 1st June, 2011.

• To reduce compliance burden upon small tax payers, any class of persons may be exempted from requirement of filing of return of income. Such class of persons will be notified by Central Government later on.

• Liaison offices of a company will be required to file Annual Information in the prescribed form with in the 60 days from the end of the financial year.


Indirect Taxes

• To stay on course for transition to GST.

• Central Excise Duty to be maintained at standard rate of 10 %. Reduction in number of exemptions in Central Excise rate structure.


• Nominal Central Excise Duty of 1 % imposed on 130 items entering in the tax net.

• Lower rate of Central Excise Duty enhanced from 4 % to 5 %.

• Peak rate of Custom Duty held at its current level.



Service Tax

• Standard rate of Service Tax retained at 10 %.

• Hotel accommodation in excess of ` 1,000 per day and service provided by air conditioned restaurants that have license to serve liquor added as new services for levying Service Tax.

• Tax on all services provided by hospitals with 25 or more beds with facility of central air conditioning.

• Service Tax on air travel both domestic and international raised.

• Services provided by life insurance companies in the area of investment and some more legal services proposed to be brought into tax net.

• Scope of legal consultancy service is expanded to that Services provided by a business entity to individual and representational service provided by any person to any business entity ( except service provided to individual)]]> http://www.cadelhi.com/forums/showthread.php?tid=71 Fri, 04 Mar 2011 02:07:02 -0600 http://www.cadelhi.com/forums/showthread.php?tid=71
Pls find attached the budget 2011 analysis by Delloittes.]]>
Pls find attached the budget 2011 analysis by Delloittes.]]> http://www.cadelhi.com/forums/showthread.php?tid=70 Thu, 03 Mar 2011 06:55:55 -0600 http://www.cadelhi.com/forums/showthread.php?tid=70 http://www.cadelhi.com/forums/showthread.php?tid=69 Wed, 02 Mar 2011 02:50:48 -0600 http://www.cadelhi.com/forums/showthread.php?tid=69 http://www.cadelhi.com/forums/showthread.php?tid=68 Wed, 02 Mar 2011 01:48:51 -0600 http://www.cadelhi.com/forums/showthread.php?tid=68
Additional income-tax at a higher rate of 30% will be payable on income distributed by debts funds to a person other than individual/HUF.


Under the existing provisions contained in section 115R(2) of the Income-tax Act, a Mutual Fund is liable to pay additional income-tax on the amount of income distributed to its unit holders. It is proposed to levy additional income-tax at a higher rate of 30 per cent. on income distributed by debt funds to a person other than an individual or HUF.
It is therefore proposed to amend section 115R(2) to provide that the Mutual Fund shall be liable to pay additional income-tax on such distributed income at the rate of –
(a) 25 per cent. if the recipient is an individual or HUF in case of distribution by a money market mutual fund or a liquid fund;
(b) 30 per cent. if the recipient is any other person in case of distribution by a money market mutual fund or a liquid fund;
© 12.5 per cent. if the recipient is an individual or HUF in case of distribution by a debt fund other than a money market mutual fund or a liquid fund; and
(d) 30 per cent. if the recipient is any other person in case of distribution by debt fund other than a money market mutual fund or a liquid fund.
There will be no change in the rate of income-tax in case of distribution to any individual or HUF. Distribution of income by an equity-oriented fund shall continue to be exempt from tax.
This amendment is proposed to take effect from 1st June, 2011.]]>
Additional income-tax at a higher rate of 30% will be payable on income distributed by debts funds to a person other than individual/HUF.


Under the existing provisions contained in section 115R(2) of the Income-tax Act, a Mutual Fund is liable to pay additional income-tax on the amount of income distributed to its unit holders. It is proposed to levy additional income-tax at a higher rate of 30 per cent. on income distributed by debt funds to a person other than an individual or HUF.
It is therefore proposed to amend section 115R(2) to provide that the Mutual Fund shall be liable to pay additional income-tax on such distributed income at the rate of –
(a) 25 per cent. if the recipient is an individual or HUF in case of distribution by a money market mutual fund or a liquid fund;
(b) 30 per cent. if the recipient is any other person in case of distribution by a money market mutual fund or a liquid fund;
© 12.5 per cent. if the recipient is an individual or HUF in case of distribution by a debt fund other than a money market mutual fund or a liquid fund; and
(d) 30 per cent. if the recipient is any other person in case of distribution by debt fund other than a money market mutual fund or a liquid fund.
There will be no change in the rate of income-tax in case of distribution to any individual or HUF. Distribution of income by an equity-oriented fund shall continue to be exempt from tax.
This amendment is proposed to take effect from 1st June, 2011.]]> http://www.cadelhi.com/forums/showthread.php?tid=67 Mon, 28 Feb 2011 09:38:36 -0600 http://www.cadelhi.com/forums/showthread.php?tid=67 1.1 The changes in Cenvat Credit Rules are guided, inter-alia, by the following considerations:
(a) Describe the scope of eligible inputs and input services more clearly so as to minimize disputes in their interpretations;
(b) Eliminate distortions and areas of tax avoidance arising from differential treatment of goods and services used for similar purposes;
© Provide a practical scheme for the segregation of Cenvat credits used in respect of final products and output services where they are partially exempted with condition that no such credits shall be taken;
(d) Liberalize the provisions in certain areas to meet the legitimate demands of business;
1.2 Details of important changes made in Cenvat Credit Rules, 2004 that impact service tax are given in the following paragraphs.
A. Input

1.3 “Input” has been defined to include, inter-alia, all goods used in a factory by the manufacturer and goods used for providing any output service;
1.4 Goods that shall not constitute input have been specifically excluded. These shall include, besides petroleum items, any goods used for construction of a civil structure (by a manufacturer as well as a service provider) excepting when they are used in the provision of any of the specified construction services. Thus, goods used by a sub-contractor for rendering services of construction to the main contractor shall constitute input.
1.5 Exclusions also cover goods such as food items, goods used in a guesthouse, residential colony, club or a recreational facility or a clinical establishment which are primarily meant for the personal use or consumption of the employees. When any of these goods are used directly in the manufacture of final products or provision of a service they will constitute input.
1.6 Goods which have no relationship whatsoever with the manufacture have also been excluded.
B. Input Service

1.7 The distinction between goods and services is diminishing and many goods can be received as services. Accordingly the definition of “input service” has been aligned with the definition of “input” such that goods that do not constitute “input” do not qualify as “input service”. Thus a service relating to construction of civil structure will not constitute “input service” unless it is provided by a sub-contractor to the main contractor.
1.8 Similarly services relating to motor vehicle i.e. rent-a-cab, use of tangible goods, insurance or repair of vehicle shall not constitute an “input service‟ except in respect of output services where credit on motor vehicle is permitted as “capital goods”.
1.9 On the same lines, a service meant primarily for the personal use or consumption of employees will not constitute an input service. A list of specific services has also been given by way of example in the definition. Most of these services constitute a part of the cost-to-company package of the employee and are provided either free of charge or on concessional basis to company employees.
1.10 Expression “activities relating to business” has been deleted and Business exhibition and legal services added in the list of services.
3. Obligation of manufacturer and provider of services
1.11 Definition of exempted goods shall include such excisable goods as are covered by the notification relating to concessionalduty with the condition that no credit of input and input service shall be availed. This amendment shall come into effect on 01.03.2011.
1.12 Similarly the definition of exempted services shall include taxable services which are partially exempted with the condition that no credit of input and input service shall be availed. Moreover it has been clarified that exempted service will include trading service.
1.13 Option to maintain separate accounts only in respect of inputs (and not together with input services) has also been given so that allocation as per formula given in rule 6(3A) is done only in so far as credits on input services are concerned.
1.14 The amount payable under rule 6(3)(i) in respect of services has been reduced from 6% to 5%. Moreover in the case of exempted services (that are partially taxed with no facility of credits) this amount shall be 5% of the exempted value of the service. Thus if the exemption on a certain service is 60%, the amount required to be paid shall be 3% (60X5%) of the full value of the service. In case of exempt goods, amount payable will be reduced by the amount paid at the concessional rate.
1.15 For the purpose of applying the formula under rule 6(3A) the value of trading service as well as value of services covered by composition schemes has been defined. The value of trading service shall be the difference between the sale price and purchase price of goods. The value in respect of services covered by a composition scheme will be tax amount divided by the rate of service tax applicable under section 66 read with any general exemption. As the prevalent rate is 10% the value shall be ten times the amount of service paid or payable.
1.16 A substantial part of the income of a bank or a life insurance company is from investments or by way of interest in which a number of inputs and input services are used. There have been difficulties in ascertaining the amount of credit flowing into earning these amounts. Thus a banking company or a financial institution, including NBFC, providing banking and financial services are being obligated to pay an amount equal to 50% of the credit availed. In case of services relating to life insurance or management of ULIPs such amount will be equal to 20% of credit availed. Other options of payment of amount under Rule 6 shall not be available for these taxpayers.
1.17 Consequent to the introduction of the proportionate allocation and its rationalization now, Rule 6(5) that allows full credit of 17 specified services has been deleted.
1.18 New sub-rule (6A) has been added to allow provision of services without payment of service tax to a unit in SEZ or to a developer in SEZ for their authorized operations, without requirement of reversal of any CENVAT credit on this account. This will help in tax-free receipt of services by units and developers in SEZs.
1.19 Most of the Cenvat changes will come into effect from 01.04.2011 except a few that will be effective from 01.03.2011.
C. Addition of Services under section 66A in rule 3

1.20 Service tax leviable under section 66A has been added in the list of eligible credits under rule 3 w.e.f. 18.04.2006 by a retrospective amendment in the Bill. This was already clarified by circular F. NO.345/1/2008-TRU dated 27.06.2008 but has now been done by law to settle the disputes arising due to audit objections. It shall come into force on the enactment of the Finance Bill.]]> 1.1 The changes in Cenvat Credit Rules are guided, inter-alia, by the following considerations:
(a) Describe the scope of eligible inputs and input services more clearly so as to minimize disputes in their interpretations;
(b) Eliminate distortions and areas of tax avoidance arising from differential treatment of goods and services used for similar purposes;
© Provide a practical scheme for the segregation of Cenvat credits used in respect of final products and output services where they are partially exempted with condition that no such credits shall be taken;
(d) Liberalize the provisions in certain areas to meet the legitimate demands of business;
1.2 Details of important changes made in Cenvat Credit Rules, 2004 that impact service tax are given in the following paragraphs.
A. Input

1.3 “Input” has been defined to include, inter-alia, all goods used in a factory by the manufacturer and goods used for providing any output service;
1.4 Goods that shall not constitute input have been specifically excluded. These shall include, besides petroleum items, any goods used for construction of a civil structure (by a manufacturer as well as a service provider) excepting when they are used in the provision of any of the specified construction services. Thus, goods used by a sub-contractor for rendering services of construction to the main contractor shall constitute input.
1.5 Exclusions also cover goods such as food items, goods used in a guesthouse, residential colony, club or a recreational facility or a clinical establishment which are primarily meant for the personal use or consumption of the employees. When any of these goods are used directly in the manufacture of final products or provision of a service they will constitute input.
1.6 Goods which have no relationship whatsoever with the manufacture have also been excluded.
B. Input Service

1.7 The distinction between goods and services is diminishing and many goods can be received as services. Accordingly the definition of “input service” has been aligned with the definition of “input” such that goods that do not constitute “input” do not qualify as “input service”. Thus a service relating to construction of civil structure will not constitute “input service” unless it is provided by a sub-contractor to the main contractor.
1.8 Similarly services relating to motor vehicle i.e. rent-a-cab, use of tangible goods, insurance or repair of vehicle shall not constitute an “input service‟ except in respect of output services where credit on motor vehicle is permitted as “capital goods”.
1.9 On the same lines, a service meant primarily for the personal use or consumption of employees will not constitute an input service. A list of specific services has also been given by way of example in the definition. Most of these services constitute a part of the cost-to-company package of the employee and are provided either free of charge or on concessional basis to company employees.
1.10 Expression “activities relating to business” has been deleted and Business exhibition and legal services added in the list of services.
3. Obligation of manufacturer and provider of services
1.11 Definition of exempted goods shall include such excisable goods as are covered by the notification relating to concessionalduty with the condition that no credit of input and input service shall be availed. This amendment shall come into effect on 01.03.2011.
1.12 Similarly the definition of exempted services shall include taxable services which are partially exempted with the condition that no credit of input and input service shall be availed. Moreover it has been clarified that exempted service will include trading service.
1.13 Option to maintain separate accounts only in respect of inputs (and not together with input services) has also been given so that allocation as per formula given in rule 6(3A) is done only in so far as credits on input services are concerned.
1.14 The amount payable under rule 6(3)(i) in respect of services has been reduced from 6% to 5%. Moreover in the case of exempted services (that are partially taxed with no facility of credits) this amount shall be 5% of the exempted value of the service. Thus if the exemption on a certain service is 60%, the amount required to be paid shall be 3% (60X5%) of the full value of the service. In case of exempt goods, amount payable will be reduced by the amount paid at the concessional rate.
1.15 For the purpose of applying the formula under rule 6(3A) the value of trading service as well as value of services covered by composition schemes has been defined. The value of trading service shall be the difference between the sale price and purchase price of goods. The value in respect of services covered by a composition scheme will be tax amount divided by the rate of service tax applicable under section 66 read with any general exemption. As the prevalent rate is 10% the value shall be ten times the amount of service paid or payable.
1.16 A substantial part of the income of a bank or a life insurance company is from investments or by way of interest in which a number of inputs and input services are used. There have been difficulties in ascertaining the amount of credit flowing into earning these amounts. Thus a banking company or a financial institution, including NBFC, providing banking and financial services are being obligated to pay an amount equal to 50% of the credit availed. In case of services relating to life insurance or management of ULIPs such amount will be equal to 20% of credit availed. Other options of payment of amount under Rule 6 shall not be available for these taxpayers.
1.17 Consequent to the introduction of the proportionate allocation and its rationalization now, Rule 6(5) that allows full credit of 17 specified services has been deleted.
1.18 New sub-rule (6A) has been added to allow provision of services without payment of service tax to a unit in SEZ or to a developer in SEZ for their authorized operations, without requirement of reversal of any CENVAT credit on this account. This will help in tax-free receipt of services by units and developers in SEZs.
1.19 Most of the Cenvat changes will come into effect from 01.04.2011 except a few that will be effective from 01.03.2011.
C. Addition of Services under section 66A in rule 3

1.20 Service tax leviable under section 66A has been added in the list of eligible credits under rule 3 w.e.f. 18.04.2006 by a retrospective amendment in the Bill. This was already clarified by circular F. NO.345/1/2008-TRU dated 27.06.2008 but has now been done by law to settle the disputes arising due to audit objections. It shall come into force on the enactment of the Finance Bill.]]> http://www.cadelhi.com/forums/showthread.php?tid=66 Mon, 28 Feb 2011 09:37:25 -0600 http://www.cadelhi.com/forums/showthread.php?tid=66

Note: (a) “Customs Duty” means the customs duty levied under the Customs Act, 1962.
(b) “CVD” means the Additional Duty of Customs levied under sub-section (1) of section 3 of theCustoms Tariff Act, 1975.
© “SAD” means the Special Additional Duty of Customs levied under sub-section (5) of section 3 ofthe Customs Tariff Act, 1975.
Changes come into effect immediately unless otherwise specified.
Major proposals about customs duties are the following:
A. GENERAL
1. The First Schedule to the Customs Tariff Act, 1975 is being amended vide Clause 57 of the Bill to give effect to the tariff changes relating tothe Union Customs Duties.

2. The basic customs duty rates of 2%, 2.5% and 3% are being unified at the median rate of 2.5%.

B. Proposals involving changes in rates of duty, whether by amendment of tariff rates or by notification

I. FOOD/AGRO PROCESSING/AGRICULTURE:
1) Basic customs duty is being reduced from 5% to 2.5% on specified agriculture machinery namely paddy transplanter, laser land leveler, cotton picker, reaper-cum-binder, straw or fodder balers, sugarcane harvesters and track used for manufacture of track-type combineharvester.

2) Basic customs duty is being reduced from 7.5% to 2.5% on parts and components required for the manufacture of equipment at (1)above.
3) Basic customs duty is being reduced from 7.5% to 5% on micro-irrigation equipment (tariff item 8424 8100).

4) Basic customs duty on raw pistachios is being reduced from 30% to 10%.

5) Basic customs duty on sun-dried dark seedless raisins is being reduced from 100% to 30%.

6) Basic customs duty on cranberry products is being reduced from 30% to 10%.

7) Full exemption from basic customs duty is being extended to de-oiled rice bran oil cake.

8) Export duty of 10% is being imposed on exports of de-oiled rice bran oil cake.

II. AUTOMOBILES:

1) Full exemption from basic customs duty and SAD and concessional CVD @5% (by way of a central excise duty exemption) is beingextended to specified parts of the hybrid vehicles, namely, battery pack, battery chargers, AC/DC electric motors and motorcontrollers. The concession is subject to actual user condition and will be available till 31.03.2013.
2) The customs duty dispensation and concessional CVD @5% at (1) above is also being made available to import of spare battery packsfor the electric vehicles by importers which are registered with the agencies notified for Central Financial Assistance (CFA) scheme ofthe Ministry of Non-conventional & Renewable Energy (MNRE).
3) A definition for “Completely Knocked Down (CKD) unit” of a vehicle including two wheelers, eligible for concessional import duty, isbeing inserted to exclude from its purview such units containing a pre-assembled engine or gearbox or transmission mechanism or achassis where any of such parts or sub-assemblies is installed.

III. SPECIAL ECONOMIC ZONES:

1) All clearances from SEZ into DTA are being exempted from SAD provided they are not exempt from the levy of VAT/ Sales Tax.
2) The CVD exemption currently available to Plastic materials reprocessed in India out of the scrap or the waste of goods falling underspecified chapters is being extended to domestic tariff area clearances of such plastic materials manufactured in SEZ units also.

IV. SHIP REPAIRS:

The benefit of exemption currently available to ship repair units on imports of spares and consumables required for repair of ocean goingvessels is being extended to such spares and consumables for repairs of ocean going vessels by owners of such vessels registered in India.

V. TEXTILES:
1) Basic customs duty is being reduced on raw silk (not thrown) of all grades from 30% to 5%.
2) Cotton waste is being fully exempted from basic customs duty.

3) Basic customs duty on Poly Tetra Methylene Ether Glycol (PTMEG) and Diphenylmethane 4, 4-diisocyanate (MDI) is being reducedfrom 7.5% to 5% subject to actual user condition.

4) Basic customs duty is being reduced from 5% to 2.5% on Acrylonitrile.

5) Basic customs duty is being reduced from 7.5% to 5% on Sodium Polyacrylate.

6) Basic customs duty is being reduced from 10% to 7.5% on Caprolactum.

7) Basic customs duty is being reduced from 10% to 7.5% on Nylon chips, fibre & yarn.

8) Basic customs duty is being reduced from 5% to 2.5% on rayon grade wood pulp.

VI. CAPITAL GOODS/INFRASTRUCTURE:

1) The scope of full customs duty exemption to water supply projects for agricultural and industrial use is being expanded to the waterpumping station and water reservoir of such projects.

2) The benefit of full exemption from basic customs duty and CVD currently available to ‘Tunnel Boring machine’ and parts thereof forhydro-electric power projects is being extended to such machines for highway development projects also.

3) Basic customs duty is being reduced from 7.5% to 5% for specified gems and jewellery machinery.

4) Full exemption from basic customs is being provided to cash dispensers. Parts required for the manufacturer of cash dispensers are alsobeing exempted from basic customs duty on actual user basis.

5) The concessional import duty of 5% basic customs duty, 5% CVD & Nil SAD currently applicable to high-speed printing machinery is being extended to mailroom equipment compatible with such printing machinery imported by registered newspaper establishments.

6) A concessional rate of 5% basic customs duty , 5% CVD & Nil SAD is being extended to parts and components for manufacture of23 specified high voltage transmission equipments.

7) Full exemption from basic customs duty is being extended on bio-based asphalt sealer and preservation agent, millings remover andcrack filler, asphalt remover and corrosion protectant and sprayer system for bio-based asphalt applications.

VII. CONCESSIONS TO ENVIRONMENT-FRIENDLY ITEMS:

1) Concessional CVD @5% (by way of a central excise exemption) and full exemption from SAD is being provided to LEDs used formanufacture of LED lights and light fixtures.

2) Basic customs duty is being reduced from 10% to 5% on solar lantern or lamps.

3) Full exemption from customs duty is being extended to toughened glass and silver paste imported for manufacture of solar cells or solarmodules on actual user basis.

VIII. HEALTH SECTOR:

1) Endovascular stents are being fully exempted from basic customs duty of 5%.

2) A concessional import duty regime of 5% Basic customs duty, 5% CVD & Nil SAD is being prescribed on specified raw material forthe manufacture of syringes, needles, catheters, cannulae on actual user basis.

3) Exemption from SAD is being provided to P&P medicines imported for retail sale.

4) Customs duty on four specified life saving drugs and their bulk drugs is being reduced from 10% to 5% with Nil CVD (by way of exciseduty exemption).

5) Basic customs duty on lactose for use in the manufacture of homoeopathic medicines is being reduced from 25% to 10%.

IX. ELECTRONICS HARDWARE:

1) A concessional import duty structure of 5% CVD and Nil SAD is being prescribed on parts of inkjet and laser-jet printers imported formanufacture of such printers.

2) Full exemption from basic customs duty is being extended to parts/components required for the manufacture of PC connectivity cableand sub-parts of parts & components of battery charger, hands-free head phones and PC connectivity cable of mobile handsets includingcellular phones.

3) Full exemption from SAD presently available upto 31.03.2011 on parts, components and accessories for manufacture of mobilehandsets including cellular phones is being extended upto 31.03.2012.

4) Full exemption from customs duty is being extended to additional specified capital goods and raw materials for the manufacture ofelectronic hardware.
5) A concessional import duty structure of 5% CVD and Nil SAD is being prescribed on parts for manufacture of DVD writers, Combodrives and CD Drives subject to actual user condition.

X AIRCRAFTS:

1) A basic customs duty of 2.5% is being imposed on imports of aircrafts for non-scheduled operations. The exemption from additionalduty of customs (CVD) and special additional duty of customs (SAD) would continue.

2) Exemption from education cess and secondary and higher education cess presently available to aircrafts is being withdrawn.

XI. EXPORT PROMOTION:

1) The list of specified goods, allowed to be imported duty free for use in the manufacture of leather goods, for export is being expanded.

2) The list of specified goods, allowed to be imported duty free for use in the manufacture of textile and leather garments, is beingexpanded by including anti-theft devices like labels, tags and sensors therein.

3) Description of some items is being changed in the list of items that are allowed to be imported duty free for manufacture of textile orleather garments and other leather goods for export.

4) Benefit of duty free import on trimmings, embellishments, components etc. for manufacture of leather goods, footwear and textilegarments is being extended to merchant exporters subject to certain conditions.

5) Specified tools used in the handicrafts sector are being included in the list of specified goods, allowed to be imported duty free toHandicrafts exporters.

6) Full exemption from basic customs duty is being extended to fin fish feed.

7) Basic customs duty on vannamei broodstock is being reduced from 30% to 10%.

8) Basic customs duty on bamboo used for manufacture of agarbattis is being reduced from 30% to 10%.

XII. PAPER:

Basic customs duty on waste paper is being reduced from 5% to 2.5%.

XIII. METALS:

1) Full exemption from basic customs duty is being extended to stainless steel scrap.

2) Basic customs duty on ferro-nickel is being reduced from 5% to 2.5%

3) Statutory rate of export duty on iron ores is being increased from 20% to 30% while unifying the effective rate of export duty on ironore fines and lumps at 20%.

4) Iron ore pellets are being fully exempted from the export duty.

5) Copper dross, copper residues, copper oxide mill scale, brass dross and zinc ash are being exempted from levy of SAD.

6) Basic customs duty on vanadium pentoxide and vanadium sludge is being reduced from 7.5% to 2.5%.

7) Exemption from basic customs duty is being provided on the value of gold and silver contained in the copper concentrate.

XIV. PRECIOUS METALS:

An import duty of Nil basic customs duty, CVD of Rs.140 per 10 gram and Nil SAD is being prescribed for gold dore bars of upto 80%gold purity imported for refining and manufacturing serially numbered gold bars in India.

XV. MISCELLANEOUS:

1) Basic customs duty is being reduced from 5% to 2.5% on carbon black feed stock.

2) Basic customs duty is being reduced from 5% to 2.5% on petroleum coke.

3) Basic customs duty is being reduced from 5% to 2.5% on mineral gypsum.

4) Crude palm stearin is being fully exempted from basic customs duty for use in the manufacture of laundry soap on actual user basis.

5) At present specified categories of works of art and antiquities are exempted from customs duty. The scope of the exemption is beingexpanded by including,—

(a) works or arts or antiquities for exhibition or display in private art galleries or similar premises that are open to general public;
(b) works of art created by an Indian artist abroad, irrespective of the fact whether such works are imported along with the artist or thesculptor on their return to India.

6) Special provision is being made in the Finance Bill imposing definitive safeguard duty retrospectively on imports of caustic soda lyeimported into India during the period 04.12.2009 to 03.03.2010

7) Special provision is being made in the Finance Bill to retrospectively provide a concessional basic customs duty of 30% to fresh garlic imported by National Consumer Cooperative Federation and Madhya Pradesh State Cooperative Marketing Federation under importlicenses issued by the Central Government and cleared after 15.1.2003.

8) Certain notifications are being amended retrospectively to allow exports made under the EPCG scheme to simultaneously avail of benefitsunder Export Reward Schemes such as Served From India Scheme, Focus Market Scheme etc.

[The changes at S. No. 6, 7 and 8 will come into effect on enactment of the Finance Bill]

XVI. AMENDMENTS IN CUSTOMS ACT, 1962:

1) Section 2 is being amended to include ‘self-assessment’ within the definition of ‘assessment’.

2) Section 17 is being amended to replace the existing system of assesment with ‘self-assessment’ of duty on imported and export goods by the importer or exporter. The revised provisions empower customs officers to verify the self assessment and if required, reassess duty onthe imported or export goods. It is being further provided that the officers may conduct audit in certain situations either in their own office orat the premises of the importer or exporter.

3) Section 18 is being amended to make the provisions relating to provisional assessment of duty applicable in case an importer orexporter is unable to make self-assessment with the proposed scheme of ‘self-assessment’.

4) Section 19 is being amended to align the provisions relating to determination of duty where goods consist of articles liable to differentrates of duty with the proposed scheme of ‘self-assessment’ under section 17.

5) Sub-section (1) of section 27 is being substituted so as to enhance the time limit for claiming refund of duty and interest from six monthsto one year. This will bring uniformity for both demanding duty and claiming refund.

6) Section 28 is being substituted so as to make the provisions more coherent and clear as also to harmonize the demand period in normalcases to one year.

7) Section 28AA and 28AB are being substituted with a revised section 28AA so as to make the provisions relating to interest more coherentand clear.

8) Section 46 is being amended to provide that an entry of imported goods shall be presented electronically and to empower theCommissioner of Customs to allow filing of entry in any other manner when it is infeasible to present electronically.

9) Section 50 is being amended to provide that an entry of export goods shall be presented electronically and to empower theCommissioner of Customs to allow filing of entry in any other manner when it is infeasible to present electronically.

10) Section 75 is being amended to enable the Central Government to prescribe circumstances under which drawback would not bedisallowed even though the export remittances are not received within the period specified in the Foreign Exchange Management Act.

11) Section 110A is being amended to empower the adjudicating authority to allow release of seized goods.

12) Section 124 is being amended to provide for issuance of a show cause notice with prior approval of an officer not below the rank of anAssistant Commissioner of Customs.

13) Section 131D is being inserted retrospectively with effect from 20.10.2010 to empower the Board to issue instructions relating to non-filing of appeal in certain cases in line with National Litigation Policy.

14) A new section 142A is being inserted so as to create first charge on the property of the defaulter for recovery of the customs dues fromsuch defaulter subject to provisions of section 529A of the Companies Act, the Recovery of Debt due to Bank and Financial Institution Act, 1993 and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

15) Section 150 is being amended so as to provide that the balance of sale proceeds of unclaimed cargo sold in auction shall be paid to theGovernment when it cannot be paid to the owner within six months,

16) Section 151A is being amended so as to empower the Board to also issue instructions to customs authorities on any other matters under the Customs Act or any other Act for the time being in force so far as they relate to prohibition, restrictions or procedure relating to importor export of goods.

17) Section 157 is being amended to empower the Board to prescribe regulations for specifying the manner of conducting audit at the officeof the proper officer of customs or at the premises of the importer.

[These legislative changes will come into effect on enactment of the Finance Bill]
XVII. AMENDMENTS IN CUSTOMS TARIFF ACT, 1975:

1) Section 3 is being amended to substitute the reference to Standards of Weight & Measures Act, 1976 with Legal
Metrology Act, 2009 with effect from 1.3.2011.

2) Section 9AA is being amended so as to enable the Central Government to reduce the anti-dumping duty imposed under the provisionsof sub-section (1) of section 9A on an article or an importer where such importer proves to the satisfaction of the Central Government thathe has paid anti-dumping duty in excess of his actual margin of dumping.

3) Customs Tariff (Identification, Assessment and Collection of Anti Dumping duty on Dumped Articles and for Determination of Injury) Rules, 1995 is being amended so as to revise provisions of rule 23 so as to align the same with Article 11 of the WTO Agreement on antidumping and also to insert Annexure-III containing principles to determine the non-injurious price.

[These legislative changes will come into effect on enactment of the Finance Bill]

XVIII. AMENDMENTS IN THE SCHEDULES TO THE CUSTOMS TARIFF ACT, 1975:

1) The First Schedule is being amended to include editorial changes in the Harmonized System of Nomenclature (HSN)
in certain chapters, which would be effective from 01.01.2012.

2) Description of heading 9804 in the First Schedule is being amended to cover all dutiable items intended for personal use, imported bypost or air and to prescribe a tariff rate of 35% for tariff items under the heading.

3) The Second Schedule is being amended so as to align the entries with the Harmonized System of Nomenclature (HSN) and introduce anew entry for de-oiled rice bran cake. The effective rates of export duty on all items other than iron ores lumps, fines and pellets; and de-oiled rice bran cake are being maintained.

[These legislative changes at (1) will come into effect on enactment of the Finance Bill]


II. CUSTOMS

Rate structure:
8. There is no change in the peak rate of basic customs duty of 10%. The existing rates of 2%, 2.5% and 3% are being fused into a singlerate of 2.5%. Consequently, all items that hitherto attracted basic customs duty of 2% or 3% would now be chargeable to 2.5%.

Aircraft:
9.1 Full exemption from import duty (basic, CVD and special CVD) was hitherto available to import of aircraft by non-scheduled operatorswhether for passenger services or chartered services. This exemption was subjected to certain conditions including the condition that the aircraftshould be used exclusively for charter or passenger services. The exemption from basic customs duty has been withdrawn on such imports and abasic duty of 2.5% has been imposed. The exemptions from CVD and special CVD have been retained. The conditions of theexemption have also been amended so as to allow the aircraft to be used interchangeably between passenger and charter services inconsonance with the Civil Aviation Requirements.

9.2 Exemption from education cess and secondary and higher education cess presently available to aircrafts is being withdrawn.

IT Software
10. With effect from 21.12.2010 packaged or canned software falling under chapter 85 has been notified under section 4A of the CentralExcise Act.Accordingly, the value of such software for the purposes of charging CVD is required to be determined on the basis of the retail saleprice (RSP) affixed on the package under the Standards of Weights and Measures Act, 1976. It has been represented by the trade that in certainsituations packaged software is not required to bear the RSP when imported and difficulties are being experienced in the assessment of such software to CVD. In order to resolve the issue, packaged software which is not required to bear RSP is being exempted from so much of theadditional duty of customs as is equivalent to the duty payable on the portion of the value which represents the consideration paid or payable for transfer of the right of its use. Such software would therefore be required to pay CVD only on that portion of value representing the value of themedium on which it is recorded alongwith freight and insurance.The exemption is subject to the fulfillment of certain conditions.A parallelexemption is also being provided from central excise duty in respect of IT software manufactured domestically.

Postal Imports:
11. Description of heading 9804 in the First Schedule is being amended to cover all dutiable items intended for personal use, imported by post orair and to prescribe a tariff rate of 35% for tariff items under the heading. However, the effective rate of duty for goods imported for personaluse by post or air is being maintained at 10% in respect of imports which are exempted from any prohibition under the Foreign Trade (Developmentand Regulation) Act, 1992 through a notification. This would obviate the need for resorting to merit assessment of goods when they are imported by this mode and the value exceeds the limits prescribed under the FT(D & R) Act. Fourth Schedule of the and clause 57 (a)(i) of the Finance Bill, 2011 may be seen.

Export Duty:

12.1 The Second Schedule to the Customs Tariff Act is being recast so as to align the entries with the Harmonized System of Nomenclature(HSN) and introduce a new entry for de-oiled rice bran cake. Clause 57(b) read with the Sixth Schedule of the Finance Bill, 2011 may be referred to. The effective rates of export duty on all items other than iron ores lumps, fines and pellets; and de-oiled rice bran cake are being maintainedthrough notification no. 27/2011-Customs dated 1st March, 2011.

12.2 The export duty on iron ore lumps and fines has been enhanced from 15% and 5% respectively to a uniform rate of 20%. Fullexemption from export duty has been provided to iron ore pellets.

12.3 Export duty has been imposed at the rate of 10% on de-oiled rice bran cake with immediate effect.

Relief Measures:
13.1 Exemptions/ concessions have been provided to a number of items with a view to remove anomalies in the duty structure and enable domesticvalue addition/ production. The details of these changes are available in the relevant notifications as well as the Explanatory Notes. These may kindlybe referred to.

13.2 Full exemption from import duty is available to works of art imported for exhibition in a public museum or national institution. The scope of this exemption is being expanded to include imports made for exhibition of works of art in private galleries that allow unrestricted access to general public, subject to the fulfillment of certain conditions.

13.3 In order to resolve ongoing disputes, certain clarificatory amendments have been made in exemption notifications/entries. Specifications havebeen prescribed for coking coal which is fully exempt from customs duty under S. No. 68 of notification No. 21/2002 dated 1st March, 2002 so that it may be distinguished from non-coking coal which attracts a duty of 5%. Similarly, an Explanation has been added to the entry at S.Nos 344 and 345 of the same notification to define a „Completely Knocked Down‟ (CKD) unit of a vehicle to exclude a unit containing a pre-assembled engine, gearbox or transmission mechanism as well as a body assembly on which a sub-assembly of assembled engine, gearbox ortransmission mechanism is installed. The Explanation to Notification No. 14/2004–Customs dated 8Th January,2004 has been amended toclarify that a water supply project includes water pumping station and water storage facility. A similar amendment has been carried out in entry26A of Notification No. 42/1996- Customs dated the 23rd July, 1997.

13.4 As a trade facilitation measure, it has been decided to reduce the security amount to be tendered at the time of registration of a contractunder Project Import Regulations to 2% of the contract value with a ceiling of Rs.1 crore to be taken in the form of bank guarantee. It has also beendecided that the bank guarantee would not be required to be renewed if the finalization is not completed within six months of the submission of thenecessary documentation by the importer. Instructions contained in letter of even file number dated 1st March, 2011 may kindly be seen.


Legislative Amendments:

14.1 One of the highlights of the provisions of the Finance Bill, 2011 is the introduction of self-assessment in the Customs Act, 1962 both forimported goods and export goods.This would replace the existing legal requirement of assessment of every bill of entry or shipping bill by theCustoms Officer. As you are aware, after the implementation of EDI and risk management system, the practice in most customs formations hasbeen to carry out assessment on selected bills of entry based on risk parameters and to allow the balance to be facilitated. While aligning the legal provisions with the current practice, the proposed amendments would move the Customs administration further along the path of trust basedcompliance management. They would provide a basis for progressive reduction in the levels of Customs interdiction in clearance of import/exportcargo leading to significant enhancement in facilitation for compliant trade. This would release resources for more incisive verification and audit of consignments that involve a high degree of risk enabling the department to strike an optimal balance between the concerns of tradefacilitation on the one hand and enforcement on the other. For this purpose, the important amendments proposed in the provisions of the Customs Act are as under:

(i) The definition of assessment in section 2 is being amended to include „self-assessment‟.
(ii) Section 17 which deals with assessment of duty has been recast to provide legal backing for self-assessment by the importer or exporter.Ithas also been provided that the customs officer may verify the assessment and have the goods tested or examined for this purpose. Anobligation is also being cast on the importer or exporter to furnish any documents or information that may be required for such verification.Where it is found that the self-assessment is not in order, the customs officer is required to reassess the bill of entry and to issue a speakingorder for the same unless the importer agrees with the reassessment. Barring cases where a speaking order is issued on reassessment,powers have also been assigned to customs officers to conduct audit either in their own office or at the premises of importer or exporter.
(iii) Consequential amendments are being proposed in section 18 relating to provisional assessment. It is being provided that the importermay make a request for assessment of goods by the officer when he is not in a position to self-assess. The provisions of section 19 are alsobeing amended to prescribe that the finalization of provisional assessment may be carried out by the proper officer.Other consequentialamendments include amendments in section 46 and 50 to make the electronic filing of bills of entry/shipping bills the norm. Power is also being conferred on the Commissioner of Customs to permit filing in any other manner when electronic filing is infeasible. Section 157 isbeing amended to empower the Board to issue regulations for specifying the manner of conducting audit.
These provisions would come into effect on the date of enactment of Finance Bill, 2011. They may be examined carefully andsuggestions/comments, if any, in this regard may be sent to the Board.

14.2 Sub-section (1) of section 27 is being substituted so as to enhance the time limit for claiming refund of duty and interest from six monthsto one year for all categories of importers. This would unify the provisions with regard to raising of demands and claiming of refund.

14.3 As in the case of Central Excise, Section 28 is being substituted so as to make the provisions relating to recovery of duty not levied orshort levied or erroneously refunded more coherent and clear. There is no change in the content of this provision.

14.4 Section 28AA and 28AB are being substituted with a revised section 28AA so as to make the provisions relating to interest more coherentand clear. It is being provided that interest would be payable from the first day of the month succeeding the month in which the duty ought to havebeen paid or erroneously refunded. Pending enactment of the Finance Bill, 2011, notifications revising the rate of interest to 18% per annum hasbeen issued under the existing provisions.

14.5 Section 110A is being amended to empower the adjudicating authority to allow release of seized goods instead of Commissioner of Customs.

14.6 Section 124 is being amended so as to provide for issuance of a show cause notice with prior approval of an officer not below the rank ofan Assistant Commissioner of Customs as against Deputy Commissioner presently.

14.7 Section 131D is being inserted to empower the Board to issue instructions relating to non-filing of appeal in certain cases in line withNational Litigation Policy retrospectively with effect from 20.10.2010.

14.8 A new section 142A is being inserted so as to create first charge on the property of the defaulter for recovery of the customs dues fromsuch defaulter subject to the provisions of section 529A of the Companies Act, the Recovery of Debt due to Bank and Financial Institution Act, 1993 and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

14.9 Section 150 is being amended so as to provide that the balance of sale proceeds of unclaimed cargo sold in auction shall be paid tothe Government if they cannot be paid to the owner within six months.

14.10 Special provision is being made vide clause 54 of the Finance Bill, 2011 read with the Third Schedule to retrospectively provide aconcessional basic customs duty of 30% to fresh garlic imported by National Consumer Cooperative Federation and Madhya Pradesh State Cooperative Marketing Federation under import licenses issued by the Central Government and cleared after 15.1.2003. This provision would come into force on the date of enactment of the Finance Bill, 2011. Pending cases of these importers pertaining to the period mentioned above may beidentified and disposed off accordingly.

14.11 Special provision is being made vide clause 58 of the Finance Bill, 2011 read with the Seventh Schedule to impose definitive safeguardduty retrospectively on imports of caustic soda lye imported into India during the period from 04.12.2009 to 03.03.2010. This would validate the imposition of provisional safeguard duty on this product during the same period. This provision would come into force on the enactment of theFinance Bill.

14.12 Notification Nos.92/2004-Customs dated 10th September, 2004, 41/2005-Customs dated 9th May, 2004, 90/2006-Customs dated 1st September, 2006, 64/2008-Customs dated 9th May, 2008 and 136/2008-Customs dated 24th December, 2008 have been retrospectively amended(in the case of first four w.e.f. 1st April, 2008; and the remaining ones from the date of their issuance). Clause 53 read with Second Schedule of theFinance Bill refers. The implication of these amendments is that benefit of reward schemes such as the Served from India Scheme, Focus MarketScheme, Focus Product Scheme etc. would be available towards fulfillment of export obligation under EPCG Scheme. This would also come into forceon the enactment of the Finance Bill.

14.13 Notification No.16/2011-Customs (N.T) dated 1st March, 2011 has been issued under section 11 of the Customs Act to restrictimports of acetate tow and filter rods except when they are used for manufacture of filter rods and filter cigarettes respectively.



15. Amendments in the Customs Tariff Act, 1975:

a. Section 3 is being amended to substitute the reference to Standards of Weight & Measures Act, 1976 with Legal Metrology Act,2009 with effect from 1.3.2011 as has been repealed by the latter. This change would be effective from the date of enactment of the FinanceBill, 2011.
b. The First Schedule is being amended to include editorial changes in the Harmonized System of Nomenclature (HSN) in certain chapters, which would be effective from 01.01.2012.

These provisions would come into effect on the date of enactment of Finance Bill, 2011]]>

Note: (a) “Customs Duty” means the customs duty levied under the Customs Act, 1962.
(b) “CVD” means the Additional Duty of Customs levied under sub-section (1) of section 3 of theCustoms Tariff Act, 1975.
© “SAD” means the Special Additional Duty of Customs levied under sub-section (5) of section 3 ofthe Customs Tariff Act, 1975.
Changes come into effect immediately unless otherwise specified.
Major proposals about customs duties are the following:
A. GENERAL
1. The First Schedule to the Customs Tariff Act, 1975 is being amended vide Clause 57 of the Bill to give effect to the tariff changes relating tothe Union Customs Duties.

2. The basic customs duty rates of 2%, 2.5% and 3% are being unified at the median rate of 2.5%.

B. Proposals involving changes in rates of duty, whether by amendment of tariff rates or by notification

I. FOOD/AGRO PROCESSING/AGRICULTURE:
1) Basic customs duty is being reduced from 5% to 2.5% on specified agriculture machinery namely paddy transplanter, laser land leveler, cotton picker, reaper-cum-binder, straw or fodder balers, sugarcane harvesters and track used for manufacture of track-type combineharvester.

2) Basic customs duty is being reduced from 7.5% to 2.5% on parts and components required for the manufacture of equipment at (1)above.
3) Basic customs duty is being reduced from 7.5% to 5% on micro-irrigation equipment (tariff item 8424 8100).

4) Basic customs duty on raw pistachios is being reduced from 30% to 10%.

5) Basic customs duty on sun-dried dark seedless raisins is being reduced from 100% to 30%.

6) Basic customs duty on cranberry products is being reduced from 30% to 10%.

7) Full exemption from basic customs duty is being extended to de-oiled rice bran oil cake.

8) Export duty of 10% is being imposed on exports of de-oiled rice bran oil cake.

II. AUTOMOBILES:

1) Full exemption from basic customs duty and SAD and concessional CVD @5% (by way of a central excise duty exemption) is beingextended to specified parts of the hybrid vehicles, namely, battery pack, battery chargers, AC/DC electric motors and motorcontrollers. The concession is subject to actual user condition and will be available till 31.03.2013.
2) The customs duty dispensation and concessional CVD @5% at (1) above is also being made available to import of spare battery packsfor the electric vehicles by importers which are registered with the agencies notified for Central Financial Assistance (CFA) scheme ofthe Ministry of Non-conventional & Renewable Energy (MNRE).
3) A definition for “Completely Knocked Down (CKD) unit” of a vehicle including two wheelers, eligible for concessional import duty, isbeing inserted to exclude from its purview such units containing a pre-assembled engine or gearbox or transmission mechanism or achassis where any of such parts or sub-assemblies is installed.

III. SPECIAL ECONOMIC ZONES:

1) All clearances from SEZ into DTA are being exempted from SAD provided they are not exempt from the levy of VAT/ Sales Tax.
2) The CVD exemption currently available to Plastic materials reprocessed in India out of the scrap or the waste of goods falling underspecified chapters is being extended to domestic tariff area clearances of such plastic materials manufactured in SEZ units also.

IV. SHIP REPAIRS:

The benefit of exemption currently available to ship repair units on imports of spares and consumables required for repair of ocean goingvessels is being extended to such spares and consumables for repairs of ocean going vessels by owners of such vessels registered in India.

V. TEXTILES:
1) Basic customs duty is being reduced on raw silk (not thrown) of all grades from 30% to 5%.
2) Cotton waste is being fully exempted from basic customs duty.

3) Basic customs duty on Poly Tetra Methylene Ether Glycol (PTMEG) and Diphenylmethane 4, 4-diisocyanate (MDI) is being reducedfrom 7.5% to 5% subject to actual user condition.

4) Basic customs duty is being reduced from 5% to 2.5% on Acrylonitrile.

5) Basic customs duty is being reduced from 7.5% to 5% on Sodium Polyacrylate.

6) Basic customs duty is being reduced from 10% to 7.5% on Caprolactum.

7) Basic customs duty is being reduced from 10% to 7.5% on Nylon chips, fibre & yarn.

8) Basic customs duty is being reduced from 5% to 2.5% on rayon grade wood pulp.

VI. CAPITAL GOODS/INFRASTRUCTURE:

1) The scope of full customs duty exemption to water supply projects for agricultural and industrial use is being expanded to the waterpumping station and water reservoir of such projects.

2) The benefit of full exemption from basic customs duty and CVD currently available to ‘Tunnel Boring machine’ and parts thereof forhydro-electric power projects is being extended to such machines for highway development projects also.

3) Basic customs duty is being reduced from 7.5% to 5% for specified gems and jewellery machinery.

4) Full exemption from basic customs is being provided to cash dispensers. Parts required for the manufacturer of cash dispensers are alsobeing exempted from basic customs duty on actual user basis.

5) The concessional import duty of 5% basic customs duty, 5% CVD & Nil SAD currently applicable to high-speed printing machinery is being extended to mailroom equipment compatible with such printing machinery imported by registered newspaper establishments.

6) A concessional rate of 5% basic customs duty , 5% CVD & Nil SAD is being extended to parts and components for manufacture of23 specified high voltage transmission equipments.

7) Full exemption from basic customs duty is being extended on bio-based asphalt sealer and preservation agent, millings remover andcrack filler, asphalt remover and corrosion protectant and sprayer system for bio-based asphalt applications.

VII. CONCESSIONS TO ENVIRONMENT-FRIENDLY ITEMS:

1) Concessional CVD @5% (by way of a central excise exemption) and full exemption from SAD is being provided to LEDs used formanufacture of LED lights and light fixtures.

2) Basic customs duty is being reduced from 10% to 5% on solar lantern or lamps.

3) Full exemption from customs duty is being extended to toughened glass and silver paste imported for manufacture of solar cells or solarmodules on actual user basis.

VIII. HEALTH SECTOR:

1) Endovascular stents are being fully exempted from basic customs duty of 5%.

2) A concessional import duty regime of 5% Basic customs duty, 5% CVD & Nil SAD is being prescribed on specified raw material forthe manufacture of syringes, needles, catheters, cannulae on actual user basis.

3) Exemption from SAD is being provided to P&P medicines imported for retail sale.

4) Customs duty on four specified life saving drugs and their bulk drugs is being reduced from 10% to 5% with Nil CVD (by way of exciseduty exemption).

5) Basic customs duty on lactose for use in the manufacture of homoeopathic medicines is being reduced from 25% to 10%.

IX. ELECTRONICS HARDWARE:

1) A concessional import duty structure of 5% CVD and Nil SAD is being prescribed on parts of inkjet and laser-jet printers imported formanufacture of such printers.

2) Full exemption from basic customs duty is being extended to parts/components required for the manufacture of PC connectivity cableand sub-parts of parts & components of battery charger, hands-free head phones and PC connectivity cable of mobile handsets includingcellular phones.

3) Full exemption from SAD presently available upto 31.03.2011 on parts, components and accessories for manufacture of mobilehandsets including cellular phones is being extended upto 31.03.2012.

4) Full exemption from customs duty is being extended to additional specified capital goods and raw materials for the manufacture ofelectronic hardware.
5) A concessional import duty structure of 5% CVD and Nil SAD is being prescribed on parts for manufacture of DVD writers, Combodrives and CD Drives subject to actual user condition.

X AIRCRAFTS:

1) A basic customs duty of 2.5% is being imposed on imports of aircrafts for non-scheduled operations. The exemption from additionalduty of customs (CVD) and special additional duty of customs (SAD) would continue.

2) Exemption from education cess and secondary and higher education cess presently available to aircrafts is being withdrawn.

XI. EXPORT PROMOTION:

1) The list of specified goods, allowed to be imported duty free for use in the manufacture of leather goods, for export is being expanded.

2) The list of specified goods, allowed to be imported duty free for use in the manufacture of textile and leather garments, is beingexpanded by including anti-theft devices like labels, tags and sensors therein.

3) Description of some items is being changed in the list of items that are allowed to be imported duty free for manufacture of textile orleather garments and other leather goods for export.

4) Benefit of duty free import on trimmings, embellishments, components etc. for manufacture of leather goods, footwear and textilegarments is being extended to merchant exporters subject to certain conditions.

5) Specified tools used in the handicrafts sector are being included in the list of specified goods, allowed to be imported duty free toHandicrafts exporters.

6) Full exemption from basic customs duty is being extended to fin fish feed.

7) Basic customs duty on vannamei broodstock is being reduced from 30% to 10%.

8) Basic customs duty on bamboo used for manufacture of agarbattis is being reduced from 30% to 10%.

XII. PAPER:

Basic customs duty on waste paper is being reduced from 5% to 2.5%.

XIII. METALS:

1) Full exemption from basic customs duty is being extended to stainless steel scrap.

2) Basic customs duty on ferro-nickel is being reduced from 5% to 2.5%

3) Statutory rate of export duty on iron ores is being increased from 20% to 30% while unifying the effective rate of export duty on ironore fines and lumps at 20%.

4) Iron ore pellets are being fully exempted from the export duty.

5) Copper dross, copper residues, copper oxide mill scale, brass dross and zinc ash are being exempted from levy of SAD.

6) Basic customs duty on vanadium pentoxide and vanadium sludge is being reduced from 7.5% to 2.5%.

7) Exemption from basic customs duty is being provided on the value of gold and silver contained in the copper concentrate.

XIV. PRECIOUS METALS:

An import duty of Nil basic customs duty, CVD of Rs.140 per 10 gram and Nil SAD is being prescribed for gold dore bars of upto 80%gold purity imported for refining and manufacturing serially numbered gold bars in India.

XV. MISCELLANEOUS:

1) Basic customs duty is being reduced from 5% to 2.5% on carbon black feed stock.

2) Basic customs duty is being reduced from 5% to 2.5% on petroleum coke.

3) Basic customs duty is being reduced from 5% to 2.5% on mineral gypsum.

4) Crude palm stearin is being fully exempted from basic customs duty for use in the manufacture of laundry soap on actual user basis.

5) At present specified categories of works of art and antiquities are exempted from customs duty. The scope of the exemption is beingexpanded by including,—

(a) works or arts or antiquities for exhibition or display in private art galleries or similar premises that are open to general public;
(b) works of art created by an Indian artist abroad, irrespective of the fact whether such works are imported along with the artist or thesculptor on their return to India.

6) Special provision is being made in the Finance Bill imposing definitive safeguard duty retrospectively on imports of caustic soda lyeimported into India during the period 04.12.2009 to 03.03.2010

7) Special provision is being made in the Finance Bill to retrospectively provide a concessional basic customs duty of 30% to fresh garlic imported by National Consumer Cooperative Federation and Madhya Pradesh State Cooperative Marketing Federation under importlicenses issued by the Central Government and cleared after 15.1.2003.

8) Certain notifications are being amended retrospectively to allow exports made under the EPCG scheme to simultaneously avail of benefitsunder Export Reward Schemes such as Served From India Scheme, Focus Market Scheme etc.

[The changes at S. No. 6, 7 and 8 will come into effect on enactment of the Finance Bill]

XVI. AMENDMENTS IN CUSTOMS ACT, 1962:

1) Section 2 is being amended to include ‘self-assessment’ within the definition of ‘assessment’.

2) Section 17 is being amended to replace the existing system of assesment with ‘self-assessment’ of duty on imported and export goods by the importer or exporter. The revised provisions empower customs officers to verify the self assessment and if required, reassess duty onthe imported or export goods. It is being further provided that the officers may conduct audit in certain situations either in their own office orat the premises of the importer or exporter.

3) Section 18 is being amended to make the provisions relating to provisional assessment of duty applicable in case an importer orexporter is unable to make self-assessment with the proposed scheme of ‘self-assessment’.

4) Section 19 is being amended to align the provisions relating to determination of duty where goods consist of articles liable to differentrates of duty with the proposed scheme of ‘self-assessment’ under section 17.

5) Sub-section (1) of section 27 is being substituted so as to enhance the time limit for claiming refund of duty and interest from six monthsto one year. This will bring uniformity for both demanding duty and claiming refund.

6) Section 28 is being substituted so as to make the provisions more coherent and clear as also to harmonize the demand period in normalcases to one year.

7) Section 28AA and 28AB are being substituted with a revised section 28AA so as to make the provisions relating to interest more coherentand clear.

8) Section 46 is being amended to provide that an entry of imported goods shall be presented electronically and to empower theCommissioner of Customs to allow filing of entry in any other manner when it is infeasible to present electronically.

9) Section 50 is being amended to provide that an entry of export goods shall be presented electronically and to empower theCommissioner of Customs to allow filing of entry in any other manner when it is infeasible to present electronically.

10) Section 75 is being amended to enable the Central Government to prescribe circumstances under which drawback would not bedisallowed even though the export remittances are not received within the period specified in the Foreign Exchange Management Act.

11) Section 110A is being amended to empower the adjudicating authority to allow release of seized goods.

12) Section 124 is being amended to provide for issuance of a show cause notice with prior approval of an officer not below the rank of anAssistant Commissioner of Customs.

13) Section 131D is being inserted retrospectively with effect from 20.10.2010 to empower the Board to issue instructions relating to non-filing of appeal in certain cases in line with National Litigation Policy.

14) A new section 142A is being inserted so as to create first charge on the property of the defaulter for recovery of the customs dues fromsuch defaulter subject to provisions of section 529A of the Companies Act, the Recovery of Debt due to Bank and Financial Institution Act, 1993 and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

15) Section 150 is being amended so as to provide that the balance of sale proceeds of unclaimed cargo sold in auction shall be paid to theGovernment when it cannot be paid to the owner within six months,

16) Section 151A is being amended so as to empower the Board to also issue instructions to customs authorities on any other matters under the Customs Act or any other Act for the time being in force so far as they relate to prohibition, restrictions or procedure relating to importor export of goods.

17) Section 157 is being amended to empower the Board to prescribe regulations for specifying the manner of conducting audit at the officeof the proper officer of customs or at the premises of the importer.

[These legislative changes will come into effect on enactment of the Finance Bill]
XVII. AMENDMENTS IN CUSTOMS TARIFF ACT, 1975:

1) Section 3 is being amended to substitute the reference to Standards of Weight & Measures Act, 1976 with Legal
Metrology Act, 2009 with effect from 1.3.2011.

2) Section 9AA is being amended so as to enable the Central Government to reduce the anti-dumping duty imposed under the provisionsof sub-section (1) of section 9A on an article or an importer where such importer proves to the satisfaction of the Central Government thathe has paid anti-dumping duty in excess of his actual margin of dumping.

3) Customs Tariff (Identification, Assessment and Collection of Anti Dumping duty on Dumped Articles and for Determination of Injury) Rules, 1995 is being amended so as to revise provisions of rule 23 so as to align the same with Article 11 of the WTO Agreement on antidumping and also to insert Annexure-III containing principles to determine the non-injurious price.

[These legislative changes will come into effect on enactment of the Finance Bill]

XVIII. AMENDMENTS IN THE SCHEDULES TO THE CUSTOMS TARIFF ACT, 1975:

1) The First Schedule is being amended to include editorial changes in the Harmonized System of Nomenclature (HSN)
in certain chapters, which would be effective from 01.01.2012.

2) Description of heading 9804 in the First Schedule is being amended to cover all dutiable items intended for personal use, imported bypost or air and to prescribe a tariff rate of 35% for tariff items under the heading.

3) The Second Schedule is being amended so as to align the entries with the Harmonized System of Nomenclature (HSN) and introduce anew entry for de-oiled rice bran cake. The effective rates of export duty on all items other than iron ores lumps, fines and pellets; and de-oiled rice bran cake are being maintained.

[These legislative changes at (1) will come into effect on enactment of the Finance Bill]


II. CUSTOMS

Rate structure:
8. There is no change in the peak rate of basic customs duty of 10%. The existing rates of 2%, 2.5% and 3% are being fused into a singlerate of 2.5%. Consequently, all items that hitherto attracted basic customs duty of 2% or 3% would now be chargeable to 2.5%.

Aircraft:
9.1 Full exemption from import duty (basic, CVD and special CVD) was hitherto available to import of aircraft by non-scheduled operatorswhether for passenger services or chartered services. This exemption was subjected to certain conditions including the condition that the aircraftshould be used exclusively for charter or passenger services. The exemption from basic customs duty has been withdrawn on such imports and abasic duty of 2.5% has been imposed. The exemptions from CVD and special CVD have been retained. The conditions of theexemption have also been amended so as to allow the aircraft to be used interchangeably between passenger and charter services inconsonance with the Civil Aviation Requirements.

9.2 Exemption from education cess and secondary and higher education cess presently available to aircrafts is being withdrawn.

IT Software
10. With effect from 21.12.2010 packaged or canned software falling under chapter 85 has been notified under section 4A of the CentralExcise Act.Accordingly, the value of such software for the purposes of charging CVD is required to be determined on the basis of the retail saleprice (RSP) affixed on the package under the Standards of Weights and Measures Act, 1976. It has been represented by the trade that in certainsituations packaged software is not required to bear the RSP when imported and difficulties are being experienced in the assessment of such software to CVD. In order to resolve the issue, packaged software which is not required to bear RSP is being exempted from so much of theadditional duty of customs as is equivalent to the duty payable on the portion of the value which represents the consideration paid or payable for transfer of the right of its use. Such software would therefore be required to pay CVD only on that portion of value representing the value of themedium on which it is recorded alongwith freight and insurance.The exemption is subject to the fulfillment of certain conditions.A parallelexemption is also being provided from central excise duty in respect of IT software manufactured domestically.

Postal Imports:
11. Description of heading 9804 in the First Schedule is being amended to cover all dutiable items intended for personal use, imported by post orair and to prescribe a tariff rate of 35% for tariff items under the heading. However, the effective rate of duty for goods imported for personaluse by post or air is being maintained at 10% in respect of imports which are exempted from any prohibition under the Foreign Trade (Developmentand Regulation) Act, 1992 through a notification. This would obviate the need for resorting to merit assessment of goods when they are imported by this mode and the value exceeds the limits prescribed under the FT(D & R) Act. Fourth Schedule of the and clause 57 (a)(i) of the Finance Bill, 2011 may be seen.

Export Duty:

12.1 The Second Schedule to the Customs Tariff Act is being recast so as to align the entries with the Harmonized System of Nomenclature(HSN) and introduce a new entry for de-oiled rice bran cake. Clause 57(b) read with the Sixth Schedule of the Finance Bill, 2011 may be referred to. The effective rates of export duty on all items other than iron ores lumps, fines and pellets; and de-oiled rice bran cake are being maintainedthrough notification no. 27/2011-Customs dated 1st March, 2011.

12.2 The export duty on iron ore lumps and fines has been enhanced from 15% and 5% respectively to a uniform rate of 20%. Fullexemption from export duty has been provided to iron ore pellets.

12.3 Export duty has been imposed at the rate of 10% on de-oiled rice bran cake with immediate effect.

Relief Measures:
13.1 Exemptions/ concessions have been provided to a number of items with a view to remove anomalies in the duty structure and enable domesticvalue addition/ production. The details of these changes are available in the relevant notifications as well as the Explanatory Notes. These may kindlybe referred to.

13.2 Full exemption from import duty is available to works of art imported for exhibition in a public museum or national institution. The scope of this exemption is being expanded to include imports made for exhibition of works of art in private galleries that allow unrestricted access to general public, subject to the fulfillment of certain conditions.

13.3 In order to resolve ongoing disputes, certain clarificatory amendments have been made in exemption notifications/entries. Specifications havebeen prescribed for coking coal which is fully exempt from customs duty under S. No. 68 of notification No. 21/2002 dated 1st March, 2002 so that it may be distinguished from non-coking coal which attracts a duty of 5%. Similarly, an Explanation has been added to the entry at S.Nos 344 and 345 of the same notification to define a „Completely Knocked Down‟ (CKD) unit of a vehicle to exclude a unit containing a pre-assembled engine, gearbox or transmission mechanism as well as a body assembly on which a sub-assembly of assembled engine, gearbox ortransmission mechanism is installed. The Explanation to Notification No. 14/2004–Customs dated 8Th January,2004 has been amended toclarify that a water supply project includes water pumping station and water storage facility. A similar amendment has been carried out in entry26A of Notification No. 42/1996- Customs dated the 23rd July, 1997.

13.4 As a trade facilitation measure, it has been decided to reduce the security amount to be tendered at the time of registration of a contractunder Project Import Regulations to 2% of the contract value with a ceiling of Rs.1 crore to be taken in the form of bank guarantee. It has also beendecided that the bank guarantee would not be required to be renewed if the finalization is not completed within six months of the submission of thenecessary documentation by the importer. Instructions contained in letter of even file number dated 1st March, 2011 may kindly be seen.


Legislative Amendments:

14.1 One of the highlights of the provisions of the Finance Bill, 2011 is the introduction of self-assessment in the Customs Act, 1962 both forimported goods and export goods.This would replace the existing legal requirement of assessment of every bill of entry or shipping bill by theCustoms Officer. As you are aware, after the implementation of EDI and risk management system, the practice in most customs formations hasbeen to carry out assessment on selected bills of entry based on risk parameters and to allow the balance to be facilitated. While aligning the legal provisions with the current practice, the proposed amendments would move the Customs administration further along the path of trust basedcompliance management. They would provide a basis for progressive reduction in the levels of Customs interdiction in clearance of import/exportcargo leading to significant enhancement in facilitation for compliant trade. This would release resources for more incisive verification and audit of consignments that involve a high degree of risk enabling the department to strike an optimal balance between the concerns of tradefacilitation on the one hand and enforcement on the other. For this purpose, the important amendments proposed in the provisions of the Customs Act are as under:

(i) The definition of assessment in section 2 is being amended to include „self-assessment‟.
(ii) Section 17 which deals with assessment of duty has been recast to provide legal backing for self-assessment by the importer or exporter.Ithas also been provided that the customs officer may verify the assessment and have the goods tested or examined for this purpose. Anobligation is also being cast on the importer or exporter to furnish any documents or information that may be required for such verification.Where it is found that the self-assessment is not in order, the customs officer is required to reassess the bill of entry and to issue a speakingorder for the same unless the importer agrees with the reassessment. Barring cases where a speaking order is issued on reassessment,powers have also been assigned to customs officers to conduct audit either in their own office or at the premises of importer or exporter.
(iii) Consequential amendments are being proposed in section 18 relating to provisional assessment. It is being provided that the importermay make a request for assessment of goods by the officer when he is not in a position to self-assess. The provisions of section 19 are alsobeing amended to prescribe that the finalization of provisional assessment may be carried out by the proper officer.Other consequentialamendments include amendments in section 46 and 50 to make the electronic filing of bills of entry/shipping bills the norm. Power is also being conferred on the Commissioner of Customs to permit filing in any other manner when electronic filing is infeasible. Section 157 isbeing amended to empower the Board to issue regulations for specifying the manner of conducting audit.
These provisions would come into effect on the date of enactment of Finance Bill, 2011. They may be examined carefully andsuggestions/comments, if any, in this regard may be sent to the Board.

14.2 Sub-section (1) of section 27 is being substituted so as to enhance the time limit for claiming refund of duty and interest from six monthsto one year for all categories of importers. This would unify the provisions with regard to raising of demands and claiming of refund.

14.3 As in the case of Central Excise, Section 28 is being substituted so as to make the provisions relating to recovery of duty not levied orshort levied or erroneously refunded more coherent and clear. There is no change in the content of this provision.

14.4 Section 28AA and 28AB are being substituted with a revised section 28AA so as to make the provisions relating to interest more coherentand clear. It is being provided that interest would be payable from the first day of the month succeeding the month in which the duty ought to havebeen paid or erroneously refunded. Pending enactment of the Finance Bill, 2011, notifications revising the rate of interest to 18% per annum hasbeen issued under the existing provisions.

14.5 Section 110A is being amended to empower the adjudicating authority to allow release of seized goods instead of Commissioner of Customs.

14.6 Section 124 is being amended so as to provide for issuance of a show cause notice with prior approval of an officer not below the rank ofan Assistant Commissioner of Customs as against Deputy Commissioner presently.

14.7 Section 131D is being inserted to empower the Board to issue instructions relating to non-filing of appeal in certain cases in line withNational Litigation Policy retrospectively with effect from 20.10.2010.

14.8 A new section 142A is being inserted so as to create first charge on the property of the defaulter for recovery of the customs dues fromsuch defaulter subject to the provisions of section 529A of the Companies Act, the Recovery of Debt due to Bank and Financial Institution Act, 1993 and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

14.9 Section 150 is being amended so as to provide that the balance of sale proceeds of unclaimed cargo sold in auction shall be paid tothe Government if they cannot be paid to the owner within six months.

14.10 Special provision is being made vide clause 54 of the Finance Bill, 2011 read with the Third Schedule to retrospectively provide aconcessional basic customs duty of 30% to fresh garlic imported by National Consumer Cooperative Federation and Madhya Pradesh State Cooperative Marketing Federation under import licenses issued by the Central Government and cleared after 15.1.2003. This provision would come into force on the date of enactment of the Finance Bill, 2011. Pending cases of these importers pertaining to the period mentioned above may beidentified and disposed off accordingly.

14.11 Special provision is being made vide clause 58 of the Finance Bill, 2011 read with the Seventh Schedule to impose definitive safeguardduty retrospectively on imports of caustic soda lye imported into India during the period from 04.12.2009 to 03.03.2010. This would validate the imposition of provisional safeguard duty on this product during the same period. This provision would come into force on the enactment of theFinance Bill.

14.12 Notification Nos.92/2004-Customs dated 10th September, 2004, 41/2005-Customs dated 9th May, 2004, 90/2006-Customs dated 1st September, 2006, 64/2008-Customs dated 9th May, 2008 and 136/2008-Customs dated 24th December, 2008 have been retrospectively amended(in the case of first four w.e.f. 1st April, 2008; and the remaining ones from the date of their issuance). Clause 53 read with Second Schedule of theFinance Bill refers. The implication of these amendments is that benefit of reward schemes such as the Served from India Scheme, Focus MarketScheme, Focus Product Scheme etc. would be available towards fulfillment of export obligation under EPCG Scheme. This would also come into forceon the enactment of the Finance Bill.

14.13 Notification No.16/2011-Customs (N.T) dated 1st March, 2011 has been issued under section 11 of the Customs Act to restrictimports of acetate tow and filter rods except when they are used for manufacture of filter rods and filter cigarettes respectively.



15. Amendments in the Customs Tariff Act, 1975:

a. Section 3 is being amended to substitute the reference to Standards of Weight & Measures Act, 1976 with Legal Metrology Act,2009 with effect from 1.3.2011 as has been repealed by the latter. This change would be effective from the date of enactment of the FinanceBill, 2011.
b. The First Schedule is being amended to include editorial changes in the Harmonized System of Nomenclature (HSN) in certain chapters, which would be effective from 01.01.2012.

These provisions would come into effect on the date of enactment of Finance Bill, 2011]]> http://www.cadelhi.com/forums/showthread.php?tid=65 Mon, 28 Feb 2011 09:35:21 -0600 http://www.cadelhi.com/forums/showthread.php?tid=65

New Tax Rates

In respect of income of all categories of assessees liable to tax for the assessment year 2011-12, the rates of income-tax have been specified inPart I of the First Schedule to the Bill. These are the same as those laid down in Part III of the First Schedule to the Finance Act, 2010, for thepurposes of computation of “advance tax”, deduction of tax at source from “Salaries” and charging of tax payable in certain cases.
(1) Surcharge on income-tax—
Surcharge shall be levied in respect of income liable to tax for the assessment year 2011-12, in the following cases:—
(a) in the case of a domestic company having total income exceeding one crore rupees, the amount of income-tax computed shall be increased bya surcharge for the purposes of the Union calculated at the rate of seven and one-half per cent. of such income-tax.
(b) in the case of a company, other than a domestic company, having total income exceeding one crore rupees, the amount of income-tax computed shall be increased by a surcharge for the purposes of the Union calculated at the rate of two and one-half per cent. of such income-tax.
Surcharge shall also be levied in the case of every company having total income chargeable to tax under section 115JB of the Income-tax Act,1961 (hereinafter referred to as ‘Income-tax Act’) .
However, marginal relief shall be allowed in all these cases to ensure that the additional amount of income-tax payable, including surcharge, on the excess of income over one crore rupees is limited to the amount by which the income is more than one crore rupees.
(2) Education Cess —
For assessment year 2011-12, additional surcharge called the “Education Cess on income-tax” and “Secondary and Higher Education Cess onincome-tax” shall continue to be levied at the rate of two per cent. and one per cent., respectively, on the amount of tax computed, inclusive ofsurcharge, in all cases. No marginal relief shall be available in respect of such Cess.
II. Rates for deduction of income-tax at source during the financial year 2011-12 from certain incomes other than “Salaries”
The rates for deduction of income-tax at source during the financial year 2011-12 from certain incomes other than “Salaries” have been specifiedin Part II of the First Schedule to the Bill. The rates for all the categories of persons will remain the same as those specified in Part II of the FirstSchedule to the Finance Act, 2010 for the purposes of deduction of income-tax at source during the financial year 2010-11. However, in case of interest income paid to a non-resident by a notified infrastructure debt fund, the rates for deduction have now been provided in the proposed newsection 194LB.
(1) Surcharge—
The amount of tax so deducted, in the case of a company other than a domestic company, shall be increased by a surcharge at the rate of twoper cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crorerupees.
No surcharge will be levied on deductions in other cases.
(2) Education Cess—
“Education Cess on income-tax” and “Secondary and Higher Education Cess on income-tax” shall continue to be levied at the rate of two percent. and one per cent. respectively , of income-tax including surcharge wherever applicable, in the cases of persons not resident in India includingcompanies other than domestic company.
III. Rates for deduction of income-tax at source from “Salaries”, computation of “advance tax” and charging of income- tax in special cases during the financial year 2011-12
The rates for deduction of income-tax at source from “Salaries” during the financial year 2011-12 and also for computation of “advance tax”payable during the said year in the case of all categories of assessees have been specified in Part III of the First Schedule to the Bill.
These rates are also applicable for charging income-tax during the financial year 2011-12 on current incomes in cases where accelerated assessments have to be made, for instance, provisional assessment of shipping profits arising in India to non-residents, assessment of personsleaving India for good during the financial year, assessment of persons who are likely to transfer property to avoid tax, assessment of bodies formedfor a short duration, etc.
The salient features of the rates specified in the said Part III are indicated in the following paragraphs—
A. Individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person
Paragraph A of Part-III of First Schedule to the Bill provides following rates of income-tax:-
(i) The rates of income-tax in the case of every individual (other than those mentioned in (ii), (iii) and (iv) below) or Hindu undivided family or every association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) ofclause (31) of section 2 of the Income-tax Act (not being a case to which any other Paragraph of Part III applies) are as under :—
Upto Rs. 1,80,000 Nil.
Rs. 1,80,001 to Rs. 5,00,000 10 per cent.
Rs. 5,00,001 to Rs. 8,00,000 20 per cent.
Above Rs. 8,00,000 30 per cent.
(ii) In the case of every individual, being a woman resident in India, and below the age of sixty years at any time during the previous year,—
Upto Rs. 1,90,000 Nil.
Rs. 1,90,001 to Rs. 5,00,000 10 per cent.
Rs.5,00,001 to Rs. 8,00,000 20 per cent.
Above Rs. 8,00,000 30 per cent.
(iii) In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time duringthe previous year,—
Upto Rs. 2,50,000 Nil.
Rs. 2,50,001 to Rs. 5,00,000 10 per cent.
Rs. 5,00,001 to Rs.8,00,000 20 per cent.
Above Rs. 8,00,000 30 per cent.
(iv) in the case of every individual, being a resident in India, who is of the age of eighty years or more at anytime during the previous year, -
Upto Rs. 5,00,000 Nil.
Rs. 50,00,001 to Rs. 8,00,000 20 per cent.
Above Rs. 8,00,000 30 per cent.
No surcharge will be levied in the cases of persons covered under paragraph-A of part-III of the First Schedule.
B. Co-operative Societies
In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Bill.These rates will continue to be the same as those specified for assessment year 2011-12. No surcharge will be levied .
C. Firms
In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule to the Bill. This rate will continueto be the same as that specified for assessment year 2011-12. No surcharge will be levied .
D. Local authorities
The rate of income-tax in the case of every local authority is specified in Paragraph D of Part III of the First Schedule to the Bill. This rate willcontinue to be the same as that specified for the assessment year 2011-12. No surcharge will be levied.
E. Companies
The rates of income-tax in the case of companies are specified in Paragraph E of Part III of the First Schedule to the Bill. These rates are thesame as those specified for the assessment year 2011-12.
The existing surcharge of seven and one-half per cent. on a domestic company is proposed to be reduced to five per cent. In case of companies other than domestic companies, the existing surcharge of two and one-half per cent. is proposed to be reduced to two per cent.
However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
The existing surcharge of seven and one-half per cent. in all other cases (including sections 115JB, 115-O, 115R, etc.) is proposed to bereduced to five per cent.
For financial year 2011-12, additional surcharge called the “Education Cess on income-tax” and “Secondary and Higher Education Cess onincome-tax” shall continue to be levied at the rate of two per cent. and one per cent. respectively, on the amount of tax computed, inclusive of surcharge,in all cases. No marginal relief shall be available in respect of such Cess.



Minimum Alternate Tax

Under the existing provisions of section 115JB(1), a company is required to pay a minimum alternate tax (MAT) on its book profit, if the income-tax payable on the total income, as computed under the Act in respect of any previous year relevant to the assessment year commencing on or after 1stApril, 2011, is less than the MAT. The amount of tax paid under the said section is allowed to be carried forward and set off against tax payable up to the tenth assessment year immediately succeeding the assessment year in which the tax credit becomes allowable under the provisions of section 115JAA.
It is proposed to amend this section to increase the rate of MAT to eighteen and one-half per cent. from the existing rate of eighteen per cent. of suchbook profit.
This amendment will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 and subsequent years.


LLPs: Alternate Minimum Tax for Limited Liability Partnership (LLP)

The Limited Liability Partnership Act, 2008 (LLP) has come into effect in 2009. The LLP has features of both a body corporate as well as a traditional partnership. The Income-tax Act provides for the same taxation regime for a limited liability partnership as is applicable to a partnership firm.It also provides tax neutrality (subject to fulfilment of certain conditions) to conversion of a private limited company or an unlisted public company intoan LLP.
An LLP being treated as a firm for taxation, has the following tax advantages over a company under the Income-tax Act:-
i) it is not subject to Minimum Alternate Tax;
ii) it is not subject to Dividend Distribution Tax (DDT); and
iii) it is not subject to surcharge.
In order to preserve the tax base vis-à-vis profit-linked deductions, it is proposed to insert a new Chapter XII-BA in the Income-tax Actcontaining special provisions relating to certain limited liability partnerships.
Under the proposed amendment, where the regular income-tax payable for a previous year by a limited liability partnership is less than thealternate minimum tax payable for such previous year, the adjusted total income shall be deemed to be the total income of such limited liability partnership and it shall be liable to pay income-tax on such total income at the rate of eighteen and one-half per cent..
For the purpose of the above,
(i) “adjusted total income” shall be the total income before giving effect to this newly inserted Chapter XII-BA as increased by the deductionsclaimed under any section included in Chapter VI-A under the heading “C – Deductions in respect of certain incomes” and deductionclaimed under section 10AA;
(ii) “alternate minimum tax” shall be the amount of tax computed on adjusted total income at a rate of eighteen and one-half per cent; and
(iii) “regular income-tax” shall be the income-tax payable for a previous year by a limited liability partnership on its total income in accordancewith the provisions of the Act other than the provisions of this newly inserted Chapter XII-BA.
It is further provided that the credit for tax (tax credit) paid by a limited liability partnership under this newly inserted Chapter XII-BA shall beallowed to the extent of the excess of the alternate minimum tax paid over the regular income-tax. This tax credit shall be allowed to be carried forward up to the tenth assessment year immediately succeeding the assessment year for which such credit becomes allowable. It shall be allowed to be set offfor an assessment year in which the regular income-tax exceeds the alternate minimum tax to the extent of the excess of the regular income-tax over thealternate minimum tax.
This amendment is proposed to take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 andsubsequent years.


Tax Incentives: Tax benefits for New Pension System (NPS)

Section 80CCD of the Income-tax Act provides, inter alia, a deduction in respect of contributions made by an employee as well as an employerto the New Pension System (NPS) account on behalf of the employee. In view of the provisions of section 80CCE, the aggregate deduction undersections 80C, 80CCC and 80CCD cannot exceed one lakh rupees. The allowable deduction under section 80CCD includes both the employee’s aswell the employer’s contribution to the NPS.
It is proposed to amend section 80CCE so as to provide that the contribution made by the Central Government or any other employer to a pension scheme under section 80CCD(2) shall be excluded from the limit of one lakh rupees provided under section 80CCE.
Currently, the contribution made by an employer towards a recognised provident fund, an approved superannuation fund or an approved gratuity fund is allowable as a deduction from business income under section 36, subject to certain limits. However, the contribution made by an employer to theNPS is not allowed as a deduction.
It is, therefore, proposed to amend section 36 so as to provide that any sum paid by the assessee as an employer by way of contribution towards a pension scheme, as referred to in section 80CCD(2) on account of an employee to the extent it does not exceed ten per cent. of the salary of theemployee in the previous year, shall be allowed as deduction in computing the income under the head “Profits and gains of business or profession”.
These amendments are proposed to take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 andsubsequent years.

Tax incentives: Extension of sunset clause for tax holiday for power sector

Under the existing provisions of section 80-IA(4)(iv) of the Income-tax Act, a deduction of profits and gains is allowed to an undertaking which,—
(a) is set up for the generation and distribution of power if it begins to generate power at any time during the period beginning on 1st April, 1993and ending on 31st March, 2011;
(b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on 1st April, 1999 and ending on 31st March, 2011;
© undertakes substantial renovation and modernisation of existing network of transmission or distribution lines at any time during the periodbeginning on 1st April, 2004 and ending on 31st March, 2011.
It is proposed to amend section 80-IA(4)(iv) to extend the terminal date for a further period of one year, i.e., upto 31st March, 2012.
This amendment will take effect from 1st April, 2012 and will, accordingly, apply in relation to assessment year 2012-13 and subsequent years.

Tax Incentives : Sunset of tax holiday for certain undertakings engaged in commercial production of mineral oil

Under the existing provisions of section 80-IB(9) of the Income-tax Act, a seven-year profit-linked deduction of hundred per cent. is available to anundertaking, if it fulfils any of the following, namely:-
(i) is located in North-Eastern Region and has begun or begins commercial production of mineral oil before 1st April, 1997;
(ii) is located in any part of India and has begun or begins commercial production of mineral oil on or after 1st April, 1997;
(iii) is engaged in refining of mineral oil and begins such refining on or after 1st October, 1998 but not later than 31st March, 2012;
(iv) is engaged in commercial production of natural gas in blocks licensed under the VIII Round of bidding for award of exploration contracts (NELP-VIII) under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 and begins commercial production of natural gas on or after 1st April, 2009;
(v) is engaged in commercial production of natural gas in blocks licensed under the IV Round of bidding for award of exploration contracts forCoal Bed Methane blocks and begins commercial production of natural gas on or after 1st April, 2009.
For the purposes of claiming this deduction, all blocks licensed under a single contract, which has been awarded under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 or inpursuance of any law for the time being in force or by the Central or a State Government in any other manner, are treated as a single “undertaking”.
Thus, an undertaking, which is located in any part of India and is engaged in commercial production of mineral oil, is eligible for the above-mentioned deduction, if it has begun or begins commercial production of mineral oil at any time after 1st April, 1997. No sunset date has beenprovided for such business.
It is proposed that the aforesaid deduction available for commercial production of mineral oil will not be available for blocks licensed under acontract awarded after 31st March, 2011 under the New Exploration Licencing Policy announced by the Government of India vide ResolutionNo. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 or in pursuance of any law for the time being in force or by the Central or a StateGovernment in any other manner.
This amendment will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 andsubsequent years.

Taxation of Trusts :Definition of “charitable purpose”

For the purposes of the Income-tax Act, “charitable purpose” has been defined in section 2(15) which, among others, includes “the advancement ofany other object of general public utility”. However, “the advancement of any other object of general public utility” is not a charitable purpose, if itinvolves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity and receipts from such activities is ten lakh rupees or more in the previous year.
It is proposed to amend section 2(15) to enhance the current monetary limit in respect of receipts from such activities from ten lakhs rupees totwenty-five lakhs rupees.
This amendment is proposed to take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 andsubsequent years.


Special Economic Zones: Provisions relating to Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) in case of SpecialEconomic Zones

Under the existing provisions of section 10AA of the Income-tax Act, a deduction of hundred per cent. is allowed in respect of profits and gains derived by a unit located in a Special Economic Zone (SEZ) from the export of articles or things or services for the first five consecutiveassessment years; of fifty per cent. for further five assessment years; and thereafter, of fifty per cent. of the ploughed back export profit for the next five years.
Further, under section 80-IAB of the Income-tax Act, a deduction of hundred per cent. is allowed in respect of profits and gains derived by anundertaking from the business of development of an SEZ notified on or after 1st April, 2005 from the total income for any ten consecutive assessmentyears out of fifteen years beginning from the year in which the SEZ is notified by the Central Government.
Under the existing provisions of section 115JB(6), an exemption is allowed from payment of minimum alternate tax (MAT) on book profit inrespect of the income accrued or arising on or after 1st April, 2005 from any business carried on, or services rendered, by an entrepreneur or aDeveloper, in a Unit or Special Economic Zone (SEZ), as the case may be.
Further, under the existing provisions of section 115-O(6), an exemption is allowed from payment of tax on distributed profits [Dividend Distribution Tax (DDT)] in respect of the total income of an undertaking or enterprise engaged in developing or developing and operating or developing, operating and maintaining a Special Economic Zone for any assessment year on any amount declared, distributed or paid by such Developer or enterprise, by way of dividends (whether interim or otherwise) on or after 1st April, 2005 out of its current income. Such distributedincome is also exempt from tax under section 10(34) of the Act.
The above provisions were inserted in the Income-tax Act by the Special Economic Zones Act, 2005 (SEZ Act) with effect from 10th February, 2006.
Currently, there is no sunset date provided for exemption from MAT in the case of a developer of an SEZ or a unit located in an SEZ.Similarly, there is no sunset date for exemption from DDT in the case of a developer of an SEZ.
It is proposed to sunset the availability of exemption from minimum alternate tax in the case of SEZ Developers and units in SEZs in theIncome-tax Act as well as the SEZ Act.
This amendment to section 115JB of the Income-tax Act will take effect from 1st April, 2012 and will, accordingly, apply in relation to theassessment year 2012-13 and subsequent years.
It is further proposed to discontinue the availability of exemption from dividend distribution tax in the case of SEZ Developers under theIncome-tax Act as well as the SEZ Act for dividends declared, distributed or paid on or after 1st June, 2011.
This amendment to section 115-O of the Income-tax Act will take effect from 1st June, 2011.
It is also proposed to make consequential amendments by omitting Explanation to section 10(34) of the Income-tax Act. This amendment tosection 10 will take effect from 1st June, 2011.
Consequential amendments have also been proposed in the Second Schedule of the SEZ Act by omitting clause © of paragraph (a) [w.e.f.01.06.2011], paragraph (h) [w.e.f. 01.04.2012] and paragraph (i) [w.e.f. 01.06.2011] of the Second Schedule.

cientific Research Expenses: Weighted deduction for contribution made for approved scientific research programme

Under the existing provisions of section 35(2AA) of the Income-tax Act, weighted deduction to the extent of 175 per cent. is allowed for any sum paid to a National Laboratory or a university or an Indian Institute of Technology (IIT) or a specified person for the purpose of an approved scientificresearch programme.
In order to encourage more contributions to such approved scientific research programmes, it is proposed to increase this weighted deductionfrom 175 per cent. to 200 per cent.
This amendment is proposed to take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 andsubsequent years.

Section 35AD: Deductions: Investment linked deduction in respect of specified businesses

Under the existing provisions of section 35AD of the Income-tax Act, investment-linked tax incentive is provided by way of allowing hundred per cent. deduction in respect of any expenditure of capital nature (other than on land, goodwill and financial instrument) incurred wholly and exclusively, for the purposes of the “specified business”. Currently, the following specified businesses are eligible for availing investment-linkeddeduction under section 35AD(8)©:-
(i) setting up and operating a cold chain facility;
(ii) setting up and operating a warehousing facility for storage of agricultural produce;
(iii) laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilitiesbeing an integral part of such network;
(iv) building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government;
(v) building and operating, anywhere in India, a new hospital with at least one hundred beds for patients;
(vi) developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Governmentor a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed.
It is proposed to include two new businesses as “specified business”, i.e.,-
(a) developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed; and
(b) production of fertiliser in India.
The dates of commencement of the “specified business” as an eligibility condition are detailed in section 35AD(5). It is proposed that the date ofcommencement of operations in the case of the two “specified businesses” of affordable housing projects and production of fertilizer in a new plant or ina newly installed capacity in an existing plant shall be on or after 1st April, 2011.
These amendments will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 andsubsequent years.
Under section 73A, any loss of a “specified business” (under section 35AD) is allowed set-off against profit and gains of any other “specifiedbusiness”. In order to remove any ambiguity in this regard in respect of the business of hotels and hospitals, it is proposed to remove the word “new”from the definition of “specified business” in the case of hotels and hospitals under section 35AD(8)©. With this, the loss of an assessee on account ofa “specified business” claiming deduction under section 35AD would be allowed to be set off against the profit of another “specified business” under section 73A, whether or not the latter is eligible for deduction under section 35AD. Therefore, an assessee who currently operates a hospital or a hotel would be able to set off the profits of such business against the losses, if any, of a new hospital or new hotel which begins to operate after 1st April,2010 and which is eligible for deduction of expenditure under section 35AD.
This amendment will take effect retrospectively from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12and subsequent years.

Assessment: Extension of time limit for assessments in case of exchange of information

Section 153 of the Income-tax Act provides for the time limits for completion of assessments and reassessments. In Explanation 1 to section153 of the Income-tax Act, certain periods specified therein are to be excluded while computing the period of limitation for completion of assessmentsand reassessments.
It is proposed to exclude the time taken in obtaining information from the tax authorities in jurisdictions situated outside India, under an agreementreferred to in section 90 or section 90A, from the statutory time limit prescribed for completion of assessment or reassessment.
Accordingly, it is proposed to insert a new clause (viii) in Explanation 1 to section 153. It provides that the period commencing from the date onwhich a reference for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and endingwith the date on which the information so requested is received by the Commissioner, or a period of six months, whichever is less, shall be excluded.
Similar amendments are proposed to be made to section 153B of the Income-tax Act.
These amendments will take effect from 1st June, 2011.

Settlement Commission Modification in the conditions for filing an application before the Settlement Commission

The existing provisions contained in the proviso to section 245C(1) allow an application to be made before the Settlement
Commission if,—
(i) the proceedings have been initiated against the applicant under section 153A or under section 153C as a result of search or a requisition ofbooks of account, as the case may be, and the additional amount of income-tax payable on the income disclosed in the application exceedsfifty lakh rupees;
(ii) in other cases, if the additional amount of income-tax payable on the income disclosed in the application exceeds ten lakh rupees.
It is proposed to expand the criteria for filing an application for settlement by a tax payer in whose case proceedings have been initiated as a resultof search or requisition of books of account.
It is, therefore, proposed to insert a new clause (ia) in the proviso to section 245C(1). This stipulates that an application can also be made,where the applicant—
(a) is related to the person [referred to in (i) above] in whose case proceedings have been initiated as a result of search and who has filed anapplication; and
(b) is a person in whose case proceedings have also been initiated as a result of search,
the additional amount of income-tax payable on the income disclosed in his application exceeds ten lakh rupees.
As a consequence, a tax payer who is the subject matter of a search would be allowed to file an application for settlement if additional income-tax payable on the income disclosed in the application exceeds fifty lakh rupees. Entities related to such a tax payer, who are also the subject matter of search, would now be allowed to file an application for settlement, if additional income-tax payable in their application exceeds ten lakh rupees.
The relationship between the person who makes an application under clause (ia) of the proviso to section 245C(1) and the person mentioned inclause (i) of the proviso is defined by inserting an Explanation in the section.
This amendment will take effect from 1st June, 2011.


Settlement Commission Power of the Settlement Commission to rectify its orders

The existing provisions of section 245D(4) of the Income-tax Act provide that the Settlement Commission may pass an order, as it thinks fit, onthe matters covered by the applications received by it, after giving an opportunity of being heard to the applicant and to the Commissioner. Further, undersection 245F(1), the Settlement Commission has been conferred all the powers which are vested in an income-tax authority under the Act. An income-tax authority has the power (under section 154) to amend any order passed by it for the purpose of rectifying any mistake apparent from the record.
It is proposed to insert a new sub-section (6B) in section 245D so as to specifically provide that the Settlement Commission may, at any time within a period of six months from the date of its order, with a view to rectifying any mistake apparent from the record, amend any order passed by itunder section 245D(4).
It is further provided that a rectification which has the effect of modifying the liability of the applicant shall not be made unless the Settlement Commission has given notice to the applicant and the Commissioner of its intention to do so and has allowed the applicant and the Commissioner anopportunity of being heard.
Consequential amendments on similar lines are proposed to be made to section 22D of the Wealth Tax Act.
These amendments will take effect from 1st June, 2011.


Mutual Fund Rationalisation of Tax on Income distributed to unit holders

Under the existing provisions contained in section 115R(2) of the Income-tax Act, a Mutual Fund is liable to pay additional income-tax on the amount ofincome distributed to its unit holders.
It is proposed to levy additional income-tax at a higher rate of 30 per cent. on income distributed by debt funds to a person other than an individual orHUF.
It is therefore proposed to amend section 115R(2) to provide that the Mutual Fund shall be liable to pay additional income-tax on such distributedincome at the rate of –
(a) 25 per cent. if the recipient is an individual or HUF in case of distribution by a money market mutual fund or a liquid fund;
(b) 30 per cent. if the recipient is any other person in case of distribution by a money market mutual fund or a liquid fund;
© 12.5 per cent. if the recipient is an individual or HUF in case of distribution by a debt fund other than a money market mutual fund or a liquidfund; and
(d) 30 per cent. if the recipient is any other person in case of distribution by debt fund other than a money market mutual fund or a liquid fund.
There will be no change in the rate of income-tax in case of distribution to any individual or HUF. Distribution of income by an equity-oriented fund shallcontinue to be exempt from tax.
This amendment is proposed to take effect from 1st June, 2011.


Other Exemptions:Infrastructure Debt Fund

In order to augment long-term, low cost funds from abroad for the infrastructure sector, it is proposed to facilitate setting up of dedicated debtfunds.
Section 10 of the Income-tax Act excludes certain incomes from the ambit of total income. It is proposed to amend section 10 of the Income-taxAct so as to provide enabling power to the Central Government to notify any infrastructure debt fund which is set up in accordance with the prescribedguidelines. Once notified, the income of such debt fund would be exempt from tax. It will, however, be required to file a return of income.
It is also proposed to amend section 115A of the Income-tax Act to provide that any interest received by a non-resident from such notifiedinfrastructure debt fund shall be taxable at the rate of five per cent. on the gross amount of such interest income.
It is further proposed to insert a new section 194LB to provide that tax shall be deducted at the rate of five per cent. by such notifiedinfrastructure debt fund on any interest paid by it to a non-resident.
These amendments are proposed to take effect from 1st June 2011.


Other Exemptions:Exemption : of certain perquisites of Chairmen and Members of Union Public Service Commission

The existing provisions of the Income-tax Act provide for the taxation of any perquisites or allowances received by an employee under the head"Salaries" unless it is specifically exempt under the Act.
Currently, specified perquisites of the Chief Election Commissioner or Election Commissioner and the judges of the Supreme Court are exempt from taxation consequent to the enabling provisions in the respective Acts governing their service conditions. It is proposed to amend section 10 to extend similar benefit of exemption in respect of specific perquisites and allowances, which will be notified by the Central Government, received by bothserving as well as retired Chairmen and Members of the Union Public Service Commission.
This amendment is proposed to take effect retrospectively from 1st April, 2008 and will accordingly apply in relation to the assessment year2008-09 and subsequent years.

Other Exemptions: Exemption of specified income of notified body or authority or trust or board or commission

It is proposed to insert a new clause in section 10 of the Income-tax Act to provide exemption from income-tax to any specified income of a body, authority, board, trust or commission which is set up or constituted by a Central, State or Provincial Act or constituted by the Central Governmentor a State Government with the object of regulating or administering an activity for the benefit of the general public, provided-
(i) it is not engaged in any commercial activity, and
(ii) is notified by the Central Government in this behalf.
The nature and extent of income to be exempted will also be specified by the Central Government while notifying such entity.
A consequential amendment is proposed in section 139 of the Act to provide for filing of the return of income by such notified entity.
These amendments are proposed to take effect from 1st June 2011.


DIN: Omission of the requirement of quoting of Document Identification Number

Under the existing provisions contained in section 282B of the Income-tax Act, every income-tax authority shall, on or after the 1st day of July,2011, allot a computer-generated Document Identification Number in respect of every notice, order, letter or any correspondence issued by him to any other income-tax authority or assessee or any other person and such number shall be quoted thereon.
Considering the practical difficulties due to non-availability of requisite infrastructure on an all India basis, it is proposed to omit the aforesaidsection.
This amendment will take effect retrospectively from 1st April, 2011.

EPFO: Recognition to Provident Funds – Extension of time limit for obtaining exemption from Employees Provident Fund Organisation (EPFO)

Rule 4 in Part A of the Fourth Schedule to the Income-tax Act provides for conditions which are required to be satisfied by a Provident Fund forreceiving or retaining recognition under the Income-tax Act. One of the requirements of rule 4 [clause (ea)] is that the establishment shall obtain exemption under section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act).
Rule 3 in Part A of the Fourth Schedule provides that the Chief Commissioner or the Commissioner of Income-tax may accord recognition to anyprovident fund which, in his opinion, satisfies the conditions specified under the said rule 4 and the conditions which the Board may specify by rules.
The first proviso to sub-rule (1) of rule 3, inter alia, specifies that in a case where recognition has been accorded to any provident fund on or before 31st March, 2006, and such provident fund does not satisfy the conditions set out in clause (ea) of rule 4 on or before 31st December, 2010 andany other conditions which the Board may specify by rules in this behalf, the recognition to such fund shall be withdrawn.
In order to provide further time to the Employees’ Provident Fund Organization (EPFO) to process the applications made by establishments seeking exemption under section 17 of the EPF & MP Act, it is proposed to amend the aforesaid proviso so as to extend the time limit from 31st December, 2010 to 31st March, 2012.
This amendment will take effect retrospectively from 1st January, 2011.]]>

New Tax Rates

In respect of income of all categories of assessees liable to tax for the assessment year 2011-12, the rates of income-tax have been specified inPart I of the First Schedule to the Bill. These are the same as those laid down in Part III of the First Schedule to the Finance Act, 2010, for thepurposes of computation of “advance tax”, deduction of tax at source from “Salaries” and charging of tax payable in certain cases.
(1) Surcharge on income-tax—
Surcharge shall be levied in respect of income liable to tax for the assessment year 2011-12, in the following cases:—
(a) in the case of a domestic company having total income exceeding one crore rupees, the amount of income-tax computed shall be increased bya surcharge for the purposes of the Union calculated at the rate of seven and one-half per cent. of such income-tax.
(b) in the case of a company, other than a domestic company, having total income exceeding one crore rupees, the amount of income-tax computed shall be increased by a surcharge for the purposes of the Union calculated at the rate of two and one-half per cent. of such income-tax.
Surcharge shall also be levied in the case of every company having total income chargeable to tax under section 115JB of the Income-tax Act,1961 (hereinafter referred to as ‘Income-tax Act’) .
However, marginal relief shall be allowed in all these cases to ensure that the additional amount of income-tax payable, including surcharge, on the excess of income over one crore rupees is limited to the amount by which the income is more than one crore rupees.
(2) Education Cess —
For assessment year 2011-12, additional surcharge called the “Education Cess on income-tax” and “Secondary and Higher Education Cess onincome-tax” shall continue to be levied at the rate of two per cent. and one per cent., respectively, on the amount of tax computed, inclusive ofsurcharge, in all cases. No marginal relief shall be available in respect of such Cess.
II. Rates for deduction of income-tax at source during the financial year 2011-12 from certain incomes other than “Salaries”
The rates for deduction of income-tax at source during the financial year 2011-12 from certain incomes other than “Salaries” have been specifiedin Part II of the First Schedule to the Bill. The rates for all the categories of persons will remain the same as those specified in Part II of the FirstSchedule to the Finance Act, 2010 for the purposes of deduction of income-tax at source during the financial year 2010-11. However, in case of interest income paid to a non-resident by a notified infrastructure debt fund, the rates for deduction have now been provided in the proposed newsection 194LB.
(1) Surcharge—
The amount of tax so deducted, in the case of a company other than a domestic company, shall be increased by a surcharge at the rate of twoper cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crorerupees.
No surcharge will be levied on deductions in other cases.
(2) Education Cess—
“Education Cess on income-tax” and “Secondary and Higher Education Cess on income-tax” shall continue to be levied at the rate of two percent. and one per cent. respectively , of income-tax including surcharge wherever applicable, in the cases of persons not resident in India includingcompanies other than domestic company.
III. Rates for deduction of income-tax at source from “Salaries”, computation of “advance tax” and charging of income- tax in special cases during the financial year 2011-12
The rates for deduction of income-tax at source from “Salaries” during the financial year 2011-12 and also for computation of “advance tax”payable during the said year in the case of all categories of assessees have been specified in Part III of the First Schedule to the Bill.
These rates are also applicable for charging income-tax during the financial year 2011-12 on current incomes in cases where accelerated assessments have to be made, for instance, provisional assessment of shipping profits arising in India to non-residents, assessment of personsleaving India for good during the financial year, assessment of persons who are likely to transfer property to avoid tax, assessment of bodies formedfor a short duration, etc.
The salient features of the rates specified in the said Part III are indicated in the following paragraphs—
A. Individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person
Paragraph A of Part-III of First Schedule to the Bill provides following rates of income-tax:-
(i) The rates of income-tax in the case of every individual (other than those mentioned in (ii), (iii) and (iv) below) or Hindu undivided family or every association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) ofclause (31) of section 2 of the Income-tax Act (not being a case to which any other Paragraph of Part III applies) are as under :—
Upto Rs. 1,80,000 Nil.
Rs. 1,80,001 to Rs. 5,00,000 10 per cent.
Rs. 5,00,001 to Rs. 8,00,000 20 per cent.
Above Rs. 8,00,000 30 per cent.
(ii) In the case of every individual, being a woman resident in India, and below the age of sixty years at any time during the previous year,—
Upto Rs. 1,90,000 Nil.
Rs. 1,90,001 to Rs. 5,00,000 10 per cent.
Rs.5,00,001 to Rs. 8,00,000 20 per cent.
Above Rs. 8,00,000 30 per cent.
(iii) In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time duringthe previous year,—
Upto Rs. 2,50,000 Nil.
Rs. 2,50,001 to Rs. 5,00,000 10 per cent.
Rs. 5,00,001 to Rs.8,00,000 20 per cent.
Above Rs. 8,00,000 30 per cent.
(iv) in the case of every individual, being a resident in India, who is of the age of eighty years or more at anytime during the previous year, -
Upto Rs. 5,00,000 Nil.
Rs. 50,00,001 to Rs. 8,00,000 20 per cent.
Above Rs. 8,00,000 30 per cent.
No surcharge will be levied in the cases of persons covered under paragraph-A of part-III of the First Schedule.
B. Co-operative Societies
In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Bill.These rates will continue to be the same as those specified for assessment year 2011-12. No surcharge will be levied .
C. Firms
In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule to the Bill. This rate will continueto be the same as that specified for assessment year 2011-12. No surcharge will be levied .
D. Local authorities
The rate of income-tax in the case of every local authority is specified in Paragraph D of Part III of the First Schedule to the Bill. This rate willcontinue to be the same as that specified for the assessment year 2011-12. No surcharge will be levied.
E. Companies
The rates of income-tax in the case of companies are specified in Paragraph E of Part III of the First Schedule to the Bill. These rates are thesame as those specified for the assessment year 2011-12.
The existing surcharge of seven and one-half per cent. on a domestic company is proposed to be reduced to five per cent. In case of companies other than domestic companies, the existing surcharge of two and one-half per cent. is proposed to be reduced to two per cent.
However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
The existing surcharge of seven and one-half per cent. in all other cases (including sections 115JB, 115-O, 115R, etc.) is proposed to bereduced to five per cent.
For financial year 2011-12, additional surcharge called the “Education Cess on income-tax” and “Secondary and Higher Education Cess onincome-tax” shall continue to be levied at the rate of two per cent. and one per cent. respectively, on the amount of tax computed, inclusive of surcharge,in all cases. No marginal relief shall be available in respect of such Cess.



Minimum Alternate Tax

Under the existing provisions of section 115JB(1), a company is required to pay a minimum alternate tax (MAT) on its book profit, if the income-tax payable on the total income, as computed under the Act in respect of any previous year relevant to the assessment year commencing on or after 1stApril, 2011, is less than the MAT. The amount of tax paid under the said section is allowed to be carried forward and set off against tax payable up to the tenth assessment year immediately succeeding the assessment year in which the tax credit becomes allowable under the provisions of section 115JAA.
It is proposed to amend this section to increase the rate of MAT to eighteen and one-half per cent. from the existing rate of eighteen per cent. of suchbook profit.
This amendment will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 and subsequent years.


LLPs: Alternate Minimum Tax for Limited Liability Partnership (LLP)

The Limited Liability Partnership Act, 2008 (LLP) has come into effect in 2009. The LLP has features of both a body corporate as well as a traditional partnership. The Income-tax Act provides for the same taxation regime for a limited liability partnership as is applicable to a partnership firm.It also provides tax neutrality (subject to fulfilment of certain conditions) to conversion of a private limited company or an unlisted public company intoan LLP.
An LLP being treated as a firm for taxation, has the following tax advantages over a company under the Income-tax Act:-
i) it is not subject to Minimum Alternate Tax;
ii) it is not subject to Dividend Distribution Tax (DDT); and
iii) it is not subject to surcharge.
In order to preserve the tax base vis-à-vis profit-linked deductions, it is proposed to insert a new Chapter XII-BA in the Income-tax Actcontaining special provisions relating to certain limited liability partnerships.
Under the proposed amendment, where the regular income-tax payable for a previous year by a limited liability partnership is less than thealternate minimum tax payable for such previous year, the adjusted total income shall be deemed to be the total income of such limited liability partnership and it shall be liable to pay income-tax on such total income at the rate of eighteen and one-half per cent..
For the purpose of the above,
(i) “adjusted total income” shall be the total income before giving effect to this newly inserted Chapter XII-BA as increased by the deductionsclaimed under any section included in Chapter VI-A under the heading “C – Deductions in respect of certain incomes” and deductionclaimed under section 10AA;
(ii) “alternate minimum tax” shall be the amount of tax computed on adjusted total income at a rate of eighteen and one-half per cent; and
(iii) “regular income-tax” shall be the income-tax payable for a previous year by a limited liability partnership on its total income in accordancewith the provisions of the Act other than the provisions of this newly inserted Chapter XII-BA.
It is further provided that the credit for tax (tax credit) paid by a limited liability partnership under this newly inserted Chapter XII-BA shall beallowed to the extent of the excess of the alternate minimum tax paid over the regular income-tax. This tax credit shall be allowed to be carried forward up to the tenth assessment year immediately succeeding the assessment year for which such credit becomes allowable. It shall be allowed to be set offfor an assessment year in which the regular income-tax exceeds the alternate minimum tax to the extent of the excess of the regular income-tax over thealternate minimum tax.
This amendment is proposed to take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 andsubsequent years.


Tax Incentives: Tax benefits for New Pension System (NPS)

Section 80CCD of the Income-tax Act provides, inter alia, a deduction in respect of contributions made by an employee as well as an employerto the New Pension System (NPS) account on behalf of the employee. In view of the provisions of section 80CCE, the aggregate deduction undersections 80C, 80CCC and 80CCD cannot exceed one lakh rupees. The allowable deduction under section 80CCD includes both the employee’s aswell the employer’s contribution to the NPS.
It is proposed to amend section 80CCE so as to provide that the contribution made by the Central Government or any other employer to a pension scheme under section 80CCD(2) shall be excluded from the limit of one lakh rupees provided under section 80CCE.
Currently, the contribution made by an employer towards a recognised provident fund, an approved superannuation fund or an approved gratuity fund is allowable as a deduction from business income under section 36, subject to certain limits. However, the contribution made by an employer to theNPS is not allowed as a deduction.
It is, therefore, proposed to amend section 36 so as to provide that any sum paid by the assessee as an employer by way of contribution towards a pension scheme, as referred to in section 80CCD(2) on account of an employee to the extent it does not exceed ten per cent. of the salary of theemployee in the previous year, shall be allowed as deduction in computing the income under the head “Profits and gains of business or profession”.
These amendments are proposed to take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 andsubsequent years.

Tax incentives: Extension of sunset clause for tax holiday for power sector

Under the existing provisions of section 80-IA(4)(iv) of the Income-tax Act, a deduction of profits and gains is allowed to an undertaking which,—
(a) is set up for the generation and distribution of power if it begins to generate power at any time during the period beginning on 1st April, 1993and ending on 31st March, 2011;
(b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on 1st April, 1999 and ending on 31st March, 2011;
© undertakes substantial renovation and modernisation of existing network of transmission or distribution lines at any time during the periodbeginning on 1st April, 2004 and ending on 31st March, 2011.
It is proposed to amend section 80-IA(4)(iv) to extend the terminal date for a further period of one year, i.e., upto 31st March, 2012.
This amendment will take effect from 1st April, 2012 and will, accordingly, apply in relation to assessment year 2012-13 and subsequent years.

Tax Incentives : Sunset of tax holiday for certain undertakings engaged in commercial production of mineral oil

Under the existing provisions of section 80-IB(9) of the Income-tax Act, a seven-year profit-linked deduction of hundred per cent. is available to anundertaking, if it fulfils any of the following, namely:-
(i) is located in North-Eastern Region and has begun or begins commercial production of mineral oil before 1st April, 1997;
(ii) is located in any part of India and has begun or begins commercial production of mineral oil on or after 1st April, 1997;
(iii) is engaged in refining of mineral oil and begins such refining on or after 1st October, 1998 but not later than 31st March, 2012;
(iv) is engaged in commercial production of natural gas in blocks licensed under the VIII Round of bidding for award of exploration contracts (NELP-VIII) under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 and begins commercial production of natural gas on or after 1st April, 2009;
(v) is engaged in commercial production of natural gas in blocks licensed under the IV Round of bidding for award of exploration contracts forCoal Bed Methane blocks and begins commercial production of natural gas on or after 1st April, 2009.
For the purposes of claiming this deduction, all blocks licensed under a single contract, which has been awarded under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 or inpursuance of any law for the time being in force or by the Central or a State Government in any other manner, are treated as a single “undertaking”.
Thus, an undertaking, which is located in any part of India and is engaged in commercial production of mineral oil, is eligible for the above-mentioned deduction, if it has begun or begins commercial production of mineral oil at any time after 1st April, 1997. No sunset date has beenprovided for such business.
It is proposed that the aforesaid deduction available for commercial production of mineral oil will not be available for blocks licensed under acontract awarded after 31st March, 2011 under the New Exploration Licencing Policy announced by the Government of India vide ResolutionNo. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 or in pursuance of any law for the time being in force or by the Central or a StateGovernment in any other manner.
This amendment will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 andsubsequent years.

Taxation of Trusts :Definition of “charitable purpose”

For the purposes of the Income-tax Act, “charitable purpose” has been defined in section 2(15) which, among others, includes “the advancement ofany other object of general public utility”. However, “the advancement of any other object of general public utility” is not a charitable purpose, if itinvolves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity and receipts from such activities is ten lakh rupees or more in the previous year.
It is proposed to amend section 2(15) to enhance the current monetary limit in respect of receipts from such activities from ten lakhs rupees totwenty-five lakhs rupees.
This amendment is proposed to take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 andsubsequent years.


Special Economic Zones: Provisions relating to Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) in case of SpecialEconomic Zones

Under the existing provisions of section 10AA of the Income-tax Act, a deduction of hundred per cent. is allowed in respect of profits and gains derived by a unit located in a Special Economic Zone (SEZ) from the export of articles or things or services for the first five consecutiveassessment years; of fifty per cent. for further five assessment years; and thereafter, of fifty per cent. of the ploughed back export profit for the next five years.
Further, under section 80-IAB of the Income-tax Act, a deduction of hundred per cent. is allowed in respect of profits and gains derived by anundertaking from the business of development of an SEZ notified on or after 1st April, 2005 from the total income for any ten consecutive assessmentyears out of fifteen years beginning from the year in which the SEZ is notified by the Central Government.
Under the existing provisions of section 115JB(6), an exemption is allowed from payment of minimum alternate tax (MAT) on book profit inrespect of the income accrued or arising on or after 1st April, 2005 from any business carried on, or services rendered, by an entrepreneur or aDeveloper, in a Unit or Special Economic Zone (SEZ), as the case may be.
Further, under the existing provisions of section 115-O(6), an exemption is allowed from payment of tax on distributed profits [Dividend Distribution Tax (DDT)] in respect of the total income of an undertaking or enterprise engaged in developing or developing and operating or developing, operating and maintaining a Special Economic Zone for any assessment year on any amount declared, distributed or paid by such Developer or enterprise, by way of dividends (whether interim or otherwise) on or after 1st April, 2005 out of its current income. Such distributedincome is also exempt from tax under section 10(34) of the Act.
The above provisions were inserted in the Income-tax Act by the Special Economic Zones Act, 2005 (SEZ Act) with effect from 10th February, 2006.
Currently, there is no sunset date provided for exemption from MAT in the case of a developer of an SEZ or a unit located in an SEZ.Similarly, there is no sunset date for exemption from DDT in the case of a developer of an SEZ.
It is proposed to sunset the availability of exemption from minimum alternate tax in the case of SEZ Developers and units in SEZs in theIncome-tax Act as well as the SEZ Act.
This amendment to section 115JB of the Income-tax Act will take effect from 1st April, 2012 and will, accordingly, apply in relation to theassessment year 2012-13 and subsequent years.
It is further proposed to discontinue the availability of exemption from dividend distribution tax in the case of SEZ Developers under theIncome-tax Act as well as the SEZ Act for dividends declared, distributed or paid on or after 1st June, 2011.
This amendment to section 115-O of the Income-tax Act will take effect from 1st June, 2011.
It is also proposed to make consequential amendments by omitting Explanation to section 10(34) of the Income-tax Act. This amendment tosection 10 will take effect from 1st June, 2011.
Consequential amendments have also been proposed in the Second Schedule of the SEZ Act by omitting clause © of paragraph (a) [w.e.f.01.06.2011], paragraph (h) [w.e.f. 01.04.2012] and paragraph (i) [w.e.f. 01.06.2011] of the Second Schedule.

cientific Research Expenses: Weighted deduction for contribution made for approved scientific research programme

Under the existing provisions of section 35(2AA) of the Income-tax Act, weighted deduction to the extent of 175 per cent. is allowed for any sum paid to a National Laboratory or a university or an Indian Institute of Technology (IIT) or a specified person for the purpose of an approved scientificresearch programme.
In order to encourage more contributions to such approved scientific research programmes, it is proposed to increase this weighted deductionfrom 175 per cent. to 200 per cent.
This amendment is proposed to take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 andsubsequent years.

Section 35AD: Deductions: Investment linked deduction in respect of specified businesses

Under the existing provisions of section 35AD of the Income-tax Act, investment-linked tax incentive is provided by way of allowing hundred per cent. deduction in respect of any expenditure of capital nature (other than on land, goodwill and financial instrument) incurred wholly and exclusively, for the purposes of the “specified business”. Currently, the following specified businesses are eligible for availing investment-linkeddeduction under section 35AD(8)©:-
(i) setting up and operating a cold chain facility;
(ii) setting up and operating a warehousing facility for storage of agricultural produce;
(iii) laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilitiesbeing an integral part of such network;
(iv) building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government;
(v) building and operating, anywhere in India, a new hospital with at least one hundred beds for patients;
(vi) developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Governmentor a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed.
It is proposed to include two new businesses as “specified business”, i.e.,-
(a) developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed; and
(b) production of fertiliser in India.
The dates of commencement of the “specified business” as an eligibility condition are detailed in section 35AD(5). It is proposed that the date ofcommencement of operations in the case of the two “specified businesses” of affordable housing projects and production of fertilizer in a new plant or ina newly installed capacity in an existing plant shall be on or after 1st April, 2011.
These amendments will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 andsubsequent years.
Under section 73A, any loss of a “specified business” (under section 35AD) is allowed set-off against profit and gains of any other “specifiedbusiness”. In order to remove any ambiguity in this regard in respect of the business of hotels and hospitals, it is proposed to remove the word “new”from the definition of “specified business” in the case of hotels and hospitals under section 35AD(8)©. With this, the loss of an assessee on account ofa “specified business” claiming deduction under section 35AD would be allowed to be set off against the profit of another “specified business” under section 73A, whether or not the latter is eligible for deduction under section 35AD. Therefore, an assessee who currently operates a hospital or a hotel would be able to set off the profits of such business against the losses, if any, of a new hospital or new hotel which begins to operate after 1st April,2010 and which is eligible for deduction of expenditure under section 35AD.
This amendment will take effect retrospectively from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12and subsequent years.

Assessment: Extension of time limit for assessments in case of exchange of information

Section 153 of the Income-tax Act provides for the time limits for completion of assessments and reassessments. In Explanation 1 to section153 of the Income-tax Act, certain periods specified therein are to be excluded while computing the period of limitation for completion of assessmentsand reassessments.
It is proposed to exclude the time taken in obtaining information from the tax authorities in jurisdictions situated outside India, under an agreementreferred to in section 90 or section 90A, from the statutory time limit prescribed for completion of assessment or reassessment.
Accordingly, it is proposed to insert a new clause (viii) in Explanation 1 to section 153. It provides that the period commencing from the date onwhich a reference for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and endingwith the date on which the information so requested is received by the Commissioner, or a period of six months, whichever is less, shall be excluded.
Similar amendments are proposed to be made to section 153B of the Income-tax Act.
These amendments will take effect from 1st June, 2011.

Settlement Commission Modification in the conditions for filing an application before the Settlement Commission

The existing provisions contained in the proviso to section 245C(1) allow an application to be made before the Settlement
Commission if,—
(i) the proceedings have been initiated against the applicant under section 153A or under section 153C as a result of search or a requisition ofbooks of account, as the case may be, and the additional amount of income-tax payable on the income disclosed in the application exceedsfifty lakh rupees;
(ii) in other cases, if the additional amount of income-tax payable on the income disclosed in the application exceeds ten lakh rupees.
It is proposed to expand the criteria for filing an application for settlement by a tax payer in whose case proceedings have been initiated as a resultof search or requisition of books of account.
It is, therefore, proposed to insert a new clause (ia) in the proviso to section 245C(1). This stipulates that an application can also be made,where the applicant—
(a) is related to the person [referred to in (i) above] in whose case proceedings have been initiated as a result of search and who has filed anapplication; and
(b) is a person in whose case proceedings have also been initiated as a result of search,
the additional amount of income-tax payable on the income disclosed in his application exceeds ten lakh rupees.
As a consequence, a tax payer who is the subject matter of a search would be allowed to file an application for settlement if additional income-tax payable on the income disclosed in the application exceeds fifty lakh rupees. Entities related to such a tax payer, who are also the subject matter of search, would now be allowed to file an application for settlement, if additional income-tax payable in their application exceeds ten lakh rupees.
The relationship between the person who makes an application under clause (ia) of the proviso to section 245C(1) and the person mentioned inclause (i) of the proviso is defined by inserting an Explanation in the section.
This amendment will take effect from 1st June, 2011.


Settlement Commission Power of the Settlement Commission to rectify its orders

The existing provisions of section 245D(4) of the Income-tax Act provide that the Settlement Commission may pass an order, as it thinks fit, onthe matters covered by the applications received by it, after giving an opportunity of being heard to the applicant and to the Commissioner. Further, undersection 245F(1), the Settlement Commission has been conferred all the powers which are vested in an income-tax authority under the Act. An income-tax authority has the power (under section 154) to amend any order passed by it for the purpose of rectifying any mistake apparent from the record.
It is proposed to insert a new sub-section (6B) in section 245D so as to specifically provide that the Settlement Commission may, at any time within a period of six months from the date of its order, with a view to rectifying any mistake apparent from the record, amend any order passed by itunder section 245D(4).
It is further provided that a rectification which has the effect of modifying the liability of the applicant shall not be made unless the Settlement Commission has given notice to the applicant and the Commissioner of its intention to do so and has allowed the applicant and the Commissioner anopportunity of being heard.
Consequential amendments on similar lines are proposed to be made to section 22D of the Wealth Tax Act.
These amendments will take effect from 1st June, 2011.


Mutual Fund Rationalisation of Tax on Income distributed to unit holders

Under the existing provisions contained in section 115R(2) of the Income-tax Act, a Mutual Fund is liable to pay additional income-tax on the amount ofincome distributed to its unit holders.
It is proposed to levy additional income-tax at a higher rate of 30 per cent. on income distributed by debt funds to a person other than an individual orHUF.
It is therefore proposed to amend section 115R(2) to provide that the Mutual Fund shall be liable to pay additional income-tax on such distributedincome at the rate of –
(a) 25 per cent. if the recipient is an individual or HUF in case of distribution by a money market mutual fund or a liquid fund;
(b) 30 per cent. if the recipient is any other person in case of distribution by a money market mutual fund or a liquid fund;
© 12.5 per cent. if the recipient is an individual or HUF in case of distribution by a debt fund other than a money market mutual fund or a liquidfund; and
(d) 30 per cent. if the recipient is any other person in case of distribution by debt fund other than a money market mutual fund or a liquid fund.
There will be no change in the rate of income-tax in case of distribution to any individual or HUF. Distribution of income by an equity-oriented fund shallcontinue to be exempt from tax.
This amendment is proposed to take effect from 1st June, 2011.


Other Exemptions:Infrastructure Debt Fund

In order to augment long-term, low cost funds from abroad for the infrastructure sector, it is proposed to facilitate setting up of dedicated debtfunds.
Section 10 of the Income-tax Act excludes certain incomes from the ambit of total income. It is proposed to amend section 10 of the Income-taxAct so as to provide enabling power to the Central Government to notify any infrastructure debt fund which is set up in accordance with the prescribedguidelines. Once notified, the income of such debt fund would be exempt from tax. It will, however, be required to file a return of income.
It is also proposed to amend section 115A of the Income-tax Act to provide that any interest received by a non-resident from such notifiedinfrastructure debt fund shall be taxable at the rate of five per cent. on the gross amount of such interest income.
It is further proposed to insert a new section 194LB to provide that tax shall be deducted at the rate of five per cent. by such notifiedinfrastructure debt fund on any interest paid by it to a non-resident.
These amendments are proposed to take effect from 1st June 2011.


Other Exemptions:Exemption : of certain perquisites of Chairmen and Members of Union Public Service Commission

The existing provisions of the Income-tax Act provide for the taxation of any perquisites or allowances received by an employee under the head"Salaries" unless it is specifically exempt under the Act.
Currently, specified perquisites of the Chief Election Commissioner or Election Commissioner and the judges of the Supreme Court are exempt from taxation consequent to the enabling provisions in the respective Acts governing their service conditions. It is proposed to amend section 10 to extend similar benefit of exemption in respect of specific perquisites and allowances, which will be notified by the Central Government, received by bothserving as well as retired Chairmen and Members of the Union Public Service Commission.
This amendment is proposed to take effect retrospectively from 1st April, 2008 and will accordingly apply in relation to the assessment year2008-09 and subsequent years.

Other Exemptions: Exemption of specified income of notified body or authority or trust or board or commission

It is proposed to insert a new clause in section 10 of the Income-tax Act to provide exemption from income-tax to any specified income of a body, authority, board, trust or commission which is set up or constituted by a Central, State or Provincial Act or constituted by the Central Governmentor a State Government with the object of regulating or administering an activity for the benefit of the general public, provided-
(i) it is not engaged in any commercial activity, and
(ii) is notified by the Central Government in this behalf.
The nature and extent of income to be exempted will also be specified by the Central Government while notifying such entity.
A consequential amendment is proposed in section 139 of the Act to provide for filing of the return of income by such notified entity.
These amendments are proposed to take effect from 1st June 2011.


DIN: Omission of the requirement of quoting of Document Identification Number

Under the existing provisions contained in section 282B of the Income-tax Act, every income-tax authority shall, on or after the 1st day of July,2011, allot a computer-generated Document Identification Number in respect of every notice, order, letter or any correspondence issued by him to any other income-tax authority or assessee or any other person and such number shall be quoted thereon.
Considering the practical difficulties due to non-availability of requisite infrastructure on an all India basis, it is proposed to omit the aforesaidsection.
This amendment will take effect retrospectively from 1st April, 2011.

EPFO: Recognition to Provident Funds – Extension of time limit for obtaining exemption from Employees Provident Fund Organisation (EPFO)

Rule 4 in Part A of the Fourth Schedule to the Income-tax Act provides for conditions which are required to be satisfied by a Provident Fund forreceiving or retaining recognition under the Income-tax Act. One of the requirements of rule 4 [clause (ea)] is that the establishment shall obtain exemption under section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act).
Rule 3 in Part A of the Fourth Schedule provides that the Chief Commissioner or the Commissioner of Income-tax may accord recognition to anyprovident fund which, in his opinion, satisfies the conditions specified under the said rule 4 and the conditions which the Board may specify by rules.
The first proviso to sub-rule (1) of rule 3, inter alia, specifies that in a case where recognition has been accorded to any provident fund on or before 31st March, 2006, and such provident fund does not satisfy the conditions set out in clause (ea) of rule 4 on or before 31st December, 2010 andany other conditions which the Board may specify by rules in this behalf, the recognition to such fund shall be withdrawn.
In order to provide further time to the Employees’ Provident Fund Organization (EPFO) to process the applications made by establishments seeking exemption under section 17 of the EPF & MP Act, it is proposed to amend the aforesaid proviso so as to extend the time limit from 31st December, 2010 to 31st March, 2012.
This amendment will take effect retrospectively from 1st January, 2011.]]> http://www.cadelhi.com/forums/showthread.php?tid=64 Mon, 28 Feb 2011 08:33:42 -0600 http://www.cadelhi.com/forums/showthread.php?tid=64

How one can get the challan corrected after the payment of tax so that right credit of tax is given to the assessee/deductor concerned. The power to amend such wrong details in challan after payment of tax in OLTAS has been given to Assessing officer and Bank depending upon the type of correction, which has been provided as follows for the benefit of all concerneds.

NSDL receives tax collection data as uploaded by the bank. It is not authorized to carry out any changes in the data sent by the bank to TIN.
The fields that can be corrected and the entity authorized to carry out corrections are as below:
Sl. No----Type of Correction on Challan --------- Performed By
1--- PAN/TAN----- Assessing Officer
2 --Assessment Year ---- Assessing Officer
3--- Major Head ---- Assessing Officer /Bank
4---- Minor Head ---- Assessing Officer
5--- Nature of Payment ---- Assessing Officer
6--- Total Amount --- Bank
7--- Name ------ Bank


Thus application should be made for correction to the A.O or Bank in case of any mistake in Income Tax/TDS Challan depending upon the type of correction as mentioned above.]]>

How one can get the challan corrected after the payment of tax so that right credit of tax is given to the assessee/deductor concerned. The power to amend such wrong details in challan after payment of tax in OLTAS has been given to Assessing officer and Bank depending upon the type of correction, which has been provided as follows for the benefit of all concerneds.

NSDL receives tax collection data as uploaded by the bank. It is not authorized to carry out any changes in the data sent by the bank to TIN.
The fields that can be corrected and the entity authorized to carry out corrections are as below:
Sl. No----Type of Correction on Challan --------- Performed By
1--- PAN/TAN----- Assessing Officer
2 --Assessment Year ---- Assessing Officer
3--- Major Head ---- Assessing Officer /Bank
4---- Minor Head ---- Assessing Officer
5--- Nature of Payment ---- Assessing Officer
6--- Total Amount --- Bank
7--- Name ------ Bank


Thus application should be made for correction to the A.O or Bank in case of any mistake in Income Tax/TDS Challan depending upon the type of correction as mentioned above.]]> http://www.cadelhi.com/forums/showthread.php?tid=63 Mon, 28 Feb 2011 07:41:52 -0600 http://www.cadelhi.com/forums/showthread.php?tid=63
February 28, 2011

14.1 Notification No. 17/2011-ST has been issued superceding notification 9/2009-ST dated 03.03.2009. The new notification has the following unique features:

(a) Criteria for the determination of “wholly consumed” services have been laid down in the notification, borrowing from the Export of Services Rules, 2005. It has also been specified that all services received by an entity in a SEZ, which does not have any other DTA operations, will constitute “wholly consumed” services.

(b) No service tax is required to be paid ab-initio if the same are meant to be “wholly consumed” within SEZ, including services liable to tax on reverse charge basis under section 66A.

© Refund of the remaining services i.e. which are not wholly consumed shall be available on pro rata basis i.e. ratio of SEZ turnover to total turnover.

(d) Suitable rule has been introduced in Cenvat Credit Rules, 2004 to waive the requirements of rule 6 in case of services provided, without payment of tax, to a SEZ unit for its authorized operations.]]>
February 28, 2011

14.1 Notification No. 17/2011-ST has been issued superceding notification 9/2009-ST dated 03.03.2009. The new notification has the following unique features:

(a) Criteria for the determination of “wholly consumed” services have been laid down in the notification, borrowing from the Export of Services Rules, 2005. It has also been specified that all services received by an entity in a SEZ, which does not have any other DTA operations, will constitute “wholly consumed” services.

(b) No service tax is required to be paid ab-initio if the same are meant to be “wholly consumed” within SEZ, including services liable to tax on reverse charge basis under section 66A.

© Refund of the remaining services i.e. which are not wholly consumed shall be available on pro rata basis i.e. ratio of SEZ turnover to total turnover.

(d) Suitable rule has been introduced in Cenvat Credit Rules, 2004 to waive the requirements of rule 6 in case of services provided, without payment of tax, to a SEZ unit for its authorized operations.]]> http://www.cadelhi.com/forums/showthread.php?tid=62 Mon, 28 Feb 2011 07:39:28 -0600 http://www.cadelhi.com/forums/showthread.php?tid=62
February 28, 2011

13.1 Finance minister has announced in his budget speech that individual and sole proprietor assessees with a turnover upto Rs 60 lakhs shall not be subject to audit.

13.2 Interest rate for all assessees (including firms and corporates) upto a turnover of Rs 60 lakhs shall be 3% less than the prescribed rate.

13.3 The period for making the payment in order to avail the benefit of reduced penalty under the second proviso to Section 78 shall be 90 days for assessees mentioned at paragraph 13.2.]]>
February 28, 2011

13.1 Finance minister has announced in his budget speech that individual and sole proprietor assessees with a turnover upto Rs 60 lakhs shall not be subject to audit.

13.2 Interest rate for all assessees (including firms and corporates) upto a turnover of Rs 60 lakhs shall be 3% less than the prescribed rate.

13.3 The period for making the payment in order to avail the benefit of reduced penalty under the second proviso to Section 78 shall be 90 days for assessees mentioned at paragraph 13.2.]]> http://www.cadelhi.com/forums/showthread.php?tid=61 Mon, 28 Feb 2011 07:38:20 -0600 http://www.cadelhi.com/forums/showthread.php?tid=61
February 28, 2011

12.1 Notification 26/2010-ST dated 22-6-2010 is being amended by Notification 4/2011- ST and the service tax applicable in respect of „Transport of passengers by air service” is being revised as follows:

(a) Domestic (economy) : From Rs.100 to Rs.150

(b) International (economy) : From Rs.500 to Rs.750

© Domestic (other than economy) : Standard rate of 10%

12.2 Exemption is being given to services rendered to an exhibitor participating in an exhibition held outside India (Notification No. 5/ST-2011).

12.3 Exemption from service tax is being provided to „Works contract service‟ when rendered for the construction of residential complexes or completion and finishing services of a new complex under Jawaharlal Nehru Urban Renewable Mission (JNURM) and “Rajiv Awaas Yojana” (Notifications No. 6/ST-2011).

12.4 Exemption has been given to the taxable service of general insurance when provided under “Rashtriya Swashya Bima Yojna” (Notifications No. 7/ST-2011).

12.5 Exemption from service tax is being provided to works contract service rendered within a port, or other port or airport in specified areas (Notifications No. 10&11/ST-2011).

12.6 An exemption of 25% from the taxable value is being provided in respect of services rendered in relation to “transport of coastal goods” and goods transported through “national waterways” or “inland water” (Notification No.16/ST-2011).

12.7 Exemptions with retrospective effect have been given by the Finance Bill:

(a) To an association or chamber representing commerce or industry in respect of membership fee under the „Club or Association Service‟ for the period from 16.06.2005 to 31.03.2008; and

(b) To inter-state or intra-state transportation of passengers, in a vehicle bearing contract carriage and tourist vehicle permit for the period from 01.04.2000 to 06.07.2009

12.8 These changes will come into effect on the dates mentioned in the respective notifications or when the bill is enacted and notified, as the case may be.]]>
February 28, 2011

12.1 Notification 26/2010-ST dated 22-6-2010 is being amended by Notification 4/2011- ST and the service tax applicable in respect of „Transport of passengers by air service” is being revised as follows:

(a) Domestic (economy) : From Rs.100 to Rs.150

(b) International (economy) : From Rs.500 to Rs.750

© Domestic (other than economy) : Standard rate of 10%

12.2 Exemption is being given to services rendered to an exhibitor participating in an exhibition held outside India (Notification No. 5/ST-2011).

12.3 Exemption from service tax is being provided to „Works contract service‟ when rendered for the construction of residential complexes or completion and finishing services of a new complex under Jawaharlal Nehru Urban Renewable Mission (JNURM) and “Rajiv Awaas Yojana” (Notifications No. 6/ST-2011).

12.4 Exemption has been given to the taxable service of general insurance when provided under “Rashtriya Swashya Bima Yojna” (Notifications No. 7/ST-2011).

12.5 Exemption from service tax is being provided to works contract service rendered within a port, or other port or airport in specified areas (Notifications No. 10&11/ST-2011).

12.6 An exemption of 25% from the taxable value is being provided in respect of services rendered in relation to “transport of coastal goods” and goods transported through “national waterways” or “inland water” (Notification No.16/ST-2011).

12.7 Exemptions with retrospective effect have been given by the Finance Bill:

(a) To an association or chamber representing commerce or industry in respect of membership fee under the „Club or Association Service‟ for the period from 16.06.2005 to 31.03.2008; and

(b) To inter-state or intra-state transportation of passengers, in a vehicle bearing contract carriage and tourist vehicle permit for the period from 01.04.2000 to 06.07.2009

12.8 These changes will come into effect on the dates mentioned in the respective notifications or when the bill is enacted and notified, as the case may be.]]> http://www.cadelhi.com/forums/showthread.php?tid=60 Mon, 28 Feb 2011 07:35:14 -0600 http://www.cadelhi.com/forums/showthread.php?tid=60
February 28, 2011

11.1 A number of changes have been brought about in Cenvat Credit Rules, 2004 (Notification 3/2011-CE (NT) dated 01.03.2011). Important changes relating to Service Tax are given at Annexure C.

Annexure C

Important changes in Cenvat Rules, 2004

1.1 The changes in Cenvat Credit Rules are guided, inter-alia, by the following considerations:

a) Describe the scope of eligible inputs and input services more clearly so as to minimize disputes in their interpretations;

b) Eliminate distortions and areas of tax avoidance arising from differential treatment of goods and services used for similar purposes;

c) Provide a practical scheme for the segregation of Cenvat credits used in respect of final products and output services where they are partially exempted with condition that no such credits shall be taken;

d) Liberalize the provisions in certain areas to meet the legitimate demands of business;

1.2 Details of important changes made in Cenvat Credit Rules, 2004 that impact service tax are given in the following paragraphs.

A. Input

1.3 “Input” has been defined to include, inter-alia, all goods used in a factory by the manufacturer and goods used for providing any output service;

1.4 Goods that shall not constitute input have been specifically excluded. These shall include, besides petroleum items, any goods used for construction of a civil structure (by a manufacturer as well as a service provider) excepting when they are used in the provision of any of the specified construction services. Thus, goods used by a sub-contractor for rendering services of construction to the main contractor shall constitute input.

1.5 Exclusions also cover goods such as food items, goods used in a guesthouse, residential colony, club or a recreational facility or a clinical establishment which are primarily meant for the personal use or consumption of the employees. When any of these goods are used directly in the manufacture of final products or provision of a service they will constitute input.

1.6 Goods which have no relationship whatsoever with the manufacture have also been excluded.

B. Input Service

1.7 The distinction between goods and services is diminishing and many goods can be received as services. Accordingly the definition of “input service” has been aligned with the definition of “input” such that goods that do not constitute “input” do not qualify as “input service”. Thus a service relating to construction of civil structure will not constitute “input service” unless it is provided by a sub-contractor to the main contractor.

1.8 Similarly services relating to motor vehicle i.e. rent-a-cab, use of tangible goods, insurance or repair of vehicle shall not constitute an “input service‟ except in respect of output services where credit on motor vehicle is permitted as “capital goods”.

1.9 On the same lines, a service meant primarily for the personal use or consumption of employees will not constitute an input service. A list of specific services has also been given by way of example in the definition. Most of these services constitute a part of the cost-to-company package of the employee and are provided either free of charge or on concessional basis to company employees.

1.10 Expression “activities relating to business” has been deleted and Business exhibition and legal services added in the list of services.

3. Obligation of manufacturer and provider of services

1.11 Definition of exempted goods shall include such excisable goods as are covered by the notification relating to concessional duty with the condition that no credit of input and input service shall be availed. This amendment shall come into effect on 01.03.2011.

1.12 Similarly the definition of exempted services shall include taxable services which are partially exempted with the condition that no credit of input and input service shall be availed. Moreover it has been clarified that exempted service will include trading service.

1.13 Option to maintain separate accounts only in respect of inputs (and not together with input services) has also been given so that allocation as per formula given in rule 6(3A) is done only in so far as credits on input services are concerned. 1.14 The amount payable under rule 6(3)(i) in respect of services has been reduced from 6% to 5%. Moreover in the case of exempted services (that are partially taxed with no facility of credits) this amount shall be 5% of the exempted value of the service. Thus if the exemption on a certain service is 60%, the amount required to be paid shall be 3% (60X5%) of the full value of the service. In case of exempt goods, amount payable will be reduced by the amount paid at the concessional rate.

1.15 For the purpose of applying the formula under rule 6(3A) the value of trading service as well as value of services covered by composition schemes has been defined. The value of trading service shall be the difference between the sale price and purchase price of goods. The value in respect of services covered by a composition scheme will be tax amount divided by the rate of service tax applicable under section 66 read with any general exemption. As the prevalent rate is 10% the value shall be ten times the amount of service paid or payable.

1.16 A substantial part of the income of a bank or a life insurance company is from investments or by way of interest in which a number of inputs and input services are used. There have been difficulties in ascertaining the amount of credit flowing into earning these amounts. Thus a banking company or a financial institution, including NBFC, providing banking and financial services are being obligated to pay an amount equal to 50% of the credit availed. In case of services relating to life insurance or management of ULIPs such amount will be equal to 20% of credit availed. Other options of payment of amount under Rule 6 shall not be available for these taxpayers.

1.17 Consequent to the introduction of the proportionate allocation and its rationalization now, Rule 6(5) that allows full credit of 17 specified services has been deleted.

1.18 New sub-rule (6A) has been added to allow provision of services without payment of service tax to a unit in SEZ or to a developer in SEZ for their authorized operations, without requirement of reversal of any CENVAT credit on this account. This will help in tax-free receipt of services by units and developers in SEZs.

1.19 Most of the Cenvat changes will come into effect from 01.04.2011 except a few that will be effective from 01.03.2011.

C. Addition of Services under section 66A in rule 3

1.20 Service tax leviable under section 66A has been added in the list of eligible credits under rule 3 w.e.f. 18.04.2006 by a retrospective amendment in the Bill. This was already clarified by circular F. NO.345/1/2008-TRU dated 27.06.2008 but has now been done by law to settle the disputes arising due to audit objections. It shall come into force on the enactment of the Finance Bill.]]>
February 28, 2011

11.1 A number of changes have been brought about in Cenvat Credit Rules, 2004 (Notification 3/2011-CE (NT) dated 01.03.2011). Important changes relating to Service Tax are given at Annexure C.

Annexure C

Important changes in Cenvat Rules, 2004

1.1 The changes in Cenvat Credit Rules are guided, inter-alia, by the following considerations:

a) Describe the scope of eligible inputs and input services more clearly so as to minimize disputes in their interpretations;

b) Eliminate distortions and areas of tax avoidance arising from differential treatment of goods and services used for similar purposes;

c) Provide a practical scheme for the segregation of Cenvat credits used in respect of final products and output services where they are partially exempted with condition that no such credits shall be taken;

d) Liberalize the provisions in certain areas to meet the legitimate demands of business;

1.2 Details of important changes made in Cenvat Credit Rules, 2004 that impact service tax are given in the following paragraphs.

A. Input

1.3 “Input” has been defined to include, inter-alia, all goods used in a factory by the manufacturer and goods used for providing any output service;

1.4 Goods that shall not constitute input have been specifically excluded. These shall include, besides petroleum items, any goods used for construction of a civil structure (by a manufacturer as well as a service provider) excepting when they are used in the provision of any of the specified construction services. Thus, goods used by a sub-contractor for rendering services of construction to the main contractor shall constitute input.

1.5 Exclusions also cover goods such as food items, goods used in a guesthouse, residential colony, club or a recreational facility or a clinical establishment which are primarily meant for the personal use or consumption of the employees. When any of these goods are used directly in the manufacture of final products or provision of a service they will constitute input.

1.6 Goods which have no relationship whatsoever with the manufacture have also been excluded.

B. Input Service

1.7 The distinction between goods and services is diminishing and many goods can be received as services. Accordingly the definition of “input service” has been aligned with the definition of “input” such that goods that do not constitute “input” do not qualify as “input service”. Thus a service relating to construction of civil structure will not constitute “input service” unless it is provided by a sub-contractor to the main contractor.

1.8 Similarly services relating to motor vehicle i.e. rent-a-cab, use of tangible goods, insurance or repair of vehicle shall not constitute an “input service‟ except in respect of output services where credit on motor vehicle is permitted as “capital goods”.

1.9 On the same lines, a service meant primarily for the personal use or consumption of employees will not constitute an input service. A list of specific services has also been given by way of example in the definition. Most of these services constitute a part of the cost-to-company package of the employee and are provided either free of charge or on concessional basis to company employees.

1.10 Expression “activities relating to business” has been deleted and Business exhibition and legal services added in the list of services.

3. Obligation of manufacturer and provider of services

1.11 Definition of exempted goods shall include such excisable goods as are covered by the notification relating to concessional duty with the condition that no credit of input and input service shall be availed. This amendment shall come into effect on 01.03.2011.

1.12 Similarly the definition of exempted services shall include taxable services which are partially exempted with the condition that no credit of input and input service shall be availed. Moreover it has been clarified that exempted service will include trading service.

1.13 Option to maintain separate accounts only in respect of inputs (and not together with input services) has also been given so that allocation as per formula given in rule 6(3A) is done only in so far as credits on input services are concerned. 1.14 The amount payable under rule 6(3)(i) in respect of services has been reduced from 6% to 5%. Moreover in the case of exempted services (that are partially taxed with no facility of credits) this amount shall be 5% of the exempted value of the service. Thus if the exemption on a certain service is 60%, the amount required to be paid shall be 3% (60X5%) of the full value of the service. In case of exempt goods, amount payable will be reduced by the amount paid at the concessional rate.

1.15 For the purpose of applying the formula under rule 6(3A) the value of trading service as well as value of services covered by composition schemes has been defined. The value of trading service shall be the difference between the sale price and purchase price of goods. The value in respect of services covered by a composition scheme will be tax amount divided by the rate of service tax applicable under section 66 read with any general exemption. As the prevalent rate is 10% the value shall be ten times the amount of service paid or payable.

1.16 A substantial part of the income of a bank or a life insurance company is from investments or by way of interest in which a number of inputs and input services are used. There have been difficulties in ascertaining the amount of credit flowing into earning these amounts. Thus a banking company or a financial institution, including NBFC, providing banking and financial services are being obligated to pay an amount equal to 50% of the credit availed. In case of services relating to life insurance or management of ULIPs such amount will be equal to 20% of credit availed. Other options of payment of amount under Rule 6 shall not be available for these taxpayers.

1.17 Consequent to the introduction of the proportionate allocation and its rationalization now, Rule 6(5) that allows full credit of 17 specified services has been deleted.

1.18 New sub-rule (6A) has been added to allow provision of services without payment of service tax to a unit in SEZ or to a developer in SEZ for their authorized operations, without requirement of reversal of any CENVAT credit on this account. This will help in tax-free receipt of services by units and developers in SEZs.

1.19 Most of the Cenvat changes will come into effect from 01.04.2011 except a few that will be effective from 01.03.2011.

C. Addition of Services under section 66A in rule 3

1.20 Service tax leviable under section 66A has been added in the list of eligible credits under rule 3 w.e.f. 18.04.2006 by a retrospective amendment in the Bill. This was already clarified by circular F. NO.345/1/2008-TRU dated 27.06.2008 but has now been done by law to settle the disputes arising due to audit objections. It shall come into force on the enactment of the Finance Bill.]]>