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INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18Presenters
Dinesh KanabarCEO
Ritesh KanodiaPartner
Rakesh DharawatPartner
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INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
• Demonetisation of high denomination currency notes
• Constitutional Amendment Bill enabling GST passed
• New Insolvency and Benami Property laws brought into force
• Key tax treaties with Mauritius, Cyprus and Singapore renegotiated –capital gains exemption removed
• Other developments:
⎼ GAAR clarifications issued – provisions come into force on 1 April 2017
⎼ Final Guidelines for POEM framed
⎼ Indirect transfers valuation and reporting rules notified
⎼ Tax rates in respect of undisclosed incomes doubled
⎼ Easwar Committee Report on tax simplification submitted
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The year gone by – Highlights
Key
Announcements
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INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
5
Key Announcements
The Macro-economic context
• Adverse effects of demonetisation not expected to extend beyond the current financial year
• GDP growth projected at 7.2% and 7.7% by IMF for 2017 and 2018 respectively
Agenda : TEC India – Transform, Energise and Clean India
• FIPB to be abolished in 2017-18 - Roadmap for the same to be announced together with further liberalisation of the FDI policy
• Listing and trading of Security Receipts issued by Asset Reconstruction Companies
• Affordable housing to be given infrastructure status (with its accompanying benefits)
• Path breaking reforms in electoral funding – electoral bonds proposed
Direct Tax
Proposals
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INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
For Individuals
• Tax rate reduced from 10% to 5% in respect of incomes between INR 250,000 and INR 500,000 – for Individuals, HUFs and AOP
• Tax rate reduced from 10% to 5% in respect of incomes between INR 300,000 and INR 500,000 – for senior citizens
• Surcharge of 10% of tax introduced for incomes between INR 5 million to INR 10 million
For Companies
• Corporate tax rate reduced to 25% for companies with a turnover of less than INR 500 million (in FY 2015-16)
• No other reduction in MAT and corporate tax rates
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Rates
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
• No announcement on scrapping ICDS
• Concessional tax rate of 10% applicable on sale of carbon credits
• Depreciation and deduction not allowed in respect of cash payments in excess of INR 10,000
• Tax deduction in respect of provision for bad and doubtful debts increased to 8.5% for banks
• Rate of ‘presumptive income’ reduced from 8% to 6% on digital payments
• Notional tax on land and building held as stock in trade to be taxed after 1 year of completion
• Cash transactions in excess of INR 300,000 prohibited – penalty leviable
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Business Income
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
• MAT / AMT credit allowed to be carried forward for 15 years (from existing 10 years)
• MAT carry forward - FTC in excess of MAT to be ignored
• Rationalisation of MAT in line with treatment under Ind AS (from AY 2017-18)
• No adjustments to amount recorded in OCI forming part of P&L
• Treatment specified for amounts recorded in OCI and forming part of reserves on first time adoption of Ind AS:
⎼ Items reclassified via P&L account to be included for MAT in the year of
reclassification / disposal
⎼ On other items, which are not reclassified via P&L – MAT payable over a period of
five years
• In case of demerger, fair value accounting under Ind AS to be ignored for MAT
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Business Income - MAT
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
• Exemption for long term capital gains on sale of listed shares not available for shares acquired after 1 October 2004 without payment of Securities Transaction Tax – Exceptions to be notified
• Joint Development Agreements (JDAs) – relaxation of capital gains on deemed transfer of immovable property in JDAs
⎼ Incidence of capital gains deferred to year of completion
⎼ Stamp duty value of share in project as on date of completion plus any cash
consideration received to be the full value of consideration
⎼ If share in project transferred before completion normal capital gains taxation
will apply in the said year of transfer
• Land and building – change in holding period reduced from 3 years to 2 years for long term eligibility
• Transfer of Masala bonds (rupee denominated) between non-residents not liable to capital gains
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Capital Gains
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
• Base year for computing cost of acquisition and improvement changed from 1981 to 2001
• Gains on transfer of unquoted equity shares to be calculated based on FMV – in case consideration received is lower than FMV
• Conversion of preference shares to equity not liable to tax
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Capital Gains
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
• Investments held directly or indirectly by a non-resident in a Category I or a Category II FPI excluded from indirect transfer provisions –retrospective from AY 2012-13
• Clarifications proposed to be issued to exclude offshore redemptions consequent to sale of investments chargeable to tax in India from the ambit of indirect transfer provisions
• Benefit of 5% rate on interest on ECBs and bonds extended to 2020
• Interest on Masala bonds eligible for 5% tax rate retrospectively from AY 2016-17
• Enabling provision for rectification of assessment to grant FTC on payment of disputed tax abroad
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International Tax
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
• Where primary adjustment exceeds INR 10 million (funds not been brought into India) - To be treated as advance made to the related party
• Thin cap rules introduced (not applicable to banking and insurance companies)
⎼ Interest paid above 30% of EBITDA not to be allowed as a tax deduction.
⎼ Excess interest paid allowed to be carried forward for 8 years
• Transactions between two domestic related parties outside the scope of SDT provisions except where one of the parties is claiming a profit linked deduction
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Transfer Pricing
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
• Scope of profit linked incentives for affordable housing projects expanded
• Restrictions on loss carry forward for start-ups relaxed for change in shareholding due to capital infusions
• Scope of s. 56 (receipts without adequate consideration) expanded to cover all
assesses and all asset classes (including shares of listed entities)
• Time limit for completion of assessments proposed to be reduced in respect of:
⎼ AY 2018-19: to 18 months from 21 months
⎼ AY 2019-20: to 12 months from 21 months
• Rent paid by certain individuals / HUFs exceeding INR 50,000 per month liable to
TDS at 5%
• Refunds cannot be withheld in case of scrutiny assessment without approval of
higher authorities
• Tax deduction in respect of profit from SEZ units to be restricted to Total income of
the taxpayer
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Incentives & Others
Indirect Tax
Proposals
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INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
• Council has finalized its recommendations on almost all issues;
• IT preparedness on track;
• Govt to reach out to trade and industry from 1st April;
• No definitive timeline announced for GO-LIVE date.
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GST
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
• No change in peak rate of Customs, Excise & Service Tax
• Advance Ruling (Customs, Central Excise & Service Tax)
⎼ Common Authority for Advance Rulings for Income Tax, Customs, Central Excise, Service tax. Pending cases to be transferred on the date of assent of Finance Bill, 2017
⎼ Time limit for pronouncement of advance ruling increased from 90 days to 6 months
• Application for Settlement Commission can be made by co-noticees
• Settlement Commission can amend its order within 3 months to rectify any error apparent on record
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Common legislative changes
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
Customs Duty/ Excise duty tariff rate changes/reduction:
• To incentivize domestic value addition ‘Make in India’ (e.g. LNG, parts of LED)
• To address problems of inverted duty structure (e.g. solar tempered glass)
• To provide protection to the domestic industry (e.g. PCBs for mobile)
• To promote cashless transactions and domestic manufacturing of device (POS card reader, micro ATM, Scanner & components)
• To improve ease of doing business and Export Promotion (e.g. Increase in limit of duty free import of inputs for leather/ synthetic footwear)
• Anti-avoidance measure (e.g. silver coins)
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Key Changes – Tariff Rates
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
Customs (legislative changes)
• Ambit of importer/exporter under Customs widened to include beneficial
owner
• Ceiling of 1 day from the day of arrival of vessel/aircraft/vehicle introduced
for filing Bill of Entry in case of imports for home consumption or
warehousing
• Facility of storage of goods in public warehouse extended to goods
imported for warehousing
Key Changes (1/3)
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
CENVAT Credit
• Specific proviso introduced for banks, financial institutions (including
NBFCs) for reversal of credit under Rule 6 after considering value of
interest or discount – Effective 2 February 2017
− Position for the period April 2016 till 2 February 2017?
• Specific approval now required in cases of transfer of CENVAT credit in
relation to merger, demerger, amalgamation etc. under Rule 10
− AC/ DC to provide approval within 3 months (extendable up to 9
months)
Key Changes (2/3)
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
Service tax
• Retrospective amendment to upfront lease payment for leasing (30 years
or more) of industrial plots by State Government corporations /
undertakings – Effective 1 June 2007 to 21 September 2016
⎼ Refund application to be made within six months of the date of Finance Bill
receiving presidential assent
• Rule 2A of Valuation Rules amended to exclude value of land while calculating value of works contract service - Effective from 1 July 2010
⎼ In case where value of land is not identifiable, the value shall be considered as
25%/ 30% as applicable (instead of 40%)
R&D Cess – Repealed from 1 April 2017
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Key Changes (3/3)
INDIA UNION BUDGET
2017 - 18
INDIA UNION BUDGET
2017 - 18
OIDAR services - Effective from 1 December 2016
• Levy of Service tax on OIDAR services provided by a foreign service provider
to an Indian recipient – Definition expanded to include electronic services
such as advertising on the internet, providing cloud services, online supply of
digital content, digital data storage, online gaming etc.
• Onus of payment –
⎼ B2B transactions: Service receiver under RCM
⎼ B2C transactions: Service provider or his agent
Import of Cargo - Effective from 22 January 2017
• Service tax @4.5% on Ocean freight paid for inbound cargo into India where the
service provider and service recipient are both located outside India
⎼ Liability cast upon owner/master of the vessel or person who files IGM or
agent appointed in India to act on behalf of the owner of the vessel
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Pre - Budget: Key changes
QUESTIONS?
For more insights, visit:
www.dhruvaadvisors.com 23
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KEY CONTACTS
Dinesh Kanabar (Mumbai)
Chief Executive Officer
Vishal Gada (Ahmedabad)
Partner
Ajay Rotti (Bengaluru)
Partner
Krishan Malhotra (Delhi / NCR)
Partner
Mahip Gupta (Singapore)
Partner
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Disclaimer:
The information and analysis contained herein is intended to provide general guidance. The advice of an expert should be
obtained based on individual circumstances
