Union Budget 2014 - Synopsis IDT

CA

. BRI

JESH

VER

MA,

AGR

A

2014

UNIO

N BU

DGET

201

4-15

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SERVICE TAX

PROPOSALS

INDIRECT TAX PROPOSALS IN FINANCE BILL (NO. 2) 2014

The Hon’ble Finance Minister has, while presenting the Union Budget 2014-15, introduced the Finance (No.2) Bill, 2014 [hereinafter, the Bill] in the Lok Sabha on the 10th of July, 2014. Clause 106 appearing in Chapter V of the Bill covers the amendments made to Chapter V of the Finance Act, 1994. In addition, a set of notifications are also under issue.

The changes being made by amendments in notifications and rules can be categorized into two broad categories based on when they would come into effect: (i) changes which will have immediate effect; and (ii) changes which are proposed to be given effect to only from 1st October, so as to coincide with the Service Tax Return cycle. As far as statutory amendments are concerned, they would come into effect only from the date on which the Bill receives the assent of the President. Regarding certain amendments proposed for widening the tax base, they would come into effect on a date to be notified after the Bill receives the assent of the President. Entries in the Bill and the notifications may be carefully read, for this purpose.

The changes being made are discussed below under three broad categories:

(i) Measures to widen the tax base; [Para 2] (ii) Measures for compliance enhancement; [Para 3] and (iii) Facilitation measures. [Para 4]

The various contours of this budget are being discussed herein below in details:

A. MEASURES FOR WIDENING OF THE TAX BASE:

1. Levy of tax on sale of space or time service:

Service tax leviable currently on sale of space or time for advertisements in broadcast media, namely radio or television [section 66D (g) read with section 66B], is proposed to be extended to cover such sales on other segments like:

a. Online and mobile advertising. b. Internet websites c. Out-of-home media d. On film screen in theatres e. Bill boards, conveyances f. Buildings g. Cell phones h. Automated Teller Machines i. Tickets j. Commercial publications k. Aerial advertising, etc.

Sale of space for advertisements in print media, however, would continue to be in the negative list and hence remain excluded from service tax. Print media is being defined in service tax law for the purpose.

This change will come into effect from a date to be notified later, after the Finance (No.2) Bill, 2014 receives the assent of the President.

2. Service Tax on Radio Taxis: Service tax is proposed to be levied on services provided by radio taxis or radio cabs, whether or not air-conditioned [section 66D (o)(vi)]. The abatement presently available to rent-a-cab service would also be made available to radio taxi service, to bring them on par. A definition of radio taxi is being included in the exemption notification No.25/2012-ST. Service tax on radio taxi services will come into effect from a date to be notified later, after the Finance (No.2) Bill, 2014 receives the assent of the President.

3. Withdrawal of exemption in relation to contract carriage by AC Contract carriage Presently service of passenger transportation by a contract carriage other than for the purposes of tourism, conducted tour, charter or hire, is exempt from service tax [Sl.No.23 (b)]. The scope of exemption is being reduced by withdrawing the exemption in respect of air-conditioned contract carriages. As a result, any service provided for transport of passenger by air-conditioned contract carriage including which are used for point to point travel, will attract service tax, with immediate effect. [w.e.f. 11-07-2014]

Service tax will be charged at an abated value of 40% of the amount charged from service receiver; therefore, effective tax will be 4.944%. However, Services by non-air conditioned contract carriages for purposes other than tourism, conducted tour, charter or hire continue to be exempted.

4. Withdrawal of exemption in relation to drug testing on Human Participants Exemption to services by way of technical testing or analysis of newly developed drugs, including vaccines and herbal remedies on human participants by a clinical research organization approved to conduct clinical trials by the Drug Controller General of India [Sl.No.7] is being withdrawn. This would be taxable with immediate effect [w.e.f. 11-07-2014]

5. Exemption to services received by Educational Institutions – Rationalized At present, all services provided by educational institutions [providing educational services specified in the negative list] to their students, faculty and staff are exempted [section 66 D (l) of the Finance Act, 1994]; this will continue. However, in respect of services received by such educational institutions, presently, exemption is being operated through the concept of “auxiliary educational services” [Sl.No.9]. Doubts have been raised and clarifications have been sought regarding the scope and meaning of “auxiliary educational services”. To bring clarity, it is proposed to omit the concept of “auxiliary educational services” and specify in the notification, the services which will be exempt when received by the eligible educational institutions. Accordingly, the following services received by eligible educational institutions are exempted from service tax:

(i) Transportation of students, faculty and staff of the eligible educational institution; (ii) Catering service including any mid-day meals scheme sponsored by the Government; (iii) Security or cleaning or house-keeping services in such educational institution; (iv) Services relating to admission to such institution or conduct of examination.

Further, for the purposes of this exemption, the entry at Serial No. 9 of the Mega Exemption Notification No. 25/2012 dated 20.06.2012 is being replaced as

9. Services provided,-

(a) by an educational institution to its students, faculty and staff; (b) to an educational institution, by way of,-

(i) transportation of students, faculty and staff; (ii) catering, including any mid-day meals scheme sponsored by the Government; (iii) security or cleaning or house-keeping services performed in such educational

institution; (iv) services relating to admission to, or conduct of examination by, such institution;

Though, this seems to bring an end to the havoc created by the various field formations regarding taxation of transportation of students and faculty by the educational institutions by its own vehicles but at the same time the JS TRU Letter No. 334/15/2014 poses some confusion also in this matter. It states:

It may be noted that the scope of exemption remains the same as earlier in the case of services provided by eligible educational institutions; in the case of services received by the eligible educational institutions, exemption will be available only in respect of the services specified as above.

We shall have to wait and watch the real departmental version in this whole matter but in the view of the author, Transportation and other such related service which are provided by the educational institution to its students and faculty members should remain out of the tax net now. [w.e.f. 11.07.2014]

6. Removal of exemption in relation to renting of immovable property to an educational institution : With the replacement of entry no. 9 (supra), the exemption hitherto available to a person in respect of renting of an immovable property to an educational institution stands withdrawn. The change shall come into effect immediately [w.e.f. 11.07.2014]

7. Reduction in the scope of exemption in relation to a Government, Govt. Authority or local authority with respect to municipal functions: The entry no. 25 of Notification No. 25/2012 had a very wide connotation. The same is being restricted now and specific services are being marked for the purpose of exemption. The new entry states that the exemption shall be restricted to only such services which are provided by way of

i. water supply ii. public health iii. sanitation conservancy iv. solid waste management v. slum improvement and up-gradation vi. repair & maintenance of a vessel or an aircraft.

It has been clearly mentioned that the exemption would not be extendable to other services such as consultancy, designing, etc., not directly connected with these specified services. The change shall come into effect immediately [w.e.f. 11.07.2014]

8. Exemption relating to accommodation services – tightened In the existing exemption entry no. 18, there was an air of doubt due to the use of the word “commercial” in the entry as to whether dharmashalas, ashram or any such entity which offer accommodation would be covered therein or not. To remove any ambiguity, the word “commercial‟ is being omitted and consequently, all places having a declared tariff of 1000 or more shall now become taxable irrespective of their being “commercial” in nature or not. Renting of vacant land or buildings for hotels would continue to be taxable irrespective of the hotel’s declared tariff. The change shall come into effect immediately [w.e.f. 11.07.2014] It has been clarified that the in respect of any service provider providing any of the above services where exclusions and exemptions mentioned above are withdrawn to widen the tax base, if the aggregate value of taxable service provided by such person in a financial year does not exceed Rupees Ten Lakh, then exemption will be available in terms of Notification 33/2012-ST.

9. Increase in taxable portion of works contract in respect of “other than original works”: In Rule 2A of the Service Tax (Determination of Value) Rules, 2006, category “B” and “C” of works contracts are proposed to be merged into one single category, with percentage of service portion as 70%; this change will come into effect from 1st October, 2014. This rationalization by way of merger of categories has been made to avoid disputes of classification between these two categories. [Notification No.11/2014-ST]. [w.e.f. 01.10.2014]

B. MEASURES FOR ENHANCING COMPLAINCE

1. Time-based levy of interest: In order to ensure timely compliance and expedite payments, new interest mechanism shall be made effective on and from 1st October 2014. Under this mechanism simple interest rates per annum payable on delayed payments under section 75, shall be as follows:

Extent of Delay Simple Interest Rate p.a. Upto six months from due date

18% (15% for SSP*)

More than six months upto one year

18% (15% for SSP) for first six months, and 24% (21% for SSP) for the period of delay beyond six months

More than on year 18% (15% for SSP) for first six months, and 24% (21% for SSP) for second six months,

and 30% (27% for SSP) for the period of delay beyond one year

*SSP = Small Service Provider having value of taxable services less than 60 Lakhs during previous financial year [Proviso to Section 75 of Finance Act 1994] [w.e.f. 01.10.2014]

2. Mandatory e-payment by all assesses irrespective of quantum of payment: E-payment of service tax is being made mandatory with effect from the 1st Oct 2014. Relaxation from e-payment may be allowed by the Deputy Commissioner/Asst. Commissioner on case to case basis [Notification 09/2014-ST]. [w.e.f. 01.10.2014]

C. MEASURES FOR ASSESSEE FACILITATION & TO BRING EFFECT TO VARIOUS AMENDMENTS 1. Rules to define rate of exchange for money changing and related services – Section 67A

The Explanation to Section 67A is being amended to enable the Government to prescribe rules for determination of rate of exchange for calculation of taxable value in respect of certain services. Rules will be prescribed in due course, after the Bill receives the assent. This amendment has been proposed in view of requests from the trade and industry to delink the conversion from the notified Customs rates of exchange as at present. [Rules shall be made after or with enactment]

2. Reverse Charge Mechanism (RCM) to also apply in case of Directors of Body Corporate other than Companies: Service provided by a Director to a body corporate is being brought under the reverse charge mechanism; service receiver, who is a body corporate, will be the person liable to pay service tax. [Effective w.e.f. 11.07.2014]

3. Reverse Charge Mechanism (RCM) to also apply in case of Recovery Agents of Banks, FIs & NBFCs:

Services provided by Recovery Agents to Banks, Financial Institutions and NBFC is being brought under the reverse charge mechanism; service receiver will be the person liable to pay service tax. [Effective w.e.f. 11.07.2014]

4. Amendments in Place of Provision of Service Rules 2012:

i. Goods temporarily Imported for repair and thereafter re-exported: In the existing rule 4(a), the place of provision for such goods which are temporarily imported in taxable territory for any repair or re-conditioning and are thereafter re-exported, shall not be governed by the rule 4 by virtue of 2nd proviso to the rule which further imposes a restriction that in this regard conditions shall be prescribed. Now this proviso has been replaced by new proviso 2nd which states the condition in the proviso itself that the non-applicability of rule 4 would happen only when the goods are re-exported after the repairs without being put to any use in the taxable territory.

ii. Intermediary to include Commission agent for “Goods”: The definition of intermediary is being amended to include the intermediary of goods in its scope. Accordingly, with effect from 1.10.2014, an intermediary of goods, such as a commission agent or consignment agent shall be covered under rule 9(c) of the Place of Supply of Services Rules.

iii. Hiring of vessel or aircraft – no more a service provider based service for POP purposes: Service consisting of hiring of Vessels (excluding yachts) and Aircraft is being excluded from rule 9(d). Accordingly, hiring of vessels, or aircraft, irrespective of whether short term or long term, will be covered by the general rule, that is, the place of location of the service receiver. Hiring of yachts would however continue to be covered by rule 9 (d).

5. Amendments Point of Taxation Rules 2011: i. Reducing six months moratorium under RCM to three months:

The first proviso to rule 7 is being replaced to provide that in cases where RCM applies i.e. where the POT is the date of making payment to service provider and such payment is not made within 3 months (earlier this was 6 months) then POT shall be the date immediately following the said period of 3 months ( earlier if payment was not made within 6 months then POT was to be determined under normal rule 3)

[Amendment w.e.f. 01.10.2014]

ii. Transition Rule for invoices issued till 30.09.2014 for cases falling under Rule 7 ibid: A new rule 10 has been incorporated w.e.f. 01.10.2014 to state that regardless of anything contained in rule 7, in respect of invoices issued before 01.10.2014 for which payment is still due as on 01.10.2014 following shall be POT:

a. If such payment is made within 6 months from invoice date – Date of Payment shall be POT.

b. In other case – POT shall be determined according to rule 3 [Amendment w.e.f. 01.10.2014]

6. Amendments CENVAT Credit Rules 2004:

i. CENVAT Credit no more an infinite benefit: Newly inserted proviso to rule 4 (1) and fifth proviso to rule 4(7) state that a manufacturer or a service provider shall take credit on inputs and input services within a period of six months from the date of issue of invoice, bill or challan w.e.f. 1St September,2014

ii. In case of 100% RCM, condition make make payment of invoice to take Cenvat Credit is now withdrawn: In case of service tax paid under full reverse charge, the condition of payment of invoice value to the service provider for availing credit of input services is being withdrawn. However, there is no change in respect of partial reverse charge. [Refer amended proviso to rule 4(7)].

iii. Re-credit of reversed CENVAT in case of non receipt of export proceeds: Re-credit of CENVAT credit reversed on account of non-receipt of export proceeds within the specified period or extended period, to be allowed, if export proceeds are received within one year from the period so specified or extended period. This can be done on the basis of documents evidencing receipt of export proceeds [Refer the newly inserted proviso to rule 6(8)].

[Amendment w.e.f. 11.07.2014]

7. Amendments in abatement Notification No. 26/2012-ST dated 20.06.2012:

Following crucial amendments have been made in the abatement notification:

S. No. Amendment in which entry

Nature of amendment Effect of amendment

1. Serial No. 7 relating to Transport of Goods by Road Service (GTA) [w.e.f. 11.07.2014]

Condition of non-availment of CENVAT Credit has been limited to only the service provider.

Service recipient will not be required to establish satisfaction of this condition by the service provider

2. Serial No. 8 relating to

Chit Funds [w.e.f. 11.07.2014]

Condition for non availment of CENVAT Credit has been specifically mentioned. Earlier the words “Same as above” existed

No effect as such


Renting of Motor vehicle designed to carry passengers [w.e.f. 01.10.2014]

The name of entry has been changed to “Renting of Motor cab”. Further CENVAT of Input Services alone is being provided in respect of Input services of Rent a Cab itself.

Now CENVAT credit of another Rent-a-cab operator (input service) can be taken @100% (if ISP avails abatement) or 40% (If ISP pays full tax)

4. Serial No. 9A (Newly

Inserted) in respect of Contract Carriage other than motor cab [w.e.f. 11.07.2014] Serial No. 9A (Newly Inserted) in respect of Contract Carriage other than motor cab to be further amended on the date on which the word Radio Taxi gets omitted

Tax is imposed on 40% value Radio taxi shall also become taxable New entry

from section 66D(o)(vi) [Date of enactment]


transport of goods by vessel [w.e.f. 01.10.2014]

Taxable portion reduced from 50% to 40%

Effective rate reduced from 6.18% to 4.944%


Tour Operator [w.e.f. 01.10.2014]

CENVAT Credit allowed in respect of Input Services of another Tour Operator.

CENVAT Allowed of Input Services. Cascading Effect avoided.

8. Partial Reverse Charge in respect of Rent-a-cab (Non abated value) streamlined:

In renting of motor vehicle, where the service provider does not take abatement the portion of service tax payable by the service provider and service receiver will be modified as 50% each.

[w.e.f. 01.10.2014]

9. SEZ – procedural simplification: [changes to have immediate effect]. • To be provided that the Central Excise Officer would issue Form A-2, within fifteen days from the date of receipt of Form A-1. • Exemption would be available from the date when list of service on which SEZ is entitled to upfront exemption is endorsed by the authorized officer of SEZ in Form A-1, provided Form A-1 is furnished to the jurisdictional Central Excise Officer within fifteen days of its verification. If furnished later, exemption would be available from the date on which Form A-1 is so furnished. • Pending issuance of Form A-2, exemption will be available subject to condition that authorization issued by the Central Excise officer will be furnished to service provider within a period of three months from provision of service. • As regards services covered under reverse charge, the requirement of furnishing service tax registration number of service provider shall be dispensed with.

• A service shall be treated as exclusively used for SEZ operations if the recipient of service is a SEZ unit or developer, invoice is in the name of such unit/developer and the service is used exclusively for furtherance of authorized operations in the SEZ.

[w.e.f. 11.07.2014]

10. Legislative Amendments in Finance Act 1994

Certain other amendments in Chapter V of the Finance Act, 1994 which are proposed, are as follows:

i. Section 73 to be amended to prescribe time limit for completion of adjudications; time limit to be followed, as far as possible.

ii. Reference to first proviso to sub-section (1) of section 78, in section 80, to be omitted. In case of serious offences, waiver of penalty not to be available, though details may be available in records.

iii. Section 82(1) to be amended, along the lines of section 12F (1) of the Central Excise Act, so that Joint Commissioner or Additional Commissioner or any other officer notified by the Board can authorize any Central Excise Officer to search and seize.

iv. Section 83 to be amended to include a reference to sections 5A (2A), 15A and 15B of the Central Excise Act :

(a) Section 5A(2A) prescribes that insertion of an explanation in notifications/orders within one year shall have the effect as if it had always been part of the notification;

(b) Section 15A is being inserted in the Central Excise Act to prescribe that specified third party sources shall furnish periodic information in the manner as may be prescribed;

(c) Section 15B is being inserted in the Central Excise Act to prescribe that failure to provide information under section 15A would attract penalty.

v. Vide section 83, Section 35F of the Central Excise Act is already applicable to service tax.

Section 35F of the Central Excise Act is now being substituted with a new section which prescribes a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both, for filing appeal before the Commissioner (Appeals) or the Tribunal at the first stage and 10% of the duty demanded or penalty imposed or both, for filing the

second stage appeal before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of Rs.10 Crore. All pending appeals/stay applications would be governed by the statutory provisions prevailing at the time of filing such stay applications/appeals. When the amended section 35F in the Central Excise Act comes into force, it would, mutatis mutandis, apply to service tax by virtue of section 83 of the Finance Act, 1994.

vi. Sub-section (6A) of section 86 proposed to be amended to omit the words “for grant of stay or”.

vii. In section 87, power to recover dues of a predecessor from the assets of a successor purchased from the predecessor, is to be provided, as it is available in section 11 of the Central Excise Act.

viii. Section 94 to be amended to obtain rule making power (a) to impose upon assessees, inter alia, the duty of furnishing information, keeping

records and making returns and specify the manner in which they shall be verified;

(b) for withdrawal of facilities or imposition of restrictions (including restrictions on utilization of CENVAT credit) on a service provider or exporter, to check evasion of duty or misuse of CENVAT credit; and (c) to issue instructions in supplemental or incidental matters.

Amendment at sl.no.(i) above shall come into effect from a date to be notified after the Finance (No.2) Bill, 2014 receives the assent of the President; others will come into effect from the date of assent.

11. New exemptions: i. Life micro-insurance schemes for the poor, approved by IRDA, where sum assured does

not exceed Rupees Fifty Thousand to be exempted from service tax. ii. Transport of organic manure by vessel, rail or road (by GTA) is being exempted.

iii. Loading, unloading, packing, storage or warehousing, transport by vessel, rail or road (GTA), of cotton, ginned or baled, is being exempted.

iv. Services provided by common bio-medical waste treatment facility operators to clinical establishments are being exempted.

v. Specialized financial services received by RBI from global financial institutions in the course of management of foreign exchange reserves, e.g., external asset management, custodial services, securities lending services, etc. are being exempted.

vi. Services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India are being exempted.

vii. New exemptions will come into effect immediately,i.e.11.7.2014

12. Retrospective Exemption:

Service provided by Employees’ State Insurance Corporation (ESIC) during the period prior to 1.7.2012 to be exempted from service tax.

CENTRAL EXCISE

PROPOSALS

CENTRAL EXCISE TARIFF ACT, 1985

Sr. No. CHAPTER No.

DESCRIPTION (Excise Duty on)

NATURE OF CHANGE

EFFECT

1. Chapter 1 to 20

NO CHANGE

2.

Waters, Aerated Waters, lemonade and other

Additional duty @ 5%

3.

Chapter 21 to 24

Cigrarettes, cigars, cheroots and cigarillos of length not exceeding 65 mm

Rate of Duty Increased by 72%

4. Cigarettes, cigars, cheroots and cigarillos for other lengths.

Rate of Duty Increased by 11% to 21%

5. Filters exceeding 70 but not

exceeding 85 mm. Omitted Tariff item 24022060

Omitted

6. Pan Masala Rate of Duty 12 % to 16%

7. Unmanufactured Tobacco Rate of Duty 50% to 55%

8. Jarda Scented Tobacco, gut Rate of Duty 60% to 70%

9. Chapter 25 , 26

NO CHANGE

10.

Chapter 27 to 29

Clean Energy Cess levied on Coal , Lignite and peat

Rate of Duty Increased from Rs. 50 per tonne to Rs. 100 per tonne

11. Branded Petrol Rate of Duty Reduced from Rs. 7.50 per liter to Rs 2.35 per

litre. 12. Liquefied Propane and Butane

mixture, Liquefied Propane, Liquefied Butane and Liquefied Petroleum Gases (LPG) imported by the Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited or Bharat Petroleum Corporation Limited, for supply to Non-Domestic Exempted Category (NDEC) customers.

RETROSPECTIVE EXEMPTION

Fully exempted retrospectively w.e.f. 08.02.2013 so as to treat NDEC customers, such as, hospitals, government canteens, BSF/CISF mess, etc., at par with domestic customers for the purposes of supply of LPG.

13. Chapter 30 to 33

NO CHANGE

14.

Chapter 34 to 39

Specified raw materials used in their manufacture Backsheet and EVA sheet for manufacture of photovoltaic cells/ modules.

FULL EXEMPTION FULL EXEMPTION

15. Semi- mechanized units manufacturing safety matches to carry out the processes of ‘Pasting of labels’ and ‘Packing’ with the aid of power.

Rate of Duty Concessional rate @ 6%

16. DDT manufactured by Hindustan Insecticides Limited for supply to the National Vector Borne Diseases Control Programme (NVBDCP) of the Ministry of Health & Family Welfare.


17. Plastic materials reprocessed out of the scrap or waste and cleared into the DTA by an EOU.


18.

Chapter 40 to 55

Gloves specially designed for use in sports.

Concessional Rates

2% (Without CENVAT Credit) or 6% (With

CENVAT) 19. Writing and Printing paper

for printing of educational textbooks.

Opitonal duty of 2% (Without CENVAT Credit) / 6% (With CENVAT) is being WITHDRAWN

Uniform Excise duty of 6% (With CENVAT)

20. Security threads and security fibre supplied to Security Paper Mill Corporation of India Limited (SPMCIL) and Bank Note Paper Mill India Private Limited (BNPMIPL)


21. Polyester Staple Fiber (PSF) and Polyester Filament Yarn (PFY) manufactured from

EXEMPTED

Exempted

Retrospectively

plastic waste or scrap or plastic waste including waste polyethylene terephthalate (PET) bottles

RETROSPECTIVELY

w.e.f. 29.06.2010 to

07.05.2012

22. Polyester Staple Fiber and Polyester Filament Yarn manufactured from plastic waste or scrap or plastic waste including waste polyethylene terephthalate (PET) bottles.

Rate of Duty 2% (Without CENVAT Credit)

or 6% (With CENVAT)


NO CHANGE

24.

Chapter 64

Footwear of retail price exceeding Rs.500 per pair but not exceeding Rs.1,000 per pair.

Rate of Duty Reduced from 12% to 6%

(Footwear of retail price upto Rs.500 per pair will continue to remain exempted.)


NO CHANGE

26.

Chapter 70

Solar tempered glass used in the manufacture of solar photovoltaic cells/ modules, solar power generating equipment/system, and flat plate solar collectors.


27. Chapter 71 Un-branded articles of precious metals.

EXEMPTED RETROSPECTIVEL

Y

Exempted Retrospectively w.e.f. 01.03.2011 to 16.03.2012.

28. Chapter 72 NO CHANGE

29. Chapter 73

Forged steel rings used in the manufacture of bearings of wind operated electricity generators.

Rate of Duty Reduced from 12% to NIL

30. Chapter 74

Flat copper wire used in the manufacture of PV ribbons (tinned copper interconnect) for use in the manufacture of solar cells/modules.


31. Winding wires of copper Rate of Duty Increased from 10% to 12%

32.

Chapter 75 to 76

NO CHANGE

33. Machinery for the preparation of meat, poultry, fruits, nuts or vegetables, and on presses, crushers and similar machinery used in the manufacture of wine, cider, fruit juices or similar beverages and on packaging machinery.

Rate of Duty Reduced from 10% to 6%

34. Machinery, equipments, etc. required for setting up of compressed biogas plant (Bio-CNG)


35. Machinery, equipments, etc. required for setting up of solar energy production projects


36. Hand operated sewing machine other than those operated with electric motors (whether in-built or attachable to the body).

Rate of Duty 2% (Without CENVAT )

/ 6% (With CENVAT)

37.

Chapter 85

Metal Core PCB and LED driver for use in the manufacture of LED lights and fixtures and LED lamps

Rate of Duty Reduced from 12% / 10% to 6%.

38. Parts consumed within the factory of production for the manufacture of non-conventional energy devices


39. Recorded smart cards Rate of Duty Increased from 2% without CENVAT and 6% with CENVAT to a

uniform rate of 12%

40. Chapter 86 NO CHANGE

41. Chapter 87

Parts of tractors removed from one or more factories of a tractor manufacturer to another factory of the same manufacturer for manufacture of tractors.

EXEMPTED EXEMPTED


NO CHANGE

43.

MISCELLANEOUS

Reverse osmosis (RO) membrane element used in water filtration or purification equipment (other than household type filter).


44. RO membrane element used in household type filters.

Rate of Duty Reduced from 12% / 10% to 6%

45. Director (Electrical) is being authorized to issue the requisite certificate to enable Delhi Metro Rail Corporation in respect of their Phase-1 and Phase-2 projects instead of Director (Rolling Stock, Electrical & Signaling) at present.

Rate of Duty

NIL BCD

NIL CVD

46. HIV/AIDS drugs and diagnostic kits imported under National AIDS Control Programme (NACP) funded by the Global Fund to Fight AIDS, TB and Malaria (GFATM).


47. National Technical Research Organisation (NTRO).


48. Plants & Equipment imported prior to 2008 for use in projects financed by the UN or an international organization, which hitherto could not be transferred / sold / re-exported out of the project site, are now being

ALLOWANCE Allowed to be transferred / sold / re-exported from the project site.

49. Intermediate goods manufactured and consumed captively for further manufacture of matches


50. Plastic materials reprocessed out of the scrap or waste and cleared into the DTA by an EOU.


51. Where a manufacturer manufactures pouches of different RSPs on a single machine.

RETROSPECTIVE AMENDMENT TO RULES (RULE 8)

Duty liability for that month would be the duty applicable to the highest of the RSP so manufactured.

CENTRAL EXCISE ACT, 1944

Sr. No. SECTION No.

NATURE

1. 15A Inserted so as to empower the Central Government to prescribe an authority or agency to whom the information return shall be filed by the specified persons such as Income Tax Authorities, State Electricity Boards, VAT or Sales Tax Authorities, Registrar of Companies.

2. 35B(1) Amended so as to increase the discretionary powers of the Tribunal to refuse admission of appeal from the existing Rs.50,000 to Rs.2 lakh.

3. 35F Is being substituted with a new section to prescribe a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both for filing appeal with the Commissioner (Appeals) or the Tribunal at the first stage and 10% of the duty demanded or penalty imposed or both for filing second stage appeal before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of Rs. 10 crores.

CENVAT CREDIT RULES , 2004

Sr. No. RULE No. NATURE

1. 12 A Amended so as to disallow transfer of credit by a large taxpayer from one unit to another.

2. 2 (qa) To introduce the definition of ‘place of removal’.

3. 4 (1) Rule 4(1) (for input credit) and Rule 4(7) (for input service credit) are being amended in order to fix a time limit of six months for availment of the CENVAT Credit.

CENTRAL EXCISE VALUATION RULES , 2002


1. RULE 8 SUB-RULE

(3A)

Substituted to provide that in case of default in payment of duty, the assessee shall on his own pay a penalty of 1% per month on the amount of duty not paid for each month or part thereof.

CENTRAL EXCISE VALUATION RULES , 2004


1. The Central Excise

Valuation (Determination of Price of Excisable

Goods) Rules, 2000.

Being amended so as to provide that in cases where excisable goods are sold at a price below the manufacturing cost and profit and there is no additional consideration flowing from the buyer to the assessee directly or from a third person on behalf of the buyer, value for the assessment of duty shall be deemed to be the transaction value.

CUSTOM DUTY

PROPOSALS

CUSTOMS S.

NO. CHANGED

LEGISLATIVE DESCRIPTION NATURE OF

CHANGE EFFECT

1 Chapter 8 ‘’Sun dried dark seedless raisins’’

Change In The Description Of Product

Description changed to ‘’ dark seedless raisins’’

2 Chapter 15, 29 and 38

i. Fatty acids, Crude Palm Stearin, RBD, and other Palm Stearin and specified industrial Crude Oils.

ii. Crude Glycerine

Change in Basic Custom Duty (BCD) Rate

i. BCD on Fatty acids, Crude Palm Stearin, RBD, and other Palm Stearin and specified industrial Crude Oils is being reduced from 7.5% to NIL for manufacture of soaps and oelochemicals.

ii. BCD on Crude Glycerine is being reduced from 12.5% to 7.5% in general and from 12.5% to NIL for manufacture of soaps subject to actual user condition.

3 Chapter 22 Denatured ethyle alcohol change in BCD BCD reduced from 7.5% to 5% 4 Chapter 23 De oiled soya extract, groundnut

oil cakes/ oil cake meal, sunflower oil cake/oil cake meal, canola oil cake/ oil cake meal, mustard oil cake/ oil cake meal, rice bran/ rice bran oil cake and palm kernel cake.

change in BCD Full exemption from BCD upto 31.12.2014.

5 Chapter 24 and 25

i. Tariff item 2402 20 60 ii. Items related to cigarettes

(75mm to 85mm and 85mm)

Amendment in the first schedule to CETA, 1985 (consequential change)

i. Omitted ii. Merged into single tariff item

i.e. others (2402 20 90)

6 Chapter 24 and 25

Steel grade dolomite and steel grade limestone

Change in BCD Reduced from 5% to 2.5%

7 Chapter 26 bauxite Change in Export duty

Increased from 10% to 20%

8 Chapter 27 i. Non agglomerated coal ii. Coking coal

Change in rate of duty

i. BCD 2.5% and CVD 2% ii. BCD increased from NIL to

iii. Steam coal and bituminous coal

iv. Anthracite and other coal.

2.5% iii. BCD increased from 2% to

2.5% iv. BCD reduced from 5% to

2.5% 9 Chapter 27 Metallurgical coke Change in BCD Increased from nil to 2.5%

10 Chapter 27 Crude naphthalene Change in BCD Reduced from 10% to 5% 11. Chapter 27 Reformate and other goods

under sub heading 2707 50 00 Change in BCD Reduced from 10% to 2.5%

12 Chapter 27 Coal tar pitch Change in BCD Reduced from 10% to 5% 13 Chapter 27 Re- gasified LNG for supply to

Pakistan BCD and CVD Exemption from BCD and CVD

14 Chapter 27 Liquefied Propane and Butane mixture, Liquefied Propane, Liquefied Butane and Liquefied Petroleum Gases (LPG) imported by the Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited or Bharat Petroleum Corporation Limited, for supply to Non-Domestic Exempted Category (NDEC) customers

Duty exemption Fully exempt retrospectively w.e.f. 08.02.2013 to 11.07.2014

15 Chapter 27 Propane BCD Reduced from 5% to 2.5% 16 Chapter 28-

49 ethane and other goods under sub-heading 2901 10 00, ethylene, propylene and butadiene

BCD Reduced from 5% to 2.5%

17 Chapter 28-49

ortho-xylene

BCD Reduced from 5% to 2.5%

18 Chapter 28-49

methyl alcohol

BCD Reduced from 7.5% to 5%

19 Chapter 28-49

raw materials for manufacture of spandex yarn viz. Diphenylmethane 4,4 di-isocyanate (MDI) and

BCD Reduced from 5% to nil.

Polytetramethylene ether glycol (PT MEG)

20 Chapter 28-49

specified raw materials used in the manufacture of solar backsheet and EVA sheet for use in manufacture of solar PV cells or modules.

BCD Full exemption

21 Chapter 28-49

i. security fibre, security threads and M-feature imported by Bank Note Paper Mill India Private Limited (BNPMIPL), Mysore.

ii. raw materials required for manufacture of security threads and security fibre subject to actual user condition

BCD and CVD Full exemption

22 Chapter 28-49

Polystyrene (other than moulding powder)

BCD Increased from 1.15% to 7.5%

23. Chapter 51 and 52

The list of specified goods required by handicraft exporters.

amendment Expended and now includes wire rolls.

24 Chapter 51 and 52

Non-fusible embroidery motifs or prints

amendment Included in the list of imported free duty for manufacture of garments for export.


trimmings & embellishments and other goods used by the readymade textile garment sector for manufacture of garments for export

Change in duty free entitlement

Increased from 3% to 5%


Specified goods imported for use in the manufacture of

Exemption Fully exempt from BCD and CVD subject to condition.

textile garments for export


Fusible embroidery motifs or prints, anti-theft devices like labels, tags and sensors, pin bullets for packing, plastic tag bullets, metal tabs, bows, ring and slider and rings

amendment Included in the list of imported free duty manufacture of handloom made ups or cotton made ups or manmade made ups for export

28 Chapter 71 pre-forms of precious and semi-precious stones

BCD Full exemption

29 Chapter 71 i. half-cut or broken diamonds

ii. cut & polished diamonds including lab-grown diamonds and colored gemstones

BCD i. Increased from nil to 2.5%

ii. Increased from 2% to 2.5%

30 Chapter 71 re-import of cut and polished diamonds

Increase in variation level and the perameter of measurement

a variance not exceeding +_ 0.05mm in diameter for round shape diamonds and +_ 0.07mm in length and breadth for diamonds of other shapes shall be allowed.

31 Chapter 72 stainless steel flat products (CTH 7219 and 7220)

BCD Increased from 5% to 7.5%

32 Chapter 73 forged steel rings used in the manufacture of bearings of wind operated electricity generators

BCD Reduced from 10% to 5%

33 Chapter 74 flat copper wire for use in the manufacture of PV ribbons (tinned copper interconnect) for solar PV cells or modules

BCD Full exemption

34 Chapter 84 machinery, equipments, etc. required for initial setting up of compressed biogas plant (Bio-CNG)

BCD BCD at a concessional rate of 5% is being provided

35 Chapter 84 machinery, equipment, etc. required for initial setting up of solar energy production projects

BCD and CVD Reduced to 5% and nil respectively

36 Chapter 84 raw materials required for use in the manufacture of wind operated electricity generators

Special additional duty

Full exemption

37 Chapter 85 i. electrolysers and their parts/spares required by caustic soda or caustic potash units and membranes and their parts/spares required by industrial plants based on membrane cell technology

ii. other parts

BCD i. reduced 5% to 2.5% ii. reduced from 7.5% to 2.5%

38 Chapter 85 LCD and LED TV panels of below 19 inches

BCD Reduced from 10% to nil

39 Chapter 85 colour picture tubes for manufacture of cathode ray TVs

BCD Reduced from 10% to nil

40 Chapter 85 specified parts of LCD and LED panels for TVs

BCD Fully exempted

41 Chapter 85 E-Book readers

BCD Reduced from 7.5% to nil

42 Chapter 85 battery waste and battery scrap

BCD Reduced from 10% to 5%

43 Chapter 85 specified telecommunication BCD Increased from nil to 10%

products not covered under the ITA (Information Technology Agreement)

44 Chapter 85 inputs/components used in the manufacture of Personal Computers (laptops/desktops) and tablet computers

Special additional duty (SAD)

Fully exempt suject to actual user condition

45 Chapter 85 Certain electronic goods Education cess and senior and higher secondary education cess on CVD

Exempt from Education cess and senior and higher secondary education cess on CVD

46 Chapter 85 specified inputs (PVC sheet & Ribbon) used in the manufacture of smart cards

Special additional duty (SAD)

Fully exempt from Special additional duty (SAD)

47 Chapter 89 ships imported for breaking up

BCD BCD reduced from 5% to 2.5%

48 Chapter 90-98

i. authority to issue the requisite certificate to enable Delhi Metro Rail Corporation to avail of Nil BCD and Nil CVD benefits in respect of their Phase-1 and Phase-2 projects

amendment Authority is given to Director (electrical) instead of Director (Rolling Stock, Electrical & Signalling)

49 Chapter 90-98

portable X-ray machine / system

CVD exemption Exemption withdrawn

50 miscellaneous specified HIV/AIDS drugs and diagnostic kits imported under National AIDS Control Programme (NACP)

Custom duty exemption

Fully exempt from custom duty

51 miscellaneous National Technical Research Organisation (NTRO)

BCD exemption Full exemption from BCD

52 miscellaneous Plants & Equipment imported prior to 2008 for use in projects financed by the UN or an international organization, which hitherto could not be transferred / sold / re-exported out of the project site,

amendment Such plants and equipments are now being allowed to be transferred / sold / re-exported from the project

53 import of scientific and technical instruments, apparatus, etc. by public funded and other research institutions, subject to submission of a certificate of registration from the Department of Scientific & Industrial Research (DSIR)

Provision for refund

A provision is being made for refund of Customs duty paid at the time of import

54 BAGGAGE RULES (AMENDMENT) 1. Free baggage allowance increment Limit raised from Rs. 35000

to Rs. 45000 2. Duty free allowance of

cigarettes, cigars, and tobacco. reduction Limit reduced to 100 from

200, from 50 to 25 and 250 gms to 125gms respectively.

OTHER CHANGES 55

Clause 75 CUSTOMS ACT, 1962:

Section 25 is being amended to provide that the customs duties on mineral oils including petroleum & natural gas extracted or produced in the continental shelf of India or the exclusive economic zone of India shall not be recovered for the period prior to 7th February, 2002.

56 Clause 76 CUSTOMS ACT, 1962:

Section 46(3) is being amended to allow the filing of a Bill of Entry prior to the filing of Import Report (as the Manifest is called in case of imports by land) for imports through land route.

57 Clause 83 CUSTOMS ACT, 1962:

Section 129E is being substituted with a new section to prescribe a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both for filing appeal with the Commissioner (Appeals) or the Tribunal at the first stage and 10% of the duty demanded or penalty imposed or both for filing second stage

appeal before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of Rs. 10 crores.

58 Clause 84 CUSTOMS ACT, 1962

Section 131BA is being amended so as to enable the Commissioner (Appeal) to take into consideration the fact that a particular order being cited as a precedent decision on the issue has not been appealed against for reasons of low amount.

Documents

Union Budget 2014 - Synopsis IDT