DNS Budget Highlights 2012

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Overview of Union Budget 2012

A. Preface B. Snapshots of Sectoral Analysis C. Direct Tax Proposals D. Indirect Tax Proposals E. FRBM Amendments F. Contact Us

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A. Preface

Finance Minister Pranab Mukherjee presented the Union Budget 2012-13 in parliament on Friday in the backdrop of challenges faced by the economy during 2011-12 due to global crisis in the form of intensification of the sovereign debt crisis in the Euro zone, uncertainty due to political turmoil in Middle East, rise in crude oil prices, an earthquake striking Japan. With an optimism to improve our macroeconomic environment and strengthen domestic growth drivers to sustain high growth in the medium term, the Finance minister presented the key objectives of Twelfth Five Year Plan aimed at ―faster, sustainable and more inclusive growth.‖ The government is faced with a major challenge of Implementation gaps, leakages from public programmes and the quality of outcomes. Also the Impression of drift in governance and gap in public accountability is misplaced. The government has a challenge to improve the regulatory standards and administrative practices. The union Budget 2012-13 to serve as a transition towards a more transparent and result oriented economic management system in India.

Economic Overview

India‘s GDP is estimated to grow at 6.9 per cent in real terms in 2011-12 which is a significant slowdown in comparison to the preceding two years, primarily due to deceleration in industrial growth, more specifically in private investment.

The headline inflation remained high for most part of the year. It was only in December 2011 that it moderated to 8.3 per cent followed by 6.6 per cent in January 2012.

The current account deficit as a proportion of GDP for 2011-12 is likely to be around 3.6 per cent. This, along with reduced net capital inflows in the second and third quarters, put pressure on the exchange rate.

India‘s GDP is expected to grow at 7.6% with an outside band of +/- 0.25% in 2012-13

Average inflation expected lower next year and current account deficit smaller aided by improvement in domestic financial savings

The developments in India‘s external trade in the first half of the current year were encouraging. Exports have grown by 23 % to reach US Dollar 243 billion, while imports have recorded a growth of 29 % at US Dollar 391 billion during April to January 2011-12.

The implementation of the Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act) at Centre and the corresponding Acts at State level has been the pivot in the successful consolidation of our fiscal balance. Following the announcement in the last Budget, amendments to the FRBM Act have been introduced as part of Finance Bill, 2012. Implementation of Direct Taxes Code (DTC) and Goods and Service Tax (GST) regime with effect from April 1, 2012 has been extended. GSTN will be set up as a National Information Utility and is proposed to be operational by August 2012 which will implement common PAN-based registration, returns filing and payments processing for all States on a shared platform. Government committed to retain at least 51 % ownership and management control of the Central Public Sector Undertakings. Rs. 30,000 Crore to be raised through disinvestment in 2012-13. The decision in respect of allowing FDI in multi-brand retail trade up to 51 per cent, subject to compliance with specified conditions, has been held in abeyance. Allocation for social sector in 2011-12 (Rs. 1, 60,887 Crore) increased by 17 % over current year. It amounts to 36.4 % of total plan allocation.


B. Snapshots of Sectoral Analysis

Infrastructure and Industrial Development

More focus on public private partnerships (PPP). Infrastructure investment will go up to Rs.50 lakh crore with half of this expected from private sector.

Tax free bonds for financing infrastructure projects, are proposed to raise to Rs.60,000 crore in 2012-13 against Rs. 30,000 crore in last year.

Coal India Limited (CIL) has been advised to sign fuel supply agreements, with power plants that have entered into long term Power Purchase Agreements with DISCOMs and would get commissioned on or before March 31, 2015.

Proposed to allow External Commercial Borrowings (ECB) to part finance Rupee debt of existing power projects.

Proposed to allow ECB for capital expenditure on the maintenance and operations of toll systems for roads and highways so long as they are a part of the original project.

To reduce the cost of Aviation Turbine Fuel (ATF), Government has permitted direct import of ATF by Indian Carriers, as actual users.

To address the immediate financing concerns of the Civil Aviation sector, proposal to permit ECB for working capital requirements of the airline industry for a period of one year, subject to a total ceiling of US Dollar 1 billion.

A proposal to allow foreign airlines to participate up to 49 per cent in the equity of an air transport undertaking engaged in operation of scheduled and non-scheduled air transport services is under active consideration of the Government.

Housing Sector

Proposal to allow ECB for low cost affordable housing projects;

Set up Credit Guarantee Trust Fund to ensure better flow of institutional credit for housing loans;

Housing Sector (Contd..)

Enhance provisions under Rural Housing Fund from Rs. 3000 crore to Rs. 4000 crore;

Extend the scheme of interest subvention of 1 per cent on housing loan up to Rs. 15 lakh where the cost of the house does not exceed Rs. 25 lakh for another year; and

Enhance the limit of indirect finance under priority sector from Rs. 5 lakh to Rs. 10 lakh.

Textile

The Government has recently announced a financial package of Rs. 3,884 crore for waiver of loans of handloom weavers and their cooperative societies

Micro, Small and Medium Enterprises

Proposed to set up Rs. 5,000 crore ‗India Opportunities Venture Fund‘ with SIDBI.

To enable these enterprises greater access to finance, two SME exchanges have been launched in Mumbai recently.

Ministries and CPSEs to make a minimum of 20 per cent of their annual purchases from MSEs. Of this, 4 per cent will be earmarked for procurement from MSEs owned by SC/ST entrepreneurs.

Agriculture

The total plan outlay for the Department of Agriculture and Cooperation is being increased by 18 per cent from Rs. 17,123 crore in 2011-12 to ` 20,208 crore in 2012-13.

The outlay for Rashtriya Krishi Vikas Yojana (RKVY) is being increased from Rs. 7,860 crore in 2011-12 to Rs. 9,217 crore in 2012-13

Target for agricultural credit in 2012-13 to Rs. 5,75,000 crore, an increase of Rs. 1,00,000 crore over the target for the current year.


B. Snapshots of Sectoral Analysis (Contd..^2)

Agriculture (Contd..)

The interest subvention scheme for providing short

term crop loans to farmers at 7 per cent interest per

annum will be continued in 2012-13. An additional

subvention of 3 per cent will be available to prompt

paying farmers.

Allocation of Rs. 10,000 crore to NABARD for

refinancing the Regional Rural Banks (RRBs)

through RRB Credit Refinance Fund.

Kisan Credit Card (KCC) scheme will be modified

to make it a smart card which could be used at

ATMs.

Rural Development

Allocation under Rural Infrastructure Development

Fund (RIDF) to Rs. 20,000 crore.

Education

The Right to Education (RTE) Act is being

implemented with effect from April 1, 2010 through

the Sarva Shiksha Abhiyan (SSA). For 2012-13, Rs.

25,555 crore for RTE-SSA. This is an increase of

21.7 per cent over 2011-12.

In the Twelfth Plan, 6,000 schools have been

proposed to be set up at block level as model

schools to benchmark excellence. Of these, 2500

will be set up under Public Private Partnership.

Defense/Security

In the Budget for 2012-13, a provision of Rs.

1,93,407 crore has been made for Defense Services

which include Rs. 79,579 crore for capital

expenditure.

Better Governance

The enrolments into the Aadhaar system have crossed 20 crore and the Aadhaar numbers generated up to date have crossed 14 crore.

It has been proposed to allocate adequate funds to complete another 40 crore Aadhaar (UID) enrolments starting from April 1, 2012.

Health

No new case of polio reported in last one year.

Setting up of a new integrated vaccine unit near

Chennai to achieve vaccine security, disease

eradication and prevention.

National Rural Health Mission (NRHM) is being

implemented through ‗Accredited Social Health

Activist‘- ‗ASHA‘. Allocation to NRHM from Rs.

18,115 crore in 2011-12 to Rs. 20,822 crore in

2012-13.

Budget Estimates

Gross Tax Receipts estimated at Rs 1,077,612

crores for FY 2012-13

Total expenditures budgeted at Rs 1,490,925

crores for FY 2012-13

(This space is intentionally left blank)


C. Direct Tax Proposals

Personal tax

Personal income-tax slabs are proposed to be revised as under:

Rate % Revised Slab Existing Slab

NIL Upto Rs 200,000 Upto Rs 180,000

10% 200,001 to 500,000 180,001 to 500,000

20% 500,001 to 10,00,000 500,001 to 800,000

30% Above 10,00,000 Above 800,000

No separate tax slabs for women assessee. Thus, the maximum exemption limit for a resident women below the age of 60 years would be Rs. 2,00,000

Limits remain unchanged for senior citizens (age of 60 years and above but less than 80 years) at Rs 250,000 and for very senior citizen (age of 80 years and above) at Rs 500,000. Senior citizens not having income from business, shall be exempt from payment of advance tax.

Unexplained money, credits, investments, expenditures etc. will be taxed at the highest rate of 30 per cent irrespective of the slab of income.

A deduction of up to Rs. 10,000 has been proposed for interest from savings bank accounts to individual taxpayers.

Within the existing limit for deduction allowed for

health insurance, a deduction of upto Rs. 5,000

proposed for preventive health check-up.

It is proposed to give Income Tax deduction of 50 per cent on investments of up to Rs 50,000 in savings scheme named after Rajiv Gandhi equity scheme for those who have annual income is less than 10 lacs. The scheme will have a Lock in period of 3 year

Premium paid on life insurance policies issued on or after April 1, 2012 would be eligible for deduction under Section 80C only if premium paid does not exceed 10% of the actual capital sum assured as against 20% at present.

It has been proposed to extend the levy of Alternate Minimum Tax (AMT) on all persons other than companies, claiming profit linked deduction. It is also proposed to provide exemption from AMT if adjusted total income of an Individual or HUF or AOP or BOI does not exceed Rs. 25 lakhs.

Corporate taxation

No change in Corporate Tax Rate, Minimum

Alternate Tax, Surcharge and Education Cess

Turnover Limit for compulsory tax audit of accounts u/s 44AB as for presumptive taxation proposed to be increased to Rs 1crore from Rs. 60 Lacs

Security Transaction Tax reduced by 20% (from 0.125% to 0.1%) on cash delivery transactions.

Deeming provisions introduced to treat share premium received in excess of fair market value as income in the hands of closely held investee company

Repatriation of dividends from foreign subsidiaries of Indian companies to India at a lower tax rate of 15 per cent as against the tax rate of 30 per cent extended for one more year i.e. upto March 31, 2013

The cascading effect of Dividend Distribution Tax (DDT) in a multi-tier corporate structure proposed to be removed.

Tax Collection at Source

It is proposed to now levy tax collection at source

on purchase of bullion and jewellery in excess of Rs.

2 Lakh in cash.

Tax collection at source on trading of Coal, Lignite

and iron ore.

Others

There shall be no disallowance under Sec. 40 (a) for non deduction of tax if due taxes are paid by the payee.

Section 68 is proposed to be amended to provide that where assessee is a company (not being a widely held company), the sum found credited in its financial statement, consisting of share capital, security premium or any such amount, shall not be deemed to be unexplained if shareholder explains the source of such share capital and such explanation in the opinion of the Assessing officer is satisfactory.


C. Direct Tax Proposals (Contd..^2)

Tax Deduction at Source

It is now proposed to deduct tax at source 1% of

consideration amount on transfer of immovable

property (other than agricultural land). Such

deduction is only required if consideration exceeds

Rs. 50lacs in case of property located in specified

urban area and Rs. 20lacs in case property located in

any other area.

Withholding tax on interest payments on external

commercial borrowings reduced from 20 percent to 5

percent for power, airlines, roads, bridges, affordable

houses and fertilizer sectors.

Threshold limit for deduction of tax from payment of interest on debentures u/s 193 increased from Rs. 2,500 to Rs. 5,000.

It is now proposed to deduct tax at source under Sec. 194J from remuneration paid to a director if such payment is not subject to deduction of tax under Sec. 192.

Deductions/ Exemptions

It has been proposed to extend the weighted

deduction of 200 per cent for R&D expenditure in an

in-house facility beyond March 31, 2012 for a further

period of five years.

Investment linked deduction of capital expenditure

incurred is proposed to be provided at the enhanced

rate of 150 per cent, as against the current rate of 100

per cent. for certain businesses which include cold

chain facility, warehouse for storing food grains,

hospital, fertilizer, new sectors eligible for investment

linked deduction

Extension of the sunset date by one year for power

sector undertakings so that they can be set up on or

before March 31, 2013 for claiming 100 per cent

deduction of profits for 10 years. Further, additional

depreciation of 20 per cent in the initial year is

proposed to be extended to new assets acquired by

power generation companies.

Capital gain on sale of residential property exempted

from if the sale consideration is used for subscription

in equity of a manufacturing SME company for

purchase of new plant and machinery.

Weighted deduction at the rate of 150 per cent of

expenditure incurred on skill development in

manufacturing sector proposed in accordance with

specified guidelines.

Deduction under Sec. 80G is proposed to be disallowed if donation is paid in cash in excess of Rs. 10,000

Additional measures to deter use of unaccounted money

Compulsory reporting requirement in case of assets

held abroad

Reopening of assessment allowed up to the period

of 16years in relation to assets held abroad.

Increasing the onus of proof on closely held

companies for funds received from shareholders as

well as taxing share premium in excess of fair

market value.

Amendment to Definition of Royalty u/s 9(1)

Confirming the judgment passed in the case of

Gracemac Corporation vs. ADIT and putting aside

controversy that whether payment for use of

software or copyrighted article would be taxable as

royalty or not, definition of Royalty u/s 9(1) is

proposed to be amended inserting Explanation 5 to

include consideration in respect of any right,

property or information, whether or not—

the possession or control of such right, property

or information is with the payer;

such right, property or information is used

directly by the payer;

the location of such right, property or

information is in India.

Now, post amendment every payment for use of or right to use of software shall be taxable as royalty.


Overcome of Supreme Court's Ruling in Vodafone's case- Retrospective amendments to sections 2(14), 2(47) and 9 of the Income Tax Act, 1961

The Supreme Court in the instant case {Vodafone International Holdings B.V. v. UOI [2012] 17 taxmann.com 202 (SC)} held that transfer of shares of a foreign company which has an Indian Company as its subsidiary does not amount to transfer of any capital asset situated in India within meaning of section 9(1)(i). The Supreme Court‘s view in this respect was that:

o ―controlling interest‖ is not a capital asset o the words ―directly or indirectly‖ do not qualify the transfer of the asset, o if a foreign company has a subsidiary in India, shares of foreign company are not deemed to be situated in

India

Pursuant to this judgment, the Finance Bill, 2012 seeks to tax indirect transfer of capital assets in India by inserting clarificatory explanations to Section 2(14), 2(47), 9(1) and 195 of the Act. The amendment is proposed to be applicable retrospectively from 1 April, 1962.

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

Explanation to section 2(14) is proposed to be added with effect from the 1st day of April 1962, so as to clarify that

“the term „property‟ includes any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever.”

After the amendment, transfer of shares which result in transfer of ―controlling interest of an Indian Company‖ could give rise to a taxable event in India.

Section 2(47): Definition of “Transfer”

Explanation to section 2(47) is proposed to be added with effect from the 1st day of April 1962, so as to clarify

that “transfer includes disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company incorporated outside India.”

Thus, ‗transfer‘ would include indirect transfer of shares if rights in such shares are effected and dependent upon transfer of shares even of a foreign company.

Clarification of „through‟ in Section 9(1) - Explanation 4 to Section 9(1) of the Act

The Bill further proposes to clarify that the expression ‗through‘ shall mean and include and shall be deemed to have always meant and included ‗by means of‘, ‗in consequence of‖ or ‗by reason of‘.

Section 9(1): Definition of income deemed to accrue or arise in India

In section 9(1) of the Income Tax Act, Explanation 5 shall be inserted w.e.f. the 1st day of April 1962, so as to

clarify that “an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share of the interest derives, directly or indirectly, its value substantially from the assets located in India”.

Accordingly, the amendment seeks to widen the scope of income under Section 9 of the Act and bring into tax net, the gains derived from transfer of share or interest if such share or interest derives either directly or indirectly its value substantially from assets located in India.

Section 195: Withholding tax on payment to non residents

A consequential amendment is proposed to be made in section 195 to extend applicability of withholding tax provisions u/s 195 to all persons whether resident or non- resident. It is further clarified that such non- resident may or may not have a residence or place of business or business connection or any other presence in any manner whatsoever in India.

C. Direct Tax Proposals (Contd…^3)


TRC is mandatory to get treaty benefit, if GAAR invoked no Treaty benefit As per existing provisions of section 90 of the Act, provisions of the DTAA entered into by India with other countries

or the provisions of the Act, whichever is more beneficial, would be applicable to the non-residents tax payers, being

residents of such other countries.

In view of such DTAAs, there are few countries, inter-alia, Mauritius, Cayman Islands, etc. wherein the right to tax

certain income (i.e. capital gains) is granted to the resident country. To ensure that the persons, availing the benefit of

such provisions in the DTAA, are actually residents of the corresponding country, the Assessing officer generally asks

for the Tax Residency Certificate (―TRC‖), to be issued by the tax authorities of such country.

Presently, there is no specific provision in the Act to obtain a TRC to claim benefits under the DTAA except in the

case of Mauritius which is provided by Circular No. 789 dated 13th April, 2000 issued by CBDT wherein it was

clarified that that wherever a Certificate of Residence is issued by the Mauritian Authorities, such Certificate will

constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the

DTAC accordingly.

Amendment to Section 90 and 90A

Finance Bill 2012 proposes to amend section 90 and 90A of the Act in order to provide that the non-residents would

be entitled to be governed by the provisions of DTAA only when TRC is obtained from the tax authorities of the

country of residence of such non-resident.

The amendment shall be applicable from 1 April 2013 to ensure that third party residents do not claim unintended

treaty benefits

Prevention of Generation and Circulation of Black Money It is proposed to lay a white paper on black money on the Table of the House in the current session of Parliament. Also it has been announced that there is advancement in tracking the trail of black money menace. The following have already been done

82 Double Taxation Avoidance Agreements (DTAA) and 17 Tax Information Exchange Agreements (TIEA) have been finalized and information regarding bank accounts and assets held by Indians abroad has started flowing in. In some cases prosecution will be initiated;

Dedicated exchange of information cell for speedy exchange of tax information with treaty countries is fully functional in CBDT;

India became the 33rd signatory of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters; and

Directorate of Income Tax Criminal Investigation has been established in CBDT.

The following legislative measures for strengthening anti-corruption framework are in various stages of enactment:

Prevention of Money Laundering (Amendment) Bill, 2011

Benami Transactions (Prohibition) Bill, 2011

National Drugs and Psychotropic Substances (Amendment) Bill, 2011

C. Direct Tax Proposals (Contd….^4)


Rate

Service tax rate raises from 10% to 12% effective from 1 April 2012.

Levy of service tax:

The concept of negative list proposed to be introduced, i.e. all services will now attract service tax, except those specified in the negative list.

Exemptions

The negative list has 17 heads and includes specified services provided by the government or local authorities, and services in the fields of education, renting of residential dwellings, entertainment and amusement, public transportation, agriculture and animal husbandry.

Film industry also gets tax exemption on copyrights relating to recording of cinematographic films.

In addition to the negative list, there is a list of exemptions which include health care, services provided by charities, religious persons, sportspersons, performing artists in folk and classical arts, individual advocates providing services to non-business entities, independent journalists, and services by way of animal care or car parking which shall be exempt from service tax.

The services of business facilitators and correspondents to banks and insurance companies included in exemption list.

Construction services relating to specified infrastructure, canals, irrigation works, post-harvest infrastructure, residential dwelling, and low-cost mass housing up to an area of 60 sq. mtr. under the Scheme of Affordable Housing in Partnership are also included in the exemptions.

It is proposed to raise the exemption for the monthly charges payable by a member to a housing society from Rs. 3,000 to Rs. 5,000.

Regulatory measures

Revision Application Authority and Settlement Commission are being introduced in Service Tax to help resolve disputes with far greater ease.

Cascading of taxes has been significantly reduced by permitting utilization of input tax credits in a number of services such as catering, restaurants, hotel accommodation, pandal and shamiana and transport sectors.

As a measure of harmonization between Central Excise and Service Tax, the Government has made a number of alignments. From now on common simplified registration form and a common return for Central Excise and Service Tax, to be named EST-1 shall be filed. This common return will comprise only one page, which will be a significant reduction from the 15 pages of the two returns at present

Possibility of a common tax code for service tax and central excise would be examined

The option of deferred payment is being allowed for all service providers rather than for specific services. The facility will be available only to individuals and partnership firms (including limited liability partnership) up to a turnover of taxable services of Rupees Fifty lakhs subject to the condition that their turnover of taxable services in previous year was below Rupees Fifty lakhs.

Service Tax Return

Periodicity of Return

Quarterly Return Monthly Return

Status Individual/ Firm/LLP assessee

Assesses other than Individual/Firm/LLP

Assesses other than Individual/Firm/ LLP

Limit Any amount of tax liability in immediately preceding F.Y

Tax liability less than 25 lakhs in immediately preceding financial year

Tax liability more than 25 lakhs in immediately preceding financial year

D. Indirect Tax Proposals – Service Tax


CENTRAL EXCISE

Rate

Rate of Excise duty raises to 12% from 10% (With CENVAT);

Merit Rate of Excise duty raised to 6% from 5% (With CENVAT);

Merit Rate of Excise duty raised to 2% from 1% (Without CENVAT) with few exceptions as briefed below.

Increase in rate of Excise Duty

It is proposed to increase excise duty on demerit

goods such as certain cigarettes, hand rolled bidis,

pan masala, gutka, chewing tobacco, un

manufactured tobacco and zarda scented tobacco.

It is proposed to enhance cess on crude petroleum

oil produced in India to Rs. 4500/- per metric

tonne from Rs. 2500/- per metric tonne

In the case of cars that attract a mixed rate of duty per vehicle, it has been proposed to increase the duty and switch over to an ad valorem rate as mentioned in the table below

Current Rate

10% 10% + Rs.

10,000

22% 22% + Rs.

15,000

Proposed Rate

12% 15% 24% 27%

Excise duty rationalized for packaged cement, whether manufactured by mini-cement plants or others.

Levy of excise duty of 1 per cent on branded precious metal jewellery to be extended to include unbranded jewellery.

Chassis for building of commercial vehicle bodies to be charged excise duty at an ad valorem rate instead of mixed rate.

12% excise duty imposed on branded retail garments. Abatement increased from 55% to 70%.

Reduction in rate of Excise Duty

Excise duty on LED lamps reduced to 6 per cent

CENVAT Credit

Service provider to pay duty on scrap capital goods.

Duty on higher of Depreciated value or Transaction

Value.

Restriction imposed on credit distribution by ISD.

In case of more than one unit - distribute amongst

all relatable units proportionately on the basis of

turnover

Exemptions

It is proposed to extend concessional basic customs duty of 5 per cent with full exemption from excise duty/ CVD to six specified life-saving drugs/ vaccines.

Branded Silver jewellery exempted from excise duty

Import of foreign-going vessels to be exempted from CVD of 5 per cent retrospectively.

CUSTOMS

Increase in rate of Custom Duty

It has been proposed to enhance basic customs duties on completely built units of large cars/ Multi-Utility Vehicles/ Sports Utility Vehicles having engine capacity above prescribed threshold from 60 percent to 75 per cent ad valorem.

Increase basic customs duty on gold and platinum bars from 2% to 4%. 5% to 10% on non-standard gold;

Impose basic customs duty of 2 per cent on cut and polished, coloured gem stones at par with diamonds;

Increase in BCD on bicycles from 10% to 30% and parts of bicycles from 10% to 20%.

Increase basic customs duty on Digital Still Cameras from NIL to 10% not qualifying the specification mentioned in Notification No. 15/2012-Cus

D. Indirect Tax Proposals – Central Excise & Customs


Reduction in rate of Custom Duty

Duty on soya protein concentrate and isolated soya protein to 10 per cent from the present 30 per cent or 15 per cent respectively

Basic customs duty and excise duty reduced on iodine from 6 per cent to 2.5 per cent.

Basic customs duty on probiotics is now 5 per cent reduced from 10 per cent.

Basic customs duty on sugarcane planter, root or tuber crop harvesting machine and rotary tiller and weeder and parts has been reduced from 7.5 per cent to 2.5 per cent

Basic customs duty reduced from 7.5 per cent to 5 per cent on specified coffee plantation and processing machinery.

Basic customs reduced on some water soluble fertilizers and liquid fertilizers, other than urea, from 7.5 per cent to 5 per cent and from 5 per cent to 2.5 per cent

The duty-free baggage allowance for eligible

passengers of Indian origin has been increased from Rs.25,000 to Rs. 35,000 and for children upto 10 years from Rs.12,000 to Rs.15,000.

Concession from basic customs duty and special CVD is being extended to certain items imported for manufacture for hybrid or electric vehicle and battery packs for such vehicles.

Customs duties on imported plant & machinery for iron ore plants reduced to 2.5%

Exemptions

Full exemption given from basic customs duty and a concessional CVD of 1 per cent to Steam coal for a period of two years till March 31, 2014

5% customs duty exempted on equipment for fertilizer plants

Full exemption from basic duty to Natural Gas and Liquified Natural Gas and Uranium concentrate, Sintered Uranium Dioxide in natural and pellet form

Full exemption from import duty on specified equipment imported for road construction by contractors of Ministry of Road Transport and Highways, NHAI and State Governments is being extended to contracts awarded by Metropolitan Development Authorities

Imports of equipment for initial setting-up or substantial expansion of fertilizer projects are being fully exempted from basic customs duty of 5 per cent for a period of three years up to March 31, 2015

Coating chemical used for compact fluorescent lamps fully exempt from basic customs duty.

Legislative Changes

Section 28AAA inserted for initiating proceeding against alternate person in case duty free instrument obtained by way of collusion, willful misrepresentation or suppression of facts.

Computation of Education Cess and Secondary & Higher Education Cess is simplified to exempt the cesses as leviable on CVD portion of customs duty to avoid computation of such cesses twice.

CENVAT Credit Rules are amended to permit transfer of unutilised credit of SAD lying in balance at the end of each quarter to other registered premises of same manufacturer.

21/2012-Cus consolidates SAD exemptions under 20/2006-Cus and 29/2010-Cus. Further a condition inserted requiring the importer of the specified goods to declare the State of destination where the goods are intended to be sold for the first time on payment of VAT after import along with VAT registration number.


D. Indirect Tax Proposals – Central Excise & Customs


Tax Reforms

Direct Tax Code Bill: Report of the Parliamentary Standing Committee submitted March 9, 2012 is being examined and necessary steps for the enactment of DTC at the earliest are being taken.

.

Goods and Services Tax (GST): Drafting of model legislation for Centre and State GST in concert with States is under progress. The structure of GST Network (GSTN) has been approved by the Empowered Committee of State Finance Ministers. GSTN will be set up as a National Information Utility and will become operational by August 2012. The GSTN will implement common PAN-based registration, returns filing and payments processing for all States on a shared platform.

Disinvestment

The government propose to raise Rs. 30,000 crore in 2012-13 through disinvestment as against a target of 40,000 crore last year (In actual raised 14000 crore in last year)

At least 51 per cent ownership and management control in Central Public Sector Enterprises (CPSEs) will remain with the Government.

Foreign Direct Investment

At present, FDI in single brand retail and in cash and carry wholesale trade is permitted to the extent of 100 per cent.

Efforts are on to arrive at a broad based consensus in consultation with the State Governments to allow FDI in multi-brand retail trade up to 51 per cent, subject to compliance with specified conditions.

.

Financial Sector

Income tax deduction of 50 per cent to new retail

investors under ―Rajiv Gandhi Equity Savings

Scheme‖, who invest up to Rs. 50,000 directly in

equities and whose annual income is below Rs. 10

lacs. The scheme will have a lock-in period of 3

years.

Capital Markets

Proposed to Allow Qualified Foreign Investors

(QFIs) to access Indian Corporate Bond market;

In order to simplify the process of issuing Initial

Public Offers (IPOs), it is proposed to make it

mandatory for companies to issue IPOs of Rs. 10

crore and above in electronic form through

nationwide broker network of stock exchanges;

Providing opportunities for wider shareholder

participation in important decisions of the

companies through electronic voting facilities,

besides existing process for shareholder voting,

which would be made mandatory initially for top

listed companies;

Permitting two-way fungibility in Indian

Depository Receipts subject to a ceiling with the

objective of encouraging greater foreign

participation in Indian capital market.


E. Amendments to Fiscal Responsibility and Budget Management

Act, 2003 (FRBM)


F. Contact Us

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Audit / Assurance

XBRL Conversion Services

Conversion services to Revised Schedule VI

Advisory on Company Law & FEMA matters

Secretarial Compliances

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Economy & Finance

DNS Budget Highlights 2012