Comprehensive analysis of indian budget 16 17
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The Indian Budget 2016-17 aimed to address the expectations of investors and stimulate economic growth while managing fiscal deficits. Key initiatives included increased allocations for infrastructure, rural employment, and farmer support, alongside reforms in taxation and corporate practices. The budget sought to balance support for stressed sectors with the need for fiscal prudence, targeting a growth rate of 7-7.75% and a decline in inflation.
![February 29, 2016
1
COMPREHENSIVE ANALYSIS INDIAN BUDGET
2016-2017
Pankaj Walia India Desk| Mazars [Paris, France]
61, rue Henri Regnault
92075 Paris - La Défense Cedex FRANCE
Tel. +33 1 49 97 37 78
Mob. + 33 6 61 00 18 98](https://image.slidesharecdn.com/comprehensiveanalysisofindianbudget16-17-160229134610/85/Comprehensive-analysis-of-indian-budget-16-17-1-320.jpg)
![24
TAX REFORMS
Indirect Taxes
• Service tax exemptions
(a)Services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana and services provided by Assessing Bodies
empanelled by Ministry of Skill Development & Entrepreneurship.
(b) General insurance services provided under ‘Niramaya’ Health Insurance Scheme launched by National Trust for the
Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability
(c)Annuity services provided by the National Pension System (NPS) and Services provided by EPFO to employees
(d)Reduction in service tax on Single premium Annuity (Insurance) Policies from 3.5% to 1.4% of the premium paid in
certain cases
(e)Construction of affordable houses up to 60 square metres under any scheme of the Central or State Government including
PPP Schemes
• For refrigerated containers, reduction in the basic custom and excise duty on them to 5% and 6% respectively.
• Changes in customs and excise duty rates on certain inputs, raw materials, intermediaries and components and
certain other goods and simplify procedures, so as to reduce costs and improve competitiveness of domestic industry in
sectors like Information technology hardware, capital goods, defence production, textiles, mineral fuels & mineral oils,
chemicals & petrochemicals, paper, paperboard & newsprint, Maintenance repair and overhauling [MRO] of aircrafts and
ship repair etc
• Excise duty exemption to Ready Mix Concrete.](https://image.slidesharecdn.com/comprehensiveanalysisofindianbudget16-17-160229134610/85/Comprehensive-analysis-of-indian-budget-16-17-24-320.jpg)
![25
TAX REFORMS
Indirect Taxes
• Krishi Kalyan Cess, @ 0.5% on all taxable services, to come into force from 1st June 2016. Input Tax credit of this cess
will be available for payment of this cess.
• Infrastructure cess, of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other
higher engine capacity vehicles and SUVs
• Excise duty of 1% without input tax credit or 12.5% with input tax credit on articles of jewellery [excluding silver
jewellery, other than studded with diamonds and some other precious stones], with a higher exemption and eligibility limits of
INR 6 crores and INR 12 crores respectively.
• Change in the excise duty on branded readymade garments and made up articles of textiles with a retail sale price of
INR 1,000 and above from ‘Nil without input tax credit or 6%/12.5% with input tax credit’ to ‘2% without input tax credit or
12.5% with input tax credit’
• Excise duty on tobacco products increased by about 10-15%
• Renaming of ‘Clean Energy Cess’ levied on coal, lignite and peat as ‘Clean Environment Cess’ and increase in rate from INR
200 per tonne to INR 400 per tonne
• Proposed Amendment in Finance Act, 1994 to declare assignment by the Government of the right to use the radio-frequency
spectrum and its subsequent transfers a service, to make it clear that assignment of right to use the spectrum is a
service leviable to service tax and not sale of intangible goods.
• Creation of 11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT)](https://image.slidesharecdn.com/comprehensiveanalysisofindianbudget16-17-160229134610/85/Comprehensive-analysis-of-indian-budget-16-17-25-320.jpg)
Comprehensive analysis of indian budget 16 17
- 1. February 29, 2016 1 COMPREHENSIVE ANALYSIS INDIAN BUDGET 2016-2017 Pankaj Walia India Desk| Mazars [Paris, France] 61, rue Henri Regnault 92075 Paris - La Défense Cedex FRANCE Tel. +33 1 49 97 37 78 Mob. + 33 6 61 00 18 98
- 2. 2 1. FORWARD
- 3. 3 FOREWARD The Union Budget of 2016-17 was the second full budget presented by the Modi led government and was in the response to mounting expectations of investors, both domestic and foreign. Although, the financial year 2015-2016 did not see much headway in the biggest and long pending reforms like Goods and Service Tax, Land Aquisition Bill and Bankruptcy bill, yet, Honorable Finance Minister still had lot many expectations to answer from the industry, common man and the investors. Reduction in corporate income tax rates while rationalising the exemptions and deductions was one of the key aspect to ponder upon. Other balancing acts the finance minister is expected to manage are between economist’s outlook on fiscal deficit and demands of industry for increased spending, distressed sectoral demands like agriculture, acts to further accelerate Make in India drive by pushing manufacturing, power and infra and of course overall further ease in doing business. India’s 7.6 percent growth rate in GDP for year 2015-2016 was the green shrub in the global parched economies. International Monetary Fund mentioned India to be in the bright spot. However, exchange rates are under a huge pressure and also the investor sentiments seems to be very pessimistic evidently visible in plummeted stock market in the recent days. The Finance Minister was supposed to walk a tightrope while delivering this budget. The budget clearly did not disappoint as it gave due importance to all needy and focused sections of the economy and tried to enhance the ease-of-doing business while keeping its focus on infrastructure development. Overall, a balanced budget to support the needs of the stressed sectors while simultaneously weighing the impact of additional burden on account of the recommendations of the 7th Central Pay Commission and the implementation of Defence OROP. One of the biggest challenges, inflation, has been on a declining mode. The global oil prices crash gave much needed tailwind to the government while export sales had plummeted due to weak global economic demands. My key take aways from the budget would be: 1. Government plan to skill 1 crore youth in next 3 years 2. Infrastructure push: Increased capital outlay of INR 218,000 crores 3. 10,000 KM of National Highways in FY 2016-2017 4. MGNREGA allocation hiked to INR 38,500 crores, highest ever 5. 1st time home buyers to get additional deduction of INR 50,000 on interest 6. Government sets FY17 disinvestment target at Rs 56,500 crore 7. Nuclear sector to get INR 3,000 crore yearly allocation 8. Dispute clearance windows for all assesses including those grappling with retrospective tax amendments 9. 100% FDI in marketing of food products
- 4. TABLE OF CONTENTS 1. FORWARD 2. MACRO ECONOMIC INDICATORS 3. BIG BANG ANNOUNCEMENTS 4. BUDGET HIGHLIGHTS 5. SECTORS, INDUSTRIES AND FOREIGN INVESTORS 4
- 6. 6 MACRO ECONOMIC INDICATORS The Macros 2015-2016 Actuals 2016-2017 Estimated GDP growth Based on economic survey-rational one 7.6% 7-7.75% Inflation Trending down, FY17(E) 5% 5.4% 5% Fiscal deficit Aimed at 3.5% by FY 17 3.9% 3.5% Current account deficit Drop in Oil prices 1.4% 1.3% Industrial growth Need a push 3% 2.9% Foreign exchange reserves 350 Billion Dollars N.A
- 8. Date8 Economist’s view prevails-Fiscal deficit intact Education, Skills and Job Creation BIG BANG ANNOUNCEMENTS 9 distinctive pillars includes Governance, Ease of Doing Business and Tax reforms 3 Major schemes for weaker sections Spending increased on priority areas: Farm, Rural, Social, Infra and Recapitalization of Banks
- 9. 9 ECONOMIST’S VIEW PREVAILS | FISCAL DEFICIT INTACT • Honorable Finance Minister believed that prudence lies in adhering to the fiscal targets. Consequently, the fiscal deficit in RE 2015-16 and BE 2016-17 have been retained at 3.9% and 3.5% of GDP respectively. • To improve the quality of Government expenditure, every new scheme being sanctioned by Government will have a sunset date and outcome review.
- 11. 11 SPENDING INCREASED ON PRIORITY AREAS | FARM, RURAL, SOCIAL, INFRA AND RECAPITALIZATION OF BANKS Farm Mission: Double the income of farmers by 2022, Total Allocation INR 35,984 crores • ‘Pradhan Mantri Krishi Sinchai Yojana’ scheme to bring INR 28.5 lakh hectares under irrigation • Dedicated Long Term Irrigation Fund in NABARD with an initial corpus of about INR 20,000 crore • Sustainable management programme of ground water resources • Soil Health Card Scheme to provide farmers information about nutrient level of the soil helping them making judicious use of fertilizers. • 2,000 model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities • Fertilizer companies to co-market city compost to increases the efficacy of chemical fertilizer • Organic farming to be promoted under ‘Parmparagat Krishi Vikas Yojana’. Also, a value chain based organic farming scheme called “Organic Value Chain Development in North East Region” to find local and international demand for marketing the organic products • Farmers to access the market: Unified Agriculture Marketing Scheme containing common e-market platform in selected 585 regulated wholesale markets. • Pradhan Mantri Gram Sadak Yojana (PMGSY) to be ramped up to improve connectivity of rural areas • Agricultural credit in 2016-17 will be an all-time high of INR 9 lakh crores. • Crop Insurance: Path breaking Crop Insurance Scheme approved, namely, Prime Minister Fasal Bima Yojana. • 3 initiatives: Decentralized procurement, online procurement system with Food Corporation of India and effective Pulses procurement
- 12. 12 SPENDING INCREASED ON PRIORITY AREAS | FARM, RURAL, SOCIAL, INFRA AND RECAPITALIZATION OF BANKS Rural sector objectives: Allocation of INR 38,500 crores for Mahatma Gandhi National Rural Employment Gurantee Act (MGNREGS), overall allocation INR 87,765 Crores • Grant in Aid to Gram Panchayats and Municipalities, quantum jump of 228% compared to the previous five year period. To transform villages and small towns. Ministry of Panchayati Raj to work with States and evolve guidelines • 300 Rurban Clusters to incubate growth centres in rural areas by providing infrastructure amenities and market access for the farmers and to expand employment opportunities for the youth. • 5542 villages have been electrified. Government to achieve 100% village electrification by 1 May, 2018. • To promote Swachh Bharat Abhiyan, priority allocation from Centrally Sponsored Schemes will be made to reward villages that have become free from open defecation • Digital Literacy Mission Scheme for rural India to cover around 6 crore additional households within the next 3 years. • Aiming dispute free titles of land, The National Land Record Modernisation Programme revamped under the Digital India Initiative and will be implemented as a Central sector scheme with effect from 1st April, 2016.
- 13. 13 SPENDING INCREASED ON PRIORITY AREAS | FARM, RURAL, SOCIAL, INFRA AND RECAPITALIZATION OF BANKS Social Sector including health care: Massive mission to provide LPG connection in the name of women members of poor households. Scheme to cover a total of 5 crore BPL households in coming 3 years. • For poor and economically weak families, New health protection scheme to provide health cover up to Rs. One lakh per family and an additional top-up package up to INR 30,000 for senior citizens • 3,000 Stores Jan Aushadhi Yojana to open during 2016-17 in order to supply generic drugs at affordable prices • ‘National Dialysis Services Programme’ to provide dialysis services in all district hospitals. Exemption to certain parts of dialysis equipment from basic customs duty, excise/CVD and SAD. “Stand Up India Scheme” to promote entrepreneurship among SC/ST and women. Scheme to facilitate at least two such projects per bank branch, one for each category of entrepreneur.
- 14. 14 SPENDING INCREASED ON PRIORITY AREAS | FARM, RURAL, SOCIAL, INFRA AND RECAPITALIZATION OF BANKS Education, Skills and Job Creation • To focus on quality of education, 62 new Navodaya Vidyalayas will be opened in the remaining uncovered districts over the next two years: • To empower Higher Educational Institutions to help them become world class teaching and research institutions, an enabling regulatory architecture will be provided to ten public and ten private institutions • Higher Education Financing Agency (HEFA) with an initial capital base of INR 1,000 crores. • To help validate authenticity, safe storage and easy retrieval of School Leaving Certificates, College Degrees, Academic Awards and Mark sheets, on the pattern of a Securities Depository, a Digital Depository to be established. • To set up 1500 Multi Skill Training Institutes across the country • Entrepreneurship Education and Training will be provided in 2200 colleges, 300 schools, 500 Government ITIs and 50 Vocational Training Centres through Massive Open Online Courses. Aspiring entrepreneurs, particularly those from remote parts of the country, will be connected to mentors and credit markets. • To incentivize creation of new jobs in the formal sector, Government to pay the Employee Pension Scheme contribution of 8.33% for all new employees enrolling in EPFO for the first three years of their employment. • 80JJAA to provide deduction of 30% of the emoluments paid to new employees (having monthly salary upto INR 25,000 and for whom the government is not paying the entire pension scheme contribution) for three years. • Voluntarily adoptable Model Shops and Establishments Bill to give option to small shops to remain open on all seven days of the week. This will generate further employment.
- 15. 15 SPENDING INCREASED ON PRIORITY AREAS | FARM, RURAL, SOCIAL, INFRA AND RECAPITALIZATION OF BANKS Infrastructure and Investment: Total outlay INR 221,246 Crores • Allocation of INR 55,000 crores for Roads and Highways, further topped up by additional INR 15,000 crores to be raised by NHAI through bonds. Total investment in the road sector, including Pradhan Mantri Gram Sadak Yojana (PMGSY) allocation, would be INR 97,000 crores during 2016-17. • Together with the capital expenditure of the Railways, the total outlay on roads and railways will be INR 2,18,000 crores in 2016-17. • To approve nearly 10,000 kms of National Highways in 2016-17. Nearly 50,000 kms of State highways to be up-graded as National Highways. • Abolition of permit-raj: To enact necessary amendments in the Motor Vehicles Act in order to open up the road transport sector in the passenger segment. Entrepreneurs will be able to operate buses on various routes, subject to certain efficiency and safety norms. • Civil aviation: 160 airports and air strips to be revived with State Governments to develop regional connectivity. • Proposal under consideration to incentivize gas production from deep-water, ultra deep-water and high pressure-high temperature areas, which are presently not exploited on account of higher cost and higher risks • Comprehensive plan being drawn up, spanning next 15 to 20 years, to augment the investment in nuclear power generation. Budgetary allocation up to INR 3,000 crore per annum, together with public sector investments. • Mobilisation of additional infrastructure finances may be permitted to the extent of INR 31,300 crore by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority through raising of Bonds during 2016-17
- 16. 16 SPENDING INCREASED ON PRIORITY AREAS | FARM, RURAL, SOCIAL, INFRA AND RECAPITALIZATION OF BANKS Infrastructure and Investment…..: • 3 new initiatives to reinvigorate private sector: (i) A Public Utility (Resolution of Disputes) Bill to be introduced during 2016-17 to streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, PPP and public utility contracts; (ii) Guidelines for renegotiation of PPP Concession Agreements to be issued, keeping in view the long term nature of such contracts and potential uncertainties of the real economy, without compromising transparency; (iii) A new credit rating system for infrastructure projects which gives emphasis to various in-built credit enhancement structures to be developed, instead of relying upon a standard perception of risk which often result in mispriced loans. • New policy for management of Government investment in Public Sector Enterprises, including disinvestment and strategic sale, has been approved. NITI Aayog to identify opportunities for strategic sale.
- 17. 17 SPENDING INCREASED ON PRIORITY AREAS | FARM, RURAL, SOCIAL, INFRA AND RECAPITALIZATION OF BANKS Financial Sector Reforms • Code on Resolution of Financial Firms will be introduced as a Bill to serve as a resolution mechanism to deal with bankruptcy situations in banks, insurance and financial sector entities. Together with the Insolvency and Bankruptcy Code 2015, when enacted, will provide a comprehensive resolution mechanism for our economy. • Amendment in RBI Act 1934 to provide statutory basis for a Monetary Policy Framework and a Monetary Policy Committee through the Finance Bill 2016. • Financial Data Management Centre to facilitate integrated data aggregation and analysis in the financial sector • To improve retail participation in Government securities, RBI will facilitate their participation in the primary and secondary markets through stock exchanges and access to NDS-OM trading platform. • New derivative products to be developed by SEBI in the Commodity Derivatives market. • Measures to facilitate deepening of corporate bond market to be introduced • To tackle the problem of stressed assets in the banking sector, proposed amendments in the SARFAESI Act 2002 to enable the sponsor of an ARC to hold up to 100% stake in the ARC and permit non-institutional investors to invest in Securitization Receipts. • Seed capital of INR 25,000 crores introduced to support the Banks and to support credit growth • Bank Board Bureau will be operationalized during 2016-17 and a roadmap for consolidation of Public Sector Banks will be spelt out and Debt Recovery Tribunals will be strengthened • General Insurance Companies owned by government to be listed in stock exchanges • Pradhan Mantri Mudra Yojana (PMMY) target increased to INR 180,000 crores. To benefit entrepreneurs.
- 18. 18 GOVERNANCE AND EASE OF DOING BUSINESS • 3 specific initiatives (i) Introduction of a bill for Targeted Delivery of Financial and Other Subsidies, Benefits and Services by using the Aadhar framework. A social security platform will be developed using Aadhar to accurately target beneficiaries. (ii) Proposal to introduce Direct Benefit Transfer on pilot basis for fertilizer in a few districts across the country, with a view to improving the quality of service delivery to farmers. (iii)Automation facilities to be provided in 3 lakh Fair Price Shops by March 2017. • Introduction of a bill to amend the Companies Act, 2013 which will also improve the enabling environment for start-ups. The registration of companies will also be done in one day.
- 19. 19 TAX REFORMS Direct Taxes • Individuals with income not exceeding INR 5 lakhs, proposal to raise the ceiling of tax rebate under section 87A from INR 2,000 to INR 5,000. 2 crore tax payers to get a relief of INR 3,000 in their tax liability. • Proposal to increase the limit of deduction in respect of rent paid under section 80GG from INR 24,000 per annum to INR 60,000 per annum (for those who do not have any house) • Turnover limit to avail Presumptive taxation scheme increased to INR 2 crores from INR 1 Crore. For professionals, the limit of professional receipts has been increased up to INR 50 lakh with the presumption of profit being 50% of the gross receipts. • Reduction in corporate income tax rate to be calibrated with the gradual phasing out of exemptions and deductions available under various sections: Changes in Corporate income tax rate: (a) The new manufacturing companies incorporated on or after 1.3.2016 are proposed to be given an option to be taxed at 25% + surcharge and cess provided they do not claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation. (b) Proposal to lower the corporate income tax rate for the next financial year of relatively small enterprises i.e companies with turnover not exceeding INR 5 crore (in the financial year ending March 2015), to 29% plus surcharge and cess.
- 20. 20 TAX REFORMS Direct Taxes • Exemptions being phased out: (a) The accelerated depreciation provided under IT Act will be limited to maximum 40% from 1.4.2017. (b) The benefit of deductions for Research would be limited to 150% from 1.4.2017 and 100% from 1.4.2020. (c) The benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31.3.2020. (d) The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020. • For Startups set up during April 2016 to March 2019, 100% deduction of profits for 3 out of 5 years for startups. MAT will apply in such cases. Capital gains will not be taxed if invested in regulated/notified Fund of Funds and by individuals in notified startups, in which they hold majority shares. • 10% rate of tax on income from worldwide exploitation of patents developed and registered in India • ARC’s trusts and securitization trusts to get Income Tax pass through: income will be taxed in the hands of the investors instead of the trust. However, the trust will be liable to deduct tax at source • The period for getting benefit of long term capital gain regime in case of unlisted companies is proposed to be reduced from three to two years. • Non-banking financial companies shall be eligible for deduction to the extent of 5% of its income in respect of provision for bad and doubtful debts. • Government committed for General Anti Avoidance Rules (GAAR) to be implemented from 1.4.2017 • Finance Bill, 2016 to include provision for requirement of country by country reporting for companies with a consolidated revenue of more than Euro 750 million, in order to support BEPS initiative of OECD and G-20
- 21. 21 TAX REFORMS Direct Taxes…. • Finance Bill, 2016 to include provision for requirement of country by country reporting for companies with a consolidated revenue of more than Euro 750 million, in order to support BEPS initiative of OECD and G-20 • Proposal to make withdrawal up to 40% of the corpus at the time of retirement tax exempt in the case of National Pension Scheme • For superannuation funds and recognized provident funds, including EPF, the same norm of 40% of corpus to be tax free will apply in respect of corpus created out of contributions made after 1.4.2016 • Proposal for a monetary limit for contribution of employer in recognized Provident and Superannuation Fund of INR 1.5 lakh per annum for taking tax benefit. • 100% deduction for profits to an undertaking from a housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities, approved during June 2016 to March 2019, and is completed within three years of the approval. Minimum Alternate Tax will, however, apply to these undertakings • Deduction for additional interest of INR 50,000 per annum for loans up to INR 35 lakh sanctioned during the next financial year, provided the value of the house does not exceed INR 50 lakh • Proposal to exempt Dividend Distribution Tax for distribution made out of income of SPV to the Real Estate Investment Trusts having specified shareholding • Tax at the rate of 10% of gross amount of dividend will be payable by the recipients, that is, individuals, HUFs and firms receiving dividend in excess of INR 10 lakh per annum • Increase in surcharge from 12% to 15% on persons, other than companies, firms and cooperative societies having income above INR 1 crore
- 22. 22 TAX REFORMS Direct Taxes…. • Tax collection at source at the rate of 1% on purchase of luxury cars exceeding value of INR 10 lakhs and purchase of goods and services in cash exceeding INR 2 lakhs • Rate of Securities Transaction tax in case of ‘Options’ is proposed to be increased from .017% to .05% • Tapping on foreign e-commerce companies: a person making payment to a non-resident, who does not have a permanent establishment, exceeding in aggregate INR 1 lakh in a year, as consideration for online advertisement, will withhold tax at 6% of gross amount paid, as Equalization levy. The levy will only apply to B2B transactions. • Compliance Window for domestic taxpayers to declare undisclosed income or income represented in the form of any asset and clear up their past tax transgressions by paying tax at 30%, and surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. No scrutiny or enquiry regarding income declared in these declarations under the Income Tax Act or the Wealth Tax Act and the declarants will have immunity from prosecution. Immunity from Benami Transaction (Prohibition) Act, 1988 is also proposed subject to certain conditions. The surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy. Window will be opened from 1st June to 30th September, 2016 with an option to pay amount due within two months of declaration. • New Dispute resolution scheme: Appeals pending at Commissioner (Appeals) can be settled by paying the disputed tax and interest up to the date of assessment. No penalty in respect of Income-tax cases with disputed tax up to INR 10 lakh will be levied. Cases with disputed tax exceeding INR 10 lakh will be subjected to only 25% of the minimum of the imposable penalty for both direct and indirect taxes. Any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty. • For cases pending due to Retrospective amendments, a one-time scheme of Dispute Resolution announced, in which, cases can be settle by paying only the tax arrears in which case liability of the interest and penalty shall be waived
- 23. 23 TAX REFORMS Direct Taxes…. • Curb on discretionary power of the tax officers in imposing penalties: rates will now be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts. Remission of penalty is also proposed in certain circumstances where taxes are paid and appeal is not filed. • Quantification of disallowance of expenditure relatable to exempt income in terms of Section 14A: 1% of the average monthly value of investments yielding exempt income, but not exceeding the actual expenditure claimed • Proposal to provide a time limit of one year for disposing petitions of the tax payers seeking waiver of interest and penalty • Rationalisation of TDS provisions for small tax payers • Alternative documents may be provided in case PAN number is not available with non-residents • Proposal to expand the scope of e-assessments to all assessees in 7 mega cities. Cases will be scrutinized in e-environment whereby unless the assessee himself wants to be heard, or for special reasons to be recorded, the assessing officer wants to hear the party, there will be no face to face contact of IT Department with assessee
- 24. 24 TAX REFORMS Indirect Taxes • Service tax exemptions (a)Services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana and services provided by Assessing Bodies empanelled by Ministry of Skill Development & Entrepreneurship. (b) General insurance services provided under ‘Niramaya’ Health Insurance Scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability (c)Annuity services provided by the National Pension System (NPS) and Services provided by EPFO to employees (d)Reduction in service tax on Single premium Annuity (Insurance) Policies from 3.5% to 1.4% of the premium paid in certain cases (e)Construction of affordable houses up to 60 square metres under any scheme of the Central or State Government including PPP Schemes • For refrigerated containers, reduction in the basic custom and excise duty on them to 5% and 6% respectively. • Changes in customs and excise duty rates on certain inputs, raw materials, intermediaries and components and certain other goods and simplify procedures, so as to reduce costs and improve competitiveness of domestic industry in sectors like Information technology hardware, capital goods, defence production, textiles, mineral fuels & mineral oils, chemicals & petrochemicals, paper, paperboard & newsprint, Maintenance repair and overhauling [MRO] of aircrafts and ship repair etc • Excise duty exemption to Ready Mix Concrete.
- 25. 25 TAX REFORMS Indirect Taxes • Krishi Kalyan Cess, @ 0.5% on all taxable services, to come into force from 1st June 2016. Input Tax credit of this cess will be available for payment of this cess. • Infrastructure cess, of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles and SUVs • Excise duty of 1% without input tax credit or 12.5% with input tax credit on articles of jewellery [excluding silver jewellery, other than studded with diamonds and some other precious stones], with a higher exemption and eligibility limits of INR 6 crores and INR 12 crores respectively. • Change in the excise duty on branded readymade garments and made up articles of textiles with a retail sale price of INR 1,000 and above from ‘Nil without input tax credit or 6%/12.5% with input tax credit’ to ‘2% without input tax credit or 12.5% with input tax credit’ • Excise duty on tobacco products increased by about 10-15% • Renaming of ‘Clean Energy Cess’ levied on coal, lignite and peat as ‘Clean Environment Cess’ and increase in rate from INR 200 per tonne to INR 400 per tonne • Proposed Amendment in Finance Act, 1994 to declare assignment by the Government of the right to use the radio-frequency spectrum and its subsequent transfers a service, to make it clear that assignment of right to use the spectrum is a service leviable to service tax and not sale of intangible goods. • Creation of 11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT)
- 26. 26 TAX REFORMS Indirect Taxes • Proposal to amend the CENVAT Credit Rules, 2004, so as to improve credit flow, reduce the compliance burden and associated litigation, particularly those relating to apportionment of credit between exempted and non exempted final products/services. Also enable multiple manufacturing units to maintain a common warehouse for inputs and distribute inputs with credits to the individual manufacturing units. • Facility for revision of return being extended to Central Excise assessees also • Additional options to banking companies and financial institutions, including non-banking financial companies, for reversal of input tax credits with respect to non-taxable services provided by them by way of extending deposits, loans and advances • Allowance of deferred payment of customs duties for importers and exporters with proven track record.
- 27. 27 5. SECTORS, INDUSTRIES AND FOREIGN INVESTORS
- 28. SECTORS, INDUSTRIES AND FOREIGN INVESTORS 28 Infrastructure Financial Institutions Foreign Investors Defense and Aerospace § Total outlay on roads and railways INR 2,18,000 crores § Nearly 10,000 kms of National Highways in 2016- 17. Nearly 50,000 kms of State highways to be up- graded as National Highways. § Resolution of Disputes Bill § Seed capital of INR 25,000 crores to support the Banks § Amendment in RBI Act 1934 to provide statutory basis for a Monetary Policy Framework and a Monetary Policy Committee through the Finance Bill 2016. § General Insurance Companies owned by government to be listed in stock exchanges § Roadmap for consolidation of Public sector banks Manufacturing § Exemption from Basic Customs duty, CVD and SAD and excise duty when tools and tool kits imported by MROs for aircraft § Custom duties exemption withdrawn for imports by GOI and PSU § Custom duties exemption withdrawn for imports by contractors of GOI or PSU § 49% FDI in Insurance and pension sectors § 100% FDI in ARC’s § Investment limit for foreign entities in Indian stock exchanges enhanced from 5 to 15%. § Investment by FPIs in Central Public Sector Enterprises-upto 49% § 100% FDI in marketing of food products § FDI in hybrid instruments § Residency status to foreign investors § Centre State Investment Agreement § CVD exemption on road construction equipments withdrawn § Basic Custom duty on Golf cars increased to 60% § Excise duty reduced on Routers, modems, set top boxes