APAO BUDGET PROPOSAL 2017-18

DIRECT TAX

Section /

Notification no.

Legal Position Issue Suggestion for

amendment

Rational for amendment

1 Section 80-IA of

the Income Tax

Act’1961

Sub section (4)

specifies the

business eligible for

100% deduction for

any enterprise

carrying on the

business of (i)

developing or (ii)

operating and

maintaining or (iii)

developing,

operating and

maintaining any

infrastructure

facility (including

airport)

The purpose of this section was

to give a flip to industrial

undertakings and enterprises

engaged in infrastructure

development such as airport,

highways, power and water

supply etc.

The fiscal benefit available to

new infrastructure is very much

clear in the section in the

present form. However suitable

clarity is required in the case of

upgrading the existing set up as

to whether the section extends

to that as well.

It is suggested that

government make suitable

amendment in the section

so as to make it amply

clear that the up-gradation

of the existing

infrastructure be also

eligible for the benefit of

Sec 80-IA, so that there is

no ambiguity with regard

to claim of Sec 80-IA.

Infrastructure development

is pre requisite for the

growth and development of

any country.

Infrastructure development

is achievable in two ways

i.e. to build altogether new

infrastructure or to convert

the existing structure by

upgrading it for enhancing

the existing capacity. It

goes without saying that

whether it is new

infrastructure or an

upgradation both entails

huge Capex investment and

human efforts.

2 Section 80-IA of

the Income Tax

Act’1961

Same as above In the airport sector of

infrastructure, there are many

ancillary/support services

required which are very essential

for smooth functioning of

airports. For example fuel facility,

Hence it is requested that

clarification & assurance

about eligibility of all

relevant activities for tax

holiday under Section 801A

of the Income Tax Act

In the absence of clear

definition of Airport under

the present Sec of 80-IA, it

leaves an ambiguity

whether these services

enjoy benefit of Sec 80 IA

parking, cargo, ground handling

etc. One cannot even imagine any

airport in absence of these

facilities as these are life line

services for airport. The industry

needs support, assurance and

clarity on whether all the

relevant functions & ancillary

functions / revenue streams

which have nexus for smooth

functioning of the airport

(whether the airport operator

has directly performed these

functions or by a concessionaire

(third party operator) who is

granted Service Provider Rights)

because ultimately the operator

is responsible for smooth

functioning of these important

functions at the airport.

should be extended to all

support service as well.

or not.

3 Section 80-IA of

the Income Tax

Act’1961

One of the condition

for availing

deduction under

section 80IA is that

it has entered into

an agreement with

the Central

Government or a

State Government

or a local authority

For operating airport, facilities

such as fuel facility, parking,

cargo, ground handling etc.

required. Therefore, airport

operator needs to enter into

concession agreement with

downstream Concessionaire

providing Cargo/ Fuel Farm/

Ground Handling infrastructure &

services for smooth functioning

Concession Agreements

signed by the Airport

Operator with

downstream

Concessionaire providing

Cargo/ Fuel Farm/

Ground Handling

infrastructure & services

to be treated at par with

the Agreement signed

As airport operator, One

cannot provide services

itself on its own hence

concession agreements

needs to be entered with

each concessionaire and

feasibility of entering into

an agreement of each

concessionaire with

government would be a time

or any other

statutory body for

(i) developing or (ii)

operating and

maintaining or (iii)

developing,

operating and

maintaining a new

infrastructure

facility;

of airport. with Government and

accordingly benefit of

80IA should be provided

to the downstream

concessionaire.

consuming exercise.

4 Section 80CCF

of the Income

Tax Act’1961

Deduction in respect

of subscription to

long-term

infrastructure bonds

In the Finance Act 2012, the

deduction under section 80 CCF

has been done away with.

Previously in budget 2011,

various government

undertakings were allowed to

issue tax free bonds of 30,000 cr.

in year 2012 to give boost to

infrastructure development in

railways, power, housing and

highways development.

It is recommended that the

deduction should be

restored.

Further the scope of

infrastructure should be

expanded to cover Airport

also. In addition to

existing issuers, private

infrastructure companies

should also be allowed to

issue such tax free bonds

for various infrastructure

activities. Allowing such

benefit would enable them

to source money from cost

effective funds as already

these companies are

under the grip of

mounting debt at high

While the infrastructure

sector needs a boost,

individual investors also

look at being eligible to

claim tax deductions made

in infrastructure sector.

These should be promoted

to allow benefits to the

infrastructure sector as

also to the investors and

which eventually lead to

overall development and

growth of the economy.

This will also attract larger

household savings to the

infrastructure sector.

The aforesaid suggestion

helps in meeting the target

of government of

costs.

There could be a question

on protection of investor’s

money as these would be

unsecured loans of private

infrastructure companies.

To mitigate this risk, the

government may propose

minimum credit rating to

be eligible to issue such

bonds or any other

condition which the

government may deem fit

for issuance of such bonds.

Tax deduction under

section 80 CCF for

investment in

infrastructure bonds

should be made applicable

for all years and should

not be renewed on a year-

to-year basis by the

Finance Act each year.

Also, the investment limit

and the deduction

allowable should be

increased from Rs. 20,000

to Rs. 50,000 for

individuals / HUE.

maintaining inflation along

with increase in growth

perspectives.

5 Section 10(23G)

of the Income

Tax Act’1961

This section was

enacted to exempt

income by way of

dividends other

than dividend

referred to in Sec

115-O, interest or

long term capital

gains of an

infrastructural

capital funds or an

infrastructural

capital company etc.

by way of shares or

long term finance in

any enterprise or

undertaking

engaged in the

business referred to

in sub section 4 of

sec 80IA or Sub Sec

3 of Sec 80IAB or

housing project

referred to in sub

section 10 of 80IB

or a hotel project or

a hospital project

duly approved by

the central

government.

Section 10(23G) was omitted by

Finance Act 2006, with effect

from 1.4.2007.

It is recommended that

this section be restored

back and the income of

Infrastructure Company

should also be exempted

from payment of MAT.

This section was very

encouraging for the investor

as it gives incentive to invest

the money in infrastructure

projects.

The aforesaid restoration

will attracts more

investments in India as

multiple taxation like

dividend distribution tax

leaves less or inefficient

payment of money to

foreign investors.

However this will be

subject to payment

of MAT.

6 Section 10AA of

the Income Tax

Act’1961

It provides

exemption to newly

established units in

Special Economic

Zone.

Currently out of approximate

400 civil Aircrafts in India,

majority of them fly to the

Middle East and other Asian and

European countries for availing

mandatory MRO services and

pay out in valuable foreign

currency (USD or Pound or

Euro). This results in huge

foreign exchange outflow from

the Indian economy. By enabling

the exemption from income tax

to all domestic airline customers

to avail MRO services here at

India will motivate and foreign

exchange would be kept in India

only.

This saving of valuable

foreign currency from

flowing out of the country

indirectly tantamount to

export of services and

hence the same needs to

be exempted from income

tax under Section 10AA of

the Income Tax Act.

It proves to be a precious

saving of foreign exchange

every year besides also the

potential of earning valuable

foreign currency from

various international airline

customers.

7 Section 54EC of

the Income Tax

Act’1961

This section

provides

exemption to long

term capital gain

for investment in

long term specified

assets like certain

bonds issued by

REC and NHAI.

Presently, bonds issued by few

organizations like NHAI and REC

only are qualified under section

54EC of the Act for making

investment so as to claim

exemption from capital gains.

On a similar pattern bonds

issued by infrastructure

companies should also be

qualified under section

54EC of the Act.

This will accelerate the

growth in infrastructure

sector, which is very vital

for the economic

development of the

country.

Further, the cost of raising

funds in other countries is

very low as compared to

India. The above move will

not only help the

infrastructure companies

to reduce their debt cost

but also increases the

investment avenues.

8 Section 14A of

the Income Tax

Act’1961

As per the existing

provisions, no

deduction shall be

allowed in respect

of expenditure

incurred by a

taxpayer in relation

to income which

does not form part

of total income

under the Act.

Further, section

14A of the Act

states that the

provisions of this

section shall also

apply in cases

where an assessee

claims that no

expenditure has

been incurred by

him in relation to

Even after brought in the

enumerated changes in the rule,

question of whether the

disallowance can exceed the

exempt income and whether the

1% is to be applied only to

investments which have

generated exempt income

during the previous year has not

been clarified.

The said Rule still lacks relevant

guidelines wherein the entities

had a strategic purpose of

making investment rather of

earning dividend income.

In many cases, disallowance

calculated as per rule 8D method

exceeds the amount of total

exempted income earned during

the year.

Therefore it is suggested

that:

Only those expenses

which are directly related

to earnings of exempt

income should be

disallowed. Further, the

overall maximum limit of

expenses to be disallowed

should not exceed the tax

payable on exempted

income earned.

Overall maximum limit of

expense to be disallowed

in case of dividend income

earned from holding

strategic investment in

group companies should

be capped.

Suggested changes in Rule

8D would debar arbitrary

disallowance, reduce

litigation and genuine

hardships for the

taxpayers.

income which does

not form part of the

total income under

the Act. In this

regard, a method

has been

prescribed under

rule 8D of the

Income Tax Rules,

to calculate the

amount of

disallowance for

the purpose of

section 14A of the

Act.

The said Rule has

been amended by

the Income–tax

(14th Amendment)

Rules, 2016

notified vide

Notification No

43/2016 dated 2nd

June 2016 wherein

clause (ii) of Rule

8D(2) dealing with

indirect

expenditure by way

of interest has been

omitted.

Further stated that

the disallowance

u/s 14A r.w Rule

8D cannot exceed

the actual

expenditure

claimed by the

assessee. The limit

of 0.5% under

clause (iii) has been

increased to 1%.

However, the 1%

will apply to the

annual average of

the monthly

averages of the

opening and

closing balances of

the value of

investments,

income from which

does not or shall

not form part of

total income.

9 Section 72A of

the Income Tax

Act’1961

Section 72A of the

Act, deals with

treatment of

unabsorbed losses

and unabsorbed

Section 72A is restrictive in its

application. Presently benefits of

section 72A are available only to

company owning industrial

undertaking or a ship or a hotel

It is suggested that

sectorial restrictions u/s

72A may be removed and

provisions of this section

be made applicable for all

It will facilitate smooth

operational reorganization

across the economies

including infrastructure

sector.

depreciation, in

case of

amalgamation

or a banking company. Due to

this restriction, other sectors are

not eligible for benefits in the

form of loss from one company

to another.

the sectors.

10 Section 115JAA

of the Income

Tax Act’1961

Section 115JAA

allows carry

forward of MAT

credit

Presently, MAT u/s 115JAA

cannot be carried forward by

the amalgamated company.

The Income Tax Act needs

to be amended so as to

allow carry forward of

MAT credit in the hands of

amalgamated company for

the remaining number of

years.

It is unjustified financial

loss.

11 General

Abolition of MAT

and DDT (Dividend

Distribution Tax)

on SEZ units

Finance Act 2011 has levied

MAT and DDT on SEZ units.

MAT and DDT should not

be levied on SEZ units.

SEZ units already

surrendered owing to

procedural wrangles. To

reduce the de-notification

by various SEZ units, there

is need to support by non-

levy of such taxes.

12 197 of the

Income tax

Act, 1961

Sub-section 1

specifies issuance

of certificate where

A.O is satisfied

about the request

of the Assessee.

This requires

exercise of

The A.O has been given wide

discretion to process the Lower/

NIL application from the

Assessee which does not specify

the time limit within which the

A.O is duty bound to issue or

reject the application. Hence the

discretion to process the

It is important that such

certificates are processed

in time and huge volume of

processing may be handed

over to the Centralised

Processing Centre, on the

lines of CPC which has

become more successful.

Further the guidelines

Currently the application

needs to be made to the Dy.

CIT which travels through

Jt. CIT and finally reaches

CIT for final approval. The

number of authorities

whose approvals are

currently required needs to

discretionary

power which

causes potential

harassment to the

tax payer in the

absence of

guidance from the

CBDT.

application without specifying

therein criteria for rejection/

time limit is causing hindrance

to the genuine tax payers

resulting in huge refund held for

long due to the Assessees. The

time limit set by the CBDT

instruction No 01/2014 dated

January 15, 2014 is not strictly

adhered to, which results in

irreversible damage to the

financial condition of the tax

payers.

must be laid down as to

specific documents which

are essential for making an

application. The

application currently is

considered by various

authorities starting from

Dy. CIT, Jt. CIT and CIT by

monitory limits which are

very low at present.

There has to be

monitoring cell with

regard to the pending

applications beyond the

norms set by the

Instruction.

be curtailed by setting

reasonable monitory limit

in order to reduce

intervention of multiple

authorities which enable

faster processing of the 197

applications

13 Section 199

r.w.r 37BA

Sec. 199 (3) ……..

Rule - 37BA (4) of

Income tax Rules:

The Board was empowered to

specify Rule to give tax credit u/s

199 of the Act. The Rule 37BA

prescribes that tax credit and

paid to the account of the Central

Government shall be granted on

the basis of the information

furnished by the deductor and

the information in the return of

income subject to verification.

However, in few cases the A.O

deny tax credit where Form 26AS

Where the tax credit is not

reflected in Form 26AS, the

same shall be verified with

the deductor in writing for

allowing the tax credit. This

will obviate the Assessee

from losing the tax credit to

which he is legally eligible.

Tax credit should not

depend solely on the Form

26AS. For example, even

after Instruction cited here,

the A.O still can deny the

TDS claim during the

assessment.

Instruction No

5/2013 dated July

08, 2013

Para 3:

Para 4:

does not reflect the tax credit due

to error/non-filing of e-TDS

return by the deductor but has

issued TDS certificate.

14 115JB 115JB (1)

Notwithstanding

anything contained

in any other

provision of this Act,

being a company the

income tax payable

on the total income

computed under

this Act is less than

18.50% of the book

profits, such book

profit shall be

deemed to be the

total income and tax

payable by the

assessee.

The MAT rate was started with

7.50% initially has grown up

substantially and significantly

been increased to 18.50%

(without surcharge and cess

thereon) most of which are

available as tax credit for

adjustment of future tax liability

under normal provisions.

The rate of MAT requires

rationalization and is

expected to be brought

down to around 10%.

The payment of the MAT

becomes dead investment

without bearing interest

under tax laws but for the

business there is an

imputed cost and endures

significantly for more than

3 years quiet a longer

period, especially where an

infrastructure asset such as

Airport is being built up.

15 Budget speech

2015

The Finance

minister has

committed lowering

of basic rate of

corporate tax to 25

The current effective corporate

income tax stands @ 34.608%

(surcharge 12% and cess @ 3%

included) which is high compared

to other countries since India

As committed by the

Hon’ble Finance Minister,

the rate of corporate tax

needs to be brought down

to the level of 25%.

The lower rates will provide

liquidity and provide funds

for further expansion and

relief from servicing of

borrowed funds.

per cent from 30 per

cent in four years

which needs to be

implemented right

from the Financial

Year 2016-17

onwards with a

view to provide

some liquidity in the

hands of Indian

Corporate to invest

the surplus funds

towards expansion

of the industry.

presently pursues leap in growth

rate and encourages the initiative

of ‘Make-in-India’.

16 Section 145 and

ICD’s

Sec 145(2) of the

Act, provides that

the Central

Government may

notify in the Official

Gazette from time to

time ‘income

computation and

disclosure

standards’ to be

followed by any

class of assessees or

in respect of any

class of income

The taxable income are computed

in compliance to the Companies

Act, 2013 and other guidelines of

IND-AS and are well-settled by

competent courts with regard to

specific allowances and

disallowances as interpreted by

following relevant provisions of

the Income tax Act, 1961.

However, many provisions of

ICD’s are complex and thwart the

established tax positions

currently being followed despite

the fact that it necessitates

maintenance of separate books of

The new provision is

clearly against the declared

policy of the new

Government of minimum

government and maximum

governance and therefore,

the amendment to section

145 (2) should be deleted

and earlier position

restored.

Restoring of earlier position

by deleting the amendment

to Section 145(2) will

ensure unwanted tax

litigations by the Business

entities so that energy can

be focused on the business

activities.

accounts for innumerable book

adjustments.

INDIRECT TAX

S

No

Section /

Notification

no.

Present provision Issue Suggestion for amendment Rational for amendment

1 S. No. 14 ( a)

and S.no 14A

of the

exemption

notification -

25/2012-ST

dated 20th

June 2012&

Rule 2(l)(A)

of Cenvat

Credit Rules,

2004

Issue :-

1. Service Tax

exemption on

construction,

erection,

commissioning or

installation of

original works

pertaining to an

airport or port was

withdrawn w.e.f

from 01-Apr-2015 ,

however in budget

2016 exemption

was restored for all

cases wherein

contract was

entered prior to 01-

Mar-2015.(Entry no

14A)

2.Further Cenvat

credit of service

portion in the

execution of works

contract &

construction in so

• Service tax paid is a

direct cost in the project

on the Airport operator,

since CENVAT Credit

paid on input services is

also restricted on

construction services.

• As Tariff are regulated

by AERA, Airport

operator practically

does not have choice to

recover additional tax

burden from its

consumers.

Option 1:- The Government

should restore the exemption

earlier provided at S.no 14 (a) of

the exemption notification

25/2012-ST dated 20-Jun-2012 in

respect construction, erection,

commissioning or installation of

original works pertaining to an

airport or port.

Option 2:- “Input Service

definition should be amended in

order to allow Cenvat credit in

respect of service portion in the

execution of works contract and

construction services in so far as

they are used for construction or

execution of works contract of a

building or a civil structure or a

part thereof.

Airport/port sector is not yet

established fully. It requires huge

capital investments in building,

modernizing the existing, new

infrastructure of Airport or Port,

which has long gestation period to

amortize its investment. Therefore

Govt. support is required to extend

Service tax exemption to Airport.

Further As Commercial /tariff for

Airport operator are regulated by

AERA , This sector has no ability or

choice to pass on directly or indirectly

the increased cost impacts as a result

of additional tax burden in the value

chain on the consumer.

far as they are used

for construction or

execution of works

contract of a

building or a civil

structure or a part

thereof is also not

allowed.

2 Notification

no. 31/2010-

ST dt 22-Jun-

10.

As per charging

section 66B service

tax is levied on the

value of all services,

other than those

services mentioned

in negative list.

In the erstwhile

provisions of

service tax there

was an exemption

from levy of service

tax on services by

way of supply of

water and

electricity when

provided within an

airport vide

notification no.

31/2010 dt 22-Jun-

10.

Service tax department

demands service tax on

supply of goods, i.e Water

and Electricity, which is

classified as goods in State

VAT Legislation.

Suitable amendment should be

made in order to extend benefit

of notification no 31/2010 dt

22-Jun-2010 in respect of

exemption of service tax

towards supply of water and

electricity when provided

within an airport in present

service tax regime as well.

Further, Water and Electricity

are treated as goods as per the

State VAT Legislations, hence

the same should not be liable to

Service tax at all.

Exemption as available in erstwhile

service tax regime should be included

in the list of “ Negative list of services

“

3 Section 66D-

ST Negative

list of

Services

As per charging

section 66B service

tax is levied on the

value of all services,

other than those

services mentioned

in negative list.

Therefore by

virtue of section

66B Maintenance,

repairs and

operation i.e. MRO

Services have

become taxable.

Indian MRO industry is in

its Initial phase needs

support for creating level

playing field

andcompetiveness with

MRO Hubs situated in

Singapore, Srilanka,

Dubai, since Aircraft sent

overseas are not liable to

Service tax and hence it

creates distortion

detrimental to the growth

of Indian MRO Business.

Either MRO services should be

included in negative list of service

under Section 66D of finance Act

or exemption should be provided.

.

It is desirable to exempt the MRO

services as a whole from imposition of

service tax in order to promote the

MRO industry in India.

MRO Business in India has a huge

potential to become a hub for MRO

activity and to attract foreign

investments by providing MRO

Services to foreign Airlines, operators

at lowest cost.

4 Exemption-

Service tax

As per charging

section 66B service

tax is levied on the

value of all services,

other than those

services mentioned

in negative list.

Therefore by virtue

of section 66B

development which

is nature of tax ,

service tax

demanded under

the service category

of “airport service”

Since Development fee is

a source of funding and

hence, is in the nature of

Capital receipt, It should

be exempted from

payment of Service Tax

Suitable clarification

/amendment should be brought

in the definition of “Airport

service” clarifying that

development fees is a capital

receipt and hence exempted from

payment of service tax

Since Development fee is a source of

funding and hence, is in the nature of

Capital receipt, It should be exempted

from payment of Service Tax.

In case of Consumer Online

Foundation, etc. v Union of India in

the Civil Appeal No. 361/2011 ,as per

Hon’ble Supreme Court ( Judgment

delivered on 26.04.2011)

“the said levy was held to be a

tax or cess in nature de-hors the

facility provided to passengers vide

para 14 page No 35 of the Judgment in

the above case where it held that the

object of Parliament in inserting

Section 22A in the 2004 Act by the

Amendment Act of 2003 is to

authorize by law the levy and

collection of development fees from

every embarking passenger de-hors

the facilities that the embarking

passengers get at the existing airports.

5 Section 66D-

ST Negative

list of

Services

Services provided

by CISF to MOCA ( at

Airport) is subject of

litigation

Services provided by CISF

to MOCA is services from

one arm of govt. of India

(CISF) to another arm of

govt. of India (MOCA).

Airport operator merely

support CISF in

overseeing the Security

arrangements in the

Airport, therefore these

services should not be

taxable in the hands of

Airport operator

Services provided by CISF to

MOCA should be exempted by

addition of the same in negative

list of services or clarification may

be provided that where ever these

services are provided to another

department of the Government of

India the said services provided

by CISF should be exempted or

Service tax may be charged

directly by CISF fromMoCA / MHA

CISF has been entrusted with the

responsibility of providing security at

the Airports as per direction of MoCA.

These activities are being funded

through PSF (SC) – [passenger service

fee –Security component fund] a fund

maintained by MoCA. Therefore the

Security services provided by CISF to

the Government may be exempted or

in the alternative, the burden of

discharging Service tax should be

shifted on CISF being the Service

Provider in respect of Security

services provided to MoCA / MHA.

6 Currently the

benefit under

project imports, as

mentioned in

Chapter 98 of

Customs Tariff

actare restricted to

items such as

machinery,

In the Airport

construction project

various necessary items

required for execution of

project may not

necessarily be classified

as Machinery, equipment

or spares. Thereby benefit

under project import are

Benefit under chapter 98 of

Customs Tariff act should be

given to all items which are

imported for the purpose of

construction and development of

Airport. In that regard , a

notification may be issued so as to

expand the list appended to the

Principal notification 21/2002 as

Apart from machineries, equipment

etc there are various other items

required to be imported for the

construction of airport such as Steel

Structures, Fabricated aluminum /

Steel sheets etc . These item are

integral part of airport construction

project. Depriving the benefit of

project import, on other items,

equipment and their

spares for notified

projects.

not given to items other

than machinery

/equipment and the like

goods etc.

amended for description of goods

Custom tariff Chapter heading

9801

overburden the Project cost.

7 Finance Act

1994 and

Central

excise act

1944

At present, interest

is charged @ 15%

on excise duty and

Service tax

demands. However

in case of refunds,

only 6% interest is

allowed on refund

of excise duty and

service tax paid

There is huge gap in

interest .rate on demands

vs interest rate on refund

Amendment should be brought in

so that interest rate gap can be

bridged.

It can be linked to SBI’s PLR or

SBI’s Base Rate

Equality should be also brought in the

provisions of interest on refund vis-à-

vis interest on excise duty and service

tax demands.

8 Sec 27A of

Customs Act,

1962

There is no specific

provision under

Customs Act, 1962

for grant of interest

on refund of

Customs duty paid

under protest,

arising out of a

demand/ SCN.

Relief is granted at High

Court/ Supreme Court stage

(after 8-10 years) only,

leading to significant

interest loss

A suitable amendment should be

brought in Sec 27A of Customs

Act, 1962, whereby

the importer is entitled for

interest on duty paid under

protest from the date of such

payment.

Severe Cash flow issues due to locked-

up funds in the form of Customs duties

paid under protest.

9 Finance

Act 2015

Education cess

and Secondary

and higher edu

cess has been

Government has not

provided any

clarification on

utilization of closing

Suitable amendment should be

brought in to CCR rules 2004 in

order to allow utilization of closing

balance of Edu cess and She cess as

Assesse is not able to utilize closing

balance in Edu cess and She cess

balance lying as on 31-May-2015.

This has resulted in unnecessary

subsumed in

service tax rate

of 14% w.e.f

from 01-Jun-

2015.

Government

vide notification

no 22/2015 dt

01-Jun-2015

has amended

relevant

provisions of

CCR rules 2004

in order to

allow utilization

of edu cess &

She cess credit

related to

input/capital

goods and input

services

received after

01-Jun-2015

against payment

of Service tax.

balance of Edu cess and

She cess lying as on 31-

may-2015 towards

payment of service tax

on 31-may-2015 towards payment

of service tax

blockage of funds as well.

CUSTOM DUTY

a)

Concessional Customs Duty on

Goods required for

development of Airports

Clarification under Project

Imports to allow benefit of Project

Import to all items required

for Airport Development

Projects.

Due to peak tariff rate of custom

duty, goods for Airport

development are imported at

higher rate which resulting higher

project cost. We request that goods

imported for development of

Airports should be eligible for

basis concessional custom duty @

5%.

Under customs tariff vide Sl.No.232 of notification No. 21/2002 – Customs dated 1st March, 2002 a lower

rate of basic custom duty had been specified as compared to peak tariff rate. However, subsequent to

reduction in peak tariff from 12.5% to 10% items included under List 20 corresponding to Sl.No.232 of

the above notification were not allowed any concessional rate of duty because Sl.No.232 was deleted

from the above Customs notification. This has resulted into import of goods for Airport development at

peak tariff rate of Customs Duty for goods required for development of Airports. We request the

erstwhile List 20 be expanded and goods imported for development of Airports should be eligible for

basic concessional customs duty @5%. The suggested list of goods required for Airport development is

enclosed as Annexure- I.

b)

Exemption from Custom Duty

for X-ray baggage inspection

system and parts thereof and

other Airport security systems.

Vide entry No.382 of notification 21/2002 – Customs dated 1st March, 2002 - X-ray baggage inspection

system and parts thereof are eligible for NIL basic customs duty subject to fulfillment of condition No.81

of the notification. Condition 81 prescribes that import should be by Government or its authorized

person for anti-smuggling or by CISF, Police Force, Central Reserve Police Force, National Security Guard

(NSG) or Special Protection Group (SPG) for bomb detection and disposal. Import of x-ray baggage

Exemption from duties of

Customs on all Airport Security

systems including X-ray

baggage inspection system and

part

Thereof required by Airport

Operator upon certification of

MoCA.

inspection system at Airports is for security purpose and security is Sovereign function (Reserved

Activity) as per State Support Agreement (SSA) with Ministry of Civil Aviation ( MoCA ) and import cost is

met out of Security Component of Passenger Service Fee. However, since import is not directly

undertaken by the above specified agencies but by respective Airport operators, duty concession is not

available though money is being paid out of funds of Government of India (GoI). Hence, this condition

needs to be amended to expand its scope to cover other security systems also and to incorporate import

by respective Airport operators subject to certificate from Government (MoCA). This concession should

not be limited to x-ray machines alone because there are other machines, which are used for bomb

detection and disposal. Further, it should also include other goods required for Airport security. Entry at

Sl. No. 382 should be amended to “X-ray baggage inspection system and other airport security systems

and parts thereof” (falling under chapter 84, 90 or any other chapter).

List of such Security Systems are furnished below:

a) X-ray baggage inspection system and parts thereof,

b) Explosive detectors,

c) Bomb/suspect luggage containment vessels/units. d) Robots for handling of bombs or suspected

baggage,

e) Parameter security intrusion system and accessories

f) Access Control System

g) Hydraulic bollards,

h) Boom barriers

i) Cameras for CCTV.

All the above systems are bought as per specifications laid down by Bureau of Civil Aviation Security

(BCAS), MoCA, and GoI.

c) Free of duty Import of Spares &

Consumables by MRO operators

All Materials like aircrafts spares and consumables has to free of duty by MRO Operators. Presently there

is a free of duty of aircraft spares with a condition that the same utilized within one year from the date of

import otherwise the same is taxable. Consumable are taxable from the beginning.

Hence, the Free of Duty is required for Import of Spare and Consumables with no restrictions by MRO

Operators.

CENTRAL SALES TAX

a)

Issue of “C” Form by Airport

Operators

Allow Airport sector to issue “C” form.

Though Airport sector is an important infrastructure sector like telecom, electricity

generation and distribution, and mining, it is not included as one of the eligible categories

which can issue concessional Form “C‟ because of which purchase of goods for Airport

development attracts higher Sales Tax resulting in increased cost of project, which is not in

public interest as any increase in cost of project ultimately translates into higher passenger

fees. In view of this, Airport sector should also be allowed to issue C Form and to this extent

Section 8(3)(b) of Central Sales Tax Act, 1956 may be suitably amended.

b)

ATF as Declared Goods

Classification of “Aviation

Turbine Fuel (ATF)” as Declared

Goods to bring a uniform tariff /

Tax across India.

Aviation Turbine Fuel (ATF) may be classified as “Declared Goods‟ category under CST Act

with a uniform application of Sales Tax rate all over the country. This will facilitate

emergence of Indian Airports as “Hubs‟ and stabilize ATF prices across the country which

will lower tariffs for passengers.

POLICY ISSUE

a)

Change in Baggage Rules

Baggage rules, 1998(as amended in 2016) permit, inter alia, duty free import of articles other

than articles mentioned in Annexure 1 to the rules, to the extent of Rs.50, 000. Annexure 1

prohibits import of liquor or wine in excess of 2 ltrs.

With depreciation of Rupee there is need to increase allowance to at least Rs.60,000 from

Rs.50,000 and also duty free import of liquor may be allowed upto 3 ltrs. of liquor and

additional 2 ltrs. of wine

Goods required for Airport development

Annexure-I

Sl. No. Tariff Code Particulars

1 Chapter 84 or any other chapter Navigational / Communication Aids

2 Chapter 84 or any other chapter Airfield Crash Fire Tenders & other fire fighting vehicles

3 Chapter 84 or any other chapter Elevated Transport Vehicle

4 Chapter 84 or any other chapter AC Plant of capacity more than 200 TR

5 Chapter 84 or any other chapter T-5 Triphosfor Tube

6 Chapter 84 or any other chapter Flight Inspection System (Ground & Air)

7 Chapter 84 or any other chapter Runway Marking & Pavement testing machine

8 Chapter 84 or any other chapter Baggage Conveyor (handling) system

9

Chapter 84 or any other chapter Passenger Boarding bridges (Aerobridges) along with associated Visual

Guidance Docking Systems

10 Chapter 84 or any other chapter HVAC & accessories

11 Chapter 84 or any other chapter Travelators / Escalators / Lifts

12 Chapter 70 or any other chapter Structural glazing (glass)

13 Chapter 94 or any other chapter Airport ground lighting

14 Chapter 76 or any other chapter Aluminium (Roof sheeting)

15 Chapter 73 or any other chapter False ceiling

16 Chapter 57 or any other chapter Carpet

17 Chapter 94 or any other chapter Fire proof door

18 Chapter 94 or any other chapter Revolving door

19 Chapter 94 or any other chapter LED Light fittings

20 Chapter 94 or any other chapter Check in counters

21 Chapter 84 or any other chapter Chillers

22 Chapter 84 or any other chapter Ground Power Unit (frequency convertor)

23 Chapter 94 or any other chapter Signages

24 Chapter 94 or any other chapter Chairs

25 Chapter 69 or any other chapter Vitrified tiles

26 Chapter 84 or any other chapter Runway Sweepers

27 Chapter 85 or any other chapter Variable speed drives

28 Chapter 85 or any other chapter LCD/ LED Flat Panels