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Union Budget- Indirect Tax

Budget 2014 - Indirect Tax Provisions

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Analysis of Amendments in Service Tax provisions, Highlights of amendment made in Central Excise Act and Customs Act proposed in Union Budget, 2014.

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Page 1: Budget 2014 - Indirect Tax Provisions

Union Budget-Indirect Tax

Page 2: Budget 2014 - Indirect Tax Provisions
Page 3: Budget 2014 - Indirect Tax Provisions

SERVICE TAX-Amendments

Amendment in Negative List under Section 66D of the Finance Act :

i. Service Tax @ 12.36% would be applicable on Selling of Space for Advertisement (except Print Media).

ii. Service of all radio taxis or radio cabs is taxable@ 4.94%.

(w.e.f date to be notified)

Page 4: Budget 2014 - Indirect Tax Provisions

Exemptions withdrawn / Service Tax scope increased

i. Tax on Renting of Immovable property services to an Educational Institution @ 12.36%.

ii. Services of transport, catering, house keeping and security to staff, student and faculty by approved Educational Institution is exempt.

iii. Service Tax on Transportation of passengers in air- conditioned

contract carriage (e.g. Neeta Volvo from Mumbai to Ahmedabad) @4.94%.

Page 5: Budget 2014 - Indirect Tax Provisions

Exemptions withdrawn / Service Tax scope increased

iv. Services by Clinical Research Organization (CRO) of Testing of newly developed drugs, vaccines and herbal remedies on human participants is taxable.

v. Services provided to Government or Local Authority for water supply, public health, sanitation, solid waste management or slum improvement is exempt. ( w.e.f 11-07-2014)

Page 6: Budget 2014 - Indirect Tax Provisions

New Exemptions granted / Service Tax scope reduced

i. Services of operators of Common Bio-medical WasteTreatment Facility to a clinical establishment is exempt.

ii. Accommodation services having declared tariff less than Rs. 1,000/- per day is exempt.

iii. Approved Life micro-insurance schemes for poor if sum assured is less than Rs. 50,000/- is exempt.

iv. Transportation of organic manure by vessel, rail or road (GTA) is exempt.

Page 7: Budget 2014 - Indirect Tax Provisions

New Exemptions granted / Service Tax scope reduced

v. Service of loading, unloading, packing, storage or warehousing, transportation by vessel, rail or road (GTA) of cotton, ginned or baled is exempt.

vi. Service to RBI from outside India of Foreign Exchange reserves management is exempt.

vii. Service of tour operator to a foreign tourist for tour conducted wholly outside India is exempt.

( w.e.f 11-07-2014)

Page 8: Budget 2014 - Indirect Tax Provisions

Amendment in Valuation of Works Contract

Category ‘B’ and ‘C’ with service portion of 70% and 60% is merged, having taxable service portion of 70% and hence effective rate is 8.652%.

( w.e.f 01-10-2014)

Page 9: Budget 2014 - Indirect Tax Provisions

Amendment in Abatement

i. Abatement of 60% on services of air- conditioned contract carriage taxable from 1-07-2014.

( w.e.f 11-07-2014)

ii. Abatement of 60% on services provided by radio taxis taxable from a date to be notified.

(w.e.f date to be notified)

iii. Abatement in case of transport of gods by vessel to be increased from 50% to 60%.

(w.e.f 01-10-2014)

(Effective Tax Rate for above services – 4.944%)

Page 10: Budget 2014 - Indirect Tax Provisions

Retrospective Exemption :

Services provided by Employees’ State Insurance Corporation (ESIC) during the period prior to 01-07-2012 is exempt.

Page 11: Budget 2014 - Indirect Tax Provisions

Increase in Rate of Interest on delayed payment of Service Tax

A Concession of 3% to small service providers having turnover of less than Rs. 60 Lakhs.

( w.e.f 1-10-2014)

Page 12: Budget 2014 - Indirect Tax Provisions

Amendment in Reverse Charge Mechanism (RCM)

i. Banking Company or Financial Institutions or NBFCs to pay100% tax on Recovery Agent services.

ii. Company and Body Corporate to pay 100% tax on services of a director.

iii. Renting of motor vehicle, where abatement is not availed,50% tax paid by service provider and 50% tax paid by service receiver.

( w.e.f 11-07-2014)

Page 13: Budget 2014 - Indirect Tax Provisions

Amendment in Point of Taxation Rules, 2011

Rule 7 provides that point of taxation in case of reverse charge, will be

i. the payment date or ii. first day, after 3 months from the date of invoice,

whichever is earlier. ( w.e.f 01-10-2014)

Page 14: Budget 2014 - Indirect Tax Provisions

Amendment in Place of Provision of Service Rules, 2012

i. In case of temporary imports of gods into India for repairs, Rule 4 will not apply. Provision of place or provision of repair services is also omitted.

ii. Definition of ‘Intermediary’ includes intermediary of goods hence, commission agent or consignment agent covered in rule 9(c) of the POPR Rules.

iii. Services of hiring of Vessels (excluding yachts) and Aircraft is excluded from Rule 9 (d) and hence covered by general Rule 3.

(w.e.f 01-10-2014)

Page 15: Budget 2014 - Indirect Tax Provisions

Amendment in CENVAT Credit Rules, 2004

Amendment Effective Date

i. Credit have to be availed within 6 months of the date of invoice or challan.

01-09-2014

ii. In full reverse charge, condition of payment of invoice value for availing Credit is withdrawn. Hence, Credit can be taken on payment of ServiceTax only.

11-07-2014

iii. Re-credit of credit reversed on non-receipt ofexports proceeds, is allowed, if received within one year.

11-07-2014

iv. In GTA services, service receiver may avail abatement, without the condition of non-availment by service provider.

11-07-2014

Page 16: Budget 2014 - Indirect Tax Provisions

Amendment Effective Date

v. Credit is allowed on services received by a Rent-a-cab operator from sub-contractor.

01-10-2014

vi. Credit is allowed on services received by a Tour operator from Sub-contractor.

01-10-2014

vii. Rule 7 viz. Input Service Distribution allow distribution of Credit, whether such services are used or not, in the ratio of their turnover of the previous period to total turnover of al the units.

01-10-2014

Amendment in CENVAT Credit Rules, 2004

Page 17: Budget 2014 - Indirect Tax Provisions

Amendments in Finance Act, 1994

i. Section 73 prescribe time limit for completion of adjudications.

ii. The power to waive 50% penalty is amended under Section 80.

iii. Section 87 empowers to recover dues of a predecessor from the assets of a successor.

iv. Company and Body Corporate to pay service tax as a on services received by a director.

( w.e.f date of Presidential Assent)

Page 18: Budget 2014 - Indirect Tax Provisions

Central Excise Provisions made applicable to Service Tax

i. Section 5A(2): Clarification on the scope or applicability of any Notification shall have effect from the date of issue of suchnotification.

ii. Section 15A: It stipulate that third party sources should furnish periodic information.

iii. Section 15B: Failure to provide information under section 15A would attract penalty.

( w.e.f 11-07-2014)

Page 19: Budget 2014 - Indirect Tax Provisions

Central Excise Provisions made applicable to Service Tax

iv. Section 35F: This section prescribes mandatory pre-deposit as under:

( w.e.f 1-07-2014)

Page 20: Budget 2014 - Indirect Tax Provisions

SEZ Provisions simplified

Page 21: Budget 2014 - Indirect Tax Provisions

Other Amendments

i. Advance Ruling - The resident Private Limited Company is eligible to make an application for Advance Ruling.

(w.e.f 11-07-2014)

ii. E-Payment of service tax is mandatory for all the assesses notwithstanding the Tax amount.

(w.e.f 01-10-2014)

Page 22: Budget 2014 - Indirect Tax Provisions

CENTRAL EXCISE – AMENDMENTS

All changes come into effect immediately unless otherwise specified.

• Education cess and secondary and higher education cess (customs component) is exempted on goods cleared by an EOU into DTA.

• Insertion of Section 15B:

• Section 15B provides for imposition of penalty if the information return is not submitted.

Page 23: Budget 2014 - Indirect Tax Provisions

AMENDMENT IN CENTRAL EXCISE RULES, 2002:

E-payment is being made mandatory for all assessees . Assistant Commissioner or the Deputy Commissioner allow an assesses to pay duty by any other way.

[w.e.f. 01.10.2014] (Notification No. 19/2014, Central Excise (N.T.))

Page 24: Budget 2014 - Indirect Tax Provisions

AMENDMENT IN CENTRAL EXCISE VALUATION (DETERMINATION OF PRICE OF EXCISABLE GOODS) RULES, 2000:

• Proviso to Rule 6 of the Valuation Rules - where price is not the sole consideration for sale and goods are sold at a price less than cost and profit, value shall be transaction value.

[w.e.f. 11.07.2014] (Notification No. 20/2014, Central Excise (N.T.))

Page 25: Budget 2014 - Indirect Tax Provisions

Customs – Amendments Highlights

Mandatory pre-deposit to the extent of 7.5% of the amount involved (at first appeals level ) and 10% (at second stage level ) subject to Rs. 10 crores in case of appeal.

This substituted provisions would not be applicable to pending appeals and stay applications.

Customs duty on certain goods rationalized

Reduced dependency on imports

Page 26: Budget 2014 - Indirect Tax Provisions

Advance ruling option made available to resident private limited companies.

• Free baggage allowance increased from Rs. 35k to Rs. 45K

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Thank You