Post-Budget: PwC takes on indirect taxes,I-T

1. Basic Customs Duty on crude petroleum is being increased from NIL to 5%

2. Basic Customs Duty on Motor Spirit (petrol) and HSD (diesel) is being increased from 2.5% to 7.5%

3. Basic Customs Duty on several other specified petroleum products is being increased from 5% to 10%

* Information Technology Software Services are proposed to be taxed under services tax even if used for non commercial purposes.

* The Budget proposal rationalizes the Customs duty applicable on medical,surgical,dental and veterinary equipments falling under chapter heading no. 90.18 to 90.22. At present such equipments attracts varying rates of customs duty and are spread over many lists. This multiplicity of rates is being done away with and now all medical equipments (with some exception) will attract 5% Basic Customs Duty,4% CVD/excise duty and NIL Special Additional Duty on Excise. The effective rate of Customs duty shall be 9.2%

* Withdrawal of concessional customs duty on spares for maintenance of medical equipment except in specified cases.

* Retention of full exemption from Basic Customs Duty and CVD / Excise duty for specified medical devices as well as for assistive devices,rehabilitation aids and other goods for disabled. Import of Cobalt-chrome alloys special grade stainless steel etc. for manufacture of orthopedic implants to be exempt from Basic Customs Duty.

* Service Tax levy is proposed to be extended to the following Health Services:

* Health check up by hospitals or medical establishments for the employees of business entities;

* Health services provided by insurance companies under health insurance schemes.

Service tax would be applicable only on payments for above services made directly by the business entity/ insurance company to the hospital/ medical establishment.

Any additional amount paid by the individual would not be subjected to service tax.

* Change in the rate of central excise duty applicable on various products.

* Standard rate of central excise duty increased from 8% to 10%,except petroleum products.

* Excise duty on packaged cement increased from 8% to 10% for cement of declared retail sale price exceeding Rs. 190/- per 50 kg bag or Rs. 3,800/- per ton.

* Excise duty on bulk cement enhanced from 8% to 10% or Rs. 230/- to Rs. 290/- per metric ton,which ever is higher

* Excise duty on petrol and diesel increased by One Rupee per litre.

* Full exemption to specified equipment extended for dairy,marine produce,as well as processing thereof.

* Exemption on microprocessors for computers,hard disk drive,CD/DVD etc. has been withdrawn.

* Supplies to specified Mega Power projects to be exempt from excise duty.

* The Budget proposes to simplify the procedure under Central Excise by taking following measures:

* Pre-authentication of invoice is proposed to be dispensed with;

* CENVAT Credit Rules are proposed to be retrospectively amended to provide option to manufacturer (engaged in manufacturing both dutiable and exempted goods) for availing full credit on inputs,other than fuel,after making proportionate reversal for inputs used in manufacturing exempted goods;

* The Cenvat Credit Rules are proposed to be amended to facilitate movement of molds,dies,jigs etc by the main manufacturer to vendors without loss of Cenvat credit;

* There shall be no penalty on voluntary payment of duty under 11A (2B).

* Settlement commission procedure simplified

* Provisions for slab depreciation in Cenvat credit has been notified for Computers and Computer peripherals.

* Service tax hitherto applicable on international air travel journeys by classes,other than economy class,is proposed to be now extended to both domestic and international air travel journeys on all classes of travel.

* The Budget proposes to retrospectively amend,from the date of introduction of the service itself,the definition of ‘Renting of Immovable Property Services’ to explicitly clarify that both renting itself as well as any other services in relation to such renting are covered under the scope of the taxable service.

Further,‘Vacant Land’ given on lease/ license for construction of building/ temporary structure which is meant to be used in furtherance of business of commerce is proposed to be included within the ambit of ‘Renting of Immovable Property Services’.

* Transportation of food grains and pulses by road are proposed to be exempted from service tax.

* Budget proposes to dispense with the condition of “the service is provided from India and used outside India” for any service to qualify as an export.

* The Budget also proposes to incorporate the following changes in the Export of Services Rules,2005:

* ‘Mandap Keeper Services’ would qualify as export of services if the services are provided in relation to an immovable property situated outside India.

* ‘Chartered Accountant’s Services’,Company Secretary’s Services and Cost Accountant’s Services would qualify as export of services if the services are provided to a recipient located outside India.

Lightened tax burdens brings cheer for middle class households

In a step to provide relief to the salaried class,the tax slabs for personal income have been revised,resulting in possible tax savings of up to fifty thousand rupees in the hands of an individual tax payer. In addition to this,a further deduction of Rs. 20,000 (over and above the normal deduction Rs.100,000 currently available on small saving under Section 80C of the ‘Act’) is proposed to be allowed for investments in specified long term infrastructure bonds. This measure will help make available additional funds for investment in the infrastructure sector and promote savings.

Proposal to move to citizen centric governance for improving tax administration

As a step towards tax administration procedural reforms,the Finance Minister on Friday announced that two more units (in addition to the one in Bangalore would be set up for central processing of tax returns in India to strengthen the back office infrastructure for a uniform/consistent administration of tax laws and reducing the physical interface between taxpayers and tax administration.

The Finance Minister also announced that the income tax department has introduced “Sevottam”,as a pilot project at Pune,Kochi and Chandigarh through Aayakar Seva Kendras. This year the scheme will be extended to four more cities.