Union Budget 2012 - 13

1. Union Budget 2012 - 13 D Arvind D Arvind & Associates Chartered Accountants

2. Contents • Performance • Budget Expectations • Indirect Tax • Direct Tax • Direct Tax Proposals • Indirect Tax Proposals • Tax Impact - Sector Wise • Tax Impact – Consumers / Individuals D Arvind & Associates Chartered Accountants

3. Performance D Arvind & Associates Chartered Accountants

4. GDP Growth Rate D Arvind & Associates Chartered Accountants

5. Inflation D Arvind & Associates

6. Fiscal deficit as a % of GDP D Arvind & Associates Chartered Accountants

7. Sector wise Growth performance D Arvind & Associates Chartered Accountants

8. Unbalanced Growth • Growth down from 8.4% to 6.9% in FY 11-12 Lowest in recent past (except for FY 09) • Economic Survey: Resilience largely due to services sector • Manufacturing and Agricultural sector key to balanced growth D Arvind & Associates

9. Budget Expectation D Arvind & Associates Chartered Accountants

10. Direct Tax - Expectations • Implementation of DTC • Abolition of surcharge on corporate tax • Abolition of DDT • Increase in Tax slabs for Individuals • Measures to minimize Black money • Reduction in MAT from 19.93% to 15% • Reduction in Corporate Rate of IT D Arvind & Associates Chartered Accountants

11. Indirect Tax - Expectations • Implementation of GST • Reduction / Abolition of CST • Reduction in peak rate of customs on raw materials and inputs • Cenvat Credit on Diesel / LDO / HSD for manufacturer • 100% credit on CG in the year of receipt • Excise Duty exemption for Inter unit transfers • Service Tax based on Negative list approach D Arvind & Associates Chartered Accountants

12. Indirect Tax - Expectations • Service Tax credit for Brand owners • Decrease in rate of composition under works contract service from 4% to 3% • Clarity on taxes on software • Clarity on supply of tangible goods service- VAT and Service Tax • Abolition of SAD / Reduction of SAD D Arvind & Associates Chartered Accountants

13. Direct Tax Proposals D Arvind & Associates Chartered Accountants

14. Proposed Changes- Personal Taxation • Minimum threshold limit raised to Rs. 2 Lac • Maximum rate of tax of 30% is from Rs.10 Lac • Maximum Effective saving is Rs. 22660 • Interest on savings account exempt up to Rs.10000 • Deduction of Rs. 5000/- for preventive check up • Salaried tax payers with Income up to 5 Lac not required to file tax return • Exemption for Investment in Equity up to 50% of Investment subject to maximum investment of Rs.50000 D Arvind & Associates Chartered Accountants

15. Proposed Changes- Corporate Taxes • Taxation of foreign dividends at 15% instead of marginal rate- extended up to March 13 • Extension of sun set clause for tax holiday for power sector for one more year • Cascading effect of DDT eliminated for multi tiered structures • Withholding tax on Interest on ECB in Infrastructure sector reduced from 20 to 5% • MAT Applicable to other entities • TDS on sale of immovable properties at 1% D Arvind & Associates Chartered Accountants

16. Incentives • Tax Holiday in Power sector – commencement date extended to 31 March 2013 • Initial depreciation of 20 % allowed to power companies • Investment linked incentives for specified business (Cold Chain facility etc.) increased from 100% to 150% D Arvind & Associates

17. Incentives • Investment linked incentives extended to ‘Container Freight Station’ ‘Inland Container Depot’, ‘ Warehousing facility for storage of Sugar’ etc • 200% Weighted deduction for In-House Research expenditure extended for 5 years (i.e. upto AY 2017-18) D Arvind & Associates

18. Indirect Tax Proposal D Arvind & Associates Chartered Accountants

19. Service Tax D Arvind & Associates Chartered Accountants

20. Widened Services tax net • Increase in Rate from 10 to 12% • Taxation on basis of Negative list – Net widened • Negative List to include specified services in relation to agriculture, education, trading of goods, services by Government or local authority, residential renting, interest or discount on deposits, loans or advances D Arvind & Associates Chartered Accountants

21. Service Tax – Negative List • Shift from “selective taxation” to” Compreheive taxation” • Service defined to mean • Any activity • For consideration • Carried out by a person for another • Including declared services like construction, works contracts, renting of immovable properties, leasing , IT Software, IPR, Non compete, catering D Arvind & Associates Chartered Accountants

22. “Service” does not include • Any activity that constitutes only a transfer in title of goods, immovable property by way of sale, gift or in any other manner • Transaction of only money or actionable claim • Any service provided by an employee to an Employer in the course of employment • fee payable to Tribunals and courts D Arvind & Associates Chartered Accountants

23. Other Important Changes • Export and Import Rules to be revamped- New “ Place of provision of services Rules to be introduced • Amendments in POT Rules to ease administrative hurdles • Amendments in valuation to provide specfic inclusions and exclusions • Mega Exemption List in addition to Negative list D Arvind & Associates Chartered Accountants

24. Other Important Change in Export of Service • Five Export conditions incorporated in Service Tax Rules: • Location of service provider in taxable territory; • Location of service recipient outside India; • Service provided is a service other than in the negative list. • Place of Provision of the service is outside India; and • Payment received in convertible foreign exchange D Arvind & Associates Chartered Accountants

25. Other Important Changes • “Dominant Nature test” for taxing services • Sweeping changes in reverse charge mechanism- Joint liability of service provider and recipient in 3 cases • Simplified registration and one pager return format for Central Excise and Service Tax tabled for public comments – Returns to be monthly • Adjustment of excess Service Tax paid allowed without any monetary limit effective 1 April 2012 D Arvind & Associates Chartered Accountants

26. Cenvat Credit Rules D Arvind & Associates Chartered Accountants

27. Proposed Changes • Reversal under Rule 6(3) of CCR increased to 6% from 5% • Rule 3(5) and 3(5A) are being amended to prescribe that in case the capital goods on which Cenvat credit has been taken are cleared after being used then the amount payable shall be either the amount calculated on the basis of Cenvat credit taken at the time of receipt reduced by a prescribed percentage or the duty on transaction value whichever is higher • . D Arvind & Associates Chartered Accountants

28. Proposed Changes • Rule 10A is being inserted to permit transfer of unutilized credit of SAD lying in balance at the end of each quarter to another factory of the manufacturer • Rule 14 is being amended to substitute the word “or” with “and” so that interest is not payable on credit wrongly taken unless the same is utilized • Credit of Service Tax on hiring, insurance and repair of specific vehicles allowed D Arvind & Associates

29. Central Excise D Arvind & Associates

30. Proposed Changes • Excise duty rate (effective 17 March 2012) • Std. Rate from 10% to 12% • Mean rate from 5% to 6% • Cess on Crude petroleum increased from INR 2,500 per MT to INR 4,500 per MT (effective 17 March 2012) • Inter-unit transfer of unutilized SAD credit permitted D Arvind & Associates Chartered Accountants

31. Proposed Changes • Substantial expansion in units enjoying J&K exemption – ten year period to be computed from the expanded capacity • Specified pharma products duty slashed from 10 % to 6 % • Designated Central excise officers empowered to make arrests even without prior approval of the Commissioner D Arvind & Associates Chartered Accountants

32. Customs D Arvind & Associates Chartered Accountants

33. Proposed Changes • Peak rate of BCD retained at 10% • Increase in effective rate by 2% due to increase in ED (CVD) • Exemption of SAD on Pre-packaged goods intended for retail trade • Import against duty scrips obtained fraudulently – Powers to recover customs and attach property D Arvind & Associates Chartered Accountants

34. Excise Changes • Increase in BCD: Gem & Jewellery: Import duty on gold / gemstones doubled / increased • Auto: Luxury cars of certain specifications to 75 % • •Exemption from BCD: Power: Thermal coal (CVD also reduced to 1%) valid upto 31 March 2014 • Aviation: Parts of aircraft / testing equipment for MRO by third parties only • Mining: Coal mining projects D Arvind & Associates

35. Impact on Business – Sector wise D Arvind & Associates Chartered Accountants

36. Power Expected Proposed Sunset clause for IT exemption extended by another one year Additional depreciation of 20% to power Cos Import of Coal exempt from customs for power projects and CVD at 1% • Extension of sunset clause for power projects • Rationalization of Indirect taxes i.e merger of Electricity duty • Refund of ED for setting up of Mega/Ultra Mega projects D Arvind & Associates Chartered Accountants

37. Infrastructure Expected Proposed Increased allocation of funds marginally Withholding Tax reduction from 20% to 5% on Interest on ECB • Increase in infrastructure spending through higher allocation to various schemes • Tax Concessions D Arvind & Associates Chartered Accountants

38. Agriculture / Food Expected Proposed Reduction in customs duties for specified agricultural machinery Reduction in CD for fertilizer's Services provided in relation to Agriculture is in the Negative list • Reduction in custom duties for agricultural machinery • Reduction in CD for fertilsers D Arvind & Associates Chartered Accountants

39. Software & ITES Expected Proposed Increase in ED across the board – PCs to cost more Increase in Service tax from 10 to 12% • Clarity on the taxation of ‘right-to-use’ software whether under Service Tax and/or  VAT D Arvind & Associates Chartered Accountants

40. Automobiles Expected Proposed Increase in ED Full exemption from Customs for parts of hybrid Vehicles Increase of 60% to 75% in CD on large cars • Increase in ED • Concession to fuel efficient vehicles D Arvind & Associates Chartered Accountants

41. Pharma & Healthcare Expected Proposed Reduction in customs for specified raw materials for manufacture of medical Kits Service tax on Health care widened • Infrastructure status to Healthcare • Exemption of ED on physician samples • Reduction in duties for imports D Arvind & Associates Chartered Accountants

42. GST Status • No date for implementation of GST announced • Constitutional Amendment Bill for introduction of GST to be tabled in the current session of Parliament • Status of other initiatives: • Drafting of model legislation for Central GST and State GST underway • National Securities Depository Limited (NSDL) has been selected as technology partner for establishing and operating the IT infrastructure for GST • NSDL to set up a pilot portal in collaboration with 11 States prior to rollout across the country D Arvind & Associates

43. Business Implication in general • Increase in ED from 10% to 12% • Increase in Service tax from 10% to 12% • Service tax widened • CENVAT credit curtailed • GST implementation date yet to be notified • DTC from April 2013 • White paper on Black Money • Measures to check undisclosed Income • All goods and services will be more costlier D Arvind & Associates Chartered Accountants

44. Impact on Consumers • Marginal relief in Income tax • Increase in ED by 1% on essential goods and 2% on other goods. Cascading effect of VAT • Health services will become costlier • All services and goods will be costlier • Relief granted under IT is more than taken under IDT D Arvind & Associates Chartered Accountants

45. Expectation Gap • DTC implementation deferred • Uncertainty in GST Implementation • No Clarity on multiple taxes on Intangibles and software • SAD Continues • CST Continues D Arvind & Associates

46. Thanks D Arvind & Associates Chartered Accountants