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BUDGET 2011-12 INDIRECT TAXATION PROPOSALS

Explore key updates on service tax and central excise, including legislative changes, point of taxation, and CENVAT credit rules. Stay informed on expanded levies and exemptions.

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BUDGET 2011-12 INDIRECT TAXATION PROPOSALS

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  1. BUDGET 2011-12 INDIRECT TAXATION PROPOSALS • by • jaikumar • advocate • swamy associates

  2. SERVICE TAX

  3. SERVICE TAX NEW LEVIES • Air – conditioned restaurants and • Licence to serve liquor (70 % abatement). • Short term accommodation in hotels (50 % abatement).

  4. SERVICE TAX EXPANSION OF EXISTING LEVIES • Authorised Service Stations – Good bye to “authorised”. • Life Insurance – Investment portion of premium. • Club or Associations – Services to non Member also. • (Reprieve for past – for Industrial associations).

  5. SERVICE TAX LEGISLATIVE CHANGES • Section 70 – Maximum penalty Rs.20,000 (from Rs. 2000) • Section 75 – Interest hiked to 18 % p.a.(3 % discount to small service providers having annual taxable turnover > Rs. 60 lakhs). • Section 76 - Penalty halved. • Section 77 – Penalty enhanced to Rs.10,000 from Rs.5000/- • Section 73 / 78 – Concept of “semi-evasion”.

  6. SERVICE TAX LEGISLATIVE CHANGES • Section 80 – Limited waiver for Sec. 78 penalty. • Search Powers – Delegated. • Precedence to Service Tax Dues. • Prosecution is back. • - Not raising invoices. • - Wrong availment of cenvat credit. • - Not supplying information / maintenance of false books. • - Collecting but not paying service tax.

  7. SERVICE TAX POINT OF TAXATION • Issue of Invoice ( on failure date of completion)or • Receipt of payment/advance – whichever is earlier – • Is the point of taxation.

  8. SERVICE TAX POINT OF TAXATION • Applicability of change of rate – Service provided • before change of rate.

  9. SERVICE TAX POINT OF TAXATION • Applicability of change of rate – Service provided • after change of rate.

  10. SERVICE TAX POINT OF TAXATION • Continuous supply of service relevant date • as per contract • Special provision for 2(1)(d) & specified services. • Outstanding on 30.06.2011 – Saved! • Bad debts to be “very bad”

  11. SERVICE TAX MISCELLANEOUS • Service tax on air travel enhanced. • Self adjustment limit raised to Rs.2,00,000. • Old wine in new Bottle – New SEZ exemption.

  12. CENTRAL EXCISE

  13. CENTRAL EXCISE • 4 becomes 5. • (Pumps, medicines) • Duty of 1 % on 130 items without Cenvat Credit • or 5 % with Cenvat Credit. • Branded readymade garments – 10 % on 45% of RSP. • Availability of SSI Exemption.

  14. CENTRAL EXCISE • Branded readymade garments – 10 % on 45% of RSP. • - Option to pay duty by Principal. • - SSI Exemption. • - Deemed Manufacture.

  15. CENTRAL EXCISE LEGISLATIVE AMENDMENTS • Section 11 A – Revamped – “semi evasion”. • Interest rate enhanced to 18 % p.a. No • change in interest rate for delayed refunds. • Deemed manufacture – Chapters 22, 26, 63 • refining of gold & Galvanisation (chapter 72).

  16. CENVAT CREDIT RULES • Inputs definition amended. • - all goods used in the factory; • - accessories cleared along with final product; • - goods meant for free warranty; • - all goods used for generation of electricity / steam; • - all goods used for providing output service. • Exclusions: • - Diesel, Petrol; • - goods used for construction, foundation, support • structures; • - Capital goods, except when used as parts of • final products; • - Goods primarily used for personal use by employees; • - Goods having no nexus to manufacture.

  17. CENVAT CREDIT RULES Input service definition amended. - used for providing output service; - used by a manufacturer of final products, whether directly or indirectly, in or in relation to manufacture and clearance of final products up to place of removal; and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal The words “ activity relating to business is taken out” – to come out of coco – cola case!

  18. CENVAT CREDIT RULES • Exclusions. • - Architect, Port Service, Airport Services, commercial or industrial • construction, construction of residential complex, works contract • service – if used for construction of building / civil structure or for • laying of foundation / structures for capital goods – except where • the output services are also the above. • - Insurance of vehicles, rent a cab, service center, supply of tangible • goods (vehicles), except for courier, tour operator, rent a cab, • cargo handling, GTA, outdoor catering, pandal and shamiana. • - Employee welfare services.

  19. CENVAT CREDIT RULES • Exempted goods shall include goods attracting 1 % • duty, for the purposes of Rule 6. • Exempted services shall include those services, • where abatement is claimed and trading ( 10%) • 1 % duty now imposed cannot be availed as credit. • Credit cannot be used to pay this 1 % duty. • Credit reversal even for partial write off. • If discount is allowed by service provider, • proportionate credit to be reversed. • Credit can be taken upon receipt of invoice and payment to be made within 3 months.

  20. CENVAT CREDIT RULES RULE 6 • Option to maintain separate records only for • inputs and go for proportionate reversal for input services. • 6 % on exempted services reduced to 5 %. • Easy option of 50 % reversal for banking companies. • Easy option of 20 % reversal for insurance companies. • No more protected services. • Protection for services provided to SEZ.

  21. CUSTOMS DUTY

  22. CUSTOMS DUTY • Peak rate remains at 7.5. • Basic rate of customs duty unified at 2.5%. • BCD exemption to import of stainless steel scrap. • BCD reduced on agricultural machinery and parts, micro irrigation equipment. • Full exemption from BCD, SAD and concessional CVD at 5%, to specified parts of hybrid vehicles. • SAD exemption on clearance from SEZ to DTA on goods charged with VAT/Sales tax. • BCD reduced on raw silk of all grades. • BCD exemption to cotton waste. • BCD exemption to water pumping station and reservoir to water supply projects for agricultural and industrial use.

  23. CUSTOMS DUTY • 5% CVD and NIL SAD on parts of inkjet and laser printers. • SAD exemption to parts , components and accessories of mobile handsets. • List of goods to be imported duty free for use in manufacture of leather goods, textile and leather garments expanded. • Duty free import facility to merchant exporters on trimmings, embellishments, components for manufacturing leather goods, footwear and textile garments. • Self assessment for exports and imports. • Time limit for filing refund extended to one year.

  24. Thank you mail@swamyassociates.com

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