Indirect_tax_Finance Bill 2015_Sujit_Ghosh_03.03.2016

37 Pages·2016·0.6 MB·English

INDIRECT TAX PROPOSALS
UNDER UNION BUDGET 2016
Sujit Ghosh (
Advocate, Delhi High Court and
Supreme Court)

Partner & National Head, Advaita Legal
At a glance
At a glance
• No commitment apropos GST
• Merit rates of excise duty and Basic Customs Duty (BCD) remain unchanged. Thus, the
general effective Customs duty rate continues to be 26.43 per cent (capital goods)/ 29.44
per cent (other goods)
• Krishi Kalyan Cess levied on all the taxable services at the rate of 0.5 per cent pushing
effective service tax rate to 15% (effective from 1 June 2016). While announced to be
creditable, no specific amendments yet
• Oil Industries Development Cess on domestically produced crude oil has been
reduced from INR 4,500 PMT to 20 per cent ad valorem (effective from date of assent to
Finance Bill, 2016)
• Fillip to ‘Make In India’
‒ Rationalizing duty structures on inputs/raw materials to reduce costs and improve
competitiveness of domestic industry in sectors like Information technology hardware,
capital goods, defence production, textiles, mineral fuels & mineral oils, chemicals &
petrochemicals, paper, paperboard & newsprint, Maintenance repair and overhauling
[MRO] of aircrafts and ship repair etc.
‒ Attempts made at easing CENVAT credit provisions
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At a glance
• National Calamity Contingent Duty (“NCCD”) will only be utilized for payment of NCCD on
all goods* (effective from 1 March 2016)
• Infrastructure Cess (non-creditable) on all Motor Vehicles falling under 8703 designed for
transport of persons at the rates specified below - immediately effective under the
Provisional Collection of Taxes Act, 1931:-
1% on Petrol, LPG and CNG driven motor vehicles less than 4 meters long and below
o
1200cc
2.5% on Diesel Driven Motor Vehicles less than 4 meters long and below 1500cc
o
4% on all other vehicles
o
• Clean Energy Cess renamed as “Clean Environment Cess” and the rate of this cess on
coal, lignite and peat etc. has been hiked to Rs.400 per tonne - immediately effective
under the Provisional Collection of Taxes Act, 1931
This is despite the fact that India already has a higher-than-global-average ‘carbon tax’.
o

* Earlier CENVAT credit of any duty could be utilized for payment of NCCD except NCCD
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paid on CTH 85171210 and 85171290
At a glance - Indirect Tax Dispute Resolution
Scheme, 2016
• Attempt to reduce litigation through the Indirect Tax Dispute Resolution Scheme, 2016
(effective from 1st June 2016)
o Where appeals are pending as on 01.03.2016 before Commissioner (Appeals) under
Customs Act, 1962, Central Excise Act, 1944 and Finance Act, 1994;
o Declarations can be filed till 31.12.2016 in prescribed Form before Assistant
Commissioner post payment of tax + interest + 25% of the penalties imposed in the
order under appeal except
where the impugned order under appeal relates to search and seizure proceedings,

or prosecution has been initiated in the matter, or matter relates to narcotic drugs or
other prohibited goods, or matter pertains to offences under Indian Penal Code or
Narcotic Substances and Psychotropic Substances Act or Prevention of Corruption
Act, or where detention order has been passed under Conservation of Foreign
Exchange and Prevention of Smuggling Activities Act;
o Assistant Commissioner to pass Order of discharge of dues within 15 days of receipt of
proof of payment, which Order shall be final and conclusive and appeal pending before
Commissioner Appeals shall stand disposed of and Declarant shall get immunity from
all proceedings under the relevant Act relating to the matter
o Amount paid by the Declarant not refundable; Order not on merits and not appealable.
Order does not confer any benefits to the Declarant other than the immunities 4
Proposals under Service Tax and
CENVAT Credit Rules
Negative List
Services removed from Negative List and included under Mega Exemption Notification
• Service provided by educational institution as stipulated under Section 66D(l)
This has been included in the Mega exemption Notification 25/2012 (vide Notification No.
9/2016.)
• Transport of passengers by a stage carriage provided under 66D(o)(i)
o Exemption to Stage carriage other than air-conditioned stage carriage under Mega
exemption Notification 25/2012.
o air-conditioned stage carriage- 60% abatement- DTC AC buses??
• Transport of goods by an aircraft or a vessel from a place outside India upto the
customs station of clearance in India - under 66D(p)(ii).
o Transportation of goods by an aircraft from a place outside India upto the customs
station of clearance in India has been included in exemption Notification 25/2012-
w.e.f. 1.06.2016
• Transport of goods by a vessel from outside India taxable now - subject to Place of
Provision of Services Rules. No territorial nexus to levy service tax on ocean
freight? - Customs Valuation - inclusion of Service tax component would need to be
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examined.
Declared Service - Assignment of spectrum
Declared Service- Section 66E
• Assignment by the Government of the right to use the radio frequency spectrum and
subsequent transfers, proposed to be made a declared service under 66E(j).
• Whether ‘allocation’ of spectrum and a conditional right to use the same can be termed
as ‘Assignment’?
• Would the subsequent ‘transfer’ be restricted to the rights assigned?
• Recently, vide Notification 06/2016-ST, any service by government or local
authority provided to business entities were made liable to service tax. Thus grant
of mining leases would also be liable to service tax now. Does that mean that while
mere “grant” of mining lease will attract service tax, for allocation of spectrum to be
liable to service tax, the same has to qualify as an “assignment” as understood under
law?
• Can spectrum be considered as “goods”??
• Is it a one time service?

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Amendments in CENVAT Credit Rules, 2004-
CCR- Assignment
‘Assignment’ of right to use natural resources
• CENVAT Credit of Service tax paid on service provided by way of ‘assignment’ by the
government or any other person of the right to use any natural resource, shall be
spread over such period of time as the right to use has been assigned.
• Amount of CENVAT credit which can be taken in a financial year = Service tax paid
on charges payable for such assignment of right to use / Number of years for
which the right has been assigned.
• If such right is further assigned to any other person against a consideration, then the
balance CENVAT Credit as does not exceed the Service tax payable on the
consideration charged by him for such further assignment shall be allowed in the same
financial year.
• In case of annual or monthly user charges payable in respect of service of assignment
of right to use natural resource, credit apropos such charges shall be allowed in
the same year in which they are paid

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Amendments in CENVAT Credit Rules, 2004-
CCR - Assignment
‘Assignment’ of right to use natural resources - impact
• The aforementioned restriction in relation to Cenvat credit not applicable for all
services provided by Government in the nature of grant of rights over natural
resources - only restricted to assignment of right to use any natural resource??
• The proviso deals with further ‘assignment of right’ which is in distinction with
‘subsequent transfer’ as used in section 66E(j)- Whether ‘assignment’ or ‘transfer’ is the
same??

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