Hon’ble Finance Minister presented budget for FY 2011-12. Significant proposal are as follows;
General: GDP is expected to grow in the region of 8.75% to 9.25%. The Minister spoken about fiscal consolidation and put up a target of 4.6% fiscal deficit. Government is also mooting liberalizing the FDI policy in the country, however no details was presented. A host of new bills to bring reforms in the financial sector to be introduced in the current parliamentary session including Pension Bill, LIC Bill, Banking Laws Amendment Bill and SBI Subsidiaries Bill. Bill to allow RBI to grant more banking licenses under consideration. Government to introduce GST (Goods and Service Tax Bill) in the current Parliamentary session. Government to move to direct tax subsidy for kerosene and fertilizer. Subsidies to reach BPL families directly now under a new scheme, the modalities of which will be worked out by Nandan Nilekani. Standard of of Weights & Measure Act is being repealed and replaced by Legal Metrology Act from 01.03.2011.
Direct Taxes:
- Personal Income Tax limit have been increased to 180,000.
- Surcharge on corporate taxation have been reduced to 5%.
- MAT has been increased to 18.5%.
Indirect Taxes:
Custom:
- Self assessment in custom is being introduced.
- There is no change in the peak rate of basic custom duty.
- Assessment of postal import is being simplified with two rates, @35% and 10%.
- Aircrafts will attract custom duty @ 2.5%.
- Export duty on Iron ores have been increased to 20%.
- There shall be no export duty on Ore pellets.
- Export duty of 10% have been imposed on de-oiled rice bran cake.
- Sub-section (1) of section 27 is being substituted so as to enhance the time limit for claiming refund of duty and interest from six months to one year for all categories of importers. This would unify the provisions with regard to raising of demands and claiming of refund.
Central Excise:
- The standard rate of 10% has been maintained.
- Goods attracting 4% of Central Excise duty shall attract an enhanced rate of 5%.
- Exemptions have been withdrawn from 130 items. These items will attract a duty of 1% without Cenvat benefit.
- Rationalisation of duty rate on Cement has been made. Now the Cement shall attract a duty to 10% ad velorem plus specific rate of Rs.30-180 PMT.
- Ready made garments and made up article of textile, bearing a brand name has been brought under Central Excise net with imposition of duty @ 10%. These products shall attract duty on MRP basis with an abatement of 40%. A new Rule [Rule 4(1A) of Central Excise Rules] is being added so as to make complying with central excise procedure a responsibility of the Brand name owners, and not of the job workers.
- Sugar, Textile and Textile product is being removed from the schedule of Additional Duties of Excise Act. Now there products will be subject to State’s VAT.
- Welcome legal changes have been proposed to clarify the provisions and reduce dispute. The maximum penalty under Section 11A has been reduced to 50% if the transaction have been recorded in the books.
- Rate of interest on delayed payment of duty is being raised to 18%.
- Power to authorize searches is being given to Joint/Additional Commissioner in place of Assistant/Deputy Commissioner.
- Cenvat Credit Rules is being amended to clarify the definition of inputs and input services.
- The definition of deemed manufacture is being amended and now conversion of ores into concentrates, refining of gold dole bars, galvanization etc. shall amount to manufacture. In respect to products falling under Chapter 22, packing, labeling etc. amounts to manufacture.
Service Tax:
- The existing rate of 10% has been retained.
- Service Tax is being proposed on air conditioned restaurants having bar license, and short term accommodation in hotels/clubs/guest houses etc. Air travel will attract higher service tax.
- Scope of various services have been extended.
- Definition of Commercial coaching and training is being expanded to include all coaching/training not recognized by law irrespective of the fact that whether the institute is providing any course recognized by law.
- The scope of the Club & Association service is proposed to be expanded to include service provided to non-members as well.
- The scope of Business Support service is being expanded to include operational or administrative assistance of any kind.
- Scope of Legal consultancy services is being expanded to include Services of advice, consultancy or assistance provided by a business entity to individuals as well; Representational services provided by any person to a business entity and Services provided by arbitrators to business entities.
- The scope of heath services, insurance services etc. has also been expanded.
- Legal compliance system has been proposed to be revamped.
- A new rule 5B has been introduced to provide that the applicable rate of tax shall be the rate prevailing at the time when the services are deemed to have been provided.
- It has also been provided that when an invoice has been issued or a payment received for a service which is not subsequently provided, the assessee may take the credit of the service tax earlier paid when the amount has been refunded by him to the recipient or by the issue of credit note, as the case may be. The amount stated in rule 6(4B)(iii) for adjustment of excess amount paid by an assessee is being enhanced to Rs. 2 lakhs.
- Export and Import of Service rules are being amended and there is a movement towards destination-based levy in respect of B2B services while origin-based levy is largely applicable to B2C services.
- There is proposal of enhanced penalty and prosecution in Service Tax offences.
The budget is taking important steps towards tax reforms. The Minister promised that Constitutional amendment bill for implementation of GST shall be introduced in this session of Parliament. Raodmap to various tax reforms was stated, and it is a welcome step.
Written by:- Advocate Rajesh Kumar. The author can be contacted on The author can be contacted on [email protected] , Web: www.rajeshkumar.co.in
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