1 Service tax
1.1 Scope of the term ‘service’ should be restricted [Section 65B(44) of the Finance Act, 1994]
Currently, Section 65B (44) of the Finance Act, 1994 (“Finance Act”) defines the term ‘service’ to include ‘any activity carried out by a person for another for consideration’. The scope of the present definition of term is very wide to include even personal or religious activities within its ambit and leads to unintended interpretations and conclusion.
In line with the international practices, it is recommended that the scope of term ‘service’ under the Finance Act be restricted to any activity for consideration in the course of or in furtherance of business, trade, commerce or profession or industry.
1.2 Technical Testing services to Foreign Clients [Rule 4 of the Place of Provision Rules, 2012]
Testing, analysis or research and development activities carried out in the labs in India for which test reports are sent to the foreign clients, especially by pharmaceutical development and research companies on biological or chemical samples received in India from foreign clients, are currently chargeable to service tax in India, as the place of provision of such services in terms of Rule 4 of the Place of Provision Rules, 2012 (“POPS Rules”) is within India.
India is a large exporter of technical testing services, including in the health care industry (e.g. pharmaceutical research and development companies). Levying service tax on such services in India is making outsourcing of such research or pharmaceutical development functions to India commercially unviable. Further, such services have not been extended the same treatment as available to other services exported outside India even when such services are also earning huge foreign exchange for the country. It is important to note that under the erstwhile service tax regime, to address this very same issue, technical testing and analysis services, was reclassified from the second category (i.e. performance based services) of Export of Service Rules, 2005 (“Export Rules”) to third category (i.e. the recipient based services) with effect from April 1, 2011 thus enabling services providers to claim export benefit on testing or analysis services.
In the interest of the exporters of testing or analysis and R&D services, it is recommended that the export benefit to technical testing or analysis services should be restored to the position applicable prior to introduction of negative list.
1.3 Services provided by clinical trials. [Serial Number 7 of the Mega Exemption Notification]
Exemption provided to services of technical testing of newly developed drugs on human participants by a clinical research organization approved to conduct clinical trials by the Drug Controller General of India now stands withdrawn vide the Union Budget 2014 and as a result now such services have come under the purview of service tax.
India has the potential of becoming a global clinical trial hub. However, with this new levy this industry will now be at a disadvantage. The POPS Rules categorize these services under Rule 4, even when such services are provided for service recipients located abroad as the samples of medicine are made available for testing / trials in India. As a result, these services cannot qualify as exports and would not be eligible for input tax refund despite the fact that recipient of service is located outside India and consideration is received in foreign exchange.
It is suggested that the place of provision of such service s should be classified under Rule 3 of POPS Rules instead of the current classification under Rule 4.
1.4 Pre-deposit for filing appeals
Vide the Union Budget 2014, common procedural amendments have been made across Customs, Excise and Service tax laws prescribing compulsory pre-deposit before filing appeals subject to a ceiling of INR 10 crores) as follows:
Presently, various registries and department officials are taking different interpretation on various issues and clarification is required of the following issues:
1.5 CENVAT credit availment [Rule 4 of the CENVAT Credit Rules, 2004]
CENVAT Credit Rules, 2004 (“Credit Rules”) have been amended during the Union Budget 2014 to prescribe a time limit of six months for availment of CENVAT credit on inputs and input services, from date of invoice/challan/specified documents.
CENVAT credit is a benefit accruing to an assessee on payment of duties and taxes on inputs/input services/ capital goods. Hence, it is the statutory right of an assessee to be eligible to avail CENVAT credit. Specifying time limit to avail the credit is draconian in nature and against the very principle of value addition on which the levy of excise and service tax is based.
It is recommended that the Credit Rules may be amended to eliminate the time limit for availing credit and allow the assessee to avail credit without any such time restriction.
1.6 Interest on delayed payment of Service tax [Section 75 of the Finance Act]
The Central Government vide Union Budget 2014 has introduced variable interest rates on delayed payment of service tax with effect from 1st October, 2014. In terms of the said amendment, interest rate in case of delayed payment of service tax beyond a year would be 30 percent.
1.7 Advance Ruling in Service tax [Chapter VA of the Finance Act]
Earlier, only JV and resident public limited companies were eligible to apply for Advance Ruling. Now, such eligibility has been extended to resident private limited company also
The scope of applicants for Advance Ruling purpose should be further extended to include Limited Liability Partnerships, foreign companies, its project offices and branches as well.
1.8 Large Taxpayer units (LTU) [Sub Rule 4 of Rule 12A of the CENVAT Credit Rules, 2004 (the Credit Rules)]
Credit Rules have been amended during the Union Budget 2014 whereby the incentive available to LTUs for transfer of credit from one unit to another has been withdrawn.
The Large Taxpayer Unit (LTU) scheme was announced to bring respite to large taxpayers, but its success has been questionable. The scheme was intentended to be a one-stop solution for large tax payers with respect to corporate tax and indirect tax filings and also to facilitate distribution of Central Value Added Tax (Cenvat) credit. But Union Budget 2014 has significantly narrowed the scope of LTUs by disallowing transfer of Cenvat credit from one taxpayer unit to another. This has further reduced the attractiveness of the LTUs.
payers with respect to corporate tax and indirect tax filings and also to facilitate distribution of Central Value Added Tax (Cenvat) credit. But Union Budget 2014 has significantly narrowed the scope of LTUs by disallowing transfer of Cenvat credit from one taxpayer unit to another. This has further reduced the attractiveness of the LTUs.
It is recommended that the facility of transferability of Cenvat credit by one unit of LTU to another unit be reinstated.
1.9 Information Return [Section15A and 15B of the Excise Act and Section 83 of the Finance Act]
Section 15A of the Excise Act has been introduced to provide that third party sources shall furnish periodic information, in accordance with the manner prescribed. Further, Section 15B of the Excise Act proposes to impose penalty if the information return is not submitted. The said provisions has also been made applicable to service tax vide Section 83 of the Finance Act.
Assesses in India are already excessively burdened with the various compliance procedures across all the direct and indirect taxes. Any additional compliance for furnishing Information Return will augment the plight of the assessee.
The assessee is already filing income tax return, service tax return, VAT return, excise return etc. with the Government departments. All such returns are filed online and the data therein can be easily retrieved . Accordingly, in case any information is needed by a department the existing data can be collected directly from the other department without making it onerous for the assesses.
1.10 Service Tax impact on Brand Owners in case of manufacture by Job Workers
As per present provisions, CENVAT Credit on inputs and capital goods may be availed by a manufacturer subject to the condition that inputs / capital goods are physically received in his factory premises under cover of a valid Central excise invoice and are used by him in or in relation to manufacture of their final goods cleared on payment of appropriate Central excise duty. Further, credit of service tax may be availed by a manufacturer on payment of the same to corresponding input service provider, as long as the input service is received in or in relation to manufacture of the finished goods cleared on payment of appropriate duty of excise.
Job workers, who engage in manufacture of goods for the Brand Owners, can avail the benefit of Cenvat Credit on inputs used in such manufacturing activity, subject to compliance of conditions and thereby offset their Central excise liability on finished goods.
On the matter of Service tax credit on input services, since the payments for taxable input services are generally effected by the Brand Owner instead of the job-worker and the corresponding invoices for the said services are received in the name of the Brand Owner, the benefit of service tax paid on input services is neither available to the Brand Owner nor to the job worker. This is due to the fact that present provisions of the Credit Rules do not permit the Brand Owner to avail the credit since he is not the manufacturer of the finished goods and the job worker cannot avail the credit since he does not pay for the taxable input service, the corresponding invoices of services are not in their name and said services not directly received by them.
The CENVAT Credit on the input services consumed is a cost to the Company even though the services are utilized in relation to the business activity. In cases, where the Brand Owner itself is the manufacturer the credit would have been availed and utilized. The same should be followed in the case of a job work arrangement also as it could be construed that the said services are in relation to the ‘business’ of the Company.
Specific provisions should be inserted in the Credit Rules to enable the Brand Owner to avail the credit in such cases and distribute the credit to the job worker or avail the said credit on its own, to do away with this inequitable situation differentiating between manufacture in-house or at the job workers premises.
1.11 Double Taxation of Licensed intellectual property right, Software etc. (VAT and Service Tax)
Temporary transfer or permitting the use or enjoyment of any intellectual property right is currently liable to service tax. However, in light of various settled judicial precedents, intellectual property right (IPR) has also been held to be ‘goods’ and accordingly, since software supplied electronically constitutes goods, it is subjected to VAT under the respective State VAT legislations. However, there is still confusion and litigation existing as many State Governments are proposing to levy sales tax on temporary transfer of IPR or licensing of software on the ground that the definition of sale in state VAT legislations includes ‘right to use’ thereby leading to double taxation of such activities.
It is need of the hour that the double taxation of such IPR is done away with and clarity is provided on whether temporary transfer of IPR is ‘deemed sale’ or ‘service’ transaction.
Suitable explanations should be added in the Finance Act itself to ensure that sale/licensing of IPR is taxed only once – either under VAT as goods or under Service tax legislation as taxable service.
1.12 CENVAT Credit of Input Service – Activities Relating to Business
The implementation of the concept of Negative List of Services has resulted in all activities undertaken by a person for another for a consideration being brought under the tax net. However, the restrictions, exceptions and limitations on availability of input tax credit still continue. This anomaly has led to an inequitable situation whereby the taxation of services is universal while the credit for the tax paid on input services continues to be restricted.
In order to correct this inequity and to provide much needed relief to industry the service tax laws in general the definition of input service should be amended to allow input tax credit without any restrictions – in line with the principles of GST. Further, in order to ensure that the CENVAT Credit scheme meets its objectives it is important that unnecessary qualifications/categorizations like ‘input’, ‘input service’ and ‘capital goods’ be done away with and all input side tax costs in relation to business activity should be allowed as credit.
1.13 Sponsorship Services not a defined concept with effect from 1 July 2012
With effect from 1 July 2012, the definition of taxable service categories under Section 65 cannot be relied on for the purposes of determining the classification of services under different service categories. However, the negative list regime continues to use terms which are not specifically defined under the new regime.
The most relevant illustration for the same is ‘sponsorship services’ on which a service recipient is required to pay tax under reverse charge mechanism. However, there is an ambiguity created in industry as the Finance Act or the rules made thereunder do not provide as to what would qualifyy as sponsorship services.
For example, pharmaceutical industry spends a lot of expenses on account of supporting programs and training for continuous medical awareness. However, these services are considered by the department officials as sponsorship activities requiring the industry to pay service tax under reverse charge mechanism.
A suitable definition of sponsorship service and other terms not defined should be introduced in the Finance Act in order to enable the assesses to correctly determine their service tax liability.
1.14 Interest on delayed payments under credit cards
While interest payable on loans and advances has been kept outside the service tax net, interest charged by credit card companies on delayed payment is treated as consideration for providing taxable service attracting service tax levy in view of the clarification provided by CBEC in Education Guide dated 20 June 2012. It has been clarified that interest on delayed payment of credit card is not in the nature of interest on loans/advances primarily since intent of the Bank at the time of contractual negotiation is not to give loan/advance but provide convenience of using a credit card and thus liable to Service Tax.
The convenience of using a credit card is nothing but allowing the card holder to purchase goods/services on a credit. Therefore any interest earned on such a credit facility is identical to interest on loans/advances. Also, reporting of credit given to card holders is classified under ‘Loans or Advances’ by the Bank as per Accounting Standard issued by ICAI.
Further, the convenience fee or charges collected by companies from the customers to use a credit card are anyways chargeable to service Tax.
It is recommended that in order to promote consumption interest charged on the credit card payments should be given the same treatment as interest on loans and advances and therefore should be excluded from the levy of service tax.
1.15 Time limit for filing refund for export of service tax [Section 11B of the Central Excise Act, 1944]
In accordance with Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No. 27 /2012-CE (N.T.) dated 18th June, 2012, the application for refund has to be filed by the claimant before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (“CE Act”).
Section 11B of the CE Act contemplates specific circumstances when the goods shall be deemed to be exported with certain residuary general provisions. Such provision, being specific to export of goods, is not sufficient to conclusively determine when the services would be treated to be exported. This anomaly has led to various disputes and litigations.
Since one of the important conditions for services to qualify as exports is that the consideration for such services is received in convertible foreign exchange, it is imperative that the date of export is considered as the date when the convertible foreign exchange is received.
It is recommended that a specific provision shall be inserted in the Finance Act or the rules made thereunder to provide that services would be treated to be exported only when the foreign convertible exchange is received and the same shall be the relevant date for the purposes of determining the time limit for filing refund application.
1.16 Service tax on commercial training or coaching centers
In order to sustain a 9 percent growth rate in the Indian economy, it is imperative to generate sufficient and high quality skilled work force, with a quantum leap in both the skill development capacity and in the number of skills and trades in which training is being imparted. The Prime Minister’s skill development mission aims to achieve the aforesaid objective. A private sector led skill development corporation is an integral part of the mission and the coordinated action plan for skill development, which was approved by the Union Cabinet in May, 2008.
It is recommended that all kindse of training and education services should be made should be made Tax free, so that all levels of society can afford, and people with lower incomes can take advantage of the training provided by private sector, thus improve their earning capabilities and contribute towards nation building.
1.17 Other Recommendations
2 Customs Duty
2.1 Customs Duty exemption to notified Life Saving drugs
Customs Duty on import of Life Saving Drugs and medical devices
With increased focus of the Government on health care, it is imperative that critical life saving drugs be made available to the patients at reduced prices, which will help in bringing down the cost of treatment for these ailments. Further, reduction in import duty on medical devices would overall reduce the cost of treatment of patients and help in making available the best medical facility in India at relatively cheaper rates.
Presently, basic customs duty on certain drugs (and bulk drugs for their manufacture)/ vaccine is 5 percent. These drugs are exempted from the excise duty/ additional customs duty.
All life saving drugs should be grated exemption from payment of whole of custom duty.
2.2 Customs Duty exemption to medical devices
The sophisticated medical devices have become the integral part of provision of medical services and have tremendously increased the quality of healthcare services in India.
Presently most of the medical, surgical, dental and veterinary equipments attract basic customs duty at the rate of 5 percent. Most of such medical devices also attract additional customs duty in lieu of excise (‘CVD’) at the rate of 6 percent. Further, all parts and accessories of medical, surgical, dental and veterinary equipments also attract basic customs duty on 5 percent.
All medical devices should be exempted from whole of Custom Duty. Further presently different medical devices have partial/full exemption under various entries in different notifications. This could be rationalized so as to bring about more clarity and less disputes from a classification aspect.
2.3 Rationalization of Customs Duty for Formulations
Presently, the basic customs duty on formulations is 10 percent (other than specified drugs, life saving drugs, vaccines and bulk drugs for which the basic customs duty rate is 5 percent).
Basic customs duty on all formulations should be reduced to 5 percent. This suggestion is in line with the Chelliah Committee’s long-term fiscal policy recommendation.
2.4 Measures to address accumulated credit of Special Additional Duty (SAD)
Special Additional Duty (SAD) of 4 percent was introduced in the Finance Bill of 2005 on goods imported into India having regard to the sales tax / value added tax and other local taxes suffered by like goods in India to create a level playing field for the domestic manufacturers.
When SAD was introduced, the Central Sales Tax (CST) rate was levied at 4 percent. The CST rate was reduced from 4 percent to 3 percent effective 1st April 2007 and further reduced to 2 percent effective 1st June 2008. Despite the above said reductions in CST rates, SAD remains unchanged and is still being charged at 4 percent on imports.
Though, the Cenvat Credit Rules allow the manufacturer to avail credit of SAD against duty payment for the clearance of final products, it is not possible to fully utilize SAD levied on imported raw material in cases where the value addition in the conversion of raw material into finished goods is minimal. This results in accumulation of SAD credit year on year, adversely affecting the cash flow.
Further, the process of obtaining refunds of special additional duty in lieu of sales tax/VAT (“SAD”) payable on goods imported for re-sale is time-consuming both for the department as well as the assessee.
It is therefore recommended that SAD may be waived on imports of all products. Alternatively, SAD should be waived on goods imported for re-sale and a facility of refund of SAD to end use manufacturers may be introduced. Also, the rate of SAD should be brought down to the rate of CST i.e. 2 percent.
2.5 Other Recommendations
3 Central Excise Duty
3.1 Inverted duty structure for Active Pharmaceutical Ingredients
Active Pharmaceutical Ingredients (“API”) which are used by the pharmaceutical manufacturers attract excise duty at the rate of 12.36 percent. However, the output manufactured using such API is chargeable to excise duty at 6.18 percent. This inverted duty structure leads to accumulation of CENVAT Credit in the books of manufacturers especially those who are cater only to the domestic market and therefore do not have the benefits available to the exporters. Since there is no provision to recover the accumulated CENVAT Credit, the same becomes a cost to pharmaceutical manufacturer.
The Excise duty rate of API may be rationalized and made at par with pharmaceutical goods by reducing the same to 6 percent. Alternatively, the Government may introduce a refund mechanism to enable pharmaceutical manufacturers to avail refund of excess CENVAT credit especially in case of such an inverted duty structure.
3.2 Levy of Excise duty on Pharmaceuticals
As per Section 4A of the CE Act read with Notification no. 49 / 2008 CE (NT) dated 24 December 2008, an abatement of 35 percent allowed for the purpose of levying Excise Duty on medicament and other pharmaceuticals products.
An abatement of 45 percent to 50 percent is necessary to enable pharmaceutical industry to cover its costs while calculating the Excise duty payable. Further there are other products that enjoy a higher abatement percentage than pharmaceutical products, such as clocks (40 percent), mineral water (45 percent), glazed tiles and vitrified tiles( 45 percent).
It is recommended that the abatement on such products should be increased to 50 percent as the current 35 percent abatement does not even cover the trade margins and the value of R&D costs and other costs associated with the Industry such as distribution of many medicines through “cold chain” – (e.g. Vaccines)
3.3 CENVAT Credit paid on capital goods [Rule 4 of Credit Rules]
CENVAT Credit paid on capital goods is eligible for availment in two installments i.e. the first installment being half of the duty paid in the year of receipt of capital goods in the factory or premises of the service provider, as the case may be, and the remaining in any subsequent financial year, subject to prescribed conditions.
There exists no clear reason for deffering eligible CENVAT Credit in the case of capital goods especially in the absence of similar restrictions in the case of inputs.
The Department should consider bringing out simplicity in the provisions of law vis-a-vis availment of credit on capital goods, doing away with avoidable paper work and parity with inputs in as much as that entire 100 percent credit of duty paid on capital goods should be available to the manufacturer / service provider in the year of receipt of the said capital goods in their premises. In the prevalent economic scenario of recession, this would also help improve the cash flow of the assessee.
In the Finance Act, 2010, the Government allowed the manufacturers from the SSI industry to avail 100 percent of the credit on capital goods in the first year of receipt of capital goods. Accordingly, the Credit Rules should be amended to provide for availing complete credit in the year of receipt of capital goods, subject to conditions. This would also pave the way for similar treatment under the proposed GST regime.
3.4 CENVAT Credit on High Speed Diesel (HSD) and Light Diesel Oil (LDO)
Availment and utilization of CENVAT Credit on HSD and LDO is specifically disallowed under the current Credit Rules.
HSD and LDO are used by most industries as fuel for generating electricity used in or in relation to manufacture of excisable final goods. Thus, the non-availment of credit on the duty paid on the fuels becomes additional cost to the manufacturers.
The availment of credit on HSD and LDO would help in maintaining the chain of CENVAT Credit availability and utilization, as in the present case. The same mechanism may also be passed onto the GST regime.
There is no reason for keeping HSD and LDO out of the scope of Credit Rules. Given that GST would soon be implemented, it is proposed that Credit Rules may be amended to permit availment of CENVAT Credit paid on HSD and LDO.
3.5 CENVAT Credit on endorsed Bill of Entry
There is no provision under Credit Rules for availing CENVAT Credit on endorsed bill of entry against import of goods. Traders who import goods and desire to pass on the credit of CVD component of customs duty are required to register with the Central excise department.
The requirement of obtaining registration as Importer with the Central Excise Department leads to increased procedural compliance. In the past, Customs officers at the port of import were allowing endorsement of the Bill of entry to enable the importer to pass on the credit of CVD to the registered manufacturer / service provider / dealer, as the case may be. The said procedure should be reinstated. Further, the present application format for registration (Form A1) under central excise (even under ACES registration) does not provide for registration for category of ‘importer’ which leads to procedural hassles and delay in getting registration.
It is suggested that Credit Rules may be amended to recognize endorsed Bill of Entry as a valid document for availing credit of duty paid at the time of import. The erstwhile procedure of endorsement of Bill of Entry in such cases should be continued.
3.6 CENVAT Credit of additional customs duty paid u/s 3(5) of Customs Tariff Act (SAD)
Currently, only manufacturers are eligible to avail the credit of SAD paid on import of input goods and the same facility is not available to the service providers.
The component of SAD paid by service provider while importing goods becomes a cost especially industries requiring expensive imported capital goods such as R&D centres etc.
This differential treatment should be addressed by allowing service recipients to avail CENVAT credit of SAD paid on import of inputs and capital goods.
3.7 Other Recommendations
4 Foreign Trade Policy
4.1 Product Registration cost
Under Foreign Trade Policy, Market Access Initiative (MAI) is available which provides Financial assistance for export promotion activities. Under MAI scheme, financial assistance is provided to cover various expenses which include market studies/surveys, participation in international trade fairs, displays in International departmental stores, brand promotion, reimbursement of registration charges for pharmaceuticals and expenses for carrying out clinical trials and assistance for contesting Anti Dumping litigations.
The actual benefit of reimbursement in regard to statutory compliance which includes product registration charges is limited to INR 50 Lacs per annum for exporters.
However, actual product registration cost for export products in few countries much higher than the ceiling prescribed and may even run in crores.
Further, the benefit is given only when the product registration certificate is in the name of Indian registered entity. The benefit is not given if the certificate is in the name of foreign subsidiary of the India Pharmaceutical company.
The quantum of benefit should be increased to cover full product registration cost. Also the benefit should be linked to original manufacturer, not withstanding that the registration may be done by subsidiary located in Foreign Country.
4.2 Served From India Scheme (SFIS)
By an amendment in Foreign Trade Policy on 18th April, 2013, the entitlement under SFIS scheme to the service provider has been restricted to 10 percent of net free foreign exchange earned, i.e. total foreign exchange earned less total foreign exchange spent during the financial year. prior to such amendment, the benefit under the said scheme was computed on the basis of 10 percent of total foreign exchange earned.
Thus the aforesaid amendment has substantially reduced the benefit available to service exporter under the said scheme. Further, the policy does not clearly provide the type of foreign exchange expenditure which shall be deducted for calculating net foreign exchange earnings. In addition, since SFIS license is not transferable, the service exporters who do not have substantial imports on regular basis are not able to utilize the benefits.
It is recommended that the benefit under SFIS scheme shall be restored as per earlier policy i.e. 10 percent of total foreign exchange earnings. Also, SFIS license should be made transferable / tradable.
4.3 Advance Authorization for Non-Infringing process
An Advance Authorization is issued to allow duty free import of inputs, which are physically incorporated in export product (making normal allowance for wastage). Advance Authorizations are issued for inputs and export items given under Standard Input Output Norms (SION).
Advance Authorisation can be issued to Pharmaceutical companies for pharmaceutical products manufactured through Non-Infringing (NI) process. A manufacturer exporter can avail the benefit of this provision even if the SION or the adhoc norm for the said product is available. Input combination permitted under NI process for manufacturing the product shall be certified by the Chartered Engineer (Chemical) after due verification of the details of each input and its quantity as given in Abbreviated New Drug Application (ANDA) / Drug Master File (DMF) of the applicant. RA shall issue Advance Authorisation license based on this combination only.
The benefit of ‘Advance Authorization for Non-Infringing process’ provided by the Government to pharmaceuticals companies is not yielding the desired results due to complex procedural compliances such as obtaining certificate from Central Excise authorities for redemption of Advance Licenses. While, in case of redemption of Advance Authorisation license for other than Non-Infringing process, only CA certificate is sufficient.
The requirement of obtaining certificate from Central Excise authorities for redemption of Advance Authorisation License should be dispensed with and only CA certificate should suffice.
4.4 Inputs procured against Advance Authorization / Duty Free Import Authorisation Scheme
Government of India vide Notification No. 31 (RE-2013) / 2009-2014 dated 1st August 2013 has made amendment in AA scheme which stipulates that inputs actually used in manufacture of the export product should only be imported under the authorisation. Similarly inputs actually imported must be used in the export product. This has to be established in respect of every Advance Authorisation / DFIA. In other words, the name/description of the input used (or to be used) in the Authorisation must match exactly the name/description endorsed in the shipping bill. At the time of discharge of export obligation (EODC) or at the time of redemption, RA shall allow only those inputs which have been specifically indicated in the shipping bill. This has become concern for industry as a minute clerical error may lead to non acceptance of shipping bill at the time of redemption of license.
The mandatory requirement of exactly matching the Name/description of the input used (or to be used) in the Authorisation with the name/description endorsed in the shipping Bill should be dispensed with.
4.5 Export Promotion Capital Goods (EPCG) scheme
As per the amendment made in Foreign Trade Policy on 18th April, 2013, import of second hand Capital Goods under Export Promotion Capital Goods (EPCG) scheme is not permitted which is creating hurdle for those companies who intend to reduce the cost of manufactured goods by importing Second hand Capital equipments for use in manufacture and export the goods.
Further, the amendment has also removed the benefit available in relation to fulfillment of export obligation by exporting other goods or exports by group companies.
The benefits with respect to import of second hand capital goods under the EPCG Scheme should be re-instated. Further, exporters should be allowed to discharge the export obligation by exporting other goods or export by group companies.
(Please Note- above Detailed Pre Budget Memorandum on Indirect Taxes for 2015 was Presented to Government of India, Ministry of Finance,Department of Revenue, Tax Research Unit, New Delhi On 25th November 2014 by Indian American Chamber of Commerce (IACC))