Major Highlight of Amendment to Finance Bill 2010-11 passed in Lok Sabha

Direct Taxes

• Considering the pressing need for more hospitals all over the country, it is proposed to include the business of a new hospital anywhere in India, with at least one hundred beds for patients, as a ‘specific business’ for availing the benefit of investment linked deduction.
• business of developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government to be included as a ‘specified business’ for availing the benefit of investment linked deduction.
• In consequence of the decision to allow tax-neutrality for conversion of a company in to Limited Liability partnership (LLP), it is proposed to also exempt from taxation the transfer of shares by the shareholders of the company in respect of such a conversion.
• FM says he has written letters to 65 countries for amendment in DTAAs for exchange of tax information; Switzerland, Bahamas and Bermuda agreed to do needfulFM extends Sec 35AD benefits to hospitals of at least 100 beds anywhere in India and housing scheme for slum re-development

Service Tax

• Air Travel not to be prohibitive – Service tax maximum of Rs.100 per travel for domestic journey and Rs.500 per travel for international journey by economy class

• Abatement of 75% for construction service. Procedural bottlenecks relating to the completion certificate prescribed in the law would also be simplified.

• With a view to give thrust to the low cost housing schemes for the urban poor, service tax on constructions under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and under Rajiv Awas Yojna, to be exempted

• Exemption available to the vocational training institutes affiliated to the National Council for Vocational Training and offering courses in designated trades should also be extended to “Modular Employment Skill Development courses” provided by the training institutes registered under ‘Skill Development Initiative Scheme’ of the Ministry of Labour.

• Exemption granted to travel by air from North-Eastern sector.

Excise Duty

• reduced excise duty on hand-rolled cheroots priced upto Rs.3 per stick to 10% ad valorem. Similarly, the additional excise duty on this product shall now be 1.6% ad valorem.

• Full exemption from excise duty has been provided to betel nut product commonly known as `supari’. This exemption is now being extended to scented supari.

• Central excise duty on corrugated boxes and cartons was reduced from 8% to 4% when they are manufactured starting from kraft paper. Proposed to extend the exemption to cover units that manufacture such cartons from corrugated paper or paperboard also.

• Paper and paperboard manufactured from non-conventional raw material such as waste paper attract a concessional excise duty of 4% subject to certain conditions. Waste paper is chargeable to an excise duty of CVD of 10%. Domestic industry has represented that this creates an inversion leading to the accumulation of Cenvat credit. The excise duty on waste paper reduced to 4% to rectify this anomaly.

• The excise exemption for small scale units is not available to goods that bear the brand name of another person. A relaxation of this condition is available in respect of specified packing materials which are normally not sold under the brand name that they bear. In order to resolve disputes about the coverage of this relaxation, this is extended to all types of packing material.

• Automobile components have been subjected to excise duty on the basis of their retail sale price. In order to resolve disputes about the coverage of this provision, it was amended so as to make it applicable to parts, components and assemblies of vehicles of Chapter 87 of the Excise Tariff. Since these components are also used for earthmoving machinery like loaders, excavators etc., this will now apply to the parts, components and assemblies of such machinery as well.

Custom Duty

• Tunnel boring machines are critical for hydroelectric projects. Since these are not produced domestically, full exemption from customs duty was provided in this budget. It has been represented that owing to their huge size these machines are incapable of import in a single consignment. Considering this practical difficulty the exemption is being extended to parts and components of tunnel boring machines.

• Concessional customs duty for Ostomy appliances as these are mainly used by cancer patients.

• Basic customs duty on 11 specified drugs including two anti-cancer and one for the treatment of AIDS is being reduced to 5%. These drugs are also being exempted from CVD by way of excise duty exemption.

• `Optical Disc Drives’ (ODD) are ITA-bound and thus permissible for import without payment of duty. Specified parts or components required for the manufacture of ODD exempted from basic customs duty.

• Cigarette filter rods are manufactured from acetate rayon tow. While full CVD of 10% and special CVD of 4% is applicable to tow, the excise duty on filter rods is 10% creating an inversion in duty. Acetate rayon tow exempted from special CVD of 4%.

• Flax fibre and yarn are not produced in India in significant quantities. They are fully exempted from basic customs duty in order to encourage domestic value addition.

• Export duty at the statutory rate of Rs.2500 per metric tonne (PMT) was imposed on raw cotton with effect from 9 th April, 2010 in order to contain the spiraling prices by disincentivizing exports. The Government has been keenly watching the quantum of exports well as the price situation. In order to meet any future exigency, the statutory rate for this item is being enhanced to Rs.10,000 PMT while maintaining the effective rate at the current level.

• Except in the case of export duty on raw cotton, the changes in the customs and excise duties would come into force with immediate effect.

• In December, 2009 the export duty on iron ore lumps was enhanced from 5% to 10% and on fines from Nil to 5%. Keeping in view the trend in the quantum of exports and domestic and international prices, the duty on iron ore lumps is being increased further to 15%.

• In response to representations from the domestic producers of stainless steel, basic customs duty on stainless steel melting scrap reduced from 5% to 2.5%.