India Budget Tax Proposals. DSA & Co. Chartered Accountants

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1 India Budget Tax Proposals DSA & Co. Chartered Accountants

2 India Budget Preamble Finance Minister (FM) presented the budget for FY on with an eye kept on foreign investors and voters on another. In his budget speech, Finance Minister has acknowledged that global economic slowdown has impacted India s growth story and getting back to the growth rate is the challenge that is faced by India. Relentless inflation also marred growth trajectory, which is down to 5% level in sharp contrast to the projected 7.6% at the beginning. Series of measures were announced in September 2012 to tame burgeoning fuel subsidy and new fiscal consolidation path was drawn. FM evidently announced limited tax proposals in the budget by expressing that in a constrained economy, there is little room to raise tax rates or large amounts of additional tax revenues. Equally, there is little room to give away tax revenues or the tax base. It is a time for prudence, restraint and patience. India Inc. has little to cheer, as there is no major overhaul in tax and duty concessions. Both direct and indirect taxes saw skew of amendments to bring in either clarity or parity, without any commendable measures. This newsletter provides a brief update on the tax proposals put forth by the FM in the budget. We hope you will find this update useful. Page 2 of 23 DSA & Co.

3 Corporate Taxation Changes in Tax Rates\tax base Tax Rates There are no changes in the corporate tax rates. However, rate of surcharge payable on income tax is revised. The surcharge on domestic companies is increased from 5% to 10% where total income exceeds ten crore rupees. In case of foreign companies, the surcharge is increased from 2% to 5% where the total income exceeds ten crore rupees. The rate of surcharge on dividend distribution tax/tax on income distributed is increased to 10% from existing 5%. Education cess and Secondary Higher Education Cess continues to 3% put together. Taxation of royalty or fee for technical services As per existing provisions, royalty or fee for technical services (FTS) received by a non-resident is taxed at 10% of the gross amount. Now, the rate of tax is increased to 25% of the gross amount of royalty or FTS. Dividend from foreign companies Under the existing provisions, the gross dividends received by an Indian company from a specified foreign company (where the Indian Company holds 26% or more of equity shareholding) is taxed at a lower rate of 15% for FY The tax incentive is further extended for FY to attract repatriation of income from investments made abroad (Section 115BBD). Removal of cascading effect of Dividend Distribution Tax Section 115O provides for additional income tax on dividend declared, distributed or paid by the domestic company. It further provides that dividend on which the DDT is payable is to be reduced by dividend received from its Indian subsidiary if the subsidiary has paid the DDT on such dividends. Now it is proposed to extend this relief to dividends received by domestic company from subsidiary in a foreign country. The proposed amendment is effective from Page 3 of 23 DSA & Co.

4 Concessional rate of withholding tax on interest on certain rupee denominated long-term infrastructure bonds Where an Indian company borrows money in foreign currency from a source outside India either under a loan agreement or by way of issue of long-term infrastructure bonds, the interest payment to a nonresident person would be subject to a concessional rate of 5% u/s 115A. This concession is now extended to non-residents depositing the foreign currency in the designated bank account and converted into INR for subscription of long-term infrastructure bonds. The designated bank account should be solely for the purpose of deposit of money in foreign currency and such money is to be used, after conversion, for subscription to a rupee denominated long-term infrastructure bond issue of an Indian company. The proposed amendment is effective from Additional Income-tax on distributed income by company for buy-back of unlisted shares The existing provisions provide that the consideration received by a shareholder on buy-back of shares by the company is not treated as dividend but is taxable as capital gains. In such cases, the capital gains arising to the shareholders are either not chargeable to tax or are taxable at a lower rate. Now it is proposed that the consideration paid by the company for purchase of its own unlisted shares which is in excess of the sum received by the company at the time of issue of such shares will be charged to tax and the company would be liable to pay additional 20% on such excess (distributed income). The income arising to the shareholders in respect of such buy back by the company would be exempt where the company is liable to pay the additional income-tax on buy-back of shares. The amendment is effective from Rationalisation of tax on distributed income by the Mutual Funds Under the existing provisions of section 115R any amount of income distributed by the specified company or a Mutual Fund (other than a equity oriented fund) to its unit holders is chargeable to additional 12.5% or 25% depending on the nature of the fund where the distribution is to Page 4 of 23 DSA & Co.

5 individual or HUF in all other cases. In order to provide uniform taxation for all types of funds, other than equity oriented fund, it is proposed to increase the rate of tax on distributed income from 12.5% to 25% in all cases where distribution is made to an individual or a HUF. Further, it is proposed that in case of an Infrastructure debt fund (IDF) set up as trust, 5% on income distributed is payable in respect of income distributed to a non-resident Investor by a Mutual Fund under an IDF scheme. This is to align with provision relating IDF set up as a Non-Banking Finance Company (NBFC) where the interest payment made by the fund to a non-resident investor is taxable at a concessional rate of 5%. The amendment is effective from Computation of income under the head Profits and gains of business or profession for transfer of immovable property in certain cases It is proposed that where the consideration for the transfer of an asset (other than capital asset), being land or building or both, is less than the stamp duty value, the value so adopted or assessed or assessable for stamp duty purposes would be deemed as the full value of the consideration for the purposes of computing income under the head Profits and gains of business of profession. Tax Reliefs Investment Allowance A company investing in new plant and machinery of Rs. 100 crore or more during the period from to is allowed a 15% of actual costs in addition to depreciation allowance. The company should be engaged in the business of manufacture of an article or thing. The new assets does not include ship, aircraft, previously used plant and machinery, those used in office premises, residential accommodation including guest house, office appliances including computer software, vehicle. Further, the cost of the new assets should not have been allowed as deduction from business income for any previous year. The new assets should not be sold or transferred (except in connection with amalgamation or demerger) for five years from the date of installation. Where the new assets are sold or transferred within five years, the deduction allowed is deemed to be income under the head profits and gains of business or profession of the previous year in which Page 5 of 23 DSA & Co.

6 the asset is sold or otherwise transferred (Section 32AC). Extension of sunset date for deduction u/s 80IA for power sector Under the existing provisions, undertakings engaged in the generation or generation and distribution of power or transmission or distribution by laying a network of new transmission or distribution lines or undertake substantial renovation and modernisation of the existing network of transmission or distribution lines should commence the eligible activity on or before 31.o to avail the deduction u/s 80IA. With a view to provide further time, for commencement of the activity, the terminal date is extended for one more year up to for these undertakings. Taxation of securitization trusts It is proposed to provide for new taxation regime in respect of income of securitization entities set up as trust. The salient features of new regime are: The securitisation trusts which are regulated by RBI or SEBI exempt from tax in respect of its income from activity of securitisation. These trusts are liable to pay additional income tax on income distributed to its 25% where the investors are individual / HUF and 30% in other cases. Where the investors are exempt from the tax, no additional tax is payable by these trusts on the income distributed to such investor. Such income on which the distribution tax is paid is exempt in the hands of investors. Where the additional income tax is not paid within the specified date, interest is p.m. or part of a month. Pass through Status to certain Alternative Investment Funds Existing provisions provide that any income of a Venture Capital Company (VCC) or Venture Capital Fund (VCF) from investment in a Venture Capital Undertaking (VCU) is exempt from taxation and investors are taxed directly on the income from VCC/VCF in the same manner as if the person had made direct investment in the VCU. These sections provide a tax pass through status (i.e. income is taxable in the hands of investors instead of VCF/VCC) only to the funds which satisfy the investment and Page 6 of 23 DSA & Co.

7 other conditions as are provided in SEBI (Venture Capital Fund) Regulations, Further the pass through status is available only in respect of income which arises to the fund from investment in VCU, being a company which satisfies the conditions provided in aforesaid VCF Regulations. The SEBI (Alternative Investment Funds) Regulations, 2012 (AIF regulations) have replaced the VCF Regulations from 21 st May, In order to provide benefit of pass through to similar VCFs as are registered under new regulations and subject to same conditions of investment restrictions in the context of investment in a VCU, it is proposed to amend section 10(23FB) to provide that The existing VCFs and VCCs (i.e. which have been registered before 21/05/2012) and are regulated by the erstwhile VCF regulations, would continue to avail pass through status as currently available. In the context of AIF regulations, the VCC shall be defined as a company and VCF shall be defined as a fund set up as a trust, which is granted a certificate of registration as VCF being a sub-category of Category I Alternative Investment Fund and satisfies the following conditions:- (a) That at least two-thirds of its investible funds are invested in unlisted equity shares or equity linked instruments of VCU. (b) No investment is made by such AIFs in a VCU which is an associate company. (c) Units of a trust set up as AIF or shares of a company set up as AIF, are not listed on a recognised stock exchange. In the context of AIF regulations, the VCU will be as defined in the AIF Regulations. This amendment is effective from AY Deduction for additional wages in certain cases The existing provisions contained in section 80JJAA of the Income-tax Act provide for a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed in any previous year by an Indian company in its industrial undertaking engaged in manufacture or production of article or thing. Page 7 of 23 DSA & Co.

8 It is now proposed that the deduction is allowed to an Indian Company deriving profits from manufacture of goods in its factory. It is further provided that the deduction is not available if the factory is hived off or transferred from another existing entity or acquired by the assessee company as a result of amalgamation with another company. Anti Tax Avoidance Measures General Anti Avoidance Rules (GAAR) The GAAR was introduced in the Income-tax Act by the Finance Act, A number of representations were received against the provisions relating to GAAR. An Expert Committee was constituted by the Government with broad terms of reference including consultation with stakeholders and finalising the GAAR guidelines and a road map for implementation. The major recommendations of the Expert Committee have been accepted by the Government, with some modifications. In order to give effect to the recommendations the following amendments have been made in GAAR provisions currently provided in the Act:- The provisions of GAAR will be effective from the AY An arrangement, the main purpose of which is to obtain a tax benefit, would be considered as an impermissible avoidance arrangement. The present provision provided that it should be the main purpose or one of the main purposes. The factors like, period or time for which the arrangement had existed; the fact of payment of taxes by the assessee and the fact that an exit route was provided by the arrangement, would be relevant but not sufficient to determine whether the arrangement is an impermissible avoidance arrangement. The present provisions provided that these factors would not be relevant. An arrangement shall also be deemed to be lacking commercial substance, if it does not have a significant effect upon the business risks, or net cash flows of any party to the arrangement apart from any effect attributable to the tax benefit that would be obtained but for the application of GAAR. The present provisions proposed to be amended to provide that an arrangement shall also be deemed to lack commercial substance if the condition provided above is satisfied. Page 8 of 23 DSA & Co.

9 The Approving Panel shall consist of a Chairperson who is or has been a Judge of a High Court; one Member of the Indian Revenue Service not below the rank of Chief Commissioner of Income-tax; and one Member who shall be an academic or scholar having special knowledge of matters such as direct taxes, business accounts and international trade practices. The directions issued by the Approving Panel shall be binding on the assessee as well as the incometax authorities and no appeal against such directions can be made under the provisions of the Act. The current provisions of section 144BA providing that the direction of the Approving Panel will be binding only on the Assessing Officer have been proposed to be amended accordingly. The amendments are effective from the AY Tax Residency Certificate The Central Government has entered into various Double Taxation Avoidance Agreements (DTAAs) with different countries and has adopted agreements between specified associations for relief of double taxation. The resident of one of the contracting country to the DTAA is entitled to claim applicability of beneficial provisions either of DTAA or of the domestic law subject submission of Tax Residency Certificate containing prescribed particulars, as a condition for availing benefits of the DTAAs. It is proposed that submission of a tax residency certificate is a necessary but not a sufficient condition for claiming benefits under the DTAAs. These amendments are effective retrospectively from the assessment year Other Proposals Clarification for amount to be eligible for deduction as bad debts in case of banks In order to clarify the scope and applicability of provisions in the case of certain banks (not incorporated outside India) and certain co-operative banks, it is now provided that the amount of deduction in respect of the bad debts actually written off would be limited to the amount by which such bad debts exceeds the credit balance in the provision for bad and doubtful debts account without any distinction between provision made for rural advances and other advances. Page 9 of 23 DSA & Co.

10 Disallowance of certain fee, charge, etc. in the case of State Government Undertakings In order to protect the tax base of State Government undertakings vis-à-vis exclusive levy of royalty, fee, charge, etc. or appropriation of amount by the State Governments from its undertakings, it is proposed that any amount paid by way of fee, charge, etc., which is levied exclusively on, or any amount appropriated, directly or indirectly, from a State Government undertaking, by the State Government, will not be allowed as deduction for the purposes of computation of income of such undertakings under the head Profits and gains of business or profession. Contribution not to be in cash for deduction under section 80GGB & section 80GGC Under the existing provisions any sum contributed by certain tax payers to any political party or an electoral trust in the previous year, is allowed as deduction in computing the total income of such assessee. There is no specific mode provided for making such contribution. With a view to discourage cash payments by the contributors, it is proposed that no deduction will be allowed in respect of any sum contributed by way of cash. Penalty under section 271FA for non-filing of Annual Information Return The existing provisions provide for penalty of rupees hundred for every day during which the failure continues. It is now further provided that where the person fails to file the AIR within the period specified in the notice by the income tax authority, the person is liable to pay a penalty of five hundred rupees for every day during which the failure continues beginning from the day immediately following the day on which the period for filing AIR expires. Individual Taxation Changes in Tax Rates\Tax Base There are no changes in the rates. However, the surcharge is 10% of income tax where the total income exceeds one crore rupees. Rebate for individuals having total income up to Rs 5 lakh Page 10 of 23 DSA & Co.

11 With a view to provide tax relief to the individual tax payers who are in lower income bracket, rebate is proposed from the tax payable by individual resident in India whose total income does not exceed five lakh rupees. The rebate is equal to the amount of incometax payable on the total income for any assessment year or an amount of two thousand rupees, whichever is less. Taxability of immovable property received for inadequate consideration The existing provisions provide that where any immovable property is received by an individual or HUF without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property would be charged to tax in the hands of the individual or HUF as income from other sources. The existing provision does not cover a situation where the immovable property is received by an individual or HUF for inadequate consideration. It is now proposed that where any immovable property is received for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration would be chargeable to tax in the hands of the individual or HUF as income from other sources. Tax Reliefs Additional deduction in respect of interest on housing loan It is now proposed to provide an additional deduction to individuals in respect of interest on loan taken from any financial institution for the acquisition of a residential house property not exceeding one lakh. Where the interest payable for the previous year is less than one lakh rupees, the balance amount can be claimed as deduction in the next previous year. The deduction is subject to the following conditions:- (i) the loan is sanctioned by the financial institution during FY , (ii) loan sanctioned for acquisition of the residential house property does not exceed twenty-five lakh rupees, (iii) the value of the residential house property does not exceed forty lakh rupees, and (iv) the assessee does not own any residential house property on the date of sanction of the loan. Page 11 of 23 DSA & Co.

12 Raising the limit of percentage of eligible premium for life insurance policies of persons with disability or disease Under the existing provisions any sum received under a life insurance policy is exempt, subject to the condition that the premium paid for such policy does not exceed ten per cent of the actual capital sum assured. It is now proposed to revise that limit of ten per cent to fifteen percent in respect of an insurance policy issued on or after for the insurance on the life of any person who is a person with disability or a person with severe disability or suffering from specified disease or ailment. Accordingly, any sum received under these policies would be exempt. Further, the deduction in respect of any premium or other payment made on an insurance policy is restricted to ten per cent of the actual capital sum assured. It is now proposed that the deduction in respect of premium paid on aforesaid policies will be allowed to the extent the premium paid does not exceed 15% of the actual capital sum assured. Deduction for contribution to Health Schemes similar to CGHS The existing provisions provide for deduction of the amount paid in the previous year by an individual to effect or to keep in force an insurance on his health or the health of the family or any contribution made towards the Central Government Health Scheme (CGHS) or any payment made on account of preventive health check-up of the assessee or his family not exceed in the aggregate fifteen thousand rupees. It is proposed to allow the benefit of deduction within the said limit, in respect of any payment or contribution made by the assessee to such other health scheme as may be notified by the Central Government. Expanding the scope of deduction and its eligibility under section 80CCG The existing provisions provide for deduction to the extent of fifty per cent of the amount invested in such equity shares not exceeding twenty five thousand rupees, to a resident individual who has acquired listed equity shares in accordance with the scheme notified by the Central Government. The deduction is available to a new retail investor whose gross total income does not exceed ten lakh rupees. Page 12 of 23 DSA & Co.

13 It is proposed to increase the limit of gross total income to twelve lakhs and also that investment in listed units of an equity oriented fund will shall also be eligible for deduction. It is further proposed that the deduction will be allowed for three consecutive assessment years, beginning with the assessment year relevant to the previous year in which the listed equity shares or listed units were first acquired by the new retail investor. One hundred per cent deduction for donation to National Children s Fund Under the existing provisions, a deduction of fifty percent of amount donated to the National Children s Fund is allowed. It is proposed to allow hundred per cent deduction in respect of any sum paid to the National Children s Fund. Other Proposals Keyman insurance policy The existing provisions exempt any sum received under a life insurance policy other than a keyman insurance policy. It is proposed that a keyman insurance policy which is assigned to any person during its term, with or without consideration, will continue to be treated as a keyman insurance policy and exemption cannot be claimed in respect its proceeds on maturity. Amendment in the definition of Capital Asset The existing provisions define capital asset as property of any kind held by an assessee, whether or not connected with his business or profession. Agricultural land is not considered as capital asset subject to conditions. Agricultural land situated in any area within the jurisdiction of a municipality or cantonment board having population of not less than ten thousand according to last preceding census or agricultural land situated in any area within such distance not exceeding eight kilometers from the local limits of any municipality or cantonment board, as notified by the Central Government having regard to the extent and scope of urbanization and other relevant factors, forms part of capital asset. It is now proposed that the land situated in any area within the distance, measured aerially (shortest aerial distance) not being more than two kilometers, from the local limits of any municipality or cantonment board and which has a population of more than ten Page 13 of 23 DSA & Co.

14 thousand but not exceeding one lakh or not being more than six kilometers from the local limits of any municipality or cantonment board and which has a population of more than one lakh but not exceeding ten lakh or not being more than eight kilometers, from the local limits of any municipality or cantonment board and which has a population of more than ten lakh, shall form part of capital asset. Tax Deduction at Source (TDS) on transfer of certain immovable properties It is proposed that where any immovable property (other than agricultural land) is transferred by a resident, the transferee is required to deduct tax at the rate of 1% of consideration. It is further proposed that no deduction of tax is required to be made where consideration for the transfer of an immovable property is less than fifty lakh rupees. The amendment is effective from Return of Income filed without payment of selfassessment tax to be treated as defective return of furnishing of the return. This amendment is effective from Wealth Tax Enabling provisions for facilitating electronic filing of annexure-less return of net wealth In order to facilitate electronic filing of annexure-less return of net wealth, it is proposed to provide for electronic filing of returns and also to provide for rule making powers of the Board in this regard. The amendment is effective from <<This space is left blank intentionally>> It is proposed that the return of income will be regarded as defective unless the tax together with interest, if any, payable is paid on or before the date Page 14 of 23 DSA & Co.

15 SERVICE TAX No change in the rate of tax, rate remains at 12.36% (inclusive cess and surcharge). Exemptions Service tax exemption on transfer or permitting use of / enjoyment of copy right relating to cinematographic films is now restricted to films exhibited in cinema halls/cinema theatre only. Exemption provided to restaurants with air conditioning and licence to serve liquor rationalised. Service tax is now proposed on taxable service provided in restaurants with air-conditioning or central air heating in any part of the establishment at any time during the year. Charitable organizations providing services towards any other object of general public utility now onwards will be covered under the basic threshold limit of 10 lakhs as against the earlier limit of 25 lakhs. Exemption to services provided by GTA (Goods Transport Agency) is expanded. The transportation of certain goods such as agricultural produces (earlier restricted only to fruits, vegetables, eggs, milks, food grain, milk and pulses), foodstuffs including flours, tea, coffee, jiggery, sugar, milk products, salt, edible oil excluding alcoholic beverages, chemical fertilizers and oilcakes, newspaper and magazines, defence/military equipment, relief materials at the time of natural calamities or disasters are exempted from service tax. Following services will be taxable due to withdrawal of exemptions: Vehicle parking to general public; Services provided by an educational institution by way of renting of immovable property and auxiliary education services; Services provided to Government, a local authority or a governmental authority, by way of repair or maintenance of aircraft. Transportation of petroleum/ petroleum Page 15 of 23 DSA & Co.

16 products, postal mail/ mail bags and household effects by rail or vessel. Retrospective exemption is provided to the Indian Railways on the service tax leviable on various taxable services provided by them during the period prior to to the extent show cause notices have been issued up to Negative List Expanded Testing activities in relation to agriculture and agricultural produce have been added in the negative list of services, hence no service tax liability on these. Earlier mere seed testing was in the negative list. Approved vocational education course to include courses run by State Council of Vocational Training (SCVT). Hence forth, courses in 'designated trades' offered by Industrial Training Institute or Industrial Training Centre affiliated to State Council of Vocational Training will also be covered by the negative list. Exemption in respect of courses run by institutes affiliated with National Skill Development Corporation (NSDC) is withdrawn making courses run by them liable to service tax. Presently, process amounting to manufacture or production of goods is included in the negative list. The scope is expanded to include processes on which excise duty is leviable under Medicinal and Toilet Preparations (Excise Duties) Act, Abatement on construction of residential units Rate of abatement for homes and flats with carpet area of more than 2,000 sq. Ft or value of one crore or more is reduced to 70% from existing 75% where value of land is included in the amount charged from the service recipient. This amendment is effective from Existing exemption from service tax on low cost housing/ single residential units continues. Sigh of relief to defaulters Voluntary Compliance Encouragement Scheme is introduced. Under this, defaulters since to can take amnesty and pay their dues Page 16 of 23 DSA & Co.

17 to Government. Broad guidelines are as follows: Application to be made before , Any person can opt for the scheme to whom no notice is issued or order is passed till in respect of transaction undertaken by them. Taxes to be paid and returns to be filed. Interest, penalties and other proceedings applicable will be waived off. Can be opted even by persons who have filed their returns but not disclosed their correct liability. Tax liability to be discharged in two instalments: (1) before (2) before Tax paid will not be refunded under any circumstances. On declarations made under this scheme, no matter will be reopened under any authority or court. However, recovery proceedings may be initiated, if the Commissioner has reason to believe the declarations made are substantially false. Penalty provisions: Maximum penalty for failure to get registered under the Service tax law is restricted to INR 10,000. A director, manger or other specified official of a company who is knowingly involved in contraventions can now penalised up to INR 100,000. Failure to deposit service tax collected after a period of six months from the due date is a cognizable offence now if tax involved is more than fifty lakh rupees. Moreover, term of imprisonment is extended to 7 years as against current provisions of 3 years. Advance Ruling Advance rulings can now be sought even by domestic public limited companies. Page 17 of 23 DSA & Co.

18 CENTRAL EXCISE Basic duty remains unchanged at 12.36% (with applicable surcharge and cess). Exemptions Zero excise duty route for cotton and manmade yarn not containing any other textile material restored. However, CENVAT Credit option is also available with 6% duty. Handmade carpets, textile floor coverings of coir or jute are exempt from excise duty. In order to give a thrust to ship building industry, both ships and vessels are exempted from excise duty. Consequently, CVD on imported ships and vessels also abolished. <<This space is left blank intentionally>> Changes in rates of excise duty Particulars Proposed Existing Sports Utility 30% 27% Vehicles ( other than used as taxis) Marble INR 60 per sq mtr INR 30 per sq mtr Mobile phones 6% 1% priced above INR 2,000( less than INR 2,000 still enjoys 1% duty) Chassis of 13% 14% diesel motor vehicles used to transport goods Branded medicaments of Ayurveda, Unani, Siddha, Homeopathy and bio-chemic systems of medicine is brought under MRP (Maximum Retail Price) based Page 18 of 23 DSA & Co.

19 valuation with an abatement of 35%, with tax rate of 12.36%. Others: Benefit of advance ruling to be extended to resident public limited companies. Also obtaining of advance ruling expanded to cover issue of admissibility of credit of service tax paid on input services which was available only to excise duty paid on inputs so far. The word activity is redefined thereby making new production or manufacturing business an existing assessee proposes to undertake. Accordingly, existing manufacturer can seek advance ruling for activities they propose to undertake. The limit for prosecution of offences relating to evasion of excise duty or credit revised to amount exceeding fifty lakh rupees and also cognizable and non-bailable. Mode of service of documents to include speed post with proof of delivery and courier apart from existing registered post. Exemption from Central Excise Duty for units in Uttarakhand and Himachal Pradesh availing area based exemption on captive consumption of intermediate goods. A statement containing details of excise duty not levied or short levied or short paid shall be deemed to constitute a service of show-cause notice where grounds relied for the subsequent period are the same as those relied in the earlier notice or notices. CENVAT credit is repayable along with interest where capital goods/ inputs removed as such; removed after being used; partially/fully written off. <<This space is left blank intentionally>> Page 19 of 23 DSA & Co.

20 CUSTOMS Changes in rates of duty same is installed within 3 months. This time frame has been extended to 1 year now onwards. Similar amendments made for the import of goods for repair of ocean going vessels also. Concession of duty free import available for specified parts of electric and hybrid vehicles has been extended up to March 31, In order to give thrust to leather exports, specified machinery for manufacture of leather and leather goods / footwear import duty has been brought down from 7.5% to 5%. Specified textile machinery parts also enjoy 5% import duty hereon. Duty on pre-forms of precious and semi-precious stones reduced from 10 percent to 2 percent. Export duty on de-oiled rice bran oil cake is withdrawn. Import of parts for aircraft maintenance, repair and overhaul (MRO) or testing of aircrafts is allowed without payment of duty on the condition that the Import duties on set top boxes and raw silk has been increased to 10 and 15 percent respectively. Differentiation between steam coal and bituminous coal for charging import duty has been done away with. Now onwards, both are chargeable with 2% customs duty and 2% CVD. Imported Vehicle to cost more; revised duty structure will be as follows: For cars: CIF value exceeding USD 40,000 and engine capacity exceeding 3000 CC for petrol, and 2500 CC for diesel; BCD increased from 75% to 100%. Page 20 of 23 DSA & Co.

21 For motor cycles with engine capacity of 800 CC or more - BCD increased from 60% to 75%. BCD on yatchs increased from 10% to 25%. Exemption from education cess and secondary and higher education cess withdrawn for aircraft/ helicopters and parts. Baggage rule relaxed: It proposed to increase the duty free limit to import of jewellery by eligible passengers. Revised limits are : Male passenger Female passenger INR 50,000 INR 100,000 Provisional attachment of property introduced wherein duty not levied, short levied, erroneously refunded, interest not paid etc. due to wilful misstatement, collusion, suppression of facts. Electronic filing of Import Manifest to be made mandatory. However, commissioner is empowered to accept in any other form where electronic filing is not feasible. Similar to Excise, limit for imposing punishment increased to INR 5 million from 3 million of duty evasion. Import duty on samples removed for testing/ examination and consumed/destroyed are exempt from duty. Others Interest free period for payment of import duty reduced from 5 to 2 days from the date of presentation of BoE. After 2 nd day, interest will be payable (excluding holidays). Similar to excise, word activity has been redefined to include proposed activity to be undertaken enabling importers/exporters to seek advance ruling for proposed to be undertaken. Provisions similar to warehousing facility been Page 21 of 23 DSA & Co.

22 extended to postal imports. Accordingly, in case of postal imports, importer will be able to re export goods without payment of duty. Custom house agents will be re-designated as customs brokers. Central Sales Tax Remains 2 percent against Form C. <<This space is left blank intentionally>> <<This space is left blank intentionally>> Page 22 of 23 DSA & Co.

23 DSA & Co. Chartered Accountants No. 1309/8, 11 th Main, Vijayanagar, Bangalore , India Disclaimer The information and update provided in this newsletter is general in nature. This should not be construed as professional opinion on the subject nor comprehensive for decision making. No person should act on this without appropriate professional advice. We will not be responsible for any loss or damage arising from actions taken based on this newsletter. This newsletter is meant for private circulation only. Page 23 of 23 DSA & Co.