INDIAN
FINANCE BILL 2012
TAX
PROPOSALS
DIRECT
TAXES PROPOSALS
1)
DTC rates proposed to be introduced for personal income tax.
2)
Changes in tax rates, deductions, withholding tax :-
a.
Basic Exemption limit raised for the general category of individual taxpayers.
The limit is proposed to be enhanced from `1,80,000 to `2,00,000
giving a tax relief of `2,000.
b.
Upper
limit of 20 per cent tax slab to be raised from `8 lakh to `10 lakh.
c.
In
line with earlier notification exempting specified salary earners from filing
their returns, a deduction of upto `10,000 for interest from savings bank accounts is now to be
allowed to individual tax payers.
d.
Deduction
of upto `5,000
for preventive health check up to be allowed to individuals.
e.
No
advance tax to be paid by senior citizens who do not have any business income.
f.
Rate
of withholding tax (TDS on foreign payments) on interest payment on ECBs to be
reduced from 20 per cent to 5 per cent for 3 years for certain sectors.
g.
Repatriation
of dividends from foreign subsidiaries of Indian companies at lower tax rate of
15 per cent. Extended upto 31.3.2013.
3)
Business Deductions
a.
Investment
linked deduction of capital expenditure for certain businesses to be allowed at
an enhanced rate of 150 per cent. New sectors are to be added for the purposes
of investment linked deduction.
b.
Proposal
to extend weighted deduction of 200 per cent for R&D expenditure in an
in-house facility for a further period of 5 years upto March 31, 2017.
c.
Providing
weighted deduction of 150 per cent on expenditure incurred for agri-extension
services.
d.
Weighted
deduction at 150 per cent of expenditure incurred on skill development in
manufacturing sector.
e.
Extending
sunset date for setting up power sector undertakings by one year for claiming
100 per cent deduction of profits for 10 years.
4)
Restriction on Venture Capital Funds to invest only in 9
specified sectors proposed to be removed. So far the government
had restricted investment to information technology, software, nanotechnology,
biotechnology, basic drugs and seed development and research, biofuels, hotels,
dairy and poultry projects in India
However, this restriction has been removed. Apart from a small negative
list which includes agriculture and atomic energy, Venture Capital Funds will
be allowed to invest in all other sectors.
5)
Tax Audit Limits to be increased :-
Raising of Turnover limit for compulsory tax audit of accounts
and presumptive taxation of small and medium enterprises from `60 lakhs to `1 crore.
6)
Ensuring Flow of Capital investment to SMEs.
Exemption from Capital Gains tax on sale of residential
property, if sale consideration
is used for subscription in equity of a manufacturing small and
medium enterprise for purchase of new plant and machinery. This is mainly to
give a boost to setting up of small and medium enterprises.
7)
Reduction in securities transaction tax by 20 per cent on cash
delivery transactions.
8)
Proposal to extend the levy of Alternate Minimum Tax to all
business entities (all persons other than companies) claiming profit linked deductions. This
will mean a higher rate of tax for businesses.
9)
Introduction
of General Anti Avoidance Rule to counter aggressive tax avoidance scheme.
Measures proposed to deter the generation and use of unaccounted money.
Estimated Effect of the Direct
Tax Proposals – Net revenue loss of `4,500 crore.
INDIRECT
TAXES
Service
Tax
1) Sevice tax confronts challenges of its share being
below its potential, complexity in tax law, and need to bring it closer to
Central Excise Law for eventual transition to GST.
2) Introduction of negative list of services. Proposal
to tax all services except those in the negative list comprising of 17 heads.
For a list of the proposed negative services, please refer to Annexure 1.
3) Exemption from service tax for some sectors.
4) Rationalisation of Service Tax law. Harmonising
Service Tax and Central Excise provisions. The main aim is to introduce a
single unified code for Service Tax and Central Excise.
5) Simplified Registration Form and Common Return
(single page) for Service Tax and Central Excise.
6) Utilization of input tax credit permitted in number
of services to reduce cascading
of taxes.
7) Revision Application Authority and Settlement
Commission being introduced in Service Tax for dispute resolution.
8) Place of Supply Rules for determining the location
of service to be put in public
domain
for stakeholders’ comments.
9) New scheme announced for simplification of refunds.
10) Rules pertaining to point of taxation are being
rationalised. To maintain a healthy fiscal situation proposal to raise service
tax rate from 10 per cent to 12 per cent, with corresponding changes in rates
for individual services.
Estimated Effect of Service Tax Proposals -
Additional revenue of `18,660
crore.
Excise and Customs
1) Given the imperative for fiscal correction, standard
rate of excise duty to be raised from 10 per cent to 12 per cent, merit rate
from 5 per cent to 6 per cent and the lower merit rate from 1 per cent to 2 per
cent with few exemptions.
2) Excise duty on large cars also proposed to be
enhanced.
3) No change proposed in the peak rate of customs duty
of 10 per cent on non-agricultural goods.
4) To stimulate investment relief proposals for
specific sectors - especially those under stress.
a)
Agriculture and Related Sectors
·
Basic customs duty reduced for
certain agricultural equipment and their parts;
·
Full exemption from basic
customs duty for import of equipment for expansion or setting up of fertiliser
projects upto March 31, 2015.
b)
Infrastructure
·
Proposal for full exemption
from basic customs duty and a concessional CVD of 1 per cent to steam coal till
31st March, 2014.
·
Full exemption from basic duty
provided to certain fuels for power generation.
c)
Mining
·
Full exemption from basic
customs duty to coal mining project imports.
·
Basic custom duty proposed to
be reduced for machinery and instruments needed for surveying and prospecting
for minerals.
d)
Railways
Basic custom duty proposed to be reduced for
equipments required for installation of train protection and warning system and
upgradation of track structure for high speed trains.
e)
Roads
Full exemption from import duty on certain
categories of specified equipment needed for road construction, tunnel boring
machines and parts of their assembly.
f)
Civil Aviation
Tax concessions proposed for parts of aircraft and
testing equipment for third party maintenance, repair and overhaul of civilian
aircraft.
g)
Manufacturing
Relief proposed to be extended to sectors such as
steel, textiles, branded readymade garments, low-cost medical devices,
labour-intensive sectors producing items of mass consumption and matches
produced by semi-mechanised units.
h)
Health and Nutrition
·
Proposal to extend concessional
basic customs duty of 5 per cent with full exemption from excise duty/CVD to 6
specified life saving drugs/vaccines.
·
Basic customs duty and excise
duty reduced on Soya products to address protein deficiency among women and
children.
·
Basic customs duty and excise
duty reduced on Iodine.
·
Basic customs duty reduced on
Probiotics.
i)
Environment
·
Concessions and exemptions
proposed for encouraging the consumption of energy saving devices, plant and
equipment needed for solar thermal projects.
·
Concession from basic customs
duty and special CVD being extended to certain items imported for manufacture
for hybrid or electric vehicle and battery packs for such vehicles.
5) Proposal to increase basic customs duty on imports
of gold and other precious metals.
6)
Additional resource mobilization
a.
Proposals to increase excise
duty on ‘demerit’ goods such as certain cigarettes, hand-rolled bidis, pan masala,
gutkha, chewing tobacco, unmanufactured tobacco and zarda scented tobacco.
b.
Cess on crude petroleum oil
produced in India revised to `4,500 per metric tonne.
c.
Basic customs duty proposed to
be enhanced for certain categories of completely built units of large
cars/MUVs/SUVs.
10) Rationalization measures
a.
Excise duty rationalised for
packaged cement, whether manufactured by mincemeat plants or others.
b.
Levy of excise duty of 1 per
cent on branded precious metal jewellery to be extended to include unbranded jewellery.
Operations simplified and measures taken to minimise impact on small artisans
and goldsmiths.
c.
Branded Silver jewellery
exempted from excise duty.
d.
Chassis for building of
commercial vehicle bodies to be charged excise duty at an ad valorem rate
instead of mixed rate.
e.
Import of foreign-going vessels
to be exempted from CVD of 5 per cent retrospectively.
f.
Duty-free allowances increased
for eligible passengers and for children of upto 10 years.
Estimated Effect of
Customs and Central excise Proposals - Net revenue gain of `27,280 crore.
Net gain
of `41,440 crore in the Budget due to various taxation
proposals.
TAX REFORMS
1)
Progress
towards DTC and GST.
2) DTC Bill to be enacted at the earliest after expeditious
examination of the report of the Parliamentary Standing Committee.
3) Drafting of model legislation for the Centre and State GST in
concert with Statesis under progress.
4) GST network to be set up as a National Information Utility and to
become operational by August 2012.
DISINVESTMENT
POLICY
1)
Government has further evolved
its approach to divestment of Central Public Sector Enterprises by allowing
them a level playing field vis-à-vis the private sector in respect of practices
like buy backs and listing at stock exchanges. For 2012-13, `30,000 crore to be raised through disinvestment. At
least 51 per cent ownership and management control to remain with Government.
OTHER
PROPOSALS HAVING AN IMPACT ON THE ECONOMY :-
INVESTMENT
Foreign Direct Investment
Efforts
to arrive at a broadbased consensus in consultation with the State Governments
in respect of decision to allow FDI in multi-brand retail upto 51 per cent.
Advance Pricing Agreement
Provision
regarding implementation of Advance Pricing Agreement to be introduced in
Finance Bill, 2012.
Financial Sector
Rajiv
Gandhi Equity Saving Scheme to allow for income tax deduction of 50 per cent to
new retail investors, who invest upto `50,000 directly in equities and whose annual income is
below `10 lakh to be introduced. The
scheme will have a lock-in period of 3 years.
Capital Market
Various
steps proposed to be taken for deepening the reforms in the Capital markets,
including simplifying process of IPOs, allowing QFIs to access Indian Bond
Market etc.
Legislative Reforms
Official
amendment to “The Pension Fund Regulatory and Development Authority Bill,
2011”, “The Banking Laws (Amendment) Bill, 2011” and “The Insurance Law
(Amendment) Bill, 2008” to be moved in this session.Various Bills proposed to
be moved in the Budget session of the Parliament to take forward the process of
financial sector legislative reforms.
GOVERNANCE
UID-Aadhaar
Enrolment
of 20 crore persons completed under UID mission. Adequate funds to be allocated
to complete enrolment of another 40 crore persons.
Black Money
Proposal
to lay a White Paper on Black Money in current session of Parliament.
Public Procurement Legislation
Bill
regarding Public Procurement Legislation to be introduced in the Budget Session
of the Parliament.
*****************************
ANNEXURE 1
(Refer to Service Tax Proposal –
item no. 2)
Negative List as per concept paper introduced for public
discussion
1. Notified
services provided by:
a. Government* and Judiciary;
b. RBI; and
c. government regulatory bodies
2. Services provided by individuals to
Government in relation to their representation on any council, commission or similar body set up by the Government.
3. Service by UN, international bodies,
diplomatic missions under diplomatic and consular arrangements as per laid down conditions
(details to be specified). Services provided to such entities to remain exempt
as at present.
4. Services provided by organizations
registered as non-profit entities in matters relating to public and social
welfare activities-excluding education and health (covered
separately)-including charitable fund-raising events, sponsorships to
charitable events and voluntary donations to charity.
5. Funeral,
burial, crematorium and mortuary services.
6. Agriculture & animal
husbandry : Services directly used for
growing, cultivation, harvesting of the agricultural produce, horticulture,
animal husbandry, forestry, dairy, poultry farming and pisciculture (including
renting of vacant land exclusively or predominantly for any such purpose)
Certain support services in relation to agriculture and allied activities may
be separately exempted.
7. Sale,
purchase or acquisition of securities and debts on principal-to-principal basis
Acquisition of shares in
lieu of services will be liable to tax.
8. Interest
9. Dividend
on investments
10 Inter-bank
sale and purchase of foreign currency
11 Transport
of passengers by:
a) public transport
buses on a point-to-point basis (except tourist buses) and stagecarriage basis;
b) public transport
in ship or vessel of less than 15 net tonnage on a point-to-point basis;
c) by metered taxis
or three-wheeler auto rickshaw plying within the precincts of a city
12 Transport
of goods to a destination outside India by any means of transport
13 Supply
of goods carriage to a person engaged in the business of transportation of
goods
14 Construction,
works-contract, repair, alteration, renovation or restoration of:
a)
roads, airports, railways, transport, terminals, bridges, tunnels, dams,
canals, irrigation and flood control
waterworks including watershed development and water-bodies, water treatment
plants and water supply pipelines;
b)
buildings owned by Government, other than meant predominantly for industrial or
commercial use, including government hospitals and educational institutions
c) residential
building comprising of a single dwelling unit;
d)
homeless shelter, orphanage, old-age home, rehabilitation & de-addiction
centre, child day-care home or place of worship
15 Renting
of personal dwelling for residential use of a person below a threshold (to be
finalized after debate) and when used otherwise as a hotel, inn, guest house,
club or campsite or similar accommodation
16 Pre-school,
school and recognized education** and vocational training recognized by NCVT
except as capitation fee, donations or similar charges in relation to
admission.
17. Option
1: Services provided by a clinical establishment with a turnover below Rs 4
crore in the
previous year
Option 2: Hospital,
medical care, diagnostic, paramedical services except in relation to
preventive
health check-up within the precincts of a clinical establishment,cosmetic or
plastic surgery.
Note : Apart from
the above, there are other services specified such as copyright services of
original literary works, services provided by independent journalist to PTI and
UNI, services provided by sportspersons as players, coach referees, religious
services, trade union services, etc. There is no clarity with reference to
these services, which are in addition to the 17 services as per the draft paper.
……………………………..
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Regards,
Taxationexperz team.
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