Budget 2015 Highlights

Budget 2015 Highlights

Central Excise, Customs & Service Tax

GENERAL

1.    FM's Budget speech dwelt on agriculture, public investments in infrastructure, manufacturing and social sector spending.

2.    States to be equal partners in economic growth; move to making India cashless society; social sector programmes to continue. Some of the challenges mentioned by the Finance Minister are: poor agricultural income, decline in manufacturing; and the need for fiscal discipline.

3.    Govt. proposes to set up 5 ultra mega power projects, each of 4000MW.  AIIMS in Jammu and Kashmir, Punjab, Tamil Nadu, Himachal Pradesh, Bihar and Assam. IIT in Karnataka; Indian Institute of Mines in Dhanbad to be upgraded to IIT. IIM for Jammu and Kashmir and Andhra Pradesh.

4.    Visa on Arrival for 150 countries.

5.    GOODS AND SERVICE TAX (GST): Finance Minister reiterated his resolve for introduction of GST by April 2016.

6.    DIRECT TAX CODE (DTC): Finance Minister said that most of the provisions of contemplated DTC have been incorporated in present Income Tax Act 1961. So DTC chapter is closed for now.

7.    LEGISLATIVE CHANGES: A number of positive legislative changes have been made for ease of business, most importantly reduction of upper limit of penalties to be imposed. See in the relevant section.

DIRECT TAXES HIGHLIGHTS

1.    Wealth Tax being abolished.

2.    Additional 2% surcharge for the super rich with income of over Rs. 1 crore.

3.    Rate of corporate income tax to be reduced to 25% over next four years.

4.    An individual with total income up to Rs. 4,44,200 may not pay any tax by investing in various investment and insurance schemes.

5.    100% exemption for contribution to Swachch Bharat, apart from CSR.

CENTRAL EXCISE

Part I: CENTRAL EXCISE ACT, 1944: STATUTORY CHANGES (w.e.f. enactment of Finance Act’ 2015.  Normally it is enacted in First week of April)

1.    Amendment in Section 11A

a.    When a return is filed the time limit of one year or five year for demanding differential duty shall start from the date on which such return is filed.

b.    When a return is filed based on self assessment and duty payable is shown in the return, even though such duty is not paid, NO SCN shall be issued proposing recovery and penalty. The amount admitted in return can be straight way recovered under Section 11 as an arrears of revenue.

c.    Time limit for recovery of interest is also introduced, which will start from the date on which duty was paid on which interest is being demanded.

d.    All SCNs issued after enactment of Finance Act 2015, shall be governed by amended Section even if they pertain to older period.

[Clause 91 of the Finance Bill, 2015]

2.    Amendment in Section 11AC/Rule 25

a.    In non fraud cases maximum penalty is 10% of the duty evaded. Earlier it was up to 100% of the duty evaded.

b.    In non fraud cases if duty and interest is paid either before SCN or within 30 days of communication of SCN, no penalty shall be imposed.

c.    In non fraud cases if duty and interest is paid within 30 days of receipt of adjudication order, the penal liability is 25% of the penalty imposed, meaning thereby that maximum penalty shall be 2.5% of the duty involved.

d.    In fraud cases penal liability is equal to duty evaded.

e.    In fraud cases if duty and interest is paid either before SCN or within 30 days of communication of SCN, penal liability shall be 15% of the duty evaded.  

f.     In fraud cases if duty and interest is paid within 30 days of communication of OIO, penal liability shall be 25% of the duty evaded. 

g.    All cases where no SCN is issued, and SCN is issued after the date, on which Finance Act 2015 is enacted, shall be governed by new provisions.

h.    All cases where SCN is issued, before the date, on which Finance Act 2015 is enacted, but remains un-adjudicated on the date on which FA 2015 is enacted, can claim benefit of no penalty in non fraud case and 15% penalty in fraud case provided duty along with interest is paid within 30 days of enactment of FA 2015. 

i.      All cases where adjudication order is passed after the date on which FA 2015 is enacted, can claim benefit of 2.5% penalty in non fraud case and 25% penalty in fraud case provided duty along with interest is paid within 30 days of communication of order, irrespective of the date on which SCN is issued. 

[Clause 92 of the Finance Bill, 2015]

Part II: CENTRAL EXCISE TARIFF ACT, 1985: STATUTORY CHANGES (w.e.f. 1.3.2015)

1.    The standard ad valorem effective rate of duty of excise (i.e. CENVAT) is being increased from 12.36 % to 12.5%. No separate education cess shall be levied.

[Clause 104 of the Finance Bill, 2015. The above change will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931.]

Part III: STATUTORY CHANGES IN RULES (w.e.f. 1.3.2015)

1.    Now formally a dealer or importer can dispatch the goods procured by him to his customer without first bringing it to his registered premises (Rule 11 of CER and Rule 4 of CCR refers). Now by specific provision, transit sales are being recognized for allowing seamless transfer of credit.

2.    Now formally a principal manufacturer or a service provider can send inputs and capital goods to job worker without first bringing them to his registered premises (Rule 11 of CER and Rule 4 of CCR refers).

3.    Export out of India alone shall be eligible for (i) refund of CENVAT credit under Rule 5 of CCR 2004 and (ii) rebate of duty under Rule 18 of CER 2002. However under Rule 19 of CER 2002,   Export out of India as well as supplies to SEZ can be made without payment of duty. This has been done by insertion of definition of export in Rule 5/Rule 18 referred. No such insertion is done in Rule 19 of CER 2002.

4.    Now formally issue of digitally signed invoices and preservation of records in electronic form by a manufacturer is being recognized under Rule 10 and 11 of CER 2002.

5.    CENVAT Credit Rules, 2004 are being amended to –

a.    Increase the time limit for taking CENVAT credit on inputs and input services from the present six months to one year (Rule 4 of CCR).

b.    Principal manufacturer can take credit on the date on which goods are received by job worker directly from supplier of inputs.

c.    Increase the time limit for return of Capital Goods from a job worker from the present six months to two years (Rule 4 of CCR refers).

d.    Now rule 6 of CENVAT Credit Rules teats non-excisable goods at par with exempt goods and services.

6.    Registration process in Central excise is being simplified to ensure that registration is granted within two working days of the receipt of a duly completed application form. Verification of documents and premises, as the case may be, shall be carried out after the grant of the registration. [Notification No.7/2015-Central Excise (N.T.) dated 1st March, 2015]

7.    Circular No.998/5/2015-Central Excise dated 28th February, 2015 allows withdrawal of prosecution where the civil proceedings of duty evasion on identical set of facts have been decided in favor of assessee and same has attained finality.

Part IV: Miscellaneous (w.e.f. 1.3.2015)

8.    The scheme of Advance Ruling is being extended to almost every entity including Proprietorship, partnership, limited liability partnership firm by Notification No.11/2015-Central Excise (N.T.) dated 1st March, 2015 which was earlier available to only Joint ventures and Public Limited companies.  

CUSTOMS

Part I: Customs Act 1944: STATUTORY CHANGES (w.e.f. enactment of Finance Act’ 2015.  Normally it is enacted in First week of April)

1.    Amendment in Section 28

a.    In non fraud cases if duty and interest is paid either before SCN or within 30 days of communication of SCN, no penalty shall be imposed.

b.    In fraud cases if duty and interest is paid either before SCN or within 30 days of communication of SCN, penal liability shall be 15% of the duty evaded.  In fraud cases otherwise penal liability is equal to duty evaded, which gets reduced to 15% under this clause.

c.    All cases where SCN is issued, before the date, on which Finance Act 2015 is enacted, but remains un-adjudicated on the date on which FA 2015 is enacted, can claim benefit of no penalty in non fraud case and 15% penalty in fraud case provided duty along with interest is paid within 30 days of enactment of FA 2015. 

[Clause 80 of the Finance Bill, 2015]

2.    Amendment in Section 112

a.    In non fraud cases involving import of dutiable goods maximum penalty is 10% of the duty evaded. Earlier it was up to 100% of the duty evaded.

b.    In non fraud cases involving import of dutiable goods if duty and interest is paid within 30 days of receipt of adjudication order, the penal liability is 25% of the penalty imposed, meaning thereby that maximum penalty shall be 2.5% of the duty involved.

[Clause 81 of the Finance Bill, 2015]

3.    Amendment in Section 114

a.    In non fraud cases involving export of dutiable goods maximum penalty is 10% of the duty evaded. Earlier it was up to 100% of the duty evaded.

b.    In non fraud cases involving export of dutiable goods if duty and interest is paid within 30 days of receipt of adjudication order, the penal liability is 25% of the penalty imposed, meaning thereby that maximum penalty shall be 2.5% of the duty involved.

[Clause 82 of the Finance Bill, 2015]

Part II: Miscellaneous  (w.e.f. 1.3. 2015)

1.    The scheme of Advance Ruling is being extended to almost every entity including Proprietorship, partnership, limited liability partnership firm by Notification No.27/2015-Customs (N.T.) dated 1st March, 2015 which was earlier available to only Joint ventures and Public Limited companies. 

2.    Bulk drugs used in the manufacture of the specified drugs exempt from BCD or attract concessional rate of 5% BCD, under Sl. No. 148(B) / 147(B) of notification No 12/2012-Customs, if the procedure as laid down in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 is followed by the importers. Further, these bulk drugs used in the manufacture of the specified drugs are also exempt from excise duty and thus from CVD, under S. No. 108 (B) of the notification 12/2012- CE, provided the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, is followed. In this context, It is being clarified that there is no need to separately comply with Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 for the purposes of availing of the CVD exemption under notification No.12/2012-Central Excise, if the procedure as laid down in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rule, 1996 is already followed by the importer for availing exemption / concession from BCD on the said goods.

Service tax

Part I: Changes brought vide Finance Bill 2015 (w.e.f. date to be notified by Central Government)

4.    Amendment in Section 66B

a.    Service tax rate has been increased from current 12.36% to 14% (inclusive of education cess and Secondary Higher education cess)

b.    Section 95 of Finance Act 2004 (levying Education Cess) and Section 140 of Finance Act 2007 (levying secondary and higher education cess) shall cease to have effect

5.    Amendment in Section 66D

a.    Following entry i.e. 66D (j) is omitted:

                            i.    Admission to entertainment event or access to amusement facility

b.    Now following would be chargeable to service tax (illustrative list)

                            i.    Amusement parks

                          ii.    Bowling alley

                         iii.    Water parks

                         iv.    Theme parks

                          v.    Cinematographic film

                         vi.    Circus

                        vii.    Concerts

                      viii.    Etc.

c.    However exemption notification No 25/2015 is amended to provide exemption on the following:

1.          Services by way of admission to a museum, national park, wildlife sanctuary, tiger reserve or zoo [effective 1^st April 2015];

2.          Service provided by way of exhibition of movie by an exhibitor to the distributor or an association of persons consisting of the exhibitor as one of its members [effective 1^st April 2015];

3.          Services by way of right to admission to,-

(i)            exhibition of cinematographic film, circus, dance, or theatrical performance including drama or ballet;

(ii)          recognised sporting event;

(iii)         award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event, where the consideration for admission is not more than Rs 500 per person.”.

d.    Now any service [earlier support services] provided by Government to the business entities would be chargeable to Service tax [Section 66D(a)(iv) amended]

e.    Reverse charge Notification and definition of ‘person liable to pay Service tax’ defined under Rule 2(1)(d)(i)(E) of Service Tax Rule, 1994 is also suitably amended to omit the word ‘support’

f.     Section 66D clause (f) has been substituted by following:

“(f) services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption;”

g.    Thus, now even the manufacture of alcoholic liquor for human consumption is chargeable to service tax

h.    Carrying out an intermediate production process as job work in relation to manufacture of alcoholic liquor for human consumption is made chargeable to Service tax [entry 30].[amendment in Notification No 25/2012]

Part I: Changes brought vide Finance Bill 2015 (w.e.f. date on which Finance Act 2015 is enacted)

6.    Amendment in Section 65B

a.    Explanation 2 of clause 44 of Section 65B has been amended and now:

                            i.    Conduction or organising chit by foreman of chit fund; or

                          ii.    Promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind by lottery distributor or selling agent

… is chargeable to Service tax 

b.    Definition of Government has been inserted in Section 65B (26A) as:

‘(26A) “Government” means the Departments of the Central Government, a State Government and its Departments and a Union territory and its Departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or the rules made thereunder;’

c.    Earlier the said expression was not defined. In General clauses Act, the same is defined as follows:

‘Government’ includes both Central Government and any State government

7.    Amendment in Section 67

a.    To legislatively overcome the case of Intercontinental Consultants and Technocrats Pvt. Ltd., clause a) of explanation to the Section 67 has been substituted to include:

‘(a) “consideration” includes–…..

 (ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed;

(iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket.’.

8.    Amendment in Section 73

a.    Sub Section 1B is inserted to recover the service tax with interest without service of notice from the assessee who have mentioned the service tax in the return filed under section 70(1) but not paid fully or partially.  This would mean that no penalty under section 76 or 78 is imposable in such cases.

9.    Amendment in Section 76

a.    Outer limit of penalty in cases of bona fide default of Service Tax has been confined to 10% of the Service Tax amount as against the existing 50%.

b.    The assessee has the option of paying service tax along with interest within 30 days of service of notice or receipt of order and in such cases maximum penalty is 2.5% of the Service Tax amount can be levied.

10. Amendment in Section 78

a.    In fraud cases where the Service Tax and interest as specified in the notice or order is paid within 30 days of:

                            i.    Date of Service of notice u/s 73(1) - penalty shall be 15% of Service Tax;

                          ii.    Date receipt of order u/s 73(2) - penalty imposable shall be 25% of the amount of Service Tax.

                         iii.    In case service tax is varied in any appeal, if service tax, interest and reduced penalty is paid within 30 days of order of the appellate authority/ tribunal/ court, then benefit of reduced penalty is available.

11. Section 80 deleted

a.    Earlier no penalty was imposable if the assessee shows the reasonable cause for the failure but now such benefit has been deleted

12. Amendment in Section 94

a.    Rule making Power of Central Government has been extended to make rules regarding:

(aa) determination of the amount and value of taxable service, the manner thereof, and the circumstances and conditions under which an amount shall not be a consideration, under section 67.

13. Swachh Bharat Cess: Will come into force from date to be notified

a.    Swachh Bharat cess (SBC) to be levied as Service tax on all or any of the taxable services @ 2% on the value of such services.

b.    SBC will be in addition of any other cess.

Part II: Changes brought vide Notification

14. Notification No 3/2015 – ST

a.    This notification shall come into force from 1 March 2015.

b.    Notification No 42/2012 is rescinded: this notification granted exemption to commission agents of the exporters.

15. Notification No 4/2015 – ST

a.    Benefit of exemption notification has been extended to transportation of exported goods till Land customs station (earlier it was only available till port and airport).

16. Notification No 5/2015 – ST

a.    This notification amends Service tax Rules.

b.    Definition of ‘person liable to pay service tax’ has been amended to include in relation to: effective from 1 March 2015

                            i.    service provided or agreed to be provided by a person involving an aggregator in any manner - the aggregator of the service

                          ii.    service provided or agreed to be provided by a mutual fund agent or distributor to a mutual fund or asset management company, the recipient of the service;

                         iii.    service provided or agreed to be provided by a selling or marketing agent of lottery tickets to a lottery distributor or selling agent, the recipient of the service

c.    Rule 4 and 5 amended. Now following documents can be authenticated by digital signature: effective from 1 March 2015

                            i.    Any invoice, bill or challan or consignment note.

                          ii.    Records under Rule 5 which are preserved in electronic form

17. Notification No 6/2015: effective from 1 April 2015

a.    Amendment on health care services has been extended to Services provided by way of transportation of a patient in an ambulance [entry 2]

b.    Services specified under following clauses of Sl. No. 12 provided to Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of has been deleted [entry 12]:

(a)  a civil structure meant predominantly for  use other than for commerce, industry, or any other business or profession;

(c) a structure meant predominantly for use  as (i) an educational, (ii) a clinical, or  (iii) an art or cultural establishment;

(f)    a residential complex predominantly meant for self-use

c.    Services by way of construction, erection, commissioning, or installation of original works pertaining to an airport or port is now chargeable to Service tax [entry 14].

d.    Now service provided by an artist in folk or classical art is exempt upto the consideration of 1 lakh [entry 16].

e.    Exemption on services by way of transport of goods by rail, vessel or GTA has been limited. [entry 20 and 21] Now the following goods has been made chargeable to service tax:

·         flour,

·         tea,

·         coffee,

·         jaggery,

·         sugar,

·         milk products,

·         edible oil,

·         other Foodstuff

·         (excluding milk, salt, food grain including flours, pulses  and rice)

f.     Service tax exemption has been allowed on following services:

·         Services by operator of Common Effluent Treatment Plant by way of treatment of effluent;

·         Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables;

18. Notification No. 7/ 2015: amending notification no 30/2012

a.    In respect of the following services now recipient of service is liable to pay 100% of service tax [effective from 1 April 2015]:

                            i.    Services provided by a mutual fund agent or distributor to a mutual fund or asset management company

                          ii.    By a selling or marketing agent of lottery tickets to lottery distributor or selling agent

                         iii.    Supply of manpower services/ security services

                         iv.    Service by a person involving aggregator in any manner [effective from 1 March 2015]

19. Notification No 8/2015: amending notification no 26/2012

a.    This notification would be taxable from 1 April 2014.

b.    In case of transport of goods/ passengers by rail, condition for claiming partial exemption (abatement) has been inserted. Cenvat credit on input capital goods and input service should not have been availed.

c.    In case of transport of passengers by air now the abatement in case of economy class is of 60%(i.e. 40% is taxable) and in case of other than economy class is 40% (i.e. 60% is taxable).

d.    In case of GTA service now service tax is chargeable on 30% of the value.

e.    No abatement on chit fund services.

f.     In case of transport of goods in a vessel 30% shall be taxable

20. Notification No 9/2015

a.    The scheme of Advance Ruling is being extended to almost every entity including Proprietorship, partnership, limited liability partnership firm by Notification No.27/2015-Customs (N.T.) dated 1st March, 2015 which was earlier available to only Joint ventures and Public Limited companies.