The Finance Bill & Gujarat VAT

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3 The Finance Bill & Gujarat VAT 2013 at a Glance

4 Contributors to the Publication : CA. K. K. Shah CA. S. R. Parikh CA. Sunil Talati CA. Umesh Talati CA. Manish A Baxi CA. Jayesh Barot CA. Nishith K Desai CA. Ajay Thakkar CA. Rajesh Somani CA. Anand Sharma CA. Aniket Talati CA. Anand Banka CA. Chanakya Shah CA. Amit Shah CA. Vishal Vakil CA. Arti Nagdev CA. Krishna Shah CA. Geeta Somani CA. Bhavik Khatri CA. Viral Shah CA. Sagar Gandhi CA. Aditi Sejpal CA. Shalin Mody CA. Sanket Nanavati CA. Rishil Shah CA. Sulabh Padshah CA. Shruti Saxena CA. Hiren Desai CA. Hemendra Shah CA. Kapil Ashar CA. Jatin Keshariya CA. Pratik Mehta CA. Mayank Goel CA. Payal Desai CA. Mehul Rana CA. Deepak Mavani CA. Shraddha Damani CA. Vatsal Mankad CA. Kalpana Gupta This publication is prepared for the benefit and exclusive use of the clients of Talati & Talati. Readers are advised, not to consider this publication as a substitute of professional advice. The firm has taken adequate care to ensure the accuracy of the content of this publication. However, the firm does not take any responsibility for any error or omission in this publication on any account. It is suggested that reader should take professional advice before acting on the same. 2

5 CONTENTS 1. Amendments at a glance Economic Survey Direct Taxes Income Tax 15 Wealth Tax Indirect Taxes Central Excise 34 Customs 34 Service Tax Gujarat VAT Fast Track Reference 41 3

6 1. AMENDMENTS - AT A GLANCE Income Tax No change in basic exemption limit. Tax credit for resident individuals of Rs if total income does not exceed Rs. 5 lacs. An individual, HUF, AOP, BOI, Co operative society, Firm, Local Authority will be subject to surcharge of 10% of income tax where total income exceeds Rs. 1 crore. A domestic company having total income exceeding Rs. 1 crore shall continue to pay 5%, and where total income exceeds Rs.10 crore the surcharge shall be 10%. Foreign companies having income exceeding Rs 1 crore shall pay and where total income exceeds Rs. 10 crore the surcharge shall be payable at the rate of rate of 5%. No change in education cess and higher education cess. Dividend distribution Tax shall subject to 10%. Royalty/ technical fees paid to non resident/foreign company will be subject to Tax Deducted at Source at the rate of 25% or rate provided in respective DTAA, whichever is lower. Commodities Transaction payable by seller on sale of commodity derivative. Investment allowance shall be 15% for on investment in new plant or machinery exceeding Rs. 100 crore by manufacturing companies. Extension of further period of 1 year U/s 80IA for the power sector units. Deduction u/s 80EE upto Rs. 1 lakh is available for loans sanction from bank/housing finance corporation upto Rs. 25 lakh during FY for residential house property. Exemption limit u/s 10(10D) for amount received under life insurance policy has been raised from 10% to 15% of person with disability or disease. Eligible limit for deduction u/s 80C(3A) for premium paid under life insurance policy of person with disability or disease has bee raised from 10% to 15%. Expanding the scope of deduction under section 80CCG Equity Saving Scheme for individual having income upto Rs. 12 lacs. Period for the deduction is also extended from 1 year to 3 years. for donations to National Children's Fund under section 80 G Taxation of Securitisation Trust under Section 25% in case of distribution being made to individuals and HUFs 30% in other cases. 4

7 TDS on transfer of immovable property (other than agricultural 1%, if consideration is exceeds Rs. 50 lakhs. New section 43CA is inserted which provides that in case of transfer of land or building or both (held as a stock in trade), the assessed value would be higher of full value of consideration or stamp duty value. Assessable value shall be considered as of on the date of agreement Additional income-tax at the rate of 25% shall be leviable on income distributed to an individuals or a Hindu undivided family by a fund other than money market mutual fund or a liquid fund. Income distributed by a mutual fund under an infrastructure debt scheme to a nonresident or a foreign company shall be liable for payment of additional income-tax at the rate of 5%. Amendment in the definition of Capital Asset under section 2(14)(iii)(b). Return of Income filed without payment of self- assessment tax to be treated as defective return. Additional tax on distributed income by company for buy back of unlisted shares. Wealth Tax Definition of Rural Agricultural Land is proposed to be changed under wealth tax Act. Customs Duty on pre-forms precious and semi-precious stones reduced from 10% to 2%. Duty on Set Top Boxes increased from 5% to10%. Duty on raw silk increased from 5% to 15%. Duty free gold limit increased to Rs 50,000 in case of male passenger and Rs. 1,00,000 in case of a female passenger subject to conditions. Excise Duty Relief to readymade garment industry. In case of cotton, zero excise duty at fiber stage also. In case of spun yarn made of manmade fiber, duty of 12% at the fiber stage. Handmade carpets and textile floor coverings of coir and jute totally exempted from excise duty. Specific excise duty on cigarettes increased by about 18%. Similar increase on cigars, cheroots and cigarillos. Excise duty on SUVs increased from 27% to 30%. Not applicable for SUVs registered as taxies. Excise duty on marble increased from Rs. 30 per square meter to Rs. 60 per square meter. Duty on mobile phones priced at more than Rs raised to 6%. 5

8 Service Tax Two more services have been added to the basket of NEGATIVE LIST i.e. vocational courses offered by institutes affiliated to the State Council of Vocational Training and testing activities in relation to agricultural produce. Exemption of Service Tax on copyright on cinematography limited to films exhibited in cinema halls. Proposals to levy Service Tax on all air conditioned restaurant (whether or not serving Alcoholic beverages.) Homes and flats with a carpet area of 2,000 sq.ft. or more or of a value of Rs 1 crore or more, which are high-end constructions, where the component of services is greater, rate of abatement reduced from 75 to 70 %. Onetime scheme called 'Voluntary Compliance Encouragement Scheme' proposed to be introduced. Goods and Services Tax A sum of Rs. 9,000 crores towards the first installment of the balance of CST compensation provided in the budget. Work on draft GST Constitutional amendment bill and GST law expected to be taken forward. Economic growth from 3.9 per cent in 2011 to 3.2 per cent in Textiles Technology Upgradation Fund Scheme (TUFS) to continue in 12th Plan with an investment target of Rs. 1, 51,000 crores. Allocation of Rs. 50 crores to Ministry of Textile to incentivise setting up Apparel Parks within the SITPs to house apparel manufacturing units. A new scheme called the Integrated Processing Development Scheme will be implemented in the 12th Plan to address the environmental concerns of the textile industry. Working capital and term loans at a concessional interest of 6 per cent to handloom sector. Banking Compliance of public sector banks with Basel III regulations to be ensured. Rs. 14,000 crores provided in Budget Estimate for infusing capital. All branches of public sector banks to have ATM by Proposal to set up India's first Women's Bank as a public sector bank. Provision of Rs. 1,000 crores as initial capital. 6

9 Rs. 6,000 crores to Rural Housing Fund in National Housing Bank to set up Urban Housing Fund. Rs 2,000 crores to be provided to the fund in Insurance A multi-pronged approach to increase the penetration of insurance, both life and general, in the country. Number of proposals finalised, in consultation with IRDA such as empowering insurance companies to open branches in Tier-II cities and below without prior approval of IRDA, KYC of banks to be sufficient to acquire insurance policies. Banks to be permitted to act as insurance brokers, banking correspondent allowed to sell micro-insurance products and achieving the goal of having an office of LIC and an office of at least one public sector general insurance company in towns with population of 10,000 or more. Capital Market Proposal to amend the SEBI Act, to strengthen the regulator, under consideration. Number of proposal finalised in consultation with SEBI. Designated depository participants, authorised by SEBI, may register different classes of portfolio investors, subject to compliance with KYC guidelines. SEBI will simplify the procedures and prescribe uniform registration and other norms for entry for foreign portfolio investors. Rule that, where an investor has a stake of 10 per cent or less in a company, it will be treated as FII and, where an investor has a stake of more than 10 per cent, it will be treated as FDI will be laid. FIIs will be permitted to participate in the exchange traded currency derivative segment to the extent of their Indian rupee exposure in India. FIIs will also be permitted to use their investment in corporate bonds and Government securities as collateral to meet their margin requirements. SEBI to prescribed requirement for angel investor pools by which they can be recognised as Category I AIF venture capital funds. Small and medium enterprises, to be permitted to list on the SME exchange without being required to make an initial public offer (IPO). Stock exchanges to be allowed to introduce a dedicated debt segment on the exchange. Skill Development Target of skilling 50 million people in the 12th Plan period, including 9 million in

10 Gujarat VAT at a Glance Post Offices An ambitious IT driven project to modernize the postal network at a cost of Rs. 4,909 crore. Post offices to become part of the core banking solution and offer real time banking services. Gujarat Value Added Tax Lump Sum Tax Total turnover limit of Rs. 50 lakhs increased to Rs. 75 lakhs in order to make available the benefits of the provisions of lump sum tax to more dealers of the state, u/s. 14. Approximately additional dealers would be benefited by this provision. Micro Irrigation System Equipments: Full exemption to micro irrigation system equipments from current rate of 5% including additional tax to encourage its use in agriculture. Educational Items for Study of the Students: Full exemption to pencils of all types, foot rules, slide rules, mathematical instruments and its box, school color box, rubber erasers and pencil sharpeners from current rate of 5% including additional tax. Newer made of Plastic: Full exemption to newer made of plastic from current rate of 5% including additional tax in order to give relief to the poor and middle class people in rural and urban areas. Agarbatti Dust: Full exemption to Agarbatti dust. Carbon Credit: In order to encourage the use of carbon credit, included in entry 41 of schedule II as an intangible or incorporeal goods and made it 5% including additional tax. Cigarette: The rate of tax on cigarette made from tobacco increased from the present rate of 25% including additional tax to 30% including additional tax. 8

11 Gujarat VAT at a Glance Second hand (used) two wheelers and second hand (used) commercial vehicles: Sale of second hand (used) two wheelers made 1% (Subject to maximum of Rs. 500) Sale of second hand (used) medium & heavy duty commercial vehicles made 1% (Subject to maximum of Rs. 5000) Entertainment Tax: Lump sum Entertainment tax for video houses: In order that the relief relating to lump sum tax reaches to the needy classes only, option of lump sum tax would be available to only those video houses which fulfill the following conditions: The rate of entry ticket shall not be more than Rs.30/- per person. Entertainment (showing of films) can be provided using any kind of technology. The maximum number of seats in the entertainment place shall not be more than 125. There shall not be more than one screen in the premises. Professional Tax: Full exemption to the salary & wage earners having salaries or wages upto Rs p.m. in order to give relief to neo middle class. Electricity Duty on Self Generation: It is proposed to increase electricity duty on industrial units consuming self-generated power by 15 paisa per unit. 9

12 2. ECONOMIC SURVEY Budget at a Glance 10

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14 GDP Growth Following the slowdown induced by the global financial crisis in , the Indian economy responded strongly to fiscal and monetary stimulus and achieved a growth rate of 8.6 per cent and 9.3 per cent respectively in and However, with the economy exhibiting inflationary tendencies, the Reserve Bank of India (RBI) started raising policy rates in March High rates as well as policy constraints adversely affected investment, and in the subsequent two years viz and , the growth rate slowed to 6.2 per cent and 5.0 per cent respectively Percentage Rate (%) 12

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16 Rs. in Crore Inflation trends in last ten years (%) Inflation Rate

17 3. DIRECT TAXES Income Tax Rates 15

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22 Income Tax Amendments in rates of tax, TDS and surcharge. Rates for deduction of income-tax at source during the financial year from payments made to a Non resident (other than Company or a foreign company) in the nature of income by way of royalty or fees for a technical service It is proposed to amend rates for deduction of income-tax at source in case of certain payments made to a Non resident (other than Company or a foreign company) in the nature of income by way of royalty or fees for a technical service, the rate shall be 25% of such an income except this the rate of all categories will remain same. Royalty/ technical fees to non resident/foreign company will be subject to tax (TDS will also applicable) at a higher rate of 25% or rate given in DTA whichever is lower. This amendment shall impact India Inc. which are utilising foreign technology and /or technical know how to run the business etc. for which they have to pay royalty and /or fees for technical services. This amendment will take effect from 1st April 2014 and will accordingly apply in relation to the A.Y and subsequent assessment years. Surcharge and Education Cess Commodities Transaction Tax A new tax called Commodities Transaction Tax (CTT) is proposed to be levied on taxable commodities transactions entered into in a recognised association. It is proposed to define 'taxable commodities transaction' to mean a transaction of sale of commodity derivatives in respect of commodities, other than agricultural commodities, traded in recognised associations. 20

23 This tax is proposed to be levied from the date on which Chapter VII of the Finance Bill, 2013 comes into force by way of notification in the Official Gazette by the Central Government. Further, it is proposed to amend section 36 of the Income-tax Act to provide that an amount equal to the commodities transaction tax paid by the assessee in respect of the taxable commodities transactions entered into in the course of his business during the previous year shall be allowable as deduction, if the income arising from such taxable commodities transactions is included in the income computed under the head Profits and gains of business or profession. This amendment in section 36 of the Income-tax Act will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year and subsequent assessment years. Securities Transaction Tax (STT) It is proposed to amend section 98 to reduce STT rates in the taxable securities transactions as indicated hereunder: - The proposed amendments in the rates of securities transaction tax will be effective from 1st June, 2013 and will accordingly apply to any transaction made on or after that date. Amendments in Deductions and Exemptions Incentive for acquisition and installation of new plant or machinery by manufacturing company 21

24 In order to encourage substantial investment in plant or machinery, it is proposed to insert a new section 32AC in the Income tax Act to provide that where an assessee, being a company, (a) is engaged in the business of manufacture of an article or thing; and (b) invests a sum of more than Rs.100 crore in new assets (plant or machinery) during the period beginning from 1st April, 2013 and ending on 31st March, 2015, then, the assessee shall be allowed (i) for assessment year , a deduction of 15% of aggregate amount of actual cost of new assets acquired and installed during the financial year , if the cost of such assets exceeds Rs.100 crore; (ii) for assessment year , a deduction of 15% of aggregate amount of actual cost of new assets, acquired and installed during the period beginning on 1st April, 2013 and ending on 31st March, 2015, as reduced by the deduction allowed, if any, for assessment year The phrase new asset has been defined as new plant or machinery but does not include (i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person; (ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; (iii) any office appliances including computers or computer software; (iv) any vehicle; (v) ship or aircraft; or (vi) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head Profits and gains of business or profession of any previous year. It is further proposed to provide suitable safeguards so as to restrict the transfer of the plant or machinery for a period of 5 years. However, this restriction shall not apply in a case of amalgamation or demerger but shall continue to apply to the amalgamated company or resulting company, as the case may be. Let us hope that this amendment shall be able to boost up the investment in manufacturing sector in immediate future. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year and subsequent assessment years. Extension of Sunset date under section 80IA for the power sector With a view to provide further time to the undertakings to commence the eligible activity to avail the tax incentive, it is proposed to amend the above provisions so as to extend the terminal date by a further period of one year i.e. up to 31st March,

25 These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year and subsequent assessment years. Deduction in respect of interest on loan sanctioned during financial year for acquiring residential house property section 80EE It is propose to insert a new section 80EE in the Income-tax Act relating to deduction in respect of interest on loan taken for residential house property. Sub-section (1) of the new section 80EE seeks to provide that in computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property. Sub-section (2) of the said section seeks to provide that the deduction under sub-section (1) shall not exceed 1 lakh rupees and shall be allowed in computing the total income of the individual for the assessment year beginning on 1st day of April, 2014 and in a case where the interest payable for the previous year relevant to the said assessment year is less than 1 lakh rupees, the balance amount shall be allowed in the assessment year beginning on 1st day of April, Sub-section (3) of the said section 80EE provides that the deduction shall be subject to the conditions, such as (i) the loan has been sanctioned by the financial institution during the period beginning on 1st day of April, 2013 and ending on 31st day of March, 2014; (ii) the amount of loan sanctioned for acquisition of the residential house property does not exceed 25 lakh rupees; (iii) the value of the residential house property does not exceed 40 lakh rupees; (iv) the assessee does not own any residential house property on the date of sanction of the loan. Sub-section (4) of the said section 80EE seeks to provide that where a deduction under this section is allowed for any interest referred to in subsection (1), deduction shall not be allowed in respect of such interest under any other provisions of the Act for the same or any other assessment year. Subsection (5) of the said section 80EE seeks to define the terms financial institution and housing finance company. This amendment shall help the tax payers who are dreaming for own small house up to Rs. 40 /- lakhs and also provide little boost to the Housing Industry This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year and subsequent assessment years. Raising the limit of percentage of eligible premium for life insurance policies of persons with disability or disease section 10(10D) and 80C 23

26 It is proposed to provide that any sum including the sum allocated by way of bonus received under an insurance policy issued on or after 1st April, 2013 for the insurance on the life of any person with disability or disease shall be exempt under clause (10D) of section 10 if the premium payable for any of the years during the term of the policy does not exceed 15% of the actual capital sum assured. It is also proposed to amend section 80C(3A) so as to provide that the deduction under the said section on account of premium paid in respect of a policy issued on or after 1st April, 2013 for insurance on the life of a person referred to above shall be allowed to the extent the premium paid does not exceed 15% of the actual capital sum assured. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the A.Y and subsequent assessment years. Deduction for contribution to Health Schemes similar to CGHS section 80D It is proposed to amend the provision of Section 80 D(2)(a) so as to allow the benefit of deduction under section 80 D within the said limit, in respect of any payment or contribution made by the assesses to any other health scheme which may be notified by Central Government. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the A.Y and subsequent assessment years. Expanding the scope of deduction and its eligibility under section 80CCG Equity Saving Scheme It is proposed to amend the provision of Section 80CCG (1), (2) and (3) that investment in listed units of an equity oriented fund shall also be eligible for deduction for 3 consecutive A.Y. beginning with the A.Y. relevant to the previous year in which the listed equity shares or listed units of equity oriented funds were first acquired. It is also proposed to enhance the existing limit to 12 Lakhs. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the A.Y and subsequent assessment years. Exemption to income of Investor Protection Fund of depositories section 10(23DA) It is proposed that income, by way of contribution from a depository, of the Investor Protection Fund set up by the depository in accordance with the regulations prescribed by SEBI will not be included while computing the total income subject to same conditions as are applicable in respect of exemption to an Investor Protection Fund set up by recognised stock exchanges. However, where any amount standing to the credit of the fund and not charged to income-tax during any previous year is shared wholly or partly with a depository, the amount so shared shall be deemed to be the income of the 24

27 previous year in which such amount is shared. It is proposed to insert new clause (23DA) of section 10 to provide for exemption in respect of any income of a securitisation trust from the activity of securitisation. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the A.Y and subsequent assessment years. One hundred per cent deduction for donation to National Children's Fund section 80G It is proposed to allow hundred per cent deduction in respect of any sum paid to the National Children's Fund under section 80 G. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to A.Y and subsequent assessment years. Section 80GGB and 80GGC It is proposed to amend section 80 GGB and section 80 GGC by inserting a proviso as to provide that no deduction shall be allowed under these sections in respect of any sum contributed by way of Cash Amendment in provision of special tax rates Lower rate of tax on dividends received from foreign companies section 115BBD It is proposed to amend section 115BBD to extend the applicability of this section in respect of income by way of dividends received from a specified foreign company in F.Y also, subject to the same conditions. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to assessment year Removal of Cascading effect of Dividend Distribution Tax (DDT) It is proposed to amend section 115-O in order to remove the cascading effect in respect of dividends received by a domestic company from a similarly placed foreign subsidiary ( ie the foreign company in which domestic company holds more than fifty percent of equity share capital). It is proposed that where the tax on dividends received from the foreign subsidiary is payable under section 115BBD by the holding domestic company then, any dividend distributed by the holding company in the same year, to the extent of such dividends, shall not be subject to Dividend Distribution Tax under section 115-O of the Income-tax Act. This amendment will take effect from 1st June, Concessional Rate of withholding tax on interest in case of certain rupee denominated long term infrastructure bonds It is proposed to amend the said sub-section (2) so as to provide that where a 25

28 non-resident (not being a company) or a foreign company has deposited any sum of money in foreign currency in a designated account through which such sum, as converted in rupees, is utilised by the non-resident or the foreign company, as the case may be, to subscribe to any long term infrastructure bonds issued by the specified company in India, then, such borrowing for the purposes of section 194LC shall be deemed to have been made by the specified company in foreign currency. This amendment will take effect from 1st June, Taxation of Securitisation Trusts It is proposed to insert a new Chapter XII-EA consisting of new sections 115TA, 115TB and 115TC in the Income-tax Act relating to special provisions relating to tax on distributed income by securitisation trusts. Under Section 115TA, the securitisation trust will be liable to pay additional income-tax on income distributed to its investors on the line of distribution tax levied in the case of mutual funds. The additional income-tax shall be 25% in case of distribution being made to investors who are individual and HUF 30% in other cases. No additional income tax shall be payable if the income distributed by the securitisation trust is received by a person who is exempt from tax under the Act. Under Section 115TB, the securitisation trust will be liable to pay interest at the rate of one percent for every month or part of the month on the amount of additional income-tax not paid within the specified time. Under Section 115TC, the person responsible for payment of income or the securitisation trust will be deemed to be an assessee in default in respect of amount of tax payable by him or it in case the additional income-tax is not paid to the credit of Central Government. This amendment will take effect from 1st June, Additional Income-tax on distributed income by company for buy-back of unlisted shares section 115QA The proposed new section 115QA provides that notwithstanding anything contained in any other provision of the Act, any distributed income to a shareholder by a domestic company on buy-back of shares, the shares being not listed on any recognised stock exchange, shall be chargeable to tax and such company shall be liable to pay additional income-tax at the rate of 20% on the distributed income. The proposed additional income-tax shall be in addition to the income-tax chargeable in respect of the total income of such company whether income-tax is payable by the company on its total income or not. It further provides that the amount of tax shall be remitted within 14 days of the 26

29 date of payment of consideration. It also provides that the tax shall be final payment of tax and no credit shall be claimed either by the company or any other person in respect of the tax paid. It also provides that no deduction under any provision of the Act shall be allowed to company or shareholder in respect of the said income or tax. This amendment will take effect from 1st June, Rationalisation of tax on distributed income by the Mutual Funds section 115R It is proposed to amend Section 115R (2)(ii) to provide that the additional incometax at the rate of 25% shall be leviable on income distributed to an individual or a Hindu undivided family by a fund other than money market mutual fund or a liquid fund. It is further proposed to amend the said sub-section to provide that any income distributed by a mutual fund under an infrastructure debt scheme to a nonresident (other than a company) or a foreign company shall be liable for payment of additional income-tax at the rate of 5% on the income distributed. It is also proposed to define the expression infrastructure debt fund scheme in the proposed amendments. These amendments will take effect from 1st June, Provisions relating to taxation of real estate sector Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land) section 194IA It is proposed to insert a new section 194-IA to provide that any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land) shall deduct an amount equal to 1% of such sum as income-tax at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of cheque or draft or by any other mode, whichever is earlier. It is further proposed to provide that no deduction shall be made where consideration for the transfer of an immovable property is less than 50 lakh rupees. It is also proposed to provide an Explanation defining the expressions agricultural land and immovable property. This amendment will take effect from 1st June, Computation of income under the head Profits and gains of business or profession for transfer of immovable property in certain cases It is proposed to provide by inserting a new section 43CA 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 27

30 assessed or assessable shall be deemed to be the full value of the consideration for the purposes of computing income under the head Profits and gains of business of profession. It is also proposed to provide that where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the stamp duty value may be taken as on the date of the agreement for transfer and not as on the date of registration for such transfer. However, this exception shall apply only in those cases where amount of consideration or a part thereof for the transfer has been received by any mode other than cash on or before the date of the agreement. These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year and subsequent assessment years. Taxability of immovable property received for inadequate consideration section 56(2)(vii) It is proposed to amend the section 56(2)(vii) of so as to provide 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, shall be chargeable to tax in the hands of the individual or HUF as income from other sources. Considering the fact that there may be a time gap between the date of agreement and the date of registration, it is proposed to provide that where the date of the agreement fixing the amount of consideration for the transfer of the immovable property and the date of registration are not the same, the stamp duty value may be taken as on the date of the agreement, instead of that on the date of registration. This exception shall, however, apply only in a case where the amount of consideration, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement fixing the amount of consideration for the transfer of such immovable property. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year and subsequent assessment years. GENERAL ANTI-AVOIDANCE RULE (GAAR) The General Anti Avoidance Rule (GAAR) was introduced in the Income-tax Act by the Finance Act, The provisions of Chapter X-A as well as section 144BA would have come into force with effect from 1st April, 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 28

31 guidelines and a road map for implementation. The Expert Committee's recommendations included suggestions for legislative amendments, formulation of rules and prescribing guidelines for implementation of GAAR. The major recommendations of the Expert Committee have been accepted by the Government, with some modifications. Some of the recommendations accepted by the Government require amendment in the provisions of Chapter X-A and section 144BA. The following amendments have been made in GAAR provisions currently provided in the Act:- (A) The provisions of Chapter X-A and section 144BA will come into force with effect from April 1, 2016 as against the current date of April 1, The provisions shall apply from the assessment year instead of assessment year (B) An arrangement, the main purpose of which is to obtain a tax benefit, would be considered as an impermissible avoidance arrangement. The current provision of section 96 providing that it should be the main purpose or one of the main purposes has been proposed to be amended accordingly. (C) 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. (D) 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 Chapter X-A. (E) 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. (F) The directions issued by the Approving Panel shall be binding on the assessee as well as the income-tax 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. (G) The Central Government may constitute one or more Approving Panels as may be necessary and the term of the Approving Panel shall be ordinarily for 1 year and may be extended from time to time up to a period of 3 years. (H) The two separate definitions in the current provisions of section 102, namely, associated person and connected person will be combined and there will be only one inclusive provision defining a 'connected person'. 29

32 st These amendments will take effect from 1 April, 2016 and will, accordingly, apply in relation to the assessment year and subsequent assessment years. Other relevant amendments 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 fee, charge, etc. or appropriation of amount by the State Governments from its undertakings, it is proposed to amend section 40 of the Income-tax Act to provide 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, shall 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. It is also proposed to define the expression State Government Undertaking for this purpose. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year and subsequent assessment years. Amendment in the definition of Capital Asset It is proposed to amend section 2(14)(iii)(b) so as to provide that the land situated in any area within the distance, measured aerially (shortest aerial distance), (I) not being more than 2 kilometers, from the local limits of any municipality or cantonment board and which has a population of more than 10,000 but not exceeding 1,00,000; or (II) not being more than 6 kilometers, from the local limits of any municipality or cantonment board and which has a population of more than 1 lakh but not exceeding 10 lakh; or (III) not being more than 8 kilometers, from the local limits of any municipality or cantonment board and which has a population of more than 10 lakh, shall form part of capital asset. Similar amendments are also proposed in clause (1A) of section 2 of the Incometax Act, 1961 relating to the definition of agricultural income and in respect of the definition of urban land in the Wealth-tax Act, This amendment shall have wide and far reaching impact on the tax payers with respect to taxability of Income out of said land, Capital gains and Computation of Wealth Tax. st These amendments will take effect from 1 April, 2014 and will, accordingly, apply in relation to assessment year and subsequent assessment years. Keyman Insurance Policy It is proposed to amend the provision of section 10(10D) to provide that a keyman insurance policy which has been assigned to any person during its 30

33 term with or without consideration, shall continue to be treated as keyman insurance policy. As held by various courts amount received after assignment of key man policy was not taxable which now in view of above amendment shall not be exempted u/s 10(10D) and hence taxable in the hands of recipient. st These amendments will take effect from 1 April, 2014 and will, accordingly, apply in relation to assessment year and subsequent assessment years. Deduction for additional wages in certain cases The tax incentive under section 80JJAA was intended for employment of blue collared employees in the manufacturing sector whereas in practice, it is being claimed for other employees in other sectors also. It is, therefore, proposed to amend the provisions of section 80JJAA so as to provide that the deduction shall be available to an Indian Company deriving profits from manufacture of goods in its factory. The deduction shall be of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in such factory, in the previous year, for 3 assessment years including the assessment year relevant to the previous year in which such employment is provided. It is also proposed to provide that the deduction under this section shall not be 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. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to assessment year and subsequent assessment years. Tax Residency Certificate It is proposed to amend sections 90 and 90A in order to provide that submission of a tax residency certificate is a necessary but not a sufficient condition for claiming benefits under the agreements referred to in sections 90 and 90A. This position was earlier mentioned in the memorandum explaining the provisions in Finance Bill, 2012, in the context of insertion of sub-section (4) in sections 90 & 90A. These amendments will take effect retrospectively from 1st April, 2013 and will, accordingly, apply in relation to the assessment year and subsequent assessment years. Application of seized assets under section 132B It is proposed to insert a new Explanation in the Section 132B that the existing liability does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII of the Act. This amendment will take effect from 1st June,

34 Return of Income filed without payment of self- assessment tax to be treated as defective return It is propose to amend the explanation of Section 139 (9) to provide that the return of income shall be regarded as defective unless the tax together with interest, if any, payable in accordance with the provisions of section 140A has been paid on or before the date of furnishing of the return. This amendment will take effect from 1st June, Direction for special audit under sub-section (2A) of section 142 It is proposed to amend the aforesaid sub-section so as to provide that if at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts or specialized nature of business activity of the assessee, and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief Commissioner or the Commissioner, direct the assessee to get his accounts audited by an accountant and to furnish a report of such audit. This amendment will take effect from 1st June, Penalty under section 271FA for non-filing of Annual Information Return It is proposed to amend the section 271FA so as to provide that if a person who is required to furnish an annual information return, as required under sub-section (1) of section 285BA, fails to furnish such return within the time prescribed under sub-section (2) thereof, the income-tax authority prescribed under sub-section (1) of the said section may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which the failure continues. It is further proposed to provide that where such person fails to furnish the return within the period specified in the notice under sub-section (5) of section 285BA, he shall pay, by way of penalty, a sum of five hundred rupees for every day during which the failure continues, beginning from the day immediately following the day on which the time specified in such notice for furnishing the return expires. This amendment will take effect from 1st April, Extension of time for approval in Part A of the Fourth Schedule to the Income-tax Act, 1961 A number of applications are yet to be processed by the Employees' Provident Fund Organization (EPFO) for grant of exemption under section 17 of EPF & MP Act. With a view to provide further time to the EPFO to decide on the pending applications seeking exemption under section 17 of the EPF & MP Act, it is proposed to amend the first proviso, so as to extend the time limit from 31st March, 2013 to 31st March, This amendment will take effect retrospectively from 1st April,

35 Wealth Tax Amendment in the definition of Land It is proposed to amend clause (b) of Explanation 1 to clause (ea) of section 2 so as to provide that land situated in any area within the distance, measured aerially, (I) not being more than 2 kilometres, from the local limits of any municipality or cantonment board referred to in clause (i) and which has a population of more than 10,000 but not exceeding 1,00,000; or (II) not being more than 6 kilometres, from the local limits of any municipality or cantonment board referred to in clause (i) and which has a population of more than 1,00,000 but not exceeding 10,00,000; or (III) not being more than 8 kilometres from the local limits of any municipality or cantonment board referred to in clause (i) and which has a population of more than 10,00,000 shall be classified as urban land. An Explanation has been inserted to clarify the expression population. This amendment will take effect from 1st April, 2014, and will, accordingly, apply in relation to Assessment Year and subsequent assessment years. Enabling provisions for facilitating electronic filing of annexure-less return of Net Wealth Currently, certain documents, reports are required to be furnished along with the return of net wealth under the Section 14 of Wealth-tax Act read with the provisions of Wealth-tax Rules. Sections 139C and 139D of the Income-tax Act contain provisions for facilitating filing of annexure-less return of income in electronic form by certain class of income-tax assessees. In order to facilitate electronic filing of annexure-less return of net wealth, it is proposed to insert new sections 14A and 14B in the Wealth-tax Act on similar lines. These amendments will take effect from 1st June,

36 4. INDIRECT TAXES CENTRAL EXCISE CHANGES IN RATES OF DUTY Relief to readymade garment industry. In case of cotton, zero excise duty at fiber stage also. In case of spun yarn made of manmade fiber, duty of 12 percent at the fiber stage. Handmade carpets and textile floor coverings of coir and jute totally exempted from excise duty. To provide relief to ship building industry, ships and vessels exempted from excise duty. No CVD on imported ships and vessels. Specific excise duty on cigarettes increased by about 18 percent. Similar increase on cigars, cheroots and cigarillos. Excise duty on SUVs increased from 27 to 30 percent. Not applicable for SUVs registered as taxies. Excise duty on marble increased from Rs 30 per square meter to Rs 60 per square meter. Proposed to levy 4 percent excise duty on silver manufactured from smelting zinc or lead. Duty on mobile phones priced at more than Rs. 2,000 raised to 6 percent. AMMENDMENT IN THE MONETORY LIMIT FOR OFFENCE PUNISHABLE WITH IMPRIOSIONMENT Section 9 provides that an offence case involving evasion in which the duty leviable exceeds Rs. 50 lacs shall be punishable with a term of imprisonment extending to seven years with fine. CUSTOMS CHANGES IN RATES OF DUTY Period of concession available for specified part of electric and hybrid vehicles extended up to 31 March Duty on specified machinery for manufacture of leather and leather goods including footwear reduced from 7.5 to 5 percent. Duty on pre-forms precious and semi-precious stones reduced from 10 to 2 percent. Export duty on de-oiled rice bran oil cake withdrawn. 34

37 Duty of 10 percent on export of unprocessed limonite and 5 percent on export on ungraded limonite. Concessions to air craft maintenance, repair and overhaul (MRO) industry. Duty on Set Top Boxes increased from 5 to10 percent. Duty on raw silk increased from 5 to 15 percent. Duties on Steam Coal and Bituminous Coal equalized apart from 2 percent custom duty and 2 percent CVD levied on both kinds coal. Duty free gold limit increased to Rs 50,000 in case of male passenger and Rs. 1,00,000 in case of a female passenger subject to conditions. Nomenclature of customs house agents to customs brokers considering the global practice and internationally accepted nomenclature. Section 104 of the Customs Act, 1962 contains provisions relating to arrest. This section is being amended to make certain offences punishable under section 135 as non-bailable. The offences are: (a) Evasion or attempted evasion of duty exceeding Rs. fifty lakh; (b) Prohibited goods notified under section 11 which are also notified under sub-clause (C) of clause (i) of sub-section (1) of section 135; (c) Import or export of any goods which have not been declared in accordance with the provisions of this Act and the market price of which exceeds Rs. one crore; (d) Fraudulently availing of or attempt to avail of drawback or any exemption from duty provided under this Act, if the amount of drawback or exemption from duty exceeds Rs. fifty lakh. SERVICE TAX ADDITION OF TWO SERVICES IN THE BASKET OF NEGATIVE LIST OF SERVICE TAX Vocational courses offered by institutes affiliated to the State Council of Vocational Training and testing activities in relation to agricultural produce also included in the negative list for service tax. WIDENING THE SCOPE OF NEGATIVE LIST OF SERVICE TAX Goods manufactured as per the Medicinal and Toilet Preparations (Excise Duties) Act,1955 covered for exemption from service tax. WIDENING THE SCOPE OF MEGA EXEMTPION NOTIFICATION Exemption of Service Tax on copyright on cinematography limited to films exhibited in cinema halls. Withdrawal of exemption of services provided by educational institution by way of renting of immovable property. 35

38 PROPOSED AMMENDMENTS IN THE PENALTIES FOR NON COMPLIANCE Penalty u/s 77(1)(a) restricted to the amount up to Rs. 10,000 for failure to take registration or failure to pay service tax. Penalty u/s 78A of the Finance Act, imposed on director, manager, secretary or other officer of a company, which contravenes the provisions of the Act, who was at the time of such contravention in charge of, and was responsible to the company for the conduct of business of such company and was knowingly concerned with such contravention, shall be liable to a penalty which may extend to one lakh rupees. WIDENING THE SCOPE OF LEVY OF SERVICE TAX Proposed to levy Service Tax on all air conditioned restaurant irrespective of serving alcoholic beverages For homes and flats with a carpet area of 2,000 sq.ft. or more or of a value of Rs. 1 Crore or more, which are high-end constructions, where the component of services is greater, rate of abatement reduced from 75% to 70%. Reduction of exemption limit prescribed for charitable organization providing service towards any other object of general public utility from 25 lakhs to 10 lakhs. VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME 2013 A onetime scheme called 'Voluntary Compliance Encouragement Scheme' proposed to be introduced. Defaulter may avail of the scheme on condition that he files truthful declaration of Service Tax dues since 1st October Applicable for SERVICE TAX due from to which remains unpaid on Declaration shall be made for tax dues for which No notice is issued on or before Declaration can be made on or before Minimum 50% of Tax Due should be paid on or before and balance to be paid on or before

39 5. GUJARAT VAT 37

40 38

41 39

42 40

43 FAST TRACK REFERENCE 41

44 42

45 Filling Form in XBRL with ROC: As per the Companies (Filling of documents forms in Extensible Business Reporting Language) Second Amendment Rules, 2012 shall be applicable from 2 December, The following classes of companies have to file their Balance Sheet, Profit and Loss Account and any other documents as required under section 220 of the Companies Act,1956 with the registrar using the Extensible Business Reporting Language. 1. All companies listed with any Stock Exchange(s) in India and their Indian subsidiaries or 2. All companies having paid up capital of Rs. 5 crore and above or 3. All companies having turnover of Rs.100 crore and above or 4. All companies covered under Rule 3. nd As a part of Annual efiling, Companies incorporated under the Companies Act, 1956 are required to efile the following documents with the Registrar of Companies (ROC): 43

46 Who is covered? Every person irrespective of status is liable to pay service tax if providing any taxable service. Small Service Providers are exempted from service tax where value of taxable service does not exceed Rs. 10 Lacs in the previous financial year. Central Government can grant exemptions to certain services wholly or partly. Accordingly certain exemptions are granted by issuing notification. 44

47 Applying For Service Tax Registration in Form ST-1 Within 30 days from the date on which service tax becomes leviable. ST-3 form can be revised and submitted again within 90 days from the date of filling original return 45

48 46

49 47

50 48

51 49

52 50

53 51

54 Notes

55

56