Union Budget 2016 Indirect Taxes The Maharashtra Chamber of Housing Industry Santosh Sonar 9 March 2016 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperativ e ( KPMG International ), a Swis s entity. All rights reserved. 1
At a glance FM reinforces commitment to Legislative agenda, including passing of GST Constitution Amendment Bill No change in merit rates of service tax, excise duty and customs duty Krishi Kalyan Cess levied on value of all taxable services @ 0.5 per cent Importation of goods to be costlier; service tax to be paid by service recipient if goods are imported from foreign shipping vessel Attempt made at easing Cenvat Credit provisions Increased focus on compliances, reduction of litigations and easing of penal provisions for non wilful defaulters 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperativ e ( KPMG International ), a Swis s entity. All rights reserved. 2
Service tax Krishi Kalyan Cess levied on value of all taxable services @ 0.5 per cent from 1 June 2016, with credit available to service provider Effective Service Tax rate increased from 14.5 per cent to 15 per cent Exemption extended for affordable housing sector (1 March 2016) Services provided for construction, erection etc. of a civil structure or any other original works pertaining to : o the In-situ Rehabilitation of existing slum dwellers using land as a resource through private participation component of Housing for All (HFA) (Urban) Mission/ Pradhan Mantri Awas Yojana (PMAY), except in respect of such dwelling units of the projects which are not constructed for existing slum dwellers o Beneficiary-led individual house construction/enhancement component of Housing for All (Urban Mission) PMAY o Low cost houses upto carpet area of 60 square meters per house for approved project 1 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperativ e ( KPMG International ), a Swis s entity. All rights reserved. 3
Service tax Exemption withdrawn Services by way of construction, erection, commissioning, or installation of original works pertaining to monorail or metro in respect of contracts entered into on or after 1 March 2016 Service tax is payable on inbound ocean freight (w.e.f 1 June 2016) Services by a non-air conditioned contract carriage (w.e.f. 1 June 2016) Effective from the date of enactment of the Finance Bill Retrospective exemption provided in respect of construction, erection, maintenance or alteration of canal, dam, or other irrigation works Provided to government and governmental authority Exemption restored from 1 July 2012 to 29 January 2014 Refund of service tax paid during the above period shall be allowed Application to be filed within 6 months from the date on which the bill receives assent of the President 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperativ e ( KPMG International ), a Swis s entity. All rights reserved. 4
Service tax Effective from 1 March 2016 Restoration of exemption in respect of specified services provided to government or governmental authority for services provided under a contract entered into before 1 March 2015 for construction, erection of civil structures including for educational, clinical or cultural use (i.e. for use other than for commerce or industry) etc. construction, erection, commissioning, etc. of a residential complex meant for self-use or use of their employees if appropriate stamp duty has been paid prior to that date Exemption will now be available till 31 March 2020. Restoration of exemption till 30 March 2020 and in respect of taxable services provided during 1 April 2015 to 29 February 2016: for construction, erection, commissioning or installation of original works pertaining to an airport or port under a contract entered into before 1 March 2015 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperativ e ( KPMG International ), a Swis s entity. All rights reserved. 5
Service tax Abatement in respect of services provided by construction of residential complex, building, civil structure, or a part thereof, is proposed to be rationalised at 70% 75% for low-end residential units depending on area and value of such unit [carpet area < 2000 sq ft and value < INR 1 crore] 70% for other residential units Services provided by Government subject to service tax under reverse charge (w.e.f. 1 April 2016) Assignment by Government of right to use spectrum and subsequent transfer thereof is now included in the list of declared services Services provided by Senior Advocate to advocate or firm of advocate liable to service tax. Such senior advocates to collect and pay service tax (w.e.f. 1 April 2016) 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperativ e ( KPMG International ), a Swis s entity. All rights reserved. 6
Service tax Point of Taxation Rules, 2011 clarified for new levy of service tax and/or cess. The following cases shall be excluded from new levy: Transactions where invoice is issued, and consideration is received prior to the date of new levy Consideration for services is received prior to the date of levy and the invoice is issued within 14 days from the date of new levy Interest on delayed payment reduced to 15 per cent, however applicable @ 24 per cent on service tax collected but not paid Limitation period extended from 18 months to 30 months Monetary limit for powers to arrest increased from INR 50 lakh to INR 2 crore Indirect tax dispute resolution scheme introduced cases to be dropped pending at appeal level if taxes, interest and 25% penalty paid 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperativ e ( KPMG International ), a Swis s entity. All rights reserved. 7
Cenvat credit No credit shall be available on capital goods which are used for the manufacture of exempted goods or provision of exempted services for two years Definition of exempted service for reversal of credit expanded to include An activity which is not a service under Section 65B(44) Can the rule expand the scope of definition of service under the Act? CENVAT credit reversal under Rule 6(3) applicable only on common input services/inputs and not on entire credit FIFO basis introduced last year for utilisation of credit is done away with Annual return introduced for manufacturer and service provider, to be filed by 30 November 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperativ e ( KPMG International ), a Swis s entity. All rights reserved. 8
Customs Increase in Basic Customs duty on capital goods [100+ tariff lines] from 7.5 per cent to 10 per cent To boost Make-in-India, Customs duty rate ratinoalised on various products Increase in Basic Customs Duty (on imports) for following goods: Product Description Pre-Budget Post Budget Specified machinery required for construction of roads Nil 12.5% Plans, drawings and designs Nil 10% Mechanism for payment of customs duty on a deferred basis introduced Period of limitation enhanced from 1 year to 2 years Interest rate reduced from 18 per cent to 15 per cent 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperativ e ( KPMG International ), a Swis s entity. All rights reserved. 9
Central excise Standard rate of Central Excise duty remains unchanged Excise duty rates rationalized on certain inputs to improve competitiveness of domestic industry in various sectors Information technology hardware, capital goods Excise duty levied on manufacture of certain articles Articles Without Credit With Credit Articles of jewellery 1 per cent 12.5 per cent Branded readymade garments with retail price of more than INR 1000 Routers, broadband modems, CCTV and IP camera, set top boxes 2 per cent 12.5 per cent 4 per cent 12.5 per cent Exemption from excise duty extended to Ready mix concrete manufactured at site for construction purpose 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperativ e ( KPMG International ), a Swis s entity. All rights reserved. 10
Central excise Clean Energy Cess renamed as Clean Environment Cess, increased from INR 200 per tonne to INR 400 per tonne Infrastructure cess ranging from 1 per cent to 4 per cent is levied on motor vehicles falling under HSN 8703 Limitation period (cases not involving frauds, suppression of facts etc.) increased to two years Interest on delayed payment reduced from 18 per cent to 15 per cent 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperativ e ( KPMG International ), a Swis s entity. All rights reserved. 11
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