58 Sbgco Budget

Union Budget 2011
It'sclearlyabudget.It'sgotalotof numbers
(c)SBGabhawalla&Co (c) S B Gabhawalla & Co 1st March2011
ThePerennialConundrum The Perennial Conundrum

Inflation Human Development
Growth
SocialEquity
1/3/2011
Corruption
2
Budget2011|SBGabhawalla&Co
TheBudgetImperatives&the Govt. Response

Imperative Control Inflation EradicateCorruption StimulateGrowth CreateBalanced Growth DevelopHumanCapital Response Removalof140exemptionsin CentralExcise WidepowersunderServiceTax Adverse IncomeTaxImplicationsfor SEZs ServiceTaxonEducation,notaxon filmactors Avoidairconditioningsinceitisa luxury
1/3/2011
ThenumbersintheBudget The numbers in the Budget

Proposals relating to Service Tax estimated to ProposalsrelatingtoServiceTaxestimatedto resultinnetrevenuegainofRs.4,000crore. Noincreaseintaxrate.Only2newservices introduced. i d d Arewemissingsomething? Thedevilisinthedetails. The devil is in the details
1/3/2011 Budget2011|SBGabhawalla&Co 4
Sowhatarethedetails So what are the details

With a plan to introduce GST WithaplantointroduceGST,
140CentralExciseexemptionswithdrawn Service Tax moved to Accrual Concept ServiceTaxmovedtoAccrualConcept
ArewereallyclosetoGST? Dowesendtherightsignals?
Let scompare Lets compare

PrinciplesofGST UniformityofTaxation Unfettered InputCredit HowViolated Software LiableforCentralExcise,ServiceTax,VAT, Customs,Octroi ??? NoCreditforEmployeeCosts NoCreditforConstructionCosts Sectoral CreditRestrictions PartialCreditLossforInvestments CreditLossforTrading Credit Loss for Trading CreditLoss forConcessionalExciseRate Excise has0 1 5 10 ( (overandaboveadhocamounts) ) ServiceTaxhas0 0.10 0.60 1.20 2.50 3.30 4.005.00 6.00 7.50 10(overandaboveadhoc amounts)
SingularRate
1/3/2011
BudgetataGlance Budget at a Glance

ServiceTax Service Tax CentralExciseDuty CustomsDuty C IncomeTax
1/3/2011
PaymentofTax Payment of Tax

ServiceTaxtobepaidonthebasisofpointof Se ce a to be pa d o t e bas s o po t o provisionofserviceinsteadofreceiptofservice PointofTaxationRulesintroducedtodefine provisionofservice
Ingeneral,thepointistheprovisionofserviceor receiptofmoneyorraisingofinvoicewhicheveris i t f ii fi i hi h i earlier
Suo Motu Adjustment Limit increased from Rs. 1 AdjustmentLimitincreasedfromRs.1 lakhs toRs.2lakhs
1/3/2011
PaymentofTax:Issues Payment of Tax: Issues

What happens in cases where the invoices are Whathappensincaseswheretheinvoicesare subjecttocertificationandapproval? What happens if lesser amount is realised? Whathappensiflesseramountisrealised? Whathappensiftheamountisnotrealised? Whathappensifserviceisnotprovided subsequently? WhencanCENVATbeclaimedbytheservice recipient? p
PaymentofTax:TransitoryAspects Payment of Tax: Transitory Aspects

When will the amended provisions come into Whenwilltheamendedprovisionscomeinto effect? What would be the status of invoices raised Whatwouldbethestatusofinvoicesraised butnotrealised asonthecutoffdate? H Howwilltheexemptionforsmallservice ill h i f ll i providersworkinthiscase? Howtodealwithspecialcasesindefining pointoftaxation?
PointofTaxationRules: Isitapointoracircleofinfinitepossibilities? i i i l f i fi i ibili i ?

Situation General ImportofServices Continuous Service Associated Enterprises IntellectualProperties Point ofTaxation Dateof ProvisionofService,Invoiceor Receiptwhicheverisearlier DateofInvoice orRemittancewhichever isearlier DateofMilestone, InvoiceorReceipt whicheverisearlier Dateof EntryinAccounts,Invoiceor Receiptwhicheverisearlier Eachtimetheamountisdetermined basedonusagebytheservicerecipient
1/3/2011
11
What sbrewinginthePOT? Whats brewing in the POT ?

SpecialSituation IntermediaryChangeinTaxRate Point ofTaxation Endless Possibilities,someaddressed somenot.
Introduction ofNewService: ServicesProvidedbeforetheeffective date NotTaxable,subject toRule4A Compliance p
PaymentReceived beforetheeffectivedate NotTaxable,subject toRule4A Compliance Invoice Raisedbeforetheeffectivedate Notspecifically addressed,butseems p y , tobetaxable
1/3/2011
12
Interest
Provision Interestondelayedpaymentof servicetax Interestondelayedpaymentof amountcollectedin lieuofservice tax Amendment InterestRate increasedfrom13%per annumto18%perannum InterestRate increasedfrom13%per annumto18%perannum
Interestincaseofsmallassessees LowerInterestRateof15%per havingvalueoftaxableservices<60 annum lakhs in preceding financial year inprecedingfinancialyear
1/3/2011
13
SCN:CurrentProvisions: RecipeforSleeplessNights f l l h
Substantial Ambiguity in Taxation SubstantialAmbiguityinTaxation InvestigationculminatinginSCN
Tax on Gross Receipts for last 5 years TaxonGrossReceiptsforlast5years Interest Penalties
HighPitchedAssessmentsattimesexceeding thegrossreceipts the gross receipts IntroductionofconceptofCaptured a sact o s Transactions

Penaltiesfordelayedpaymentoftax Penalties for delayed payment of tax

Penalties reduced to half Penaltiesreducedtohalf
Stillhigh@100perdayor1%permonth restrictedto50%ofthetaxdue restricted to 50% of the tax due
Whetherpenaltiesundersection76canbe waivedifpenaltiesimposedundersection78? waived if penalties imposed under section 78?
1/3/2011
15
PenaltiesforSuppression Penalties for Suppression

Situation Fraud, Collusion,Wilful Misstatement, Suppression,Intentional Contravention C t ti CapturedTransactions Amt.Paidwithin30/90 A P id i hi 30/90 daysoftheOrderin Original Amt.PaidbeforeSCNfor Amt Paid before SCN for Captured Transactions QuantumofPenalty 100%ofthe ServiceTax Amount Whethercanbewaived? NotSubject toReasonable Cause
50%oftheServiceTax Amount 25%of h S i T 25% f theServiceTax Amount 1%permonthofthe 1% per month of the ServiceTaxAmount restrictedtomax.of25% oftheServiceTaxAmount
Subjectto Reasonable Cause Penalty l P l voluntarilypaid il id
Notsubjecttoreasonable Not subject to reasonable cause
1/3/2011
16
OtherPenalties Other Penalties

Provision LateFilingofService TaxReturns Failure to take Registration CurrentPenalty ProposedPenalty Upto Rs.20,000/ Rs. 10,000/ or Rs.200 per day whichever is higher Upto Rs. 10,000/ Rs. 10,000/ or 10,000/ Rs.200 per day whichever is higher Upto Rs. 10,000/ Rs. 10,000/ Upto Rs.2,000/ Rs. 5000/ or Rs.200 per day whichever is higher Failure to maintain books of accounts or Upto Rs. 5000/ documents Failure to furnish information/produce Rs. 5000/ or Rs.200 5000/ documents/respond to summons for per day whichever is personal attendance higher Payment by normal banking channel Upto Rs. 5000/ though li bl t pay b electronic mode th h liable to by l t i d Issue of Incorrect/ Incomplete Invoice or Rs. 5000/ Failure to Account for the Invoice in Books of Accounts Any other noncompliance/contravention Rs. 5000/
1/3/2011 Budget2011|SBGabhawalla&Co
Rs. 10,000/
17
Prosecution Prosecution Scope

Provides any taxable service without a valid Providesanytaxableservicewithoutavalid invoice
Receives any imported service without a valid invoice Receivesanyimportedservicewithoutavalidinvoice
Availsandutilises creditoftaxeswithoutactual receiptofservice/goods receipt of service/ goods Maintainsfalsebooksofaccountorfailstosupply anyinformationorsuppliesfalseinformation any information or supplies false information Collectsanyamountasservicetaxbutfailstopay theamountwithinsixmonths the amount within six months
Prosecution Prosecution Term

Situation Minimum Term Maximum Term 3years
No Lame Excuses like NoLameExcuseslike

FirstTimeOffence Penaltyorother damages NotPrincipalOffender AgeoftheAccused f h d
6months Amount exceeding50 exceeding 50 lakhs Others
1year 3years
Subsequent 6months Offence
1/3/2011
19
CENVATCredit:Storysofar CENVAT Credit : Story so far

Creditgrantedtoavoidcascadingeffectof taxation Problemsincompositecases However the scars of post removal&nexus However,thescarsof postremoval & nexus aretoobig At the same time the urge to monetize is equally Atthesametime,theurgetomonetizeisequally alluring Variousissuessoughttobeaddressedbythis g y Budget
1/3/2011
20
Re Emergenceof Nexus ReEmergence of Nexus

RemovalofPhraseActivitiesRelatingto Business from the definition of input services Businessfromthedefinitionofinputservices Nexuspresumedtobeabsentincaseof
Employee Related Costs EmployeeRelatedCosts MotorVehicleRelatedCosts CivilWork
SystemstocaptureCENVATCreditwillneeda thoroughreview
1/3/2011
21
CENVATEligibilityCriteria
NatureofInput N fI Goods usedinthefactorybymanufacturer Goodsclearedwithfinished goodsasaccessories Goodsusedforprovidingfreewarrantyforexcisable goods Goodsusedfor generationofelectricity g y Goodsusedforprovidingoutputservice LDO/HSD/Motor Spirit Goodsusedfor constructionofbuildingorcivil Goods used for construction of building or civil structureorfoundationforcapitalgoods CapitalGoods Capital Goods MotorVehicles Goodsforconsumptionofemployee Goods for consumption of employee Goodswithnorelationshiptomanufacture
1/3/2011 Budget2011|SBGabhawalla&Co
Eligibility Eli ibili Yes Yes Yes Yes Yes No No,except forport,airport, No except for port airport construction,works contractserviceproviders No,exceptwhenused as No, except when used as partsorcomponents No No No
22
CENVATEligibilityCriteria, AvailableCredits
NatureofInputService Nature of Input Service Services usedforprovidingoutputservice Services usedinrelationtomanufactureoffinalgoods Modernisation,RepairsorRenovation ofPremises M d i i R i R i fP i Advertisement,SalesPromotion, MarketResearch,Storage, ProcurementofInputs,Accounting,Auditing,Financing, RecruitmentandQualityControl,CoachingandTraining, Recruitment and Quality Control Coaching and Training ComputerNetworking,CreditRating,ShareRegistry,Security, BusinessExhibition,LegalServices Eligibility Yes Yes Yes Y Yes
1/3/2011
23
CENVATEligibilityCriteria NegativeList
NatureofInputService Architect,Port, Airport,Construction&WorksContract Servicesusedforconstruction Insurance, RentaCab,RepairsorSupplyofTangibleGoods Servicesconnectedwithmotorvehicles Outdoor Catering,BeautyTreatment,HealthServices, CosmeticSurgery,Club,HealthClub.LifeInsurance,Health Insurance,TravelBenefitstoemployees Insurance Travel Benefits to employees Eligibility No,unlessusedfor providingspecified outputservices No,unlessthecredit isavailableonthe motorvehicle motor vehicle itself No
1/3/2011
24
CENVAT&CivilConstruction
Natureof T N f Transaction i Goodsusedfor constructionofbuildingor civilstructureorfoundationforcapital civil structure or foundation for capital goods(InGeneral) Goodsusedfor constructionofbuildingor civilstructureorfoundationforcapital civil structure or foundation for capital goods (forport,airport,construction,works contractserviceproviders) Architect,Port, Airport,Construction& WorksContractServicesusedfor construction(InGeneral) Architect,Port, Airport,Construction& WorksContractServicesusedfor k df construction(ForContractors) Eligibility Eli ibili No Further F h Restrictions, ifany N.A.
Yes,ifservicetax ServiceTaxnot paidon full paid on full eligibleascredit to eligible as credit to valueincluding themanufacturer materials No N.A.
Yes
Credit restrictedto 40%ifEDCredit f d claimedby subcontractor
1/3/2011
25
CENVAT:RestrictionsonAvailment CENVAT : Restrictions on Availment

No credit eligible for goods cleared under Nocrediteligibleforgoodsclearedunder concessionalrateof1% Existing CENVAT cannot be utilised for ExistingCENVATcannotbeutilised for paymentofconcessionalrateof1% C di f ADC CreditofADCrestrictedto85%incaseof i d 85% i f ships,boats&otherfloatingstructures ReversalofCreditoninputservicesifthe paymentisrefunded.
CENVAT:CompositeOutput
Natureof Transaction ManufactureofExcisableGoods ManufactureofExemptedGoods Manufacture of Goods cleared at 1% Rate ofGoodsclearedat1%Rate ClearancestoSEZUnits/Developers Exportof GoodsandServices ProvisionofTaxableServices P ii f T bl S i ProvisionofExemptedServices Services onwhichAbatementisclaimedunder Notification1/2006ST Notification 1/2006ST Services onwhichCompositionScheme/Special RatesAvailed TradinginGoods Services toSEZUnits/Developers TOTALSAY
1/3/2011
Taxable Yes No No Yes Yes Yes Y No No
Exempted No Yes Yes No No No N Yes Yes,totheextentof abatedvalue abated value
Yes,value No correspondingtotax amount No Yes 1,00,00,000~40% Yes,totheextent of grossprofits No 1,50,00,000 ~60%

27
CENVAT:CompositeOutput
Total T l SpecificIdentificationandclaimfortaxable goods/services(OptionI) 2,00,000 Say1,10,000+ 90,000 90 000 CreditAvailable C di A il bl Claim1,10,000
Noidentification compositeschemefor 2,00,000 manufacturers/serviceprovidersbasedon output(adhocpayment) OPTIONII output (ad hoc payment) OPTION II Noidentification compositeschemefor 2,00,000 manufacturers/serviceprovidersbasedon input&inputservices(proportionate payment) OPTIONIII Noidentification compositeschemefor manufacturers/serviceprovidersbasedon inputservices(proportionatepayment) ( ) OPTIONIV 2,00,000 Say60,000+ 20,000+ 1,20,000
Claim2,00,000 Pay7,50,000 Claim2,00,000 Pay 1,20,000
Claim60,000+ 1,20,000Pay 72,000
1/3/2011
28
CENVAT:CommonPoints CENVAT: Common Points

Provision granting FULL Credit for specified services is g g f p f deleted FULL Credit available for capital goods if used for common purposes
1/3/2011
29
CENVAT:SpecialCases CENVAT: Special Cases

NatureofService Banking &FinancialServicesprovidedby bankingcompany,financialinstitutionor g p y, NBFC Servicesinthe natureoflifeinsurance andULIPRelatedServices Special Payments Pay50%oftheamountclaimedascredit oninputandinputservices p p Pay20%oftheamountclaimedascredit oninputandinputservices
1/3/2011
30
Export/ImportofServices:AGameof BasketBall? k ll?

CategoryofService Builder RelatedServices RailTravelAgent HealthRelatedServices Health Related Services Credit RatingAgency MarketResearchAgency TechnicalTestingand Analysis AirTransportServices GoodsTransportAgency Services OpinionPollServices RailTransport Services
1/3/2011
EarlierBasket Recipient Based RecipientBased RecipientBased Recipient Based Performance Based Performance Based Performance Based Performance Based Performance Based Performance Based Performance Based
New Basket PropertyBased PerformanceBased PerformanceBased Performance Based RecipientBased RecipientBased RecipientBased RecipientBased RecipientBased RecipientBased RecipientBased
31
Transport&Logistics:AnkleSprain?
CategoryofService Transport ofGoodsbyRoadfortrans shipment TransportofGoodsbyRailfortrans shipment TransportofGoodsbyAirfortrans T t f G d b Ai f t shipment Transport ofGoodsbyWaterfortrans shipment Other Services(eg.PortServices)fortrans shipment TransportofGoodsbyAirwhereairfreight Transport of Goods by Air where airfreight includedincustomsvaluation Transport ofGoodsbyWater(General) Service TaxImplication ExemptvideNotification8/2011 ExemptvideNotification8/2011 ExemptvideNotification8/2011 E t id N tifi ti 8/2011 Notneededin viewofthedefinitionset Taxable ExemptvideNotification9/2011 Exempt vide Notification 9/2011 Abatement providedtotheextentof 25%ofthevalue.EffectiveServiceTax 25% of the value. Effective Service Tax Rate@7.725%
32
1/3/2011
SEZUnits/Developers SEZ Units/Developers

Clarity on eligibility of ST EC & SHEC ClarityoneligibilityofST,EC&SHEC Presentschemetocontinuebutexemptionfor servicesconsumedwithinSEZwillbeoptional services consumed within SEZ will be optional ConsumptionlinkedwithPlaceofSupplyRules
Recipient doesnotownorcarryonanybusiness otherthanoperationsinSEZ
ApprovedlistofAuthorised Operations DeclarationinFormA1

SEZUnits/Developers ServiceProvider Perspective

NatureofService Whether exempt/taxable Optionally Exempt Documentation Required for Exemption E i ListofAuthorised Operations ListofAuthorised Operations Whether corresponding CENVATAvailable CENVAT A il bl Yes
PropertyRelated ServicesonSEZ located property Performance RelatedServices whollyperformed wholly performed withinthe RecipientBased Servicesprovided toSEZ nothaving anyotherbusiness OtherCases h
1/3/2011
OptionallyExempt
Yes
OptionallyExempt
ListofAuthorised Yes Operations FormA1bearing thenameofservice provider N.A. N.A.

34
Taxable bl
SEZUnits/Developers Service RecipientPerspective

NatureofService Wholly consumed Partlyconsumed Eligibilityfor Refund Full Proportionate
1/3/2011
35
IntroductionofNewServices Introduction of New Services

2 new services introduced 2newservicesintroduced
ACRestaurantscumbars Hotel Accommodation HotelAccommodation
Effectivefromadatetobenotifiedafter enactment t t ImpactofPointofTaxationRules
1/3/2011
36
ACRestaurants cum bars AC Restaurantscumbars

RequirementsforlevyofServiceTax q y
AirConditioned LicensetoServeLiquor
Followingnotcovered
MereSaleofFood(PickuporHomeDelivery) G d S ld t MRP GoodsSoldatMRP
Abatement@70%oftheGrossBillAmountto beprovidedatthetimeofenactment be provided at the time of enactment EffectiveServiceTaxRate@3.09%ofthegross value

ServiceTaxonACRestaurantscum bars(Issues) ( )
Is there an element of service? Isthereanelementofservice? DoesitoverlapwiththeStateJurisdictionto imposeatax? impose a tax? Whatiftherestaurantcumbar
Is partially airconditioned? Ispartiallyairconditioned? Isairconditioned forpartoftheyear? Obtains a license to serve liquor in the middle of Obtainsalicensetoserveliquorinthemiddleof theyear
IsVATpayableontheservicetaxcomponent? p y p
HotelAccommodation Hotel Accommodation

Whatiscovered at s co e ed
AccommodationprovidedbyHotel,Inn,GuestHouse, CluborCampsite
Whatisnotcovered
LongTermStayabove3months DeclaredTariffofLessthanRs.1000perday l d ff f h d
Abatement@50%oftheGrossBillAmounttobe providedatthetimeofenactment provided at the time of enactment EffectiveServiceTaxRate@5.15%ofthegross value

ServiceTaxonHotelAccommodation: Issues
Isthereanelementofservice? DoesitoverlapwiththeStateJurisdictionto imposeatax? WhatifthedeclaredtariffismorethanRs.1000/ / buttheactualamountchargedislessthanRs. 1000/ 1000/ Isluxurytaxpayableontheservicetax component? Isservicetaxpayableontheluxurytax component?
AlterationinScopeofExisting Services
ScopeofServicesexpandedforthefollowing categories i
ClinicalEstablishmentServices CommercialTrainingorCoachingServices LegalConsultancyServices AuthorizedServiceStation LifeInsuranceServices ClubsorAssociationServices BusinessSupportServices
Effectivefromadatetobenotifiedafterenactment ImpactofPointofTaxationRules ImpactonPendingLitigation

ClinicalEstablishmentServices Clinical Establishment Services

Whatisclinicalestablishment
Hospitalsatisfyingthefollowingconditions:
Airconditioninginwholeorpartofthepremises More than 25 beds at any time during the financial year Morethan25bedsatanytimeduringthefinancialyear
DiagnosticClinics Doctors(notemployees)workinginsuchclinicalestablishment
Liability not linked with registration under the Clinical LiabilitynotlinkedwithregistrationundertheClinical Establishment(RegistrationandRegulation)Act,2010 ExcludesGovernmentandmunicipalhospitals
Abatement@50%oftheGrossBillAmounttobeprovidedat b f h ll b d d thetimeofenactment EffectiveServiceTaxRate@5.15%ofthegrossvalue
CommercialTrainingorCoachingServices Commercial Training or Coaching Services

Training provided by recognised bodies also Trainingprovidedbyrecognisedbodiesalso covered Courses which are recognised will be Courseswhicharerecognisedwillbe exemptedthroughaseparatenotification Di i i b Distinctionbetweentrainingandeducation i i d d i whetherrelevantordiluted
1/3/2011
43
LegalConsultancyServices Legal Consultancy Services

ComplexMatrixofPossibilities:
Service Provider BusinessEntity Any Person Arbitral Tribunal Otherthan BusinessEntity Business Entity Otherthan BusinessEntity Any Person Service Recipient AnyPerson BusinessEntity Business Entity Business Entity Otherthan BusinessEntity Business Entity AnyPerson NatureofService Representational Services Arbitration Any covered Yes Yes No Advise, ConsultancyorAssistance Yes
Advise, ConsultancyorAssistance No
Otherthan BusinessEntity
Representational Services
No
Exemption provided to Chartered Accountants likely to be withdrawn ExemptionprovidedtoCharteredAccountantslikelytobewithdrawn

AuthorizedServiceStation Authorized Service Station

Scopeexpandedtocoverrepair,reconditioning, p p p g restorationordecorationoranyothersimilar services,ofanymotorvehicleotherthanthree wheelerscooterautorickshawandmotorvehicle meantforgoodscarriage Impacton Oth th A th i d S i St ti OtherthanAuthorised ServiceStations Authorised ServiceStations Are repairs of goods carriages still exempt from Arerepairsofgoodscarriagesstillexemptfrom paymentofservicetax?
1/3/2011
45
LifeInsuranceServices
ComponentsofLifeInsurancePremium Co po e ts o e su a ce e u
Component RiskCover Investment Component Managementof Investment TaxPosition Taxedsince10.09.2004 NotTaxable Already taxedinULIP Mode Proposedtobetaxedfor d b df othercasesaswell OptionalScheme 1%oftheTotalPremium Not Taxable Will benotifiedas1.5%of theTotalPremium
Impact under the CENVAT Credit Rules ImpactundertheCENVATCreditRules

Paymentofanamountequivalentto20%oftheCredit availedoninputsandinputservices
WorksContractServices Works Contract Services

SubjectMatter CENVAT Natureof Amendment Reference Incaseofinputservices inthenature 1/2011ST ofconstructionorECIserviceswhere thetaxisdischargedonfullvalue,the creditrestrictedto40%oftheservice dit t i t d t 40% f th i taxpaid ConstructionServicesprovidedunder works contractmodeareexempted workscontract mode are exempted ConstructionServicesprovidedunder workscontractmodewithinan airportareexempted p p SpecifiedConstructionservices providedunder workscontract modewithinportareexempted 6/2011ST 10/2011ST
JNNURM/RAY Airport
Port
11/2011ST
1/3/2011
47
Banking&FinancialServices Banking & Financial Services

Change in Valuation of Taxable Services for ChangeinValuationofTaxableServicesfor moneychangingactivities
DifferencebetweentheRBIReferenceRateand thetransactionrate h
CompositionRateformoneychangingreduced to0.1%ofthegrossamount to 0 1% of the gross amount
ImpactinCENVATCreditRules liabilityto pay50%ofthecreditavailed(onlyfor pay 50% of the credit availed (only for bankingcompaniesandfinancial institutions)
AirTravelServices a e Se es
Natureof Transport International Transport International Transport Domestic Domestic Transport Domestic Transport International I t ti l Transport International p Transport
1/3/2011
Originating FromIndia FromIndia FromIndia From India FromIndia
Class Economy Others Economy Others
Amt.Payable upto 01.04.2011 500perjourney 10.30%ofgross value 100perjourney 100 per journey 100perjourney NotApplicable N t A li bl NotApplicable
AmtPayable After01.04.2011 750perjourney 10.30%ofgross value 150perjourney 150 per journey 10.30%ofgross value NotLiable N t Li bl NotLiable
OutsideIndia Economy O t id I di E OutsideIndia Others
49
OtherServiceSpecificAmendments Other Service Specific Amendments

CategoryofService ClubsorAssociationServices NatureofAmendment Servicesrendered tononmembersisalsomade liableforpaymentofservicetax Associationsrepresentingindustryorcommerce exemptupto 31 03 2008 eligibleforrefundaswell t t 31.03.2008 li ibl f f d ll Administrative Assistancealsomadeliablefor paymentofservicetax ValidationofRetrospectiveExemptionforpointto V lid i fR i E i f i pointtransportation eligibleforrefundaswell Valueshallbethegrossamountpaidbythe subscriberandnot thedistributor subscriber and not the distributor ExhibitionsoutsideIndiaexempted frompaymentof servicetax Exemption to services rendered under Rashtriya toservicesrenderedunderRashtriya Swasthya Bima Yojana
Budget2011|SBGabhawalla&Co 50
BusinessSupportServices TourOperator T O Telecommunication Services Business ExhibitionServices GeneralInsuranceServices General Insurance Services
1/3/2011
CentralExciseDuty Central Excise Duty

ConcessionalRateincreasedto5% Co cess o a ate c eased to 5% ExemptItems 1%rateintroducedwithno p j CENVAT,or5%withoptionalCENVAT.Somemajor impactareasinclude
FoodPreparations&Beverages RMC Stationeryitemslikeenvelopes,letterheads,greeting cards,calenders,etc. cards calenders etc BrandedJewellery Ships p
CentralExciseDuty(Contd) Central Excise Duty (Contd)

BrandedReadymadeGarmentsliableforexciseduty Exemptiontoinformationtechnologysoftwareforthe valuerepresentingtheconsiderationfortherighttouse thesoftware Exemptionprovidedforgoodsrequiredforsettingupof MegaandUltraMegaPowerProjectsandexpansionof megapowerprojects AdditionalDutiesofExcise(GoodsofSpecial Importance)Act,1957. Sugar and textiles are being omitted from the Schedule of SugarandtextilesarebeingomittedfromtheScheduleof theAdditionalDutiesofExcise(GoodsofSpecial Importance)Act,1957.VATapplicableonItemsofSugar& Textileseffectivefrom01.04.2011
OtherDuties Other Duties

Customs Duty CustomsDuty
NoChangeinPeakRateofDuty Self Assessment Procedure Introduced SelfAssessmentProcedureIntroduced
CentralSalesTax
NoChangeintheRateofTax Changeinthemaximumchargeablerateincaseof declaredgoods d l d d
1/3/2011
53
Income Tax Rate of Tax

No change in Income Tax rate Basic exemption limit
Rs.1,80,000 in general Rs. 1,90,000 for women Rs. 2,50,000 for senior citizens (Above 60 years) Rs. 5,00,000 for very senior citizens (Above 80 years)
No change in tax rate for firms & companies companies. Reduction in surcharge
From 7.5% to 5% in case of Domestic Companies F From 2 5% t 2% i case of F i C 2.5% to in f Foreign Companies i
1/3/2011
54
Rate of Tax
Mi i Minimum Alt Alternate T t Tax
On companies raised to 18.50% from 18% also proposed on LLP at the rate of 18%.
Interest from investment made in infrastructure debt fund eligible for concessional tax rate @ 5% Di id d received by Indian Company from it f i Dividend i d b I di C f its foreign subsidiary eligible for concessional tax rate @ 15% SEZ liable to MAT and DDT S ab e M a d
1/3/2011
55
Business & Profession

W i ht d Average Deduction of 200% on any Weighted A D d ti f contribution made to National Laboratory or University or IIT or specified person Additions of 2 new business under Sec 35AD In the nature of developing and building housing project Production of fertilizers
1/3/2011
56
Transfer Pricing g
Variation between ALP and Actual transaction price allowable at the rate notified as against 5% earlier. ll bl t th t tifi d i t li Due Date of filing Report under 3CEB extended to 30th November Powers of TPO enhanced. Sec 94A Notified Jurisdictional area
Transaction within notified area deemed to be with associate. Authorization to seek information from financial institution. Onus on the assessee to satisfactorily explain the source of money money. TDS to be deducted at a higher rate: Rate in force A per Income Tax Act As I T A 30%
Budget2011|SBGabhawalla&Co 57
1/3/2011
Deductions
Contribution made by Central Govt or the employer to y p y pension fund (NPS) shall not be included in 80CCE limit of Rs. 1,00,000. 80CCF D d ti for Contribution t i f t t Deduction f C t ib ti to infrastructure bonds (additional amount Rs. 20000) increased by a year. Profit& Gain of industrial undertaking 80IA extended g for one more year. (power generation and distribution) 80IB Mineral Oil companies - blocks licensed under a contract awarded after 31.03.2011 t t d d ft 31 03 2011
1/3/2011
58
Procedural Aspects
Powers to income tax authority not below level of Assistant Commissioner in case of Agreements of DTAA. Discovery & Inspection Enforcing attendance & examining on oath Compelling production of books of account I i commissions Issuing i i Calling for information Period of limitation for assessment shall not include period for p which reference for exchange of information of Agreements of DTAA. Central Govt exempts certain class of p p persons from requirement of furnishing Return of Income Time limit for centralized processing of returns extended up to 31st March 2012.
Procedural Aspects Cont.

Cancellation of DIN N R id t having Li i Non Resident h i Liaison office set up in India ffi t i I di shall submit statement in prescribed form Rectification of order passed by Settlement Commission p y in case of mistake apparent from record 6 months Similar provisions in Wealth Tax
1/3/2011
60
Thankyou Th k

58 Sbgco Budget

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58 Sbgco Budget

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Union Budget 2011

ThePerennialConundrum The Perennial Conundrum

TheBudgetImperatives&the Govt. Response

ThenumbersintheBudget The numbers in the Budget

Sowhatarethedetails So what are the details

Let scompare Lets compare

BudgetataGlance Budget at a Glance

PaymentofTax Payment of Tax

PaymentofTax:Issues Payment of Tax: Issues

PaymentofTax:TransitoryAspects Payment of Tax: Transitory Aspects

PointofTaxationRules: Isitapointoracircleofinfinitepossibilities? i i i l f i fi i ibili i ?

What sbrewinginthePOT? Whats brewing in the POT ?

Introduction ofNewService: ServicesProvidedbeforetheeffective date NotTaxable,subject toRule4A Compliance p

Interestincaseofsmallassessees LowerInterestRateof15%per havingvalueoftaxableservices<60 annum lakhs in preceding financial year inprecedingfinancialyear

HighPitchedAssessmentsattimesexceeding thegrossreceipts the gross receipts IntroductionofconceptofCaptured a sact o s Transactions

Penaltiesfordelayedpaymentoftax Penalties for delayed payment of tax

Whetherpenaltiesundersection76canbe waivedifpenaltiesimposedundersection78? waived if penalties imposed under section 78?

PenaltiesforSuppression Penalties for Suppression

Subjectto Reasonable Cause Penalty l P l voluntarilypaid il id

Notsubjecttoreasonable Not subject to reasonable cause

OtherPenalties Other Penalties

Prosecution Prosecution Scope

Prosecution Prosecution Term

No Lame Excuses like NoLameExcuseslike

6months Amount exceeding50 exceeding 50 lakhs Others

Subsequent 6months Offence

CENVATCredit:Storysofar CENVAT Credit : Story so far

Re Emergenceof Nexus ReEmergence of Nexus

Credit restrictedto 40%ifEDCredit f d claimedby subcontractor

CENVAT:RestrictionsonAvailment CENVAT : Restrictions on Availment

Taxable Yes No No Yes Yes Yes Y No No

Exempted No Yes Yes No No No N Yes Yes,totheextentof abatedvalue abated value

Yes,value No correspondingtotax amount No Yes 1,00,00,000~40% Yes,totheextent of grossprofits No 1,50,00,000 ~60%

Claim2,00,000 Pay7,50,000 Claim2,00,000 Pay 1,20,000

Claim60,000+ 1,20,000Pay 72,000

CENVAT:CommonPoints CENVAT: Common Points

CENVAT:SpecialCases CENVAT: Special Cases

Export/ImportofServices:AGameof BasketBall? k ll?

SEZUnits/Developers SEZ Units/Developers

ApprovedlistofAuthorised Operations DeclarationinFormA1

SEZUnits/Developers ServiceProvider Perspective

ListofAuthorised Yes Operations FormA1bearing thenameofservice provider N.A. N.A.

SEZUnits/Developers Service RecipientPerspective

IntroductionofNewServices Introduction of New Services

Effectivefromadatetobenotifiedafter enactment t t ImpactofPointofTaxationRules

ACRestaurants cum bars AC Restaurantscumbars

Abatement@70%oftheGrossBillAmountto beprovidedatthetimeofenactment be provided at the time of enactment EffectiveServiceTaxRate@3.09%ofthegross value

HotelAccommodation Hotel Accommodation

Abatement@50%oftheGrossBillAmounttobe providedatthetimeofenactment provided at the time of enactment EffectiveServiceTaxRate@5.15%ofthegross value

Effectivefromadatetobenotifiedafterenactment ImpactofPointofTaxationRules ImpactonPendingLitigation

ClinicalEstablishmentServices Clinical Establishment Services

CommercialTrainingorCoachingServices Commercial Training or Coaching Services

LegalConsultancyServices Legal Consultancy Services

Exemption provided to Chartered Accountants likely to be withdrawn ExemptionprovidedtoCharteredAccountantslikelytobewithdrawn

AuthorizedServiceStation Authorized Service Station

Impact under the CENVAT Credit Rules ImpactundertheCENVATCreditRules

WorksContractServices Works Contract Services

Banking&FinancialServices Banking & Financial Services

CompositionRateformoneychangingreduced to0.1%ofthegrossamount to 0 1% of the gross amount

Originating FromIndia FromIndia FromIndia From India FromIndia

Class Economy Others Economy Others

OutsideIndia Economy O t id I di E OutsideIndia Others