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Indian Budget 2012
By CA A. K. Jain



The budget expectations from the Finance Minister Dr. Pranab Mukherjee were probably unrealistic and impractical. Market expectations were suggesting that, Finance Minister will have a solution for everyone's problem and his budget proposals will re-generate the enthusiasm in the economy. No one probably understood and appreciated his limitations and compulsions. Indian economy is undergoing one of the most awful period.

High inflation, falling growth rates, increasing unemployment, international economic failures, growing labour unrest, weakening central political system, civic moments in the country restrained the Finance Minister from taking any bold initiative. He has taken a very cautious approach and completed his official formality . But what is most baffling is the Finance Minister's total stillness to solve the problem of Indian money stacked in foreign accounts and creation of system of accountability in public expenditure.

We can not blame any single individual for this frame of mind. Our economic and political system is really unique and it is really intricate to change the settled mind sets of the multiple decision makers. In last 60 years, when most of the countries have prospered, we are still internationally branded as one of the most difficult destination to deal with. International Corporate only look at India as market of 120 crores of half fed population. We offer the largest market in the world for every possible product and service, whether that be, food, electronic, automobile, chemical, capital goods, defence products etc. etc. We are also the largest fund borrowers at highest possible commercial rates from the developed world. A major portion of our revenue goes towards the interest payments to international funding agencies.

We definitely need to change the inert policies and programmes and replace them with vibrant ideas without apprehensions of reactions from the old souls. We have to replace the 100-300 years old Income Tax Act and other civil and economic laws of Greek and Egyptian era. We need a dynamic leadership to take the country forward with confidence and clarity. We need disciplined implementation of our plans and programmes and application of resources with care and control. The policing in governance has to be reduced to develop healthy individuals and institutions.

I am sure some day our Hon'ble Finance Minister will offer us a budget which will put India in a enviable state and make every individual proud to have taken birth on this holy soil.

KEY FEATURES OF FINANCE MINISTER’S BUDGET 2012-2013


OVERVIEW OF THE ECONOMY

GDP growth estimated at 6.9 per cent in real terms in 2011-12. Slowdown in comparison to preceding two years is primarily due to deceleration in industrial growth. Headline inflation expected to moderate further in next few months and remain stable thereafter. Steps taken to bridge gaps in distribution, storage and marketing systems have helped in more effective management of inflation. Developments in India’s external trade in the first half of current year have been encouraging. Diversification in export and import market achieved. Current account deficit at 3.6 per cent of GDP for 2011-12 and reduced net capital inflow in the 2nd and 3rd quarters put pressure on exchange rate. India’s GDP growth in 2012-13 expected to be 7.6 per cent +/- 0.25 per cent. Deterioration in fiscal balance in 2011-12 due to slippages in direct tax revenue and increased subsidies.



FRBM ACT



Introduction of amendments to the FRBM Act as part of Finance Bill, 2012. Concept of “Effective Revenue Deficit” and “Medium Term Expenditure Framework” statement are two important features of amendment to FRBM Act in the direction of expenditure reforms. Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets. This will help in reducing consumptive component of revenue deficit and create space for increased capital spending. “Medium-term Expenditure Framework” statement will set forth a three-year rolling target for expenditure indicators. Recommendations of the Expert Committees to streamline and reduce the number of centrally sponsored schemes and to address plan and non-plan classification to be kept in view while implementing Twelfth Plan. Central Plan Scheme Monitoring System to be expanded for better tracking and utilisation of funds.

SUBSIDIES




Some subsidies, while being inevitable, may become undesirable if they compromise the macroeconomic fundamentals of economy. Subsidies related to administering the Food Security Act will be fully provided for. Endeavour to keep central subsidies under 2 per cent of GDP in 2012-13. Over next 3 year, to be further brought down to 1.75 per cent of GDP. Based on recommendation of task force headed by Shri Nandan Nilekani, a mobile-based Fertilizer Management System has been designed to provide end to-end information on movement of fertilisers and subsidies. Nation-wide roll out during 2012. All three public sector Oil Marketing Companies have launched LPG transparency portals to improve customer service and reduce leakage. Endeavour to scale up and roll out Aadhaar enabled payments for various government schemes in atleast 50 districts within next 6 months.

TAX REFORMS




DTC Bill to be enacted at the earliest after expeditious examination of the report of the Parliamentary Standing Committee. Drafting of model legislation for the Centre and State GST in concert with States is under progress.  GST network to be set up as a National Information Utility and to become operational by August 2012.

DISINVESTMENT POLICY




 Government has further evolved its approach to divestment of Central Public Sector Enterprises by allowing them a level playing field vis-à-vis the private sector in respect of practices like buy backs and listing at stock exchanges. For 2012-13, 30,000 crore to be raised through disinvestment. At least 51 per cent ownership and management control to remain with Government.

STRENGTHENING INVESTMENT ENVIRONMENT


Efforts to arrive at a broad based consensus in consultation with the State Governments in respect of decision to allow FDI in multi-brand retail up to 51 per cent. Provision regarding implementation of Advance Pricing Agreement to be introduced in Finance Bill, 2012. Rajiv Gandhi Equity Saving Scheme to allow for income tax deduction of 50 per cent to new retail investors, who invest upto 50,000 directly in equities and whose annual income is below 10 lakh to be introduced. The scheme will have a lock-in period of 3 years. Various steps proposed to be taken for deepening the reforms in the Capital markets, including simplifying process of IPOs, allowing QFIs to access Indian Bond Market etc. Official amendment to “The Pension Fund Regulatory and Development Authority Bill, 2011”, “The Banking Laws (Amendment) Bill, 2011” and “The Insurance Law (Amendment) Bill, 2008” to be moved in this session. Various Bills proposed to be moved in the Budget session of the Parliament to take forward the process of financial sector legislative reforms. To protect the financial health of Public Sector Banks and Financial Institutions, 15,888 crore proposed to be provided for capitalisation. Possibility of creating a financial holding company to raise resources to meet the capital requirements of PSU Banks under examination. A central “Know Your Customer” depository to be developed in 2012-13 to avoid multiplicity of registration and data upkeep. Revised guidelines on priority sector lending to be issued after stakeholder consultation. Out of 73,000 identified habitations that were to be covered under “Swabhimaan” campaign by March, 2012, about 70,000 habitations have been covered. Rest likely to be covered by March 31, 2012. As a next step, Ultra Small Branches are being set up at these habitations. In 2012-13, “Swabhimaan” campaign to be extended to more habitations. Out of 82 RRBs in India, 81 have successfully migrated to Core Banking Solutions and have also joined the National Electronic Fund Transfer system. Proposal to extend the scheme of capitalisation of weak RRBs by another 2 years to enable States to contribute their share.

INFRASTRUCTURE AND INDUSTRIAL DEVELOPMENT


During Twelfth Plan period, investment in infrastructure to go up to 50 lakh crore with half of this, expected from private sector. More sectors added as eligible sectors for Viability Gap Funding under the scheme “Support to PPP in infrastructure”. Government has approved guidelines for establishing joint venture companies by defence PSUs in PPP mode. First Infrastructure Debt Fund with an initial size of 8,000 crore launched earlier this month. Tax free bonds of 60,000 crore to be allowed for financing infrastructure projects in 2012-13. A harmonised master list of infrastructure sector approved by the Government. IIFCL has put in place a structure for credit enhancement and take-out finance for easing access of credit to infrastructure projects. National Manufacturing Policy announced with the objective of raising, within a decade, the share of manufacturing in GDP to 25 per cent and creating of 10 crore jobs. Coal India Limited advised to sign fuel supply agreements with power plants, having long-term PPAs with DISCOMs and getting commissioned on or before March 31, 2015. External Commercial Borrowings (ECB) to be allowed to part finance Rupee debt of existing power projects. Target of covering a length of 8,800 kilometre under NHDP next year.

Allocation of the Road Transport and Highways Ministry enhanced by 14 per cent to 25,360 crore. ECB proposed to be allowed for capital expenditure on the maintenance and operations of toll systems for roads and highways, if they are part of original project. Direct import of Aviation Turbine Fuel permitted for Indian Carriers as actual users. ECB to be permitted for working capital requirement of airline industry for a period of one year, subject to a total ceiling of US $ 1 billion. Proposal to allow foreign airlines to participate upto 49 per cent in the equity of an air transport undertaking under active consideration of the government. In September 2011 central assistance of 18,500 crore spread over 5 years approved. US $ 4.5 billion as Japanese participation in the project.
Various proposals to address the shortage of housing for low income groups in major cities and towns including allowing ECB for low cost housing projects and setting up of a credit guarantee trust fund etc. Government has taken steps to finalise pricing and investment policies for urea to reduce India’s import dependence in urea. Government has announced a financial package of 3,884 crore for waiver of loans of handloom weavers and their cooperative societies. Two more mega handloom clusters, one to cover Prakasam and Guntur districts in Andhra Pradesh and another for Godda and neighbouring districts in Jharkhand to be set up. Three Weaver’s Service Centres one each in Mizoram, Nagaland and Jharkhand to be set up for providing technical support to poor handloom weavers. 500 crore pilot scheme announced for promotion and application of Geo-textiles in the North Eastern Region. A powerloom mega cluster to be set up in Ichalkaranji in Maharashtra with a budget allocation of 70 crore. 5,000 crore India Opportunities Venture Fund to be set up with SIDBI.  To enable greater access to finance by Small and Medium Enterprises (SME), two SME exchanges launched in Mumbai recently. Policy requiring Ministries and CPSEs to make a minimum of 20 per cent of their annual purchases from MSEs approved. Of this, 4 per cent earmarked for procurement from MSEs owned by SC/ST entrepreneurs.

AGRICULTURE




Plan Outlay for Department of Agriculture and Co-operation increased by 18 per cent. Outlay for Rashtriya Krishi Vikas Yojana (RKVY) increased to 9,217 crore in 2012-13. Initiative of Bringing Green Revolution to Eastern India (BGREI) has resulted in increased production and productivity of paddy. Allocation for the scheme increased to 1,000 crore in 2012-13 from 400 crore in 2011-12. 300 crore to Vidarbha Intensified Irrigation Development Programme under RKVY. 2,242 crore project launched with World Bank assistance to improve productivity in the dairy sector. 500 crore provided to broaden scope of production of fish to coastal aquaculture. Target for agricultural credit raised by 1,00,000 crore to 5,75,000 crore in 2012-13. Interest subvention scheme for providing short term crop loans to farmers at 7 per cent interest per annum to be continued in 2012-13. Additional subvention of 3 per cent available for prompt paying farmers. Short term RRB credit refinance fund being set up to enhance the capacity of RRBs to disburse short term crop loans to small and marginal farmers. Kisan Credit Card (KCC) Scheme to be modified to make KCC a smart card which could be used at ATMs. A sum of 200 crore set aside for incentivising research with rewards.  Structural changes in Accelerated Irrigation Benefit Programme (AIBP) being made to maximise flow of benefit from investments in irrigation projects. Allocation for AIBP in 2012-13 stepped up by 13 per cent to 14,242 crore. Irrigation and Water Resource Finance Company being operationalised to mobilise large resources to fund irrigation projects.  A flood management project approved by Ganga Flood Control Commission at a cost of 439 crore for Kandi sub-division of Murshidabad District. A new centrally sponsored scheme titled “National Mission on Food Processing” to be started in 2012-13 in co-operation with State Governments. 

INCLUSION

Allocation for Scheduled Castes Sub Plan at 37,113 crore in BE 2012-13 represents an increase of 18 per cent over BE 2011-12. Allocation for Tribal Sub Plan at 21,710 crore in BE 2012-13 represents an increase of 17.6 per cent. National Food Security Bill, 2011 is before Parliamentary Standing Committee. A national information utility for computerisation of PDS is being created. To become operational by December, 2012. A multi-sectoral programme to address maternal and child malnutrition in selected 200 high burden districts is being rolled out during 2012-13. Allocation of 15,850 crore made for Integrated Child Development Service (ICDS) scheme, representing an increase of 58 per cent over BE 2011-12. 11,937 crore allocated for National Programme of Mid Day Meals in schools. An allocation of 750 crore proposed for Rajiv Gandhi Scheme for Empowerment of Adolescent Girls, SABLA.  Budgetary allocation for rural drinking water and sanitation increased from 11,000 crore to 14,000 crore representing an increase of over 27 per cent. Allocation for PMGSY increased by 20 per cent to Rs.24,000 crore to improve connectivity. Major initiative proposed to strengthen Panchayats through Rajiv Gandhi Panchayat Sashaktikaran Abhiyan.  Backward Regions Grant Fund scheme to continue in twelfth plan with enhanced allocation of 12,040 crore in 2012-13, representing an increase of 22 per cent over the BE 2011-12. Allocation under RIDF enhanced to 20,000 crore. 5,000 crore earmarked exclusively for creating warehousing facilities.

EDUCATION


For 2012-13, 25,555 crore provided for RTE-SSA representing an increase of 21.7 per cent over 2011-12. 6,000 schools proposed to be set up at block level as model schools in Twelfth Plan. 3,124 crore provided for Rashtriya Madhyamik Shiksha Abhiyan (RMSA) representing an increase of 29 per cent over BE 2011-12. To ensure better flow of credit to students, a Credit Guarantee Fund proposed to be set up.

HEALTH




Allocation for NRHM proposed to be increased from 18,115 crore in 2011-12 to 20,822 crore in 2012-13. National Urban Health Mission is being launched. Pradhan Mantri Swasthya Suraksha Yojana being expanded to cover upgradation of 7 more Government medical colleges.


EMPLOYMENT AND SKILL DEVELOPMENT

MGNREGA has had a positive impact on livelihood security.  Need to bring about greater synergy between MGNREGA and agriculture and allied rural livelihoods. Allocation of 3915 crore made for National Rural Livelihood Mission representing an increase of 34 per cent. To ease access to bank credit, corpus for ‘Women’s SHG’s Development Fund’ enlarged.  Proposal to establish Bharat Livelihoods Foundation of India through Aajeevika scheme. Allocation for Prime Minister’s Employment Generation Programme increased by 23 per cent to 1,276 crore in 2012-13. Projects approved by National Skill Development Corporation expected to train 6.2 crore persons at the end of 10 years.  1,000 crore allocated for National Skill Development Fund in 2012-13. To improve the flow of institutional credit for skill development, a separate Credit Guarantee Fund to be set up. Himayat” scheme introduced in J & K to provide skill training to 1 lakh youth in next 5 years. Entire cost to be borne by Centre.

SOCIAL SECURITY AND THE NEEDS OF WEAKER SECTIONS

Allocation under NSAP raised by 37 per cent to 8,447 crore in 2012-13. In the ongoing Indira Gandhi National Widow Pension Scheme and Indira Gandhi National Disability Pension Scheme for BPL beneficiaries, pension amount to be raised from 200 to 300 per month. Lump sum grant on the death of primary breadwinner of a BPL family, in the age group 18-64 years, doubled to 20,000. To enhance access under SWAVALAMBAN scheme, LIC appointed as an Aggregator and all Public Sector Banks appointed as Points of Presence (PoP) and Aggregators. Special grant provided to various universities and academic instiutions. A provision of 1,93,407 crore made for Defence services including 79,579 crore for capital expenditure. Any further requirement to be met. 1,185 crore proposed to be allocated for construction of nearly 4,000 residential quarters for Central Armed Police Forces. 3,280 crore proposed to be allocated for construction of office building of Central Armed Police Forces. Scheme to create National Population Register likely to be completed within next 2 years.

GOVERNANCE

Enrolment of 20 crore persons completed under UID mission. Adequate funds to be allocated to complete enrolment of another 40 crore persons. Proposal to lay a White Paper on Black Money in current session of Parliament. Bill regarding Public Procurement Legislation to be introduced in the Budget Session of the Parliament. Legislative measures for strengthening anti-corruption framework are at various stages of enactment.
BUDGET ESTIMATES 2012-13
( All Figures are in Crores ) 2010-2011 2011-2012 2011-2012 2012-2013
Actuals @ Budget Revised Budget
Estimates Estimates Estimates
1 Revenue Receipts 788471 789892 766989 935685
2 Tax Revenue (net to centre) 569869 664457 642252 771071
3 Non-Tax Revenue 218602 125435 124737 164614
4 Capital Receipts (5+6+7)$ 408857 467837 551730 555241
5 Recoveries of Loans 12420 15020 14258 11650
6 Other Receipts 22846 40000 15493 30000
7 Borrowings and other liabilities * 373591 412817 521980 513590
8 Total Receipts (1+4)$ 1197328 1257729 1318720 1490925
9 Non-Plan Expenditure 818299 816182 892116 969900
10 On Revenue Account 726491 733558 815740 865596
of which,
11 Interest Payments 234022 267986 275618 319759
12 On Capital Account 91808 82624 76376 104304
13 Plan Expenditure 379029 441547 426604 521025
14 On Revenue Account 314232 363604 346201 420513
15 On Capital Account 64797 77943 80404 100512
16 Total Expenditure (9+13) 1197328 1257729 1318720 1490925
17 Revenue Expenditure (10+14) 1040723 1097162 1161940 1286109
18 Of Which, Grants for creation of Capital Assets 87487 146853 137505 164672
19 Capital Expenditure (12+15) 156605 160567 156780 204816
20 Revenue Deficit (17-1) 252252 307270 394951 350424
-3.3 -3.4 -4.4 -3.4
21 Effective Revenue Deficit (20-18) 164765 160417 257446 185752
-2.1 -1.8 -2.9 -1.8
22 Fiscal Deficit {16-(1+5+6)} 373591 412817 521980 513590
-4.9 -4.6 -5.9 -5.1
23 Primary Deficit (22-11) 139569 144831 246362 193831
-1.8 -1.6 -2.8 -1.9

TAX PROPOSALS - DIRECT TAXES
1.   Exemption limit for the general category of individual taxpayers enhanced from 1,80,000 to 2,00,000 giving tax relief of 2,000.

2.  Upper limit of 20 per cent tax slab raised from 8 lakh to 10 lakh.


3.  Unexplained credits, money, investment, expenditure etc. shall be taxed at a rate of 30%. 


4.  Allow individual tax payers, a deduction of up to 10,000 for interest from savings bank accounts.


5.  Allow deduction of up to 5,000 for preventive health check up.


6.  Senior citizens not having income from business exempted from payment of advance tax.


7.  To provide low cost funds to stressed infrastructure sectors, rate of
withholding tax on external commercial borrowings reduced from 20% to 5% for power, airlines, roads, bridges, affordable houses and fertiliser sectors.


8.   Restriction on Venture Capital Funds to invest only in 9 specified sectors removed.


9.   Continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent up to 31.3.2013.


10.  Investment link deduction of capital expenditure for certain businesses to be provided at the enhanced rate of 150 per cent.


11.  Extend weighted deduction of 200 per cent for R& 
D expenditure in an in-house facility for a further period of 5 years beyond March 31, 2012.


12.  Provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services.


13.  Extend the sunset date for setting up power sector undertakings by one year for claiming 100 per cent deduction of profits for 10 years.


14. Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from 60 lakh to 1 crore and for professional from Rs. 15 lakh to Rs. 25 lakh.


15.  New section 54GB w.e.f. 2013-14 inserted for providing exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a new start up manufacturing SME company (more than 50% shares to be held) for purchase of new plant and machinery. 


16.  Provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector.


17.  Reduction in securities transaction tax by 20 per cent i.e. from 0.125% to 0.10% on cash delivery transactions.


18.  Provision of Alternate Minimum Tax (AMT) extended to cover any person other than a company who has claimed deduction under any section (other than section 80P) included in chapter VI- A under the heading "C- Deduction in respect of certain incomes" or under section 10AA, shall be liable to pay AMT @ 18.5% if the adjusted total income of such person more than 20 lakh. Tax credit shall be available for 10 assessment years. 19.  Introduce General Anti Avoidance Rule to counter aggressive tax avoidance scheme.

20.  TDS will be deducted on director remuneration @ 10% which in not in the nature of salary.


21.  TCS @ 1% of the sale consideration to be collected by seller on sale of bullion & jewellary more than Rs. 2 Lakh sale in cash.


22.  TDS on transfer of immovable properties other than agricultural land will be deducted @ 1%, if the consideration exceeds Rs. 50 Lakhs in urban areas and Rs. 20 Lakhs in other areas. TAN not required.


23.  Any payment more than Rs. 10,000 shall only be allowed as deduction under section 80G and 80GGA if such sum is paid by any mode other than cash.


24.  New Section 56(2) -Any consideration received by a closely held company for issue of shares which is in excess of their FMV shall be chargeable under the head "Income from other sources".


25.  Amendment to Section 68 - The source of funds in the hands of the resident shareholders to be explain by the investee closely held company in addition to the existing requirement to disclose the nature and source of any sum credited in its books.


26.  Re-opening of tax assessments up to 16 years in case of overseas assets.


27.  Mandatory ITR filing for resident having any asset abroad or signing authority in any account located outside India.


28.  With respect to any search or seizure conducted after 01/07/2012, if undisclosed income is admitted during the course of search then the tax payer will be liable for penalty @ 10% of undisclosed income. If undisclosed income is disclosed in the return of income filed after the search then the tax payer will be liable for penalty @ 20% of undisclosed income. If the income is not disclosed in the above given cases then the tax payer will be liable for penalty @ ranging from 30 to 90 % of undisclosed income.


29.  Any sum or property received without consideration or for inadequate consideration by HUF from its members would be excluded from taxation under section 56(2).


30.  Cascading effect of DDT in multi-layer corporate structure removed.


31.  Exemption for Insurance Policies issued on or after 1st April,2012 would only be available for policies where the premium payable for any of the year during the term of the policy does not exceed 10% of the actual capital sum assured (as against existing 20%).


32.  Exemption in respect of any income of foreign company received in India in Indian currency on account of sale of crude oil to any person in India subject to some conditions.


33.  Assessment of charitable organisations in case commercial receipts exceed the specified threshold i.e. Rs. 25 lakh.


34.  Extending benefit of initial depreciation to the power sector.


35.  The time limits for completion of assessments and re-assessments shall respectively be increased by 3 months.


36.  Processing of return will not be necessary in  the case where where notice u/s 143(2) has already been issued for scrutiny of the return.


37.  Due date of furnishing audit report in case of international transactions extended from 30th September to 30th November of the assessment year.


38.  If the aggregate amount of interest on debentures paid during the financial year does not exceed Rs. 5000/- and the payment is made by account payee cheque then no deduction of tax (TDS) should be made.


39.  Threshold limit for TDS on compensation or consideration for compulsory acquisition increased from Rs. 1 lakh to Rs. 2 lakh.


40.  Extension of time for passing an order u/s 201 in certain cases extended from 4 years to 6 years.


41.  TCS on sale of certain minerals shall be collected @ 1% by the seller (Section 206C).


42.  Fee and penalty for delay in furnishing of TDS/TCS statements increase from Rs 100 per day to Rs 200 per day in addition to the said fee, penalty ranging from Rs 10000/- to Rs 1 lakh shall also be levied.


43.  Where a person has received any income without deduction or collection of tax, he shall be liable to pay advance tax in respect of such income.


44.  It is proposed to provide General Anti Avoidance Rule in the income tax Act to deal with aggressive tax planning.

TAX PROPOSALS - INDIRECT TAXES


SERVICE TAX

1.   Service tax confronts challenges of its share being below its potential, complexity in tax law, and need to bring it closer to Central Excise Law for eventual transition to GST.



2.   Service tax up from 10% to 12%.


3.   Tax all services except those in the negative list comprising of 17 heads.


4.   Service tax law to be shorter by nearly 40 per cent.


5.   Number of alignment made to harmonise Central Excise and Service Tax. A common simplified registration form and a common return comprising of one page are steps in this direction.


6.   Revision Application Authority and Settlement Commission being introduced in Service Tax for dispute resolution.


7.   Utilization of input tax credit permitted in number of services to reduce cascading of taxes.


8.   Place of Supply Rules for determining the location of service to be put in public domain for stakeholders’ comments.


9.  Rules pertaining to point of taxation are being rationalised.


10.  The option of deferred payment is being allowed for all service providers rather than for specific services. The facility will be available only to individuals and partnership firms up to a turnover of taxable services of Rs. 50 lakh subject to the condition that their turnover of taxable services in the previous year was below Rs. 50 lakh.


11.  One year time limit for issuance of show cause notice for demand of service tax being increased to 18 months.
12.  Service tax on air transport payable @ 12% on 40%, subject to condition of non-availment of Cenvat credit on inputs or capital goods.


13.  Rule 7 for input service distributors is being amended to provide that credit of service used wholly in a unit shall be distributed only to that unit and that the credit of service tax attributable to service used in more than one unit shall be distributed pro rata on the basis of the turnover of the concern unit to the sum total of the turnover of all the units to which the service relates.

14.  Rule 9(1)(e) is being amended to allow availment of credit on the tax payment challan in case payment of service tax by the service receiver on reverse charge basis.


15.  Section 68(2) of the Finance Act, 1994 has been amended to put the onus of payment of service tax on reverse charge basis partly on service provider and partly on service receiver. The scheme is proposed to be made applicable on three specific services i.e. hiring of means of transport, construction and man power supply.

EXCISE


1.  12% excise duty imposed on branded retail garments.


2.  Standard excise duty hiked from 10% to 12%.


3.  A common simplified registration form and a common return for Central Excise and Service Tax, to be named EST-1. This common return will comprise only one page, which will be a significant reduction from the 15 pages of the two returns at present.


4.  Enhance the duty from 22 per cent to 24 per cent on large cars.


5.  Branded silver jewellery fully exempted from excise duty.


6.  Section 9 provides that cases of evasion in which the duty leviable exceeds Rs.
1 lakh shall be punishable with a term of imprisonment extending to seven years and with fine. The section is being amended to subsitute Rs. 1 lakh with Rs. 30 lakh.


7.  Concessional rate of excise duty of 5% on non-petroleum products is being increased to 6%.


8.  The lower rate of 1% on non-petroleum products is being increased to 2%. However, precious metal jewellery, coal and fertilizers would remain at 1%.


9.  Full exemption from excise duty is being provided to food preparations containing fruits and vegetables falling under Chapter 20, which are prepared in a hotel, restaurant or a retail outlet, whether or not such food is consumed in such hotels/restaurants/retail outlets.


10.  Exemption from excise duty is being restored on ocular lens.


11.  Excise duty is being reduced from 10% to 6% on Matches manufactured by semi-mechanised units and processed food products of soya.


12.  Excise duty on parts of mobile phones, other than those cleared to a manufacturer of mobile phones, is being reduced from 10% to 2% provided no CENVAT credit is taken.

CUSTOM





1.   No change in peak customs duty.

2.   Customs duty reduced from 7.5% to 2.5% for iron ore equipment.


3.   LCD and LED panels exempted from custom duty.


4.   Automated shuttle looms exempted from customs duty.


5.   Mobile phone parts exempted from basic customs duty.


6.   Cuts customs duty on rail equipment to 7.5% from 10%.


7.   Customs duty on some gold and platinum products increased.


8.   Import of aircraft parts exempt from basic customs duty.


9.   Customs duty on refined gold doubled.


10.  Full exemption on customs duty on coal.


11.  LNG out of customs duty.


12.  5% customs duty exempted on equipment for fertilizer plants.


13.  Thermal power companies exempted from customs duty for 2 years.


14.  Duty on large cars to go up to 27 percent.


15.  Reduce basic custom duty on Cigarettes.


16.  Waste paper is being fully exempted from basic custom duty.


17.  The duty free allowance under the baggage rules is being increased from Rs. 25,000 to Rs. 35,000 for adult passengers of Indian origin and from Rs. 10,000 to Rs. 15,000 for children upto 10 years of age.


18.  Basic custom duty on flat rolled products (HR and CR) of non-alloy steel is being increased from 5% to 7.5%.


19.  Full exemption from basic custom duty, CVD and SAD is being extended to equipment imported for road construction projects awarded by Metropolitan Development Authorities.


20.  Equipments for setting up of solar thermal projects are being fully exempted from SAD.


21.  Cenvat Credit of special additional duty (SAD) of 4% can be transferred from one unit to other unit of same manufacturer [Rule 10A of Cenvat Credit Rules w.e.f. 1-4-2012].
 
Queries & Discussions Welcome


Note: The purpose of this note is to provide a brief overview of the key announcements pertaining to the Union Budget 2012- 13. It does not seek to critically examine the various provisions nor is it meant to a complete elaboration of all its provisions. It is possible that some provisions of the Union Budget 2012- 13 could be altered in some respect at the time of enactment of the final legislation. We recommend that advice be sought before taking any action on specific issues.




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