THE BUDGET 2013-14

BY CA A. K. JAIN

The Budget of 2013-14 is once again a lackluster exercise in futile. Various amendments proposed in the finance bill do not reflect long term vision. Recessionary forces are destroying all the gains and growth, we had in last few years. Unemployment, price rise, worsening trade deficit and misapplication of available resources are all causing severe damage to the Indian Economy. The country needs financial policies which are stable and drawn with futuristic vision. It was an opportunity for the Finance Minster to provide a roadmap for industrial and infrastructure growth. But due to the limitation of coalition politics he preferred to remain passive. 

We need a budget which can provide for countrywide infrastructure development, social security to common person and positive trade balance. In this vast economy of 150 million people this is not difficult task. We have fantastic amount of untapped resources. Trivial tinkering in budget proposals can change the financial future and place the whole nation on 8% to  12%  growth chart.

We can only request to all concerned to take bold measures for implementing original ideas of the UPA Government, i.e. pursue the process of economic reforms and infrastructure development irrespective of political compulsions and limitations. 

Budget at a Glance   (In crore of Rupees)
			2011-2012	2012-2013	2012-2013	2013-2014
			Actual	Budgets Estimates	Revised Estimates	Budget Estimates
1.	Revenue Receipts		751437	935685	871828	1056331
	2.	Tax Revenue (net to centre)	629765	771071	742115	884078
	3	Non-Tax Revenue	121672	164614	129713	172252
4.	Capital Receipts (5+6+7)$		552928	555241	558998	608967
	5	. Recoveries of Loans	18850	11650	14073	10654
	6.	Other Receipts	18088	30000	24000	55814
	7.	Borrowings and other liabilities*	515990	513590	520925	542499
8	. Total Receipts (1+4)$		1304365	1490925	1430825	1665297
9.	Non-Plan Expenditure		891990	969900	1001638	1109975
	10.	On Revenue Account of which,	812049	865596	919699	992908
	11.	Interest Payments	273150	319759	316674	370684
	12.	On Capital Account	79941	104304	81939	117067
13.	Plan Expenditure		412375	521025	429187	555322
	14.	On Revenue Account	333737	420513	343373	443260
	15.	.On Capital Account	78639	100512	85814	112062
16.	Total Expenditure (9+13)		1304365	1490925	1430825	1665297
	17.	Revenue Expenditure (10+14)	1145785	1286109	1263072	1436169
	18.	Of Which, Grants for creation of Capital Assets	132582	164672	124275	174656
	19.	Capital Expenditure (12+15)	158580	204816	167753	229129
20.	Revenue Deficit (17-1)		394348 (4.4)	350424 (3.4)	391245 (3.9)	379838 (3.3)
21.	Effective Revenue		261766	185752	266970	205182
	Deficit (20-18)		(2.9)	(1.8)	(2.7)	(1.8)
22.	Fiscal Deficit		515990	513590	520925	542499
	{16-(1+5+6)}		(5.7)	(5.1)	(5.2)	(4.8)
23.	Primary Deficit (22-11)		242840	193831	204251	171814
			(2.7)	(1.9)	(2.0)	(1.5)

INCOME TAX & WEALTH TAX

No change in Income Tax slabs for all categories of assessee.

1. The credit - Rs. 2000/-(Rebate u/s 87A) (Not for HUF, AOP, BOI, etc) only for residents individual having total income not exceeding Rs. 500,000/-

2. Surcharge - 10%, if Total Income > Rs. 1.00 Cr (Applicable on Individuals, HUF, AOP, BOI, Cooprative Society, Firm, Local Authority, etc.) It is to be in force for only one year.

3. Domestic Company:  If total income exceeds Rs. 1.00 Cr & it is up to Rs. 10.00 Cr - Surcharge @ 5%, If total income exceeds Rs. 10.00 Cr surcharge @ 10%

           

Foreign Company:  It total income exceed Rs. 1.00 Cr & it is up to Rs. 10.00 Cr - Surcharge @ 2% , If total income exceeds Rs. 10.00 Cr Surcharge @ 5%

4. CDT shall be subject to surcharge of 10%.

5. Deduction of interest paid on home loan taken from bank / housing finance company of total one lakh rupee in A.Y. 2014-15 shall be allowed in computing total income, where interest payable for previous year relevant to the said assessment year is less than one lakh rupee the balance amount shall be allowed in the A. Y. 2015-16. Amount of loan should not exceed Rs. 25 Lakh and amount of house property should not exceed Rs. 40 Lakh. The assessee does not own any residential house property on the date of sanction of the loan. (u/s 80EE).

6. Investment allowance at the rate of 15% to manufacturing companies is fresh new investment that invest more than Rs. 100 crore in plant and machinery during the period 01.04.2013 to 31.03.2015 (u/s 32AC)

7. 1% TDS on transfer of immovable property other than rural agriculture land; if exceeding Rs. 50 Lakh (Applicable from 01.06.13)

8. STT reduced on equity future from 0.017% to 0.01%, on MF/ EFT redemption at fund counters 0.25% to 0.001% on MF/ ETF purchase / sale on exchange from 0.1% to 0.001% only on seller.

10. Deduction in respect of contribution given by companies (u/s 80GGB) or any person (u/s 80GGC) to political parties shall not be allowed if sum contributed is by way of cash.

11. Deduction u/s 80-IA shall also be available for A.Y. 2014-15.

12. GAAR provisions modified and will be applicable from 01.04.2016.

13. Commodity Transaction Tax (CTT) levy on non agricultural contracts @ 0.01%. Agricultural commodities will be exempted.

14. Withholding Tax of 20% on Unlisted Companies on profits distributed by unlisted companies to shareholders through buyback of shares u/s 115QA.

15. Income limit rise for Rajiv Gandhi Equity Saving Scheme to Rs. 12 Lakh and benefit has also been extended to 3 years u/s 80CCG.

16. In Wealth Tax, Definition of urban land has been changed, now urban land means land situated.

i) in any area which is comprised within the  jurisdiction of a municipality & which has a population of not less than ten thousand, or

ii) in any area within the distance, measured aerially. -

1) not being more than 2 Kilometers from the local limits of municipality & which has population of more than ten thousand but not exceeding one lakh; or

2) not being more than 6 km from the local limits of municipality & which has population of more than one lakh but not exceeding ten lakh; or

3) not being more than 8 km from the local limits of municipality & which has population of more than ten lakh.

but doesn’t include land on which construction of a building is not permissible under any law for the time being enforce in the area in which such land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or any unused land held by the assessee for industrial purpose for a period of two year from the date of its acquisition by him or any land held by the assessee as stock in trade for a period of ten years from the date of its acquisition by him.

SOME OTHER ANNOUNCEMENTS OR UPDATES

Trading in commodity derivative shall not be considered as speculative

Introduction of Inflation Index Bonds for Tax Saving.

Introduction of Tax Free Bonds for Infrastructure.

Cooperative Banks will be having CBS By 31.12.2013

2 Major Ports in West Bengal & Andhra Pradesh to be set up in F. Y. 2013-14

LIC offices to be set up in all Major Towns.

Insurance companies can open branches in certain cities without IRDA Approval

Banks are allowed to act as an insurance agent.

Insurance companies can invest directly into debt securities.

a sum of Rs. 9000 cr 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.

NEW DEVELOPMENT FOR WOMEN

India’s Fist Women Public Sector Bank to launch by October 2013 with 1000 crores as initial capital.  New initiative for women safety.

SERVICE TAX

1. Included in the negative list of service tax.

a) Vocational course offered by institutes affiliated to the State Council of Vocational Training [65B (11)]          

b) Testing activities in relation to agriculture produce [65D (d) (i)]

2. Definition of “purpose amounting to manufacture or production of goods” in section 65B(40) being amended to include process on which duties of excise are leviable under the “ Medicinal and Toilet Preparation ( Excise Duties) act 1955.

3. Section 77(1) (a): maximum penalty imposable for failure to obtain registration will be Rs. 10000.

4. Section 78 A is being inserted to impose penalty on Director, manager, secretary or other officer of the company who is in  manner knowingly concerned with specified contraventions.

5. (a ) Section 89(1) (a) / (b) /(c)/ (d): in the case of offence.

Amount	Imprisonment
Rs. 50 Lakh	6 month < 3 Years

           

       (b)    Failure to pay collected Service Tax within six month

Amount	Imprisonment
Rs. 50 Lakh	6 month < 7 Years

(c) In any other case: the imprisonment for a term which may be extended to 1 year.

6. Retrospective Exemption to Indian railways on the Service Tax leviable on various services provided by them during the period to the 1st July 2012 to the extent SCN has been issued prior upto the 28the February. 2013.

7. Construction contracts: where the carpet area of residential unit is upto 2000 Sqft or the amount charged is less than Rs. 1 Crore in the case of construction of complex, building or civil structure or a part thereof, intended for sale to a buyer, wholly or partly except where the entire consideration is received after issuance of completion certificate by the competent authority, taxable portion for the Service Tax purpose will remain as 25% in all other cases taxable portion will be 30%.

8. Service tax will be leviable on taxable services provided in restaurants with AC or central air heating in any part of the establishment at any time during the year.

9. Following exemption are withdrawn

a. Renting of immovable property by educational institute

b. Service by way of vehicle parking to general public

c. Services of repair or maintenance of aircraft of Government local authority, Government authority.

d. Temporary transfer of permitting the use or enjoyment of copyright relating to cinematographic film was fully exempted, now this exemption is restricted to exhibition of cinematographic film in cinema hall / theatre.

10. Service Tax Amnesty Scheme for.

a. Stop Filers

b. non filers/ non registrants

c. who has not disclosed true liability in returns filed during the period from October 2007 to December 2012

CENTRAL EXCISE

1. Section 9 is being amended so as to substitute the amount of 30Lakh with 50 Lakh.

2. Section 11A (7A) is being inserted : service of a statement containing details of duty not paid short levied or erroneously refunded shall be deemed to be a service of notice under (1) /(3)/ (4) / (5) of this section.

3. Section 23A (a) amended: the term “ activity” to include any new business of production or manufacture proposed to be undertaken by the existing producer or manufacturer.

4. Section 23C (2): the scope of admissibility has been expanded to include credit of service tax paid on deemed to be have been paid on input service.

5. Section 35D in being amended to enhance the limit from 10 Lakh to 50 Lakh

6. Central Excise Tariff Act 1985

Henna powder or paste not mixed with any other ingredient.	Fully exempt
SUVs	ED 30% from 27%
Truck Chesis (87060042)	ED 13% from 14%

           

            SUV registered as Taxi: refund is being adjusted accordingly

Silver manufactured from Zinc/ lead samelting	ED 4%
Compound levy stainless steel patta patti	ED 40000 p.m per machine from 30000p.m. per machine
Trimmed or untrimmed sheets of copper intended for use in the manufacture of handicrafts or utensils will include copper & copper alloys.	Rs 35000 per MT
Ships or vessels	Full exemption ( from CVD also)
Hand made carpets & carpets & other textile floor covering of coir or juit whether or not handmade	Full exemption
Branded Ayurvedic medicaments and medicaments of unani, siddha, homeopathic or bio chemic system	MRP based asstt. With  35%
Mobile phone	ED 6% from 1% whose retail S. P. >2000
Cigarettes	ED increased by 18%
Marble tiles slabs	ED 60 per sq mtr from 30 per sq matr
Cotton at fiber stage	Zero Ed
Spun yarn at fiber stage	ED 12%

CUSTOM

Section 11(2)(n) is being amended to include “designs and geographical indications” so as to provide for protection of these rights.

2. Section 27: if the amount of refund claimed is less than Rs. 100, the same shall not be refunded.

3. Section 28: SCN will not be served where the amount demanded is less than Rs. 100.

4. Section 28E(a): meaning of “activity” includes any new business of import or export proposed to be undertaken by the existing importer or exporter.

5. Section 30 & 41 is being amended to provide for electronic filing of import manifest.

6. Section 47(2): Interest free period for payment of import duty reduced from 5 days to 2 days.

7. Section 49 is being amended to restrict the period of shortage of imported duty to thirty days.

8. Section 69 is being substituted to provide that warehoused goods may be exported to a place outside India without payment of duty if a shipping bill or bill of export is presented.

9. Full exemption from export duty is being given retrospectively on flat rolled products of iron or non alloy steel, plated or coated with zinc. (N/No. 27/2011).

10. Duty free allowance of jewellery for Indian gentleman passenger increased to Rs. 50,000/- & for lady passenger to Rs. 100,000/-.

11. BCD on new passenger car & other motor vehicle with CIF value more than US$ 40,000 or engine capacity exceeding 3000 cc (petrol) or 2500cc (diesel) is being increased from 75% to 100%.

12. BCD on motor cycle with engine capacity of 800cc or more increased from 60% to 75%.

13. BCD is being reduced to 2% on pre forms of precious & semi precious stones.

14. BCD is being reduced to 5% on 20 specified machinery for use in leather & footwear industry.

15. BCD on raw silk (not thrown), of all graded is being increased to 15%.

16. BCD is being reduced to 5% on textile machinery & parts.

17. BCD on set top boxes for TV is being increased to 10%.

18. Withdrawal of exemption from EC & SHEC on aircraft & aircraft parts, soyabean oil, olive oil, etc.

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.

Date: 28th February, 2013

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