SERVICE TAX AMENDMENTS in Budget 2014

(A)    Review of the Negative List of services

·        Levy of Service Tax on Radio-taxis/cabs

The government has proposed to levy Service Tax on Radio-taxis/cabs whether or not air-conditioned. Earlier the same was exempted from the purview of Service Tax as it was covered under the Negative list [Section 66D (o)]. In order to remove disparity between the two, the abatement presently available to rent-a-cab service would also be made available to Radio-taxis/cabs. The abatements were notified by the government vide Notification No. 25/2012-ST dated 26-06-2012. The definition of radio taxi is being included in the exemption notification No.25/2012-ST which reads as mentioned here-in-below:

“a taxi including a radio cabby whatever name called which is in two way radio communicationwith a central control office and is enabled for tracing using Global Positioning System (GPS) or General Packet Radio Service (GPRS)”.

Applicable From:

It will come into effect from a date to be notified later, after the Finance (No.2) Bill, 2014 receives the assent of the President.

·        Service Tax extended to be levied on sale of space or time for advertisements on online & mobile advertising

Earlier Service Tax was leviable on sale of space or time for advertisements in broadcast media such as ‘radio’ or ‘television’. It has been now proposed to be extended to cover:-

§  Such sales on other segments like ‘online’ and ‘mobile’ advertising;

§  Advertisements in internet websites;

§  Out-of-home media;

§  On film screen in theatres;

§  Bill boards;

§  Conveyances;

§  Buildings;

§  Cell phones;

§  Automated Teller Machines;

§  Tickets;

§  Commercial publications;

§  Aerial advertising, etc..

In this regards, it would be relevant to note that the sale of space for advertisements in print media would continue to be in the negative list and hence remain excluded from the ambit of service tax.

Now one may be in dilemma over here as in what will happen if a person provides a composite service of providing space for advertisement that is covered in the negative list entry coupled with taxable service relating to design and preparation of the advertisement. How will its taxability be determined?

This would be a case of bundled services taxability of which has to be determined in terms of the principles laid down in section 66F of the Act. Bundled services have been defined in the said section as provision of one type of service with another type or types of services. If such services are bundled in the ordinary course of business then the bundle of services will be treated as consisting entirely of such service which determines the dominant nature of such a bundle. If such services are not bundled in the ordinary course of business then the bundle of services will be treated as consisting entirely of such service which attracts the highest liability of service tax.

Applicable From:

It will come into effect from a date to be notified later, after the Finance (No.2) Bill, 2014 receives the assent of the President.

(B)    Review of General Exemptions

For ease of reference and simplicity most of the exemptions were incorporated under one single mega exemption notification 25/2012-ST dated 20/6/12. Out of 39 such entries in the Mega Exemption Notification, entry no. 7 & 23(b) stands to be withdrawn which are mentioned here-in-below for ease of reference:

·        Exemption extended to clinical research on human participants is being withdrawn [Entry No. 7]

Services by way of technical testing or analysis of newly developed drugs, including vaccines and herbal remedies, on human participants by a clinical research organisation approved to conduct clinical trials by the Drug Controller General of India has been withdrawn vide Notication No. 06/2014-ST dated 11^TH July, 2014.

For this purpose ‘contract carriage’ has the meaning assigned to it in clause (7) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988)

·        Exemption extended to ‘air-conditioned’ contract carriages like buses is being withdrawn [Entry No. 23(b)]

Earlier under the entry no. 23(b) exemption was for the transportation of passengers, with or without accompanied belongings, by a contract carriage excluding tourism, conducted tour, charter or hire whether air condition or not.

In this regards, it must be noted that the exemption has been withdrawn only for ‘air-conditioned’ contract carriages like buses vide Notication No. 06/2014-ST dated 11^TH July, 2014 and hence shall now be chargeable to Service Tax. . As a result, any service provided for transport of passenger by air-conditioned contract carriage including which are used for point to point travel, will attract service tax, with immediate effect. Service tax will be charged at an abated value of 40% of the amount charged from service receiver and the effective tax will be 4.944%

 Applicable From:

Both the aforesaid exemptions withdrawn shall be chargeable to Service Tax with immediate effect.

(C)      Rationalisation of Exemptions

Amendments in EXCISE in Budget 2014

                                  EXCISE
                AMENDMENTS IN THE CENTRAL EXCISE ACT, 1944:
 
1) The Central Excise Act, 1944 or Finance Act, 1994 is being amended so that a reference in that Act to a Chief Commissioner of Central Excise or a Commissioner of Central Excise may also include a reference to the Principal
Chief Commissioner of Central Excise or the Principal Commissioner of Central Excise, as the case may be. It also seeks to provide for consequential amendments in the Act. [Clause 88]
2) Section 2(b) is being amended so as to provide for inclusion of Principal Chief Commissioner of Central Excise and Principal Commissioner of Central Excise in the definition of the Central Excise Officer. [Clause 89]
3) Section 15A is being inserted so as to empower the Central Government to prescribe an authority or agency to whom the information return shall be filed by the specified persons such as Income Tax Authorities, State Electricity Boards, VAT or Sales Tax Authorities, Registrar of Companies. Information can be collected for the purposes of the Act, such as, to identify tax evaders or recover confirmed dues. It is also proposed to insert a new section 15B which provides for imposition of penalty if the information return is not submitted. [Clause 90]
4) Section 31(g) and section 32(1) is being amended to change the name of the ‘Customs and Central Excise Settlement Commission’ to the ‘Customs, Central Excise and Service Tax Settlement Commission’ as the scope of the functioning
of the Customs and Central Excise Settlement Commission was expanded in the year 2012 so as to include settlement of Service Tax matters as well. [Clause 91, 92]
5) Section 32E(1) is being amended to replace the reference to section 11AB with a reference to section 11AA since section 11AB has been omitted by the Finance Act, 2011. [Clause 93]
6) Section 32E(1) is also being amended to allow filing of applications of settlement before the Settlement Commission in cases where the applicant has not filed the returns after recording reasons for the same. [Clause 93]
7) Section 32E is being amended to omit sub-section (2) since the same is redundant. [Clause 93]
8) Section 32O(1) is being amended so as to insert an Explanation that the concealment of particulars of duty liability relates to any such concealment made from the officer of central excise and not from the Settlement Commission.[Clause 94]
9) Section 35B(1) is being amended so as to increase the discretionary powers of the Tribunal to refuse admission of appeal from the existing Rs.50,000 to Rs.2 lakh. [Clause 95]
10) Section 35B(1B) is being amended to substitute the words “by notification in the official gazette” with “by order” so as to enable the Board to constitute a Review Committee by way of an order instead of by way of a notification.
[Clause 95]
11) Section 35C(2A) is being amended to omit the first, second and third proviso in view of substitution of section 35F with a new section. [Clause 96]
12) Section 35E is being amended to insert a proviso in sub-section (3) to vest the Board with powers to condone delay for a period upto 30 days for review by the Committee of Chief Commissioners of the orders in original passed by the
Commissioner of Central Excise. [Clause 97]
13) Section 35F is being substituted with a new section to prescribe a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both for filing appeal with the Commissioner (Appeals) or the Tribunal at the first stage and 10% of the duty demanded or penalty imposed or both for filing second stage appeal before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of Rs. 10 crores. [Clause 98]
14) Section 35L is being amended so as to clarify that determination of disputes relating to taxability or excisability of goods is covered under the term ‘determination of any question having a relation to rate of duty’ and hence, appeal against
Tribunal orders in such matters would lie before the Supreme Court. [Clause 99]
15) Section 35R is being amended so as to enable the Commissioner (Appeal) to take into consideration the fact that a particular order being cited as a precedent decision on the issue has not been appealed against for reasons of low amount. [Clause 100]
16) The Third Schedule to the Central Excise Act, 1944 is being aligned with noti fication No. 49/2008-CE (NT) dated 24.12.2008 which specifies goods liable for assessment based on Retail Sale Price (RSP). [Clause 104]
The change at para 16) will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931.

AMENDMENTS IN THE FIRST SCHEDULE TO THE CENTRAL EXCISE TARIFF ACT, 1985:1) Excise duty on cigarettes is being increased by 72% for cigarettes of length not exceeding 65 mm and by 11% to 21% for cigarettes of other lengths. Similar increases are proposed on cigars, cheroots and cigarillos.
2) Basic excise duty is being increased from 12% to 16% on pan masala, from 50% to 55% on unmanufactured tobacco and from 60% to 70% on jarda scented tobacco, gutkha and chewing tobacco.
3) Tariff item 2402 20 60 is being omitted.
4) The entry 2403 19 occurring against the description “Other than paper rolled biris, manufactured without the aid of machine” is being substituted with 2403 19 21.
5) The unit quantity code against certain entries is being changed. [Clause 105]
The changes at 1) to 4) will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931.

RETROSPECTIVE AMENDMENT TO RULES:
1) Rule 8 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 is being amended with retrospective effect from 13.04.2010 to provide that where a manufacturer manufactures pouches of
different RSPs on a single machine, the duty liability for that month would be the duty applicable to the highest of the RSP so manufactured. This will align the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 with the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 with regard to manufacture of pouches of different RSPs on a single machine under the compounded levy scheme. [Clause 101]

RETROSPECTIVE EXEMPTIONS:
1) Un-branded articles of precious metals are being exempted from excise duty for the period 01.03.2011 to 16.03.2012 so as to remove the unintended levy of excise duty on un-branded articles of precious metals for the said period.
[Clause 102]
2) Excise duty on Polyester Staple Fiber (PSF) and Polyester Filament Yarn (PFY) manufactured from plastic waste or scrap or plastic waste including waste polyethylene terephthalate (PET) bottles (which is already exempt w.e.f. 08.05.2012) is being exempted retrospectively w.e.f. 29.06.2010 to 07.05.2012 and intermediate product ‘Tow’ arising during the course of manufacture of such PSF/PFY is being exempted retrospectively w.e.f. 29.06.2010 to 10.07.2014 so as to provide relief to the manufacturers of such PSF/PFY and to rectify the unintended levy of central excise duty on tow (an intermediate product) arising during the course of manufacture of such PSF/PFY. [Clause 102, 103]
3) Full exemption from Central Excise duty is being provided to Liquefied Propane and Butane mixture, Liquefied Propane, Liquefied Butane and Liquefied Petroleum Gases (LPG) for supply to Non-Domestic Exempted Category (NDEC)
customers by the Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited or Bharat Petroleum
Corporation Limited retrospectively from 08.02.2013 so as to treat NDEC customers, such as, hospitals, government canteens, BSF/CISF mess, etc., at par with domestic customers for the purposes of supply of LPG. [Clause 103]
 
Proposals involving changes in rates of duty:
I. AGRICULTURE/AGRO PROCESSING/PLANTATION SECTOR:1) Excise duty on machinery for the preparation of meat, poultry, fruits, nuts or vegetables, and on presses, crushers and similar machinery used in the manufacture of wine, cider, fruit juices or similar beverages and on packaging machinery is being reduced from 10% to 6%.
II. AUTOMOBILES:
1) Excise duty is being exempted on parts of tractors removed from one or more factories of a tractor manufacturer to another factory of the same manufacturer for manufacture of tractors.
III. METALS:
1) Excise duty on winding wires of copper is being increased from 10% to 12%.
IV. PRECIOUS METALS
1) Un-branded articles of precious metals are being exempted from excise duty for the period 01.03.2011 to 16.03.2012.
V. TEXTILES:
1) Excise duty on Polyester Staple Fiber (PSF) and Polyester Filament Yarn (PFY) manufactured from plastic waste or scrap or plastic waste including waste polyethylene terephthalate (PET) bottles (which is already exempt w.e.f. 08.05.2012) is being exempted retrospectively w.e.f. 29.06.2010 to 07.05.2012 and intermediate product ‘Tow’ arising during the course of manufacture of such PSF/PFY is being exempted retrospectively w.e.f. 29.06.2010 to 10.07.2014.
2) Excise duty at the rate of 2% (without CENVAT) or 6% (with CENVAT) is being imposed on Polyester Staple Fiber and Polyester Filament Yarn manufactured from plastic waste or scrap or plastic waste including waste polyethylene terephthalate (PET) bottles w.e.f. 11th July, 2014.
VI. HEALTH:
1) Full exemption from excise duty is being provided to DDT manufactured by Hindustan Insecticides Limited for supply to the National Vector Borne Diseases Control Programme (NVBDCP) of the Ministry of Health & Family Welfare.
2) Full exemption from excise duty is being provided for HIV/AIDS drugs and diagnostic kits supplied under National AIDS Control Programme (NACP) funded by the Global Fund to Fight AIDS, TB and Malaria (GFATM).
3) Excise duty on cigarettes is being increased by 72% for cigarettes of length not exceeding 65 mm and by 11% to 21% for cigarettes of other lengths. Similar increases are proposed on cigars, cheroots and cigarillos.
4) Basic excise duty is being increased from 12% to 16% on pan masala, from 50% to 55% on unmanufactured tobacco and from 60% to 70% on jarda scented tobacco, gutkha and chewing tobacco.
VII. ELECTRONICS/HARDWARE:
1) Excise duty on recorded smart cards is being increased from 2% without CENVAT and 6% with CENVAT to a uniform rate of 12%.
2) Full exemption from Excise Duty is being provided to reverse osmosis (RO) membrane element used in water filtration or purification equipment (other than household type filter). Excise duty on RO membrane element used in household
type filters is being reduced from 12%/10% to 6%.
3) Excise duty on Metal Core PCB and LED driver for use in the manufacture of LED lights and fixtures and LED lamps, is being reduced from 12%/10% to 6%.
VIII. RENEWABLE ENERGY
1) Excise duty is being reduced from 12% to Nil on forged steel rings used in the manufacture of bearings of wind operated electricity generators.
2) Full exemption from excise duty is being provided for solar tempered glass used in the manufacture of solar photovoltaic cells/modules, solar power generating equipment/system, and flat plate solar collectors.
3) Full exemption from excise duty is being granted in respect of machinery, equipments, etc. required for setting up of solar energy production projects.
4) Full exemption from excise duty is being provided to backsheet and EVA sheet used in the manufacture of photovoltaic cells/modules and specified raw materials used in their manufacture.
5) Full exemption from excise duty is being provided to parts consumed within the factory of production for the manufacture of non-conventional energy devices [Sl.No.332 of notification No.12/2012-CE, dated 17.03.2012].
6) Full exemption from Excise Duty is being provided on flat copper wire used in the manufacture of PV ribbons (tinned copper interconnect) for use in the manufacture of solar cells/modules.
7) Full exemption from excise duty is being provided on machinery, equipments, etc. required for setting up of compressed biogas plant (Bio-CNG).
IX. CONSUMER GOODS
1) The scope of the phrase “not mixed with any other ingredient” in the context of excise duty exemption on “heena powder or paste, not mixed with any other ingredient” is being clarified so as to provide that the exemption is available to heena powder mixed with a liquid, so far that the liquid is a medium to change the form of heena powder into paste but excludes products like heena dye and such other products which are cosmetics and have no ceremonial or traditional value.
2) Excise duty is being reduced from 12% to 6% on footwear of retail price exceeding Rs.500 per pair but not exceeding Rs.1,000 per pair. Footwear of retail price upto Rs.500 per pair will continue to remain exempted.
3) Excise duty on hand operated sewing machine (2% without CENVAT / 6% with CENVAT) is being rationalized by levying concessional excise duty on sewing machines other than those operated with electric motors (whether in-built or attachable to the body)
4) Semi- mechanized units manufacturing safety matches, which attract concessional excise duty of 6%, are being allowed to carry out the processes of ‘Pasting of labels’ and ‘Packing’ with the aid of power.
5) Concessional excise duty of 2% without CENVAT credit and 6% with CENVAT credit is being extended to gloves specially designed for use in sports.
6) An additional duty of excise is being levied at the rate of 5% ad valorem on aerated waters containing added sugar.
X. ENERGY SECTOR
1) Central Excise duty on Branded Petrol is being reduced from Rs.7.50 per litre to Rs. 2.35 per litre.
2) Full exemption from Central Excise duty is being provided to Liquefied Propane and Butane mixture, Liquefied Propane, Liquefied Butane and Liquefied Petroleum Gases (LPG) for supply to Non-Domestic Exempted Category (NDEC)
customers by the Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited or Bharat Petroleum Corporation Limited retrospectively from 08.02.2013.
3) The rate of Clean Energy Cess levied on coal, lignite and peat is being increased from Rs.50 per tonne to Rs. 100 per tonne.
XI. SECURITY AND STRATEGIC PURPOSES:
1) Full exemption from Excise Duty is being provided to goods supplied to National Technical Research Organisation (NTRO).
2) Full exemption from excise duty is being provided for security threads and security fibre supplied to Security Paper Mill Corporation of India Limited (SPMCIL) and Bank Note Paper Mill India Private Limited (BNPMIPL).
XII. MISCELLANEOUS
1) Optional excise duty of 2% (without CENVAT)/6% (with CENVAT) on writing and printing paper for printing of educational textbooks is being withdrawn and instead a uniform excise duty of 6% with CENVAT is being levied.
2) Intermediate goods manufactured and consumed captively for further manufacture of matches is being fully exempted.
3) The scope of the Excise Duty exemption to “all goods supplied against International Competitive Bidding” is being clarified to the effect that the said exemption is also available to sub-contractors for manufacture and supply of goods to the main contractor (who has won the bid for the project through ICB) for execution of the said project.
4) Full exemption from Excise duty is being provided on plastic materials reprocessed out of the scrap or waste and cleared into the DTA by an EOU.
5) Education cess and secondary & higher education cess (customs component) is being exempted on goods cleared by an EOU into the DTA.
6) A clarification is being issued that the exemption from education cess and secondary & higher education cess under notifications No.28/2010-CE and No.29/2010-CE, both dated 22.06.2010 is applicable only in respect of the clean
energy cess leviable on coal and not in respect of excise duty leviable on coal.
7) It is being clarified that all goods falling under headings 8601 to 8606 (except 8604) attract 6% excise duty with CENVAT benefit.
MISCELLANEOUS
1) The Seventh Schedule to the Finance Act, 2001 dealing with National Calamity Contingent Duty is being amended to omit the tariff item 2402 20 60 as a consequential change to amendment in the First Schedule to the Central Excise Tariff Act.
This change will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931.
[Clause 107]
2) The Seventh Schedule to the Finance Act, 2005 dealing with Additional Excise Duty is being amended so as to:
(a) impose an additional duty of excise at the rate of 5% ad valorem on aerated waters containing added sugar.(b) omit the tariff item 2402 20 60 as a consequential change to amendment in the First Schedule to the Central Excise Tariff Act.
These changes will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931.
[Clause 110]
3) The Tenth Schedule to the Finance Act, 2010 dealing with Clean Energy Cess is being amended so as to expand the scope of purposes of levy of the said cess to include clean environment initiatives and funding research in the area of
clean environment. [Clause 111]

Amendments in CUSTOMS ACT in Budget 2014

A. General
1) Baggage Rules are being amended to,-
(i) raise the free baggage allowance from Rs.35,000 to Rs.45,000.
(ii) reduce the duty free allowance of cigarettes from 200 to 100, of cigars from 50 to 25 and of tobacco from 250 gms to 125 gms.

B. Proposals involving changes in rates of duty:
I. AGRICULTURE/AGRO PROCESSING/PLANTATION SECTOR:
1) Description of the product “sun dried dark seedless raisins” in notification No.12/2012-Customs, dated 17.03.2012, which attracts concessional Basic Customs Duty of 30% is being changed to “dark seedless raisins”.
2) Full exemption from customs duty is being granted to de-oiled soya extract, groundnut oil cake/oil cake meal, sunflower oil cake/oil cake meal, canola oil cake/oil cake meal, mustard oil cake/oil cake meal, rice bran/rice bran oil cake and palm kernel cake, up to 31.12.2014.

II. CHEMICALS AND PETROCHEMICALS
1) Basic Customs duty on reformate is being reduced from 10% to 2.5%. Basic Customs duty on propane, ethane, ethylene, propylene, butadiene is being reduced from 5% to 2.5%.
2) Basic Customs Duty on ortho-xylene is being reduced from 5% to 2.5%.
3) Basic Customs Duty on denatured ethyl alcohol and methyl alcohol is being reduced from 7.5% to 5%.
4) Basic Customs Duty on crude naphthalene is being reduced from 10% to 5%.
5) Basic Customs Duty on fatty acids, crude palm stearin, RBD and other palm stearin and specified industrial grade crude oils is being reduced from 7.5% to Nil for manufacture of soaps and oleochemicals subject to actual user condition.
Basic Customs Duty is also being reduced on crude glycerine from 12.5% to 7.5% in general and from 12.5% to Nil for manufacture of soaps subject to actual user condition.

III. ENERGY SECTOR
1) The duty structure on non-agglomerated coal of various types is being rationalized at 2.5% BCD and 2% CVD. Accordingly, the BCD on Coking coal is being increased from NIL to 2.5% and on steam coal and bituminous coal from
2% to 2.5%. The BCD on anthracite coal and other coal is being reduced from 5% to 2.5%. The CVD on Anthracite coal, Coking coal and other Coal is being reduced from 6% to 2%.
2) Basic Customs Duty on metallurgical coke is being increased from Nil to 2.5%.
3) Exemption from Basic Customs Duty is being granted on re-gasified LNG for supply to Pakistan.
4) Liquefied Propane and Butane mixture, Liquefied Propane, Liquefied Butane and Liquefied Petroleum Gases (LPG) imported by the Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited or Bharat Petroleum
Corporation Limited, for supply to Non-Domestic Exempted Category (NDEC) customers is being fully exempted retrospectively w.e.f. 08.02.2013.

IV. TEXTILES:
1) The duty free entitlement for import of trimmings & embellishments used by the readymade textile garment sector for manufacture of garments for export is being increased from 3% to 5%.
2) Non-fusible embroidery motifs or prints are being included in the list of items eligible to be imported duty free for manufacture of garments for export.
3) The list of specified goods required by handicraft manufacturer-exporters is being expanded by including wire rolls so as to provide Customs Duty exemption on import by handicraft manufacturer-exporters.
4) Fusible embroidery motifs or prints, anti-theft devices, pin bullets for packing, plastic tag bullets, metal tabs, bows, ring and slider hand rings are being included in the list of items eligible to be imported duty free for  manufacture of handloom made ups or cotton made ups or manmade made ups for export.
5) Specified goods imported for use in the manufacture of textile garments for export are fully exempt from BCD and CVD subject to the condition that the manufacturer produces an entitlement certificate from the Apparel Export Promotion Council. In addition, Indian Silk Export Promotion Council (ISEPC) is being authorised to issue entitlement certificate.
6) Basic Customs Duty on raw materials for manufacture of spandex yarn viz. Polytetramethylene ether glycol (PT MEG) and Diphenylmethane 4,4 di-isocyanate (MDI) is being reduced from 5% to Nil.

V. METALS:
1) Basic Customs Duty on stainless steel flat products (CTH 7219 and 7220) is being increased from 5% to 7.5%
2) The BCD on ships imported for breaking up is being reduced from 5% to 2.5%.
3) Export duty on bauxite is being increased from 10% to 20% .
4) Basic Customs Duty on coal tar pitch is being reduced from 10% to 5%.
5) Basic Customs Duty on battery waste and battery scrap is being reduced from 10% to 5%
6) Basic Customs Duty on steel grade limestone and steel grade dolomite is being reduced from 5% to 2.5%.

VI. PRECIOUS METALS:
1) Basic Customs Duty on half-cut or broken diamonds is being increased from NIL to 2.5% and on cut & polished diamonds and colored gemstones from 2% to 2.5%.
2) Full exemption from Basic Customs Duty is being granted to pre-forms of precious and semi-precious stones.
3) The variation level and the parameter of measurement in respect of re-import of cut and polished diamonds after certification/grading from a foreign laboratory/agency are being increased as a trade facilitation measure.

VII. ELECTRONICS/HARDWARE:
1) Basic Customs Duty on LCD and LED TV panels of below 19 inches is being reduced from 10% to NIL.
2) Basic Customs Duty is being exempted on specified parts of LCD and LED panels for TVs.
3) Basic Customs Duty on colour picture tubes for manufacture of cathode ray TVs is being reduced from 10% to NIL.
4) Basic Customs Duty on specified telecommunication products not covered under the ITA (Information Technology Agreement) is being increased from NIL to 10%.
5) Special Additional Duty (SAD) on all inputs/components used in the manufacture of Personal Computers (laptops/ desktops) and tablet computers is being exempted, subject to actual user condition.
6) Education cess and Secondary and Higher Education (SHE) cess is being levied on imported electronic products.
7) Full exemption from Special Additional Duty (SAD) is being provided on specified inputs (PVC sheet & Ribbon) used in the manufacture of smart cards.
8) Basic Customs Duty is being reduced from 7.5% to NIL on E-Book readers.
9) CVD exemption on portable X-ray machine / system is being withdrawn.

VIII. RENEWABLE ENERGY:
1) Basic Customs Duty is being reduced from 10% to 5% on forged steel rings used in the manufacture of bearings of wind operated electricity generators.
2) Full exemption from Special Additional Duty is being provided on parts and components required for the manufacture of wind operated electricity generators.
3) Basic customs duty on machinery, equipments, etc. required for setting up of solar energy production projects is being reduced to 5%.
4) Full exemption from Basic Customs Duty is being provided on specified raw materials used in the manufacture of solar backsheet and EVA sheet.
5) Full exemption from Basic Customs Duty is being provided on flat copper wire used in the manufacture of PV ribbons (tinned copper interconnect) for solar PV cells/modules.
6) Concessional customs duty of 5% is being provided on machinery, equipments, etc. required for setting up of compressed biogas plant (Bio-CNG).

IX. CAPITAL GOODS/INFRASTRUCTURE:
1) It is being clarified that road construction machinery imported duty free can be sold within 5 years of importation subject to payment of customs duty on depreciated value and that individual constituents of the consortium whose names appear in the contract can import goods without payment of duty.
2) State Governments concerned are being notified as sponsoring authority for Metro Rail Projects covered under the Project Import Regulations, 1986.
3) Plants & Equipment imported prior to 2008 for use in projects financed by the UN or an international organization, which hitherto could not be transferred / sold / re-exported out of the project site, are now being allowed to be transferred / sold / re-exported from the project site.
4) The requirement of certification by Ministry of Road Transport (or NHAI) for availing of customs duty exemption on specified goods required for construction of roads is being done away with. 
5) Director (Electrical) is being authorized to issue the requisite certificate to enable Delhi Metro Rail Corporation to avail of Nil BCD and Nil CVD benefits in respect of their Phase-1 and Phase-2 projects instead of Director (Rolling Stock,
Electrical & Signalling) at present.

X. HEALTH
1) Full exemption from customs duty is being provided for HIV/AIDS drugs and diagnostic kits imported under National AIDS Control Programme (NACP) funded by the Global Fund to Fight AIDS, TB and Malaria (GFATM).

XI. SECURITY AND STRATEGIC PURPOSES:
1) Full exemption from Basic customs Duty is being provided to goods imported by National Technical Research Organisation (NTRO).
2) Full exemption of customs duty is being provided on security fibre, security threads and M-feature imported by Bank Note Paper Mill India Private Limited (BNPMIPL), Mysore. Full exemption from BCD and CVD is also being provided for raw materials required for manufacture of security threads and security fibre subject to actual user condition.
3) The scope of exemption notification No.39/96-Customs dated 23.07.1996 [S.No.7] granting full exemption from BCD and CVD on goods imported for use in the manufacture of aircrafts for the Ministry of Defence is being clarified to the effect that the exemption is available to all materials in any form and articles thereof, subject to the overall condition that they conform to aeronautical specification accompanied with certificate of conformance/release note/airworthiness certificate for development.

XII. AIRCRAFTS & SHIPS:
1) It is being clarified that aircraft engines and parts thereof are eligible for duty exemption when imported for servicing, repair or maintenance of aircrafts used for scheduled operations.

XIII. MISCELLANEOUS:
1) Tariff item 3903 19 90 is being deleted from notification No.10/2008-Customs, [India-Singapore Comprehensive Economic Co-operation Agreement (CECA)]. As a result, Basic Customs Duty on Polystyrene (other than moulding
powder) is being increased from 1.15% to 7.5%.
2) Basic Customs Duty is being reduced from 5% to 2.5% on electrolysers and their parts/spares required by caustic soda or caustic potash units and membranes and their parts/spares required by industrial plants based on membrane cell technology. The BCD on other spares (other than membranes and parts thereof) is also being reduced from 7.5% to 2.5%.
3) A provision is being made for refund of Customs duty paid at the time of import of scientific and technical instruments, apparatus, etc. by public funded and other research institutions, subject to submission of a certificate of registration from the Department of Scientific & Industrial Research (DSIR).
4) Section 8B of the Customs Tariff Act, 1975 is being amended so as to provide for levy of safeguard duty on inputs/raw materials imported by an EOU and cleared into DTA as such or are used in the manufacture of final products & cleared into DTA.

Failure to cooperate with Income Tax Deparment can lead to imprisonment

                     Failure to produce accounts and documents


The existing provisions of section 276D of the Act provide that if a person willfully fails to produce accounts and documents as required in any notice issued under sub-section (1) of section 142 or willfully fails to comply with a direction issued to him under sub-section (2A) of section 142, he shall be punishable with rigorous imprisonment for a term which may extend to one
year or with fine equal to a sum calculated at a rate which shall not be less than four rupees or more than ten rupees for every day during which the default continues, or with both.

It is proposed to amend the provisions of the said section so as to provide that if a person willfully fails to produce accounts and documents as required in any notice issued under sub-section (1) of section 142 or willfully fails to comply with a direction issued to him under sub-section (2A) of section 142, he shall be punishable with rigorous imprisonment for a term which may extend to one year and with fine.

This amendment will take effect from 1st October, 2014.

Mutual Funds and other Venture Funds to file Income Tax Returns

    Mutual Funds, Securitisation Trusts and Venture Capital Companies
        or Venture Capital Funds to file return of income
 
The existing provisions contained in section 139 of the Act provide that every person being a company or a firm or being a person, other than a company or firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeds the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. Apart from the above, certain other entities, who are not chargeable to income-tax in accordance with the provisions of section 10, are obligated to file their return of income if their total income without giving effect to the provisions of section 10, exceeds the maximum amount which is not chargeable to income-tax.

Clause (23D) of section 10 exempts the income of a Mutual Fund, clause (23DA) of section 10 exempts the income of a securitisation trust from the activity of securitisation and clause (23FB) of section 10 exempts the income of a venture capital company (VCC) or venture capital fund (VCF) from investment in a venture capital undertaking. The Mutual Fund or securitisation trust or VCC or VCF are not obligated to furnish their return of income under section 139 of the Act. Instead they are required to furnish a statement giving details of the nature of the income paid or credited during the previous year and such other relevant
details as may be prescribed.

It is proposed to amend sub-section (4C) of section 139 so as to provide that Mutual Fund referred to in clause (23D) of section 10, securitization trust referred to in clause (23DA) of section 10 and Venture Capital Company or Venture Capital Fund referred to in clause (23FB) of section 10 shall, if the total income in respect of which such fund, trust or company is assessable, without
giving effect to the provisions of section 10, exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed forms and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of the Act, so far as may be, apply as if it were a return required to be furnished under sub-section (1) of section 139.

Further, in the case of the Mutual Funds and securitisation trusts referred to above, the requirement of filing of statements before an income-tax authority is proposed to be dispensed with by omitting sub-section (3A) of section 115R and sub-section (3) of section 115TA.

CSR expenditure will be taxable!

                            Corporate Social Responsibility (CSR)
 
Under the Companies Act, 2013 certain companies (which have net worth of Rs.500 crore or more, or turnover of Rs.1000 crore or more, or a net profit of Rs.5 crore or more during any financial year) are required to spend certain percentage of their profit on activities relating to Corporate Social Responsibility (CSR). Under the existing provisions of the Act expenditure incurred wholly and exclusively for the purposes of the business is only allowed as a deduction for computing taxable business income.

CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purposes of carrying on business. As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for computing the taxable income of the company. Moreover, the objective of CSR
is to share burden of the Government in providing social services by companies having net worth/turnover/profit above a threshold.

If such expenses are allowed as tax deduction, this would result in subsidizing of around one-third of such expenses by the Government by way of tax expenditure. The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes
of carrying on business, such expenditures cannot be allowed under the existing provisions of section 37 of the Income-tax Act.

Therefore, in order to provide certainty on this issue, it is proposed to clarify that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and hence shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfillment of conditions, if any, specified therein.

This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years.

TDS on taxable life insurane policy payoff

Tax deduction at source from non-exempt payments made under life insurance policy

Under the existing provisions of section 10(10D) of the Act, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt subject to fulfillment of conditions specified under the said section.
Therefore, the sum received under a life insurance policy which does not fulfill the conditions specified under section 10(10D) are taxable under the provisions of the Act.
 

In order to have a mechanism for reporting of transactions and collection of tax in respect of sum paid under life insurance policies which are not exempted under section 10(10D) of the Act, it is proposed to insert a new section in the Act to provide for deduction of tax at the rate of 2 per cent. on sum paid under a life insurance policy, including the sum allocated by way of bonus, which are not exempt under section 10(10D) of the Act. In order to reduce the compliance burden on the small tax payers, it has also been proposed that no deduction under this provision shall be made if the aggregate sum paid in a financial year to an assessee is less than Rs.1,00,000/-.

This amendment will take effect from 1st October, 2014.

House Loan Interest component deduction increased to 2 Lacs

                     Deduction from income from house property
 
The existing provisions contained in section 24 of the Act provide that income chargeable under the head “Income from house property” shall be computed after making certain deductions. Clause (b) of the said section provides that where the property is acquired with borrowed capital, the amount of any interest payable on such capital shall be allowed as deduction in computing the income from house property. The second proviso to clause (b) of the said section, inter-alia, provides that in case of selfoccupied property where the acquisition or construction of the property is completed within three years from the end of the financial year in which the capital is borrowed, the amount of deduction under that clause shall not exceed one lakh fifty thousand rupees.

There has been appreciation in the value of house property and accordingly cost of finance has also gone up.

Therefore, it is proposed to amend the second proviso to clause (b) of said section 24, so as to increase the limit of deduction on account of interest in respect of property referred to in sub-section (2) of section 23 to two lakh rupees.

This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year
2015-16 and subsequent assessment years.

35AD and 10AA now mutually exclusive

The existing provisions of sub-section (3) of the section 35AD provide that where any assessee has claimed a deduction under this section, no deduction shall be allowed under the provisions of Chapter VIA for the same or any other assessment year. As section 10AA also provides for profit linked deduction in respect of units set-up in Special Economic Zones, it is proposed to amend section 35AD so as to provide that where any deduction has been availed of by the assessee on account of capital expenditure incurred for the purposes of specified business in any assessment year, no deduction under section 10AA shall be available to the assessee in the same or any other assessment year in respect of such specified business.

As a consequence of this amendment, section 10AA is also proposed to be amended so as to provide that no deduction under section 35AD shall be available in any assessment year to a specified business which has claimed and availed of deduction under section 10AA in the same or any other assessment year.

These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year
2015-16 and subsequent assessment years.

Specified Business increased under section 35AD

Deduction in respect of capital expenditure on specified business

Under the existing provisions of section 35AD of the Act, investment-linked tax incentive is provided by way of allowing a deduction in respect of the whole of any expenditure of capital nature (other than expenditure on land, goodwill and financial instrument) incurred wholly and exclusively, for the purposes of the “specified business” during the previous year in which such expenditure is incurred. Currently, the following “specified businesses” are eligible for availing the investment-linked deduction under section 35AD as enumerated in clause (c) of sub-section (8) of the said section:-

(i) setting up and operating a cold chain facility;
(ii) setting up and operating a warehousing facility for storage of agricultural produce;
(iii) laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network;
(iv) building and operating, anywhere in India, a hotel of two-star or above category as classified by the Central Government;
(v) building and operating, anywhere in India, a hospital with at least one hundred beds for patients;
(vi) developing and building a housing project under a scheme for slum redevelopment or rehabilitation, framed by the Central Government or a State Government, as the case may be, and notified by the Board in accordance with the prescribed guidelines;
(vii) developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in accordance with the prescribed guidelines;
(viii) production of fertilizer in India;
(ix) setting up and operating an inland container depot or a container freight station notified or approved under the Customs Act, 1962;
(x) bee-keeping and production of honey and beeswax; and
(xi) setting up and operating a warehousing facility for storage of sugar;
 

It is proposed to include two new businesses as “specified business” for the purposes of the investment-linked deduction
under section 35AD so as to promote investment in these sectors, which are :-
(a) laying and operating a slurry pipeline for the transportation of iron ore;
(b) setting up and operating a semiconductor wafer fabrication manufacturing unit, if such unit is notified by the Board in accordance with the prescribed guidelines.

It is also proposed to provide that the date of commencement of operations for availing investment linked deduction in respect
of the two new specified businesses shall be on or after 1st April, 2014.

Non deduction disallowance now at 30%, 40(a)(ia) extends to entire Chapter XVII-B

Disallowance of expenditure for non- deduction of tax at source
 
The existing provisions of section 40(a)(i) of the Act provide that certain payments such as interest, royalty and fee for technical services made to a non-resident shall not be allowed as deduction for computing business income if tax on such payments was not deducted, or after deduction, was not paid within the time prescribed under section 200(1) of the Act. The Act contains similar
provisions for disallowance of business expenditure in respect of certain payments made to the residents. 
Under section 40(a)(ia) of the Act, in case of payments made to resident, the deductor is allowed to claim deduction for payments as expenditure in the previous year of payment, if tax is deducted during the previous year and the same is paid on or before the due date specified for filing of return of income under section 139(1) of the Act. However, in case of disallowance for non-payment of tax from payments made to non-residents, this extended time limit of payment up to the date of filing of return of income under section 139(1) is not available.

In order to provide similar extended time limit for payment of tax deducted from payments made to non-residents, it is proposed that the deductor shall be allowed to claim deduction for payments made to non-residents in the previous year of payment, if tax is deducted during the previous year and the same is paid on or before the due date specified for filing of return under section 139(1) of the Act.

As mentioned above, in case of non-deduction or non-payment of tax deducted at source (TDS) from certain payments made to residents, the entire amount of expenditure on which tax was deductible is disallowed under section 40(a)(ia) for the purposes of computing income under the head “Profits and gains of business or profession". The disallowance of whole of the amount of expenditure results into undue hardship.

In order to reduce the hardship, it is proposed that in case of non-deduction or non-payment of TDS on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed.

Further, existing provisions of section 40(a)(ia) of the Act provides that certain payments such as interest, commission, brokerage, rent, royalty fee for technical services and contract payment made to a resident shall not be allowed as deduction for computing business income if tax on such payments was not deducted, or after deduction, was not paid within the time specified under the said section. Chapter XVII-B of the Act mandates deduction of tax from certain other payments such as salary, directors fee, which are currently not specified under section 40(a)(ia) of the Act. The payments on which tax is deductible under Chapter XVII-B but not specified under section 40(a)(ia) of the Act may also be claimed as expenditure for the purposes of computation of income under the head “Profits and gains from business or profession”.

Section 40(a)(ia) has proved to be an effective tool for ensuring compliance of TDS provisions by the payers. Therefore, in order to improve the TDS compliance in respect of payments to residents which are currently not specified in section 40(a)(ia), it is proposed that the disallowance under section 40(a)(ia) of the Act shall extend to all expenditure on which tax is deductible under Chapter XVII-B of the Act.

These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years.

Ambiguity cleared regarding investment of 'a residential house'

Capital gains exemption in case of investment in a residential house property

The existing provisions contained in sub-section (1) of section 54, inter alia, provide that where capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases, or within a period of three years after the date of transfer constructs, a residential house then the amount of capital gains to the extent invested in the new residential house is not chargeable to tax under section 45 of the Act.

The existing provisions contained in sub-section (1) of section 54F, inter alia, provide that where capital gains arises from transfer of a long-term capital asset, not being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases, or within a period of three years after the date of transfer constructs, a residential house then the portion of capital gains in the ratio of cost of new asset to the net consideration received on transfer is not chargeable to tax.

The benefit was intended for investment in one residential house within India. Accordingly, it is proposed to amend the aforesaid sub-section (1) of section 54 so as to provide that the rollover relief under the said section is available if the investment is made in one residential house situated in India.

It is further proposed to amend the aforesaid sub-section (1) of section 54F so as to provide that the exemption is available if the investment is made in one residential house situated in India. 

These amendments will take effect from 1st April, 2015 and will accordingly apply in relation to assessment year 2015-16 and subsequent assessment years.

Rates of Income Tax for various taxpayers

Individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person
  

(i) The rates of income-tax in the case of every individual (other than those mentioned in (ii) and (iii) below) or Hindu undivided family or every association of persons or body of individuals, whether incorporated or not, or every artificial
juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act (not being a case to which any other Paragraph of Part III applies) are as under:—

                                    Upto Rs.2,50,000                                  Nil.

                                    Rs. 2,50,001 to Rs. 5,00,000             10 per cent.
                                    Rs. 5,00,001 to Rs. 10,00,000           20 per cent.
                                    Above Rs. 10,00,000                        30 per cent.

(ii) In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year,—
                                    Upto Rs.3,00,000                                  Nil.
                                    Rs. 3,00,001 to Rs. 5,00,000             10 per cent.
                                    Rs. 5,00,001 to Rs.10,00,000            20 per cent.
                                    Above Rs. 10,00,000                        30 per cent.
 
(iii) in the case of every individual, being a resident in India, who is of the age of eighty years or more at anytime during the previous year,—

                                     Upto Rs. 5,00,000                                  Nil.
                                     Rs. 5,00,001 to Rs. 10,00,000            20 per cent.
                                     Above Rs. 10,00,000                         30 per cent.
 
The amount of income-tax computed in accordance with the preceding  provisions of this Paragraph shall be increased by a surcharge at the rate of ten percent. of such income-tax in case of a person having a total income exceeding one crore rupees. 

However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

B. Co-operative Societies
In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Bill. These rates will continue to be the same as those specified for financial year 2013-14.
The amount of income-tax shall be increased by a surcharge at the rate of ten percent. of such income-tax in case of a cooperative society having a total income exceeding one crore rupees .
However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

C. Firms
In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for financial year 2013-2014.
The amount of income-tax shall be increased by a surcharge at the rate of ten percent. of such income-tax in case of a firm having a total income exceeding one crore rupees .
However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
 
D. Local authorities
The rate of income-tax in the case of every local authority is specified in Paragraph D of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for the financial year 2013-2014.
The amount of income-tax shall be increased by a surcharge at the rate of ten percent. of such income-tax in case of a local authority having a total income exceeding one crore rupees .
However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

E. Companies
The rates of income-tax in the case of companies are specified in Paragraph E of Part III of the First Schedule to the Bill.
These rates are the same as those specified for the financial year 2013-2014.
The existing surcharge of five per cent in case of a domestic company shall continue to be levied if the total income of the domestic company exceeds one crore rupees but does not exceed ten crore rupees. The surcharge at the rate of ten percent shall continue to be levied if the total income of the domestic company exceeds ten crore rupees. In case of companies other than domestic companies, the existing surcharge of two per cent. shall continue to be levied if the total income exceeds one crore rupees but does not exceed ten crore rupees. The surcharge at the rate of five percent shall continue to be levied if the total income of the company other than domestic company exceeds ten crore rupees.
However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees but not exceeding ten crore rupees, shall not exceed the total amount payable as income-tax on a total income of one crore rupees, by more than the amount of income that exceeds one crore  rupees. The total amount payable as income-tax and surcharge on total income exceeding ten crore rupees, shall not exceed the total amount payable as  income-tax and surcharge on a total income of ten crore rupees, by more than the amount of income that exceeds ten crore rupees.

In other cases (including sections 115-O, 115QA, 115R or 115TA) the surcharge shall continue to be levied at the rate of ten percent.

For financial year 2014-2015, additional surcharge called the “Education Cess on income-tax” and “Secondary and Higher Education Cess on income-tax” shall continue to be levied at the rate of two per cent. and one per cent. respectively, on the amount of tax computed, inclusive of surcharge (wherever applicable), in all cases. No marginal relief shall be available in respect of such Cess.

80C limit extended to 1.5 Lacs!

Raising the limit of deduction under section 80C

Under the existing provisions of section 80C of the Act, an individual or a Hindu undivided family, is allowed a deduction from income of an amount not exceeding one lakh rupees with respect to sums paid or deposited in the previous year, in certain specified instruments. The investments eligible for deduction, specified under sub-section (2) of section 80C, include life insurance premia, contributions to provident fund, schemes for deferred annuities etc. The assessee is free to invest in any one or more of the eligible instruments within the overall ceiling of Rs. 1 lakh.

The limit of above investments eligible for deduction under section 80C was fixed vide Finance Act, 2005. In order to encourage household savings, it is proposed to raise the limit of deduction allowed under section 80C from the existing Rs. 1 lakh to Rs.1.5 lakh. In view of the same, consequential amendments are proposed in sections 80CCE and 80CCD of the Act.

These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years.

Sunset clause extended for power sector

Extension of the sunset date under section 80-IA for the power sector

Under the existing provisions of clause (iv) of sub-section (4) of section 80-IA of the Income-tax Act, a deduction of profits and gains is allowed to an undertaking which,—
(a) is set up for the generation and distribution of power if it begins to generate power at any time during the period beginning on 1st April, 1993 and ending on 31st March, 2014;
(b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on 1st April, 1999 and ending on 31st March, 2014;
(c) undertakes substantial renovation and modernization of existing network of transmission or distribution lines at any time during the period beginning on 1st April, 2004 and ending on 31st March, 2014.

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 to extend the terminal date for a further period up to 31st March, 2017 i.e. till the end of the 12th Five Year Plan.

These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years.

Booster of Investment Allowance to a Manufacturing Company

Investment Allowance to a Manufacturing Company

In order to encourage the companies engaged in the business of manufacture or production of an article or thing to invest substantial amount in acquisition and installation of new plant and machinery, Finance Act, 2013 inserted section 32AC in the Act to provide that where an assessee, being a company, is engaged in the business of manufacture of an article or thing and invests a sum of more than Rs.100 crore in new assets (plant and machinery) during the period beginning from 1st April, 2013 and ending on 31st March, 2015, then the assessee shall be allowed a deduction of 15% of cost of new assets for assessment years 2014-15 and 2015-16.

As growth of the manufacturing sector is crucial for employment generation and development of an economy, it is proposed to extend the deduction available under section 32AC of the Act for investment made in plant and machinery up to 31.03.2017.
Further, in order to simplify the existing provisions of section 32AC of the Act and also to make medium size investments in plant and machinery eligible for deduction, it is also proposed that the deduction under section 32AC of the Act shall be allowed if the company on or after 1st April, 2014 invests more than Rs.25 crore in plant and machinery in a previous year. It is also proposed that the assessee who is eligible to claim deduction under the existing combined threshold limit of Rs.100 crore for investment made in previous years 2013-14 and 2014-15 shall continue to be eligible to claim deduction under the existing
provisions contained in sub-section (1) of section 32AC even if its investment in the year 2014-15 is below the proposed new threshold limit of investment of Rs. 25 crore during the previous year.

 

These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years.