Changes in ST, Excise and Custom by Interim Budget 14

Dear Professional Colleague,

The Hon’ble Finance Minister P. Chidambaram presented the Interim Budget for the fiscal year 2014-15 on Monday, February 17, 2014 to cover expenditure until the Government's term ends in May, 2014. While presenting the Interim Budget 2014 in Parliament, the Hon’ble Minister proposed no major changes in tax laws. He even expressed disappointment over delay in introduction of two of India’s biggest tax reform initiatives - the Direct Taxes Code (DTC) and the Goods and Services Tax (GST). The Government appealed to all political parties to resolve to pass the GST Laws and DTC in 2014-15. However, the Hon’ble Minister announced some changes in Indirect Tax Rates.

We are sharing with you important changes in Indirect Taxes, Interim Union Budget 2014:-

CHANGES IN SERVICE TAX:

i. Exemption on handling, storage or warehousing of rice: The definition of ‘agricultural produce' in section 65B(5) of the Finance Act, 1994, leads to a differential treatment between paddy and rice. Paddy is covered by the definition of agricultural produce which loses its essential characteristic after milling into rice. Notification 25/2012 dated June 20, 2012 (“the Mega Exemption Notification”) has been amended to insert an entry at Sl. No. 40 which reads as “services by way of loading, unloading, packing, storage or warehousing of rice” to exempt levy of service tax on handling, storage and warehousing of rice.

[Amended vide Notification No.4/2014-ST dated 17th February 2014].

ii. Exemption on transportation of rice: A clarification has been issued vide Circular No. 177/3/2014 dated 17th February 2014 (“the Circular”) that “food stuff” includes rice and hence service tax on transportation of rice by rail or a vessel or by a Goods Transport Agency by way of transport in a goods carriage, is exempt vide Sl. Nos. 20(i) and 21(d) of the Mega Exemption Notification.

iii. Exemption on milling of rice: Para 1.2 of the Circular clarifies that milling of paddy into rice carried out as job work is covered by the exemption at Sl. No.30 of the Mega Exemption Notification since such milling of paddy into rice is an intermediate production process.

iv. Services provided by cord blood banks: Entry no. 2A has been inserted in the Mega Exemption Notification, which reads as “Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation”. Therefore, services provided by cord blood banks, such as collection of umbilical cord blood, processing the same for segregation of stem cells, testing and cryo-preservation of stem cells will be exempt from levy of service tax.

[Amended vide Notification No.4/2014-ST dated 17th February 2014]

CHANGES IN CENTRAL EXCISE:

i. Excise duty on mobiles reduced: The excise duty structure on mobile handsets has been restructured so as to provide that all mobile handsets will attract 1% excise duty, if CENVAT benefit is not availed of and 6% if CENVAT benefit is availed of. Consequently, all imported mobile handsets shall attract 6% CVD.

[Amended vide notification No.4/2014-Central Excise dated 17.02.2014].

ii. Reduction in Excise duty on capital goods falling under Chapter 84 & 85: The general excise duty on all machinery & equipment, appliances such as washing machine, air conditioner, refrigerators, computers, colour televisions, LCD, microwave oven, etc., and parts thereof falling under Chapters 84 and 85 of the Central Excise Tariff has been reduced from 12% to 10%. It may be noted that the duty rates notified for the above goods are valid up to 30-06-2014 only.

[Amended vide notification No.4/2014-Central Excise dated 17.02.2014].

iii. Reduction in Excise Duty on automobile items: The excise duty on following automobile items have been reduced as under:

Further, in line with the duty reduction on commercial vehicles, the excise duty on chassis has been reduced appropriately. Duty has also been reduced on hybrid motor vehicles, hydrogen vehicles, etc. It may be noted that the duty rates notified against Sl.Nos.347 to 369 of Table of Notification No. 12/2012-CE dated 17.3.2012 for the automobile items are valid up to 30-06-2014 only.

[Amended vide notification No.4/2014-Central Excise dated 17.02.2014].

CHANGES IN CUSTOMS:

i. Extension of full exemption from customs duty on pulses: Full exemption from Customs duty on pulses valid till 31.03.2014 has been extended by another 6 months i.e. up to 30.09.2014

[Amended vide notification No.5/2014-Customs dated 17.02.2014].

ii. Withdrawal of CVD exemption on specified road construction machinery: CVD exemption hitherto available on specified road construction machinery has been withdrawn. These specified machinery will henceforth attract CVD and SAD. Exemption from the basic customs duty will however continue.

 [Amended vide notification No.5/2014-Customs dated 17.02.2014]

iii. Rationalisation of basic customs duty structure on certain items: The basic customs duty structure on non-edible grade industrial oils and its fractions, palm stearin, fatty acids and fatty alcohols has been rationalised at 7.5%.

 [Amended vide notification No.5/2014-Customs dated 17.02.2014].

iv. Exemption from BCD and CVD on LNG consumed in ONGC SEZ and cleared into DTA:LNG consumed in the authorized operations in the ONGC SEZ unit at Dahej and the remnant LNG cleared into the domestic tariff area (DTA) has been exempted from basic customs duty and CVD.

 [Amended vide notification No.5/2014-Customs, dated 17.02.2014].

v. Concessional basic customs duty on capital goods imported by or on behalf of Bank Note Paper Mill India Private Limited: A concessional basic customs duty of 5% [CVD (Nil) + SAD (Nil)] has been provided to capital goods imported by or on behalf of Bank Note Paper Mill India Private Limited. The exemption is valid up to 31.12.2014.

[Amended vide notification No.5/2014-Customs, dated 17.02.2014 and notification No.6/2014-Customs dated 17.02.2014].

vi. Human embryo has been fully exempted from customs duty.

[Amended vide notification No.5/2014-Customs dated 17.02.2014].

Hope the information will assist you in your Professional endeavours. In case of any query/ information, please do not hesitate to write back to us.

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)

F-30/31/32, Pankaj Grand Plaza

1st Floor, Mayur Vihar, Phase–I,

Delhi – 110091 (India)

E-mail: bimaljain@hotmail.com

Website: www.a2ztaxcorp.com