Taxation Aspects of Union Budget 2014

Income Tax:

• Provision of Advance Tax Ruling applicable to Residents.

• Scope of Income Tax Settlement Commission widens.

• Basic limit of Exemption increased to 2.50 lac. In case of Senior Citizen, it is increased to 3.00 lac.

• No changes of Income Tax rate. Surcharge will continue.

• Education Cess continues at 3%.

• Deduction under Section 80C increased to 1.50 Lac.

• Deduction under Section 24 increased from 1.50 lac to 2.00 Lac.

• Conducive tax regime for Infrastructure Investment Trusts and Real Estate Investment Trusts.

• Investment allowance at 15 % to a manufacturing company that invests more than 25 crore in any year in new plant and machinery.

• Investment linked deduction to slurry pipelines for the transportation of iron ore and semi-conductor wafer fabrication manufacturing units.

• A 10 year tax holiday to the undertakings which begin generation, distribution and transmission of power by 31.03.2017.

• Income arising to foreign portfolio investors from transaction in securities to be treated as capital gains.

• “Roll Back” provision in the Advance Pricing Agreement scheme to include international transactions undertaken in previous four years in specified circumstances.

• Introduction of Range Concept for determination of arm’s length price.

• Use of multiple year data to be used for comparable analysis to determine Arm Length Price.

• Long term Capital Gains on transfer of units of MF other than Equity Oriented Fund increased from 10 % to 20 % and period of holding in respect of such units increased from 12 months to 36 months.

• Disallowance expenditure in case of failure to deduct and pay TDS is decreased to 30% from 100%.

Indirect Tax- Custom Duty:

• Reduction/rationalization of Basic Custom Duty (BCD)

• Fatty acids, crude palm stearin, RBD and other palm stearin, specified industrial grade crude oils from 7.5 % to Nil for manufacture of soaps and oleo-chemicals.

• Crude glycerin from 12.5 % to 7.5 % and crude glycerin used in the manufacture of soaps from 12.5 % to Nil.

• Steel grade limestone and steel grade dolomite from 5 % to 2.5 %.

• Battery waste and battery scrap from 10 % to 5 %.

• Coal tar pitch from 10 % to 5 %.

• Specified inputs for manufacture of spandex yarn from 5 % to Nil.

• Reformate from 10 % to 2.5 %; on ethane, propane, ethylene, propylene, butadiene and ortho-xylene from 5 % to 2.5 %; on methyl alcohol and denatured ethyl alcohol from 7.5 % to 5 %; and on crude naphthalene from 10 % to 5 % used by Chemical & Petrochemical Sectors.

• Exemption of SAD on all inputs/components used in the manufacture of personal computers.

• Exemption of SAD on PVC sheet and ribbon used for the manufacture of smart cards.

• Exemption of basic customs duty on input to make cathode ray TVs.

• Reduction of BCD from 10% to Nil on LCD and LED TV panels.

• Exemption from BCD on specified inputs for use in the manufacture of EVA sheets and back sheets and flat copper wire for the manufacture of PV ribbons.

• A concessional basic customs duty of 5% to machinery and equipment required for setting up of a project for solar energy production.

• Reduction of BCD from 10 % to 5 % on forged steel rings used in the manufacture of bearings of wind operated electricity generators.

• Exemption of SAD on parts and raw materials required for the manufacture of wind operated generators.

• Concessional BCD of 5 % on machinery and equipment required for setting up of compressed biogas plants

(Bio-CNG).

• Rationalization the duty structure on all non-agglomerated coal at 2.5 % BCD and 2 % CVD.

• Reduction of BCD on ships imported for breaking up from 5 % to 2.5 %.

Increase/imposition of Custom Duty:

• Imposition of basic customs duty at 10 % on specified telecommunication products that are outside the purview of the Information Technology Agreement.

• Imposition education cess on imported electronic products.

• Increase of basic customs duty on imported flat-rolled products of stainless steel from 5 % to 7.5 %.

• BCD on metallurgical coke increased from Nil to 2.5 %.

• BCD semi-processed, half cut or broken diamonds, cut and polished diamonds and coloured gemstones increased from 2 % to 2.5 %. However, BCD on pre-forms of precious and semi-precious stones is exempted.

• Increase of duty free entitlement for import of trimmings, embellishments and other specified items from 3 % to 5 %.

• Increase of export duty on bauxite from 10 % to 20 %.

• Free baggage allowance increased from 35,000 to 45,000.

Indirect Tax- Excise Duty:

Reduction/rationalisation of Duty-

1. Reduction of specified food processing and packaging machinery from 10 % to 6 %.

2. Reduction of excise duty from 12 % to 6 % on footwear of retail price exceeding `500 per pair but not exceeding `1,000 per pair.

3. Exemption from excise duty on

• EVA sheets and solar back sheets and specified inputs used in their manufacture.

• Solar tempered glass used in the manufacture of solar photovoltaic cells and modules.

• Flat copper wire for the manufacture of PV ribbons for use in solar cells and modules.

• Machinery and equipment required for setting up of a project for solar energy production.

• Forged steel rings used in the manufacture of bearings of wind operated generators.

• Machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).

4. Concessional excise duty of 2 % without Cenvat benefit and 6 % with Cenvat benefit on sports gloves.

Increase/Imposition of Duty Of Excise:

• Withdraw of concessional excise duty on smart cards and levy of uniform excise duty at 12 %.

• Levy a duty of 2 % without Cenvat benefit and 6 % with Cenvat benefit on PSF and PFY.

• Increase on specific excise duty on cigarettes in the range of 11% to 72 %.

• Increase on excise duty from 12 % to 16 % percent on pan masala.

• Increase of Excise Duty from 50 % to 55 % on unmanufactured tobacco.

• Increase on Excise Duty from 60 % to 70 % on gutkha and chewing tobacco.

• Levy an additional duty of excise at 5 % on aerated waters containing added sugar.

• Clean Energy Cess is increased from 50 per tonne to 100 per tonne.

Service Tax:

• Imposition of Service Tax on online and mobile advertising.

• Imposition of Service Tax on Radio-Taxi.

• Withdrawal of exemptions to services by air-conditioned contract carriages.

• Withdrawal of exemptions to technical testing of newly developed drugs on human participants.

• Amendment on provision in the Place of Provision of Services Rules for Shipping Industry.

• Tax incidence on the transport of goods through coastal vessels reduced.

• Services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India taken out of the Service Tax net. Cenvat credit for services of rent-a-cab and tour operators in the same line of business.

• Service by the way of loading, unloading, storage, warehousing and transportation of cotton, whether ginned or baled, exempted from Service Tax.

• Services provided by the Employees’ State Insurance Corporation for the period prior to 1st July 2012 is exempted.

• Exemption of Service Tax on micro life insurance schemes where the sum assured does not exceed `50,000 per life insured.

• Exemption from Service Tax on services provided by common bio-medical waste treatment facilities.

• Exemption from Service Tax on education provided by municipality.

The scheme of Advance Ruling in indirect taxes widened cover resident private limited companies for new activities being proposed to be undertaken by them.