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Union Budget 2013 - Changes

Manoj Pala 
on 02 March 2013

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The Hon’ble Finance Minister Mr.P.Chidambaram has presented ‘Union Budget 2013’ in both the houses of Parliament on 28th February, 2013 at 11 Hrs sharp. There is no change in the rate of duties and accordingly the rates of Excise Tax & Service Tax remain unchanged at 12.36%

 

For ease in understanding, the BUDGET 2013-14 changes (the indirect taxes … Excise & Service Tax in particular) are categorized in three categories namely:-

 

a.Changes applicable w.e.f. 1st March, 2013, and

b. Changes applicable w.e.f. 1st April, 2013

c. Changes applicable from the date of enactment of Finance Bill, 2013,

 

Changes Applicable w.e.f. 1st March, 2013:-

1) Abatement available to developers of complex, building or civil structure is being reduced from the existing 75% to 70% in following cases:-

i) Residential properties having a carpet area above 2000 sq ft and where amount charged is equal to or more than Rs. 1 crore,

ii) Commercial properties.

(Notification No. 02/2013-ST dated 1st March, 2013)

  

2)  The benefit of Advance Ruling Authority is being extended to resident public limited companies.

(Notification No. 04/2013-ST dated 1st March, 2013)

 

3) In case of removal of inputs or capital goods as such; or removal of capital goods after being used; or written off or provision to written off of inputs or capital goods before being put to use; service provider/manufacturer is liable to pay an amount calculated as per Rule 3(5)/(5A)/(5B) of CCR, 2004. Now explanation has been added after proviso to Rule 3(5B) so as to apply recovery provisions as contained in Rule 14 of CCR, 2004, in cases service provider/manufacturer fails to pay the amount so calculated.

(Notification No. 03/2013-CE(NT) dated 1st March, 2013)

  

Changes in Mega Exemptions (Applicable w.e.f. 1.4.2013)

 

I. Exemption by way of auxiliary educational services and renting of immovable property by specified educational institutes under will no longer be available. This will have the effect of restricting the scope of exemption to “Auxiliary educational services” and “Renting of immovable property services” only when:

i.  Provided by any person to Educational Institutes;

ii. Provided by one Educational Institute to another Educational Institute.

 

II. Service tax on all AC restaurants : Earlier, to claim the exemption for services provided in relation to serving of food or beverages, Restaurant, eating joint or a mess were required to satisfy dual requirement:

(i)  Not to have the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and

(ii)  Not to have a license to serve alcoholic beverages

 

However, the exemption is being rationalized so that exemption will be now available to all non air-conditioned (non-centrally air-heated) restaurants, eating joint or a mess irrespective of they have a license to serve alcohol or not. Other impact of this amendment will be to impose service tax on restaurants having air-condition facility irrespective of they have a license to serve alcohol or not, example of the same would be KFC, McD.

  

III. The exemptions available to transportation of goods by railway and vessel under S. No 20 and services provided by a goods transportation agency (GTA) under S. No.21 are being harmonized. Thus exemption to transportation of petroleum and petroleum products, postal mails or mail bags and household effects by railways and vessels will not be available while the benefit of transportation of agricultural produce, foodstuffs, relief materials for specified purposes, chemical fertilizers and oilcakes, registered newspapers or magazines, relief materials meant for victims of natural of man-made disasters, calamitites, accidents or mishap and defense equipments will be available to GTAs;

  

IV. Exemption for vehicle parking to general public is now being withdrawn so that all type of parking facility granting whether by way of reserved (i.e. leasing of space to an entity for providing such parking facility) or unreserved (i.e. General Parking) parking will be liable to service tax

 

Changes Applicable from the date of Enactment of Finance Bill, 2013:-

 

I)  Scope of Negative List Enlarged:-

 

A) Definition of “approved vocational education courses” is being changed to include a course run by an industrial training institute or an industrial training centre affiliated to State Council for Vocational Training. Further, courses run by an institute affiliated to the National Skill Development Corporation are being excluded from the scope of the definition because National Skill Development Corporation is not an affiliating body.

B) The definition of “process amounting to manufacture or production” in section 65B(40) is being expanded to include processes under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955.

 

C) The negative list entry in sub-clause (i) of clause (d) of section 66D is being modified by deleting the word “seed”. This will allow the benefit to all other testing’s in relation to “agriculture” or “agricultural produce.

 

 II) The provisions of section 73 are being modified such that if the grounds for invoking extended period are not found to be sustained by any Appellate authority or tribunal or court, the Central Excise officer will be able to determine the demand for the shorter period of eighteen months.

 

III) Changes in provisions related to Penalty:-

 

a.  Penalty for non-registration is being restricted to Rs. 10,000. Currently quantum of penalty may extend to higher of:-

· Rs. 10,000,

· Rs. 200 per day of failure

b. A new Section 78A is also being introduced to impose penalty on directors, managers, secretary and other officers of the company for specified offences e.g. evasion of service tax, in cases of willful actions.

 

IV) Introduction of One time Amnesty Scheme:-

 

To encourage voluntary compliance and broaden the tax base, one time Amnesty Scheme has been introduced by Finance Bill, 2013 called as “Service Tax Voluntary Compliance Encouragement Scheme, 2013 by way of:

 

a. waiver of interest and penalty; and

b.  immunity from prosecution,

The essence of scheme will be that to get complete waiver from interest and penalty, assessee shall make a declaration about his tax dues and shall pay not less than fifty per cent of the tax dues so declared along with submission of proof of such payment to the designated authority on or before the 31st day of December, 2013. Balance of the tax due declared but not paid shall be required to be paid by the declarant on or before the 30th day of June, 2014.

 

However, in case a declarant fails to comply with the time limit as mentioned above but pays the same on or before 31.12.2014, interest shall be payable only for the period of delay as starting from 1.7.2014.

 

This scheme will be benefited to the stop filers, non-filers or non-registrants or service providers (who have not disclosed true liability in the returns filed by them during the period from October 2007 to December 2012) who pay the "tax dues

 

FURTHER, the following proposed legislative changes to be made effective only after the enactment of the Finance Bill 2013. 

 

1-  Section 104 of the Customs Act, 1962, which deals with the ‘Power to Arrest’, has been further amended to make certain offences as given below and  notified in section 135 are punishable as non-bailable –

a) Evasion and attempt to evade duty exceeding Rs.50 Lacs (earlier Rs.30 Lacs).

b) Import or export of prohibited goods notified under section 11 read with section 135(1)(i)(c) of the Customs Act, 1962.

c) Mis-declaration of imported or exported goods having market value exceeding Rs.1 Crore.

d) Fraudulently availing of or attempt to avail DBK or Exemption from duty where duty exceeds Rs.50 Lacs (Earlier 30 Lacs).

 

Other then above offences as notified under section 135 of the Customs Act, 1962 are bailable. Similar amendments are also made in the Section 13 of the Central Excise Act, and Finance Act, 1994.

 

2-  Very important (& unfavorable to the assessee) proposal is made to amend the Section 129B(2A) of the Customs Act, 1962 and Section 35C(2A) of the Central Excise Act, 1944, whereby the Hon’ble CESTAT / Tribunal, is empowered with to grant extension of stay order only once and no subsequent extension is permitted beyond the total period of 365 days (or one year) including the first stay order which is valid for 6 months (180 days) and subsequent extension stay order which is valid for another 6 months (i.e. 185 days). It has been made crystal clear that though there is no fault of the Assesseee / Party, in delay in disposing off the Appeal pending with the Hon’ble Tribunal, stay cannot be granted and extended further beyond total period of 365 days or one year. As a result of this amendment, if appeal is not disposed off or decided by the Tribunal within 1 (One) year time period, we have no option but to pre-deposit duty /confirmed demand under protest.

 

3- The Section 129C(4) of the Customs Act, 1962 read with Section 35D of the Central Excise Act, 1944, deals with the power of the single member bench of Tribunal /CESTAT to deal with the cases/Appeals involving monetary limit of Rs.10 Lacs. This limit has been proposed to enhance to Rs.50 Lacs. With this, all the Appeal matters of the Hon’ble Tribunal involving duty of Rs.50 Lacs and below will be disposed off /decided by the single member Bench of Tribunal.

 

4- Section 47(2) of the Customs Act, 1962 provides that once the order for the clearance of imported goods for home consumption is passed by the proper officer of the customs and the B/E is returned to the importer, the importer is required to pay duty within 5 days of the order passed or B/E is returned and failing which interest becomes payable thereafter. This period of 5 days for payment of custom duty is reduced to 2 days and thereafter interest becomes payable.

 

5-  Section 142 of the Customs Act, 1962 read with Section 11 of the Central Excise Act, 1944 which deal with ‘Recovery of sums due to government’ has now been proposed to amend further to enable the govt. to recover such sums either from other persons from whom the money is due to such person /defaulter or from Post Office or Banking company or insurer of the defaulter/person.

 

6- Section 78A has been proposed to insert after section 78 of the Finance Act, 1994 empowering the government to impose penalty to the extend to Rs.1 Lac on any Director, Manager, Secretary, officer of the company who was responsible for any contraventions in relation to -

 

a) Evasion of service tax.

b) Issuance of invoices or challans without provision of taxable service.

c) Availment and utilization of credit without actual receipt of taxable service.

d) Failure to pay an amount collected as service tax to central govt.

 

7- Section 90 is proposed to insert in the Finance Act, 1994 making the offences notified by section 89 (such as knowingly evading the payment of Service Tax, availing and utilizing of credit without actual receipt of taxable service, maintaining false books of accounts, collecting an amount as service tax but failed to pay to govt.) are cognizable (i.e. non-bailable) offence and other offences are non-cognizable or bailable.

 

Besides above, the Duty impact on certain goods;

 

1. Cigarettes

2. Marble slabs and tiles

3. Ready-made garments, made-up articles and textiles

4. Heena Powder and Paste

5. Branded Ayurvedic medicaments and medicaments of Unani, Siddha, Homeopathy or Bio chemic system (brought under MRP valuation)

6. Sulphur recovered as by product in refining of crude oil used for the manufacture of fertilisers. Fertilizers include bentonite suplhur which is exempt from excise duty.

7. Stainless steel patta- patti

8. Mobile phones

9. Hybrid and electric vehicles

10. Chassis of diesel motor vehicles

11. SUV and SUV used as taxies

12. Ships, tugs and pusher craft, dredgers and other vessels

 

My kind regards and JSK. JSV

Manoj Pala

SIEMENS LTD, Kharagpur


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