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PROVISIONS RELATING TO DIRECT TAXES- FINANCE BILL, 2016 #pdf
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(b)“CVD” means the Additional Duty of Customs levied under sub-section (1) ofsection 3 of the Customs Tariff Act, 1975. (c)“SAD” means the Special Additional Duty of Customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975. (d)“Export duty” means duty of Customs leviable on goods specified in the Second Schedule to the Customs Tariff Act, 1975. (e)Clause nos. in square brackets [ ] indicate the relevant clause of the Finance Bill, 2016. Amendments carried out through the Finance Bill, 2016 come into effect on the date of its enactment unless otherwise specified. AMENDMENTS IN THE CUSTOMS ACT, 1962: S. No. AmendmentClause of the Finance Bill, 2016 1.Subsection (43) of Section 2 is being amended so as to add a new class of warehouses for enabling storage of specific goods under physical control of thedepartment, as control over the other types of warehouses would be only record based. [113] 2.Subsection (45) of Section 2 which defines “warehousing station” is being omitted.[113] 3.Chapter heading of Chapter III is being amended to omit the word “warehousing station”.[114] 4.Section 9 is being omitted.[115] 5.Section 25 is being amended so as to omit the requirement of publishing and offering for sale any notification issued, by the Directorate of Publicity and Public Relations of CBEC. [116] 6.Sections 28, 47, 51 and 156 are being amended so as to: a)increase the period of limitation from one year to twoyearsin cases not involving fraud, suppression of facts, willful mis-statement, etc. b)provide for deferred payment of customs duties for importers and exporters to certain class of importers and exporters. [117], [118], [119], [135] 7.Section 53 is being amended so as to enable the Board to frame regulations for allowing transit of certain goods and conveyance without payment of duty.[120] 8.Sections 57 and 58 are being substituted to provide for licensing by the Principal Commissioner or Commissioner, in place of Deputy/Assistant Commissioner, subject to such conditions asmay be prescribed. [121], [122] 9.New section 58A is being inserted to provide for a new class of warehouses which require continued physical control and will be licensed for storing goods, as may be specified. [122] 10.New section 58B is being inserted so as to regulate the process of cancellation of licences which is a necessary concomitant of licencing.[122] 11.The existing section 59 governing warehousing bonds submitted by importers availing duty deferred warehousingis being substituted so as to fix the bond amount at thrice the duty involved and to furnish security as prescribed. [123] 42 12.The existing section 60 is being substituted to define the date of removal of goods from a customs station and deposit thereof ina warehouse.[124] 13.The existing section 61 is being substituted to extend the period of warehousing to all goods used by Export Oriented Undertakings, Units under Electronic Hardware Technology Parks, Software Technology Parks, Ship Building Yards and other units manufacturing under bond; empower Principal Commissioners and Commissioners to extend the warehousing period upto one year at a time. [125] 14.Section 62 relating to physical control over warehoused goods is being omitted since the conditions for licensing different categories of warehouses and exercising control over the same are being provided under sections 57, 58 and 58A. [126] 15.Section 63 relating to payment of rent and warehouse charges is being omitted in view of the privatization of services, and free market determination of rates, including those by facilities in the public sector. [126] 16.The existing section 64 relating to owner’s rights to deal with warehoused goods is being substituted so as to rationalize the facilities and rights extended under the section. [127] 17.Section 65 is being amended to delete the payment of fees to Customs for supervision of manufacturing facilities under Bond; and empower Principal Commissioner or Commissioner of Customs to licence such facilities. [128] 18.Section 68 is being amended to omit rent and other charges on account of omission of section 63.[129] 19.Section 69 is being amended to omit rent and other charges on account of omission of section 63.[130] 20.Section 71 is being amended so as to substitute the word“exportation” with the word “export” to align with definition contained in sub section (18) of section 2.[131] 21.Section 72 is being amended to delete clause (c) regarding improper removal of samples[132] 22.Section 73 is being amended to provide for cancellation bond in case of transfer of ownership of the goods, and is thus aligned with sub-section (5) of section 59.[133] 23.New section 73A is being inserted so as to provide for custody of warehoused goods and responsibilities including the liabilities of warehouse keepers.[134] AMENDMENT IN THE CUSTOMS TARIFF ACT, 1975 S. No. AmendmentClause of the Finance Bill, 2016 1.To omit Section 8C [Power of Central Government to impose transitional product specific safeguard duty on imports from People’s Republic of China][137] AMENDMENT IN THE FIRST SCHEDULE TO THE CUSTOMS TARIFF ACT, 1975 S. No. AmendmentClause of the Finance Bill, 2016 Amendments not affecting rates of duty 1.Editorial changes inthe Harmonized System of Nomenclature (HSN) in certain chapters are being incorporated in the First Schedules, to be effective from 01.01.2017.[138(ii)] 43 2.To: 1)Amend supplementary notes (e) and (f) Chapter 27 so as to change the reference: a)fromIS:1460:2000 to IS:1460:2005 for high speed diesel (HSD) and b)from IS:1460 to IS: 15770:2008 for light diesel oil (LDO); 2)Substitute Tariff line 5801 39 10 with description “Warp pile fabrics, uncut” in place of tariff line 5801 37 11 [with description Warppile fabrics ‘epingle’ uncut velvet] and 5801 37 19 [with description Warp pile fabrics ‘epingle’ uncut other]; 3)Prescribe separate tariff lines for laboratory created or laboratory grown or manmade or cultured or synthetic diamonds; 4)Delete Tariff line 852550 50, relating to Wireless microphone. [138 (i)] Amendments affecting rates of duty FromTo Articles of rubber 3Natural latex rubber made balloons falling under specified headings10%20% Metals 4Primary aluminium5%7.5% 5Zincalloys5%7.5% Jewellery 6Imitation jewellery10%15% Renewable Energy 7Industrial solar water heater7.5%10% Capital goods and parts thereof 8Increase the tariff rate of BCD for 211 specified tariff lines in Chapters 84, 85 and 907.5%10% a)The effective rates for 96 specified tariff lines will increase7.5%10% b)The effective rate for 115 tariff lines will be maintained7.5%7.5% The amendments involvingincreasein the duty rates will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931. OTHER PROPOSALS INVOLVING CHANGES IN BCD, CVD, SAD AND EXPORT DUTY RATES S.No.BCD/CVD/SAD/Export Duty FromTo Exportduty Ores and concentrates 1Iron ore fines with Fe content below 58%10%Nil 2Iron ore lumps with Fe content below 58%30%Nil 3Chromium ores and concentrates, all sorts30%Nil 44 S.No.BCD/CVD/SAD/Export Duty FromTo 4Bauxite (natural), not calcined or calcined20%15% BasicCustoms Duty Food Processing 1Cashew nuts in shellNil5% 2Cold chain including pre-cooling unit, packhouses, sorting and grading lines and ripening chambers 10%5% 3Refrigerated containers10%5% Mineral fuels and Mineral oils 4Coal; briquettes, ovoids and similar solid fuels manufactured from coal2.5% / 10%2.5% 5Lignite, whether or not agglomerated, excluding jet10%2.5% 6Peat (including peat litter), whether or not agglomerated10%2.5% 7Coke and semi-coke of coal, oflignite or of peat, whether or not agglomerated; retort carbon 5% / 10%5% 8Coal gas, water gas, producer gas and similar gases, other than petroleum gases and other gaseous hydrocarbons 10%5% 9Tar distilled from coal, from lignite or from peat and other mineral tars, whether or not dehydrated or partially distilled, including reconstituted tars 10%5% 10Oils and other products of the distillation of high temperature coal tar similar products in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents 2.5%/ 5%/ 10% 2.5% 11Pitch and pitch coke, obtained from coal taror from other mineral tars5% / 10%5% Petroleum exploration and production 12Goods required for exploration & production of hydrocarbon activities undertaken under Petroleum Exploration Licenses (PEL) or Mining Leases (ML) issued or renewed before 1stApril 1999 Applicable BCD and CVD BCD-Nil CVD–Nil Chemicals & Petrochemicals 13All acyclic hydrocarbons and all cyclic hydrocarbons [other than para-xylene which attracts Nil BCD and styrene which attracts 2% BCD] 5%/ 2.5%2.5% 14Denaturedethyl alcohol (Ethanol) subject to actual user condition5%2.5% 15Orthoxylene for the manufacture of phthalic anhydridesubject to actual user condition SAD–4%SAD–2% 16Electrolysers, membranes and their parts required by caustic soda / potashunit using membrane cell technology 2.5%Nil Paper, Paperboard and newsprint 17Wood in chips or particles for manufacture of paper, paperboard and news print5%Nil 18Plans, drawings and designsNil10% Textiles 19Specified fibres and yarns5%2.5% 45 S.No.BCD/CVD/SAD/Export Duty FromTo 20Specified fabrics [for manufacture of textile garments for export]of valueequivalent to 1% of FOB value of exports in the preceding financial year subject to the specified conditions. The entitlement for the month of March 2016 shall be one twelfthof oneper cent. of the FOB value of exports in the financial year 2014-15. Applicable BCD Nil Electronics / Hardware 21Polypropylene granules / resins for the manufacture of capacitor grade plastic films7.5%Nil 22E-ReadersNil7.5% 23Parts of E-readersApplicable BCD 5% 24Magnetron of capacity of 1 KW to 1.5 KW for usein manufacture of domestic microwave ovens subject to actual user condition. 10%Nil 25Machinery, electrical equipment and instrument and parts thereof(except populated PCBs)for semiconductor wafer fabrication / LCD fabrication units Applicable BCD SAD Nil BCD Nil SAD 26Machinery, electrical equipment and instrument and parts thereof(except populated PCBs)imported for Assembly, Test, Marking and Packaging of semiconductor chips (ATMP) Applicable BCD SAD Nil BCD Nil SAD 27Theexemption frombasiccustoms duty,CV duty, SAD on charger / adapter, battery and wired headsets / speakersfor manufacture of mobile phonebeing withdrawn BCD-Nil CVD-Nil SAD-Nil Applicable BCD CVD– 12.5% SAD–4% 28Inputs, parts and components, subparts formanufacture of charger / adapter, battery and wired headsets / speakers of mobile phones, subject to actual user condition Applicable BCD, CVD SAD Nil BCD Nil CVD Nil SAD 29Parts and components, subparts for manufacture of Routers, broadband Modems, Set-top boxes for gaining access to internet, set top boxes for TV, digital video recorder (DVR) / network video recorder (NVR), CCTV camera / IP camera, lithium ion battery [other than those for mobile handsets] Applicable BCD, CVD SAD Nil BCD Nil CVD NilSAD 30Magnetic-Heads (all types), Ceramic / Magnetic cartridges and stylus, Antennas, EHT cables, Level meters/level indicators/ tuning indicators/ peak level meters/ battery meter/VC meters / Tape counters, Tone arms, Electron guns Nil BCDApplicable BCD 31To exclude specified telecommunication equipment [Soft switches and Voice over Internet Protocol (VoIP) equipment namely VoIP phones, media gateways, gateway controllers and session border controllers, Optical Transport equipment; combination ofone / more of Packet Optical Transport Product/Switch (POTP/POTS), Optical Transport Network(OTN) products, and IP Radios, Carrier Ethernet Switch, Packet Transport Node (PTN) products, Multiprotocol Label Switching-Transport Profile (MPLS-TP) products, Multiple Input / Multiple Output (MIMO) and Long Term Evolution (LTE) Products on which 10% BCD was imposed in 2014-15 Budget being non-ITA I bound] from the purview of the other exemption. Nil BCD10% 32Preform of silica for manufacture of telecom grade optical fibre /cablesNil10% 46 S.No.BCD/CVD/SAD/Export Duty FromTo 33Specified capital goods and inputs for use in manufacture of Micro fuses, Sub-miniature fuses, Resettable fuses, and Thermal fuses Applicable BCD Nil 34Neodymium Magnet(before Magnetization) and Magnet Resin (Strontium Ferrite compound/before formed, before magnetization) for manufacture of BLDC motors, subject to actual user condition Applicable BCD 2.5% 35Populated PCBs for manufacture of personal computers (laptop or desktop)Nil SAD4% SAD 36Populated PCBs for manufacture of mobile phone/tablet computerNilSAD2% SAD Metals, glass and ceramics 37Silica sand5%2.5% 38Brass scrap5%2.5% 39Other aluminium products7.5%10% Jewellery 40Gold dore bars.8% CVD8.75% CVD 41Silver dore.7% CVD7.75% CVD Automobiles 42Golf cars10%60% 43Specified parts of electric and hybrid vehiclesBCD-Nil CVD–6% Upto 31.03.2016 BCD-Nil CVD–6% Without time limit 44Aluminium Oxide for use in the manufacture of Wash Coat, which is used in the manufacture of catalytic converters, subject to actual user condition 7.5%5% 45Engine for xEV (hybrid electric vehicle)Applicable BCD and CVD NilBCD 6% CVD Capital Goods 46Specified machinery required for construction of roadsCVD–NilCVD–12.5% Defence Production 47Direct imports of specified goods by Government of India or State Governments, with effect from 01.4.2016 BCD Nil CVD–Nil SAD–Nil Applicable BCD, CVD and SAD 48Imports of specified goods for defence purposes by contractors of the Government of India, PSUs or sub-contractors of PSUs, with effect from 01.4.2016 BCD Nil Applicable CVD and SAD Applicable BCD, CVD and SAD Maintenance, repair and overhaul [MRO] of aircrafts 49Tools and tool kits when imported by MROs for maintenance, repair, and overhauling [MRO] of aircraft subject to a certification by the Directorate General of Civil Aviation Applicable BCD, CVDand SAD Nil BCD Nil CVD Nil SAD 47 S.No.BCD/CVD/SAD/Export Duty FromTo 50Simplify the procedure for availmentof exemption from customs duties on parts, testing equipment, tools and tool-kits for maintenance, repair and overhaul of aircraft based on records and subject to actual user condition -- 51Remove the restriction of one year for utilization of dutyfree parts for maintenance, repair and overhaul of aircraft -- 52Further relax the existing conditions of stay [upto 60 days], so as to provide for stay up to 6 months of the foreign aircraft for maintenance, repair or overhauling, and provide for further extension of such period by DGCAas deemed fit -- Ship Repair Units 53Capital goods and spare thereof, raw materials, parts, material handling equipment and consumable for repairs of ocean-going vessels by a ship repair unit subject to actualuser condition. Applicable excise duty Nil 54Simplify the procedure for availment of exemption from Basic Customs Duty, CVD and SAD by ship repair units based on records and subject to actual user condition -- Miscellaneous 55Braille paper10%Nil 56Disposable sterilized dialyzerand micro barrier of artificial kidneyApplicable BCD, CVD, SAD Nil BCD Nil CVD Nil SAD 57Solar tempered glass / solar tempered (anti-reflective coated) glass, subject to actual user condition Nil5% 58Medical UseFission Molybdenum-99 imported by Board of Radiation and Isotope Technology (BRIT) for manufacture of radio pharmaceuticals 7.5%Nil 59Pulp of wood for manufacture of sanitary pads, napkins & tampons5%2.5% 60Super Absorbent Polymer when used for themanufacture of sanitary pads, napkins & tampons 7.5%5% 61Merge the exemptions from customs duties on specified goods imported for petroleum exploration under various types of licenses or mining leases, pre-NELP contracts, NELP contracts, MarginalFields Policy and the Coal Bed Methane Policy into a single exemption with a unified list of specified goods and conditions Nil BCD Nil CVD Nil SAD Nil BCD Nil CVD Nil SAD 62Specified goods required for exploration & production of hydrocarbon activities undertaken under Petroleum Exploration Licenses (PEL) or Mining Leases (ML) issued or renewed before 1stApril 1999 Applicable BCD, CVD, SAD Nil BCD Nil CVD Nil SAD 63Prescribe actual user condition for the imports of Phosphoric Acid and Anhydrous Ammonia atconcessional BCD/CVDfor manufacture of Fertilizers-- 64Prescribe actual user condition for imports of LCD/LED/OLED Panels imported at Nil BCD for manufactureof LCD/LED/OLED TVs-- 48 S.No.BCD/CVD/SAD/Export Duty FromTo 65“Foreign Satellite data” on storage media when imported by National Remote Sensing Centre (NRSC), Hyderabad Applicable BCD, CVD, SAD Nil BCD Nil CVD Nil SAD RETROSPECTIVE AMENDMENT S. No. AmendmentClause of the Finance Bill,2016 1.To amend various notifications pertaining to Advance Licenceand Duty Free Import Authorization Schemes retrospectively, to correct the reference to “section 8” in such notifications to “section 8B” so as to clearly provide that exemption from safeguard duty under section 8B of the Customs Tariff Act, 1975 was/is available under these notifications on imports under Advance Licence and Duty Free Import Authorization Schemes. [136] 49 EXCISE Note:“Basic Excise Duty” means theexcise duty set forth in the First Schedule to the Central Excise Tariff Act, 1985. AMENDMENTS IN THE CENTRAL EXCISE ACT, 1944: S. No. AmendmentClause of the Finance Bill, 2016 1.Section 5A is being amendedso as to omit the requirement of publishing and offering for sale any notification issued, by the Directorate of Publicity and Public Relations of CBEC. [139] 2.Section 11A is being amended so as to increase the period of limitation from one year to twoyearsin cases not involving fraud, suppression of facts, willful mis-statement, etc. [140] 3.Section 37B is being amended so as to empower the Board for implementation of any other provision of the said Act in addition to the power to issue orders, instructions and directions. [141] 4.The Third Schedule is being amended so as to: a)make some editorial changes, consequent to 2017 Harmonized System of Nomenclature. b)include therein: 1)All goods falling under heading 3401 and 3402; 2)Aluminiumfoils of a thickness not exceeding 0.2 mm; 3)Wrist wearable devices (commonly known as ‘smart watches’); and 4)Accessories of motor vehicleand certain other specified goods. Changes at (b) above will come into effect immediately owing to a declaration underthe Provisional Collection of Taxes Act, 1931. [142(ii)] [142(i)] AMENDMENTS IN THEFIRST SCHEDULE TO THECENTRAL EXCISE TARIFF ACT, 1985 S. No. AmendmentClause of the Finance Bill, 2016 Amendments not affecting rates of duty 1.Editorial changesin the Harmonized System of Nomenclature (HSN) in certain chapters are being incorporated in the First and Second Schedules, to be effective from 01.01.2017. [143 (ii)] 2.To: a)Amend supplementary notes (e) and (f) Chapter 27 so as to change the reference: i.from IS:1460:2000 to IS:1460:2005 for high speed diesel (HSD) and ii.from IS:1460 to IS: 15770:2008 for light diesel oil (LDO) b)Substitute Tariff line 5801 39 10 with description “Warp pile fabrics, uncut” in place of tariff line 5801 37 11 [with descriptionWarp pile fabrics ‘epingle’ uncut velvet] and 5801 37 19 [with description Warp pile fabrics ‘epingle’ uncut other]; [143(i)] 50 S. No. AmendmentClause of the Finance Bill, 2016 c)Prescribe separate tariff lines for laboratory created or laboratory grown or manmade or cultured or synthetic diamonds; d)Delete Tariff line 8525 50 50, relating to Wireless microphone. FromTo Amendments involving change in the rate of duty Aerated Beverages 1Waters,including mineral waters and aerated waters, containing added sugar or other sweetening matter orflavoured 18%21% Tobacco and Tobacco Products 2Cigar and cheroots12.5% or Rs.3375 per thousand, whichever is higher 12.5% or Rs.3755 per thousand, whichever is higher 3Cigarillos12.5% or Rs.3375 per thousand, whichever is higher 12.5% or Rs.3755per thousand, whichever is higher 4Cigarettes of tobacco substitutesRs.3375 per thousand Rs.3755 per thousand 5Cigarillos of tobacco substitutes12.5% or Rs.3375 per thousand, whichever is higher 12.5% or Rs.3755 per thousand, whichever is higher 6Others of tobacco substitutes12.5% or Rs.3375 per thousand, whichever is higher 12.5% or Rs.3755 per thousand, whichever is higher 7Gutkha, chewing tobacco (including filter khaini) and jarda scented tobacco70%81% 8Unmanufactured tobacco55%64% 9Paper rolled biris [whether handmade or machine made] and other biris [other than handmade biris] However, the effective rate of basic excise duty of Rs.21 per thousand shall remain unchanged. Rs.30 per thousand Rs.80 per thousand 51 The amendments involvingincreasein the duty rates will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931. OTHER PROPOSALS INVOLVING CHANGES IN DUTY RATES: FromTo Food processing 1Refrigeratedcontainers12.5%6% Fertilizers 2Micronutrients which are covered under Sr. No. 1(f) of Schedule 1 Part (A) of the Fertilizer Control Order, 1985 and are manufactured by the manufacturers which are registered under FCO, 1985 12.5%6% 3Physicalmixture of fertilizers manufactured by Co-operative Societies, holding certificate of manufacture for mixture of fertilizers under the Fertiliser Control Order 1985, madeout of chemical fertilizers on which duty of excise has been paid and no credit of duty paid on such chemical fertilizers has been taken under rule 3 of the CENVAT Credit Rules, 2004 and which are intended for supply to the members of such Co-operative Societies 1% [without CENVAT credit] or 6% [with CENVAT credit] Nil Textiles 4Toincrease Tariff Value of readymade garments and made up articles of textiles30% of retail sale price 60% of retail sale price 5Branded readymade garments and made up articles of textiles of retail sale price of Rs.1000 or more Nil [without CENVAT credit] or 6%/12.5% [with CENVAT credit] 2% [without CENVAT credit] or 12.5% [with CENVAT credit] 6PSF / PFY, manufactured from plastic scrap or plastic waste including waste PET bottles 2% [without CENVAT credit] or 6% [with CENVAT credit] 2% [without CENVAT credit] or 12.5% [with CENVAT credit] Footwear 7Rubber sheets & resin rubber sheets for soles and heels12.5%6% 8Increase the abatement from retail sale price (RSP) for the purposes of excise duty assessment for all categories of footwear 25%30% Metals 9To change excise duty structure on disposable containers made of aluminium foils. 2% [without CENVAT credit] or 6% [with CENVAT credit] 2% [without CENVAT credit] or 12.5% [with CENVAT credit] 52 FromTo Precious metals &Jewellery 10Refined gold bars manufactured fromgold dore bar, silver dorebar, gold ore or concentrate, silver ore or concentrate, copper ore or concentrate. Prospectively, the excise duty exemption under the existing area based exemptions on refined gold is being withdrawn. 9%9.5% 11Refined silver manufactured from silver ore or concentrate, silver dore bar, or gold dore bar. Prospectively, the excise duty exemption under the existing area based exemptions on refined silver is being withdrawn. 8%8.5% 12Articles of Jewellery [excluding silver jewellery, other than studded with diamonds or other precious stones namely, ruby, emerald and sapphire] with a higher threshold exemption upto Rs. 6 crore in a year and eligibility limit of Rs.12 crore, along with simplified compliance procedure. Nil1% [without CENVAT credit] or 12.5% [with CENVAT credit] Renewable Energy 13Unsaturated Polyester Resin (polyester based infusion resin and hand layup resin), Hardeners/Hardener for adhesive resin, Vinyl Easter Adhesive (VEA) and Epoxy Resin used for manufacture of rotor bladesand intermediates,parts and sub parts of rotor bladesfor wind operated electricity generators Nil6% 14Carbon pultrusionused for manufacture of rotor blades and intermediates, parts and sub-parts of rotor blades for wind operated electricity generators 12.5%6% 15Solar lamp12.5%Nil 16To prescribe “valid agreement between importer / producer of power with urban localbody for processing of municipal solid waste for not less than ten years from the date of commissioning of project” as an alternative to the condition of “production of valid power purchase agreement between the importer/producer of power and the purchaser, for the sale and purchase of electricity generated using non-conventional materials” for availing concessional customs/excise duty benefits in case of power generation project based on municipal and urban waste -- Civil Aviation 17Aviation TurbineFuel [ATF] other than for supply toScheduledCommuter Airlines (SCA) from theRegional Connectivity Schemeairports 8%14% Maintenance, repair and overhaul [MRO] of aircrafts 18Tools and tool kits when procured by MROs for maintenance, repair, and overhauling [MRO] of aircraft subject to a certification by the Directorate General of Civil Aviation Applicable excise duty Nil 19To simplify the procedure for availment of exemption from excise duty on parts, testing equipment, tools and tool-kits formaintenance, repair and overhaul of aircraft based on records -- 20To remove the restriction of one year for utilization of duty free parts for maintenance, repair and overhaul of aircraft -- 53 FromTo Electronics & IT hardware 21Charger / adapter, batteryand wired headsets / speakers for supply to mobile phone manufacturers as original equipment manufacturer Nil2% [without CENVAT credit] or 12.5% [with CENVAT credit] 22Inputs, parts and components, subparts for manufacture of charger / adapter, battery and wired headsets / speakers of mobile phone, subject to actual user condition. 12.5%/ NilNil 23Routers, broadband Modems, Set-top boxes for gaining access to internet, set top boxes for TV, digital video recorder (DVR) / network videorecorder (NVR), CCTV camera / IP camera, lithium ion battery [other than those for mobile handsets] 12.5%4% [without CENVAT credit] or 12.5% [with CENVAT credit] 24Parts and components, subparts for manufacture of Routers, broadband Modems, Set-topboxes for gaining access to internet, set top boxes for TV, digital video recorder (DVR) / network video recorder (NVR), CCTV camera / IP camera, lithium ion battery [other than those for mobile handsets] 12.5%Nil Machinery 25Electric motor, shafts,sleeve, chamber, impeller, washer required for the manufacture of centrifugal pump 12.5%6% Automobiles 26Specified parts of Electric Vehicles and Hybrid Vehicles6% Upto 31.03.2016 6% Without time limit 27Engine for xEV (hybrid electric vehicle)12.5%6% Miscellaneous 28Excise duty on sacks and bags ofall plasticsis being rationalized at 15%.12.5%/15%15% 29Unconditionally exempt improved cook stoves including smokeless chulhas for burning wood, agrowaste, cowdung, briquettes, and coal NilNil 30Disposable sterilizeddialyzerand micro barrier of artificial kidney12.5%Nil 31Ready Mix Concrete manufactured at the site of construction for use in construction work at such site 2% [without input tax credit] / 6% [with input tax credit] Nil 32Parts of railway or tramway locomotives or rolling stock and railway or tramway track fixtures and fittings, railway safety or traffic control equipment, etc. 12.5%6% 54 FromTo 33Remnant kerosene, presently available for manufacture of Linear alkyl Benzene [LAB] and heavy alkylate [HA] to N-paraffin.At present,exemption is restricted to manufacturers of LAB and HA. 14%Nil 34Clean Energy Cess / Clean Environment Cesson coal, lignite or peat produced or extracted as per traditional and customary rights enjoyed by local tribals without any license or lease in the State of Nagaland Rs.200 per tonne Nil 35To extend Retail Sale Price [RSP] based assessment of exciseduty to: a)all goods falling under heading 3401 and 3402 [with abatement rate of 30%], b)aluminium foils of a thickness not exceeding 0.2 mm [with abatement rate of 25%], c)wrist wearable devices (commonly known as ‘smart watches’) [with abatement rate of 35%],and d)accessories of motor vehicleand certain other specified goods[with abatement rate of 30%]. MISCELLANEOUS 1)The Oil Industry (Development) Act, 1974 is being amended so as to reduce the rate of Oil Industries Development Cess, on domestically produced crude oil, from Rs. 4500 PMT to 20% ad valorem OIDB Cess. The amendment in the Act will be effective from the date of assent to the Finance Bill, 2016. [Clause 222] 2)The Seventh Schedule to the Finance Act, 2005 is being amendedso as to increase the excise duty across all lengths of non-filter and filter cigarettes as under: [Clause 231] CigarettesFrom Rs. Per thousand To Rs. Per thousand Non filter not exceeding 65mm70215 Non-filter exceeding 65mmbut not exceeding 70mm110370 Filter not exceeding 65mm70215 Filter exceeding 65mmbut not exceeding 70mm70260 Filter exceeding 70mmbut not exceeding 75mm110370 Other180560 3)The Clean Energy Cessis being renamed as Clean Environment Cess. Also, the Tenth Schedule to the Finance Act, 2010 dealing with Clean Energy Cess is being amended so as to increase the Scheduled rate of Clean Energy Cess from Rs.300 per tonne to Rs.400 per tonne. The effective rate of Clean Energy Cess is being increased from Rs.200 per tonne to Rs.400 per tonne [Clause 232] 55 4)Infrastructure Cessis being levied on motor vehicles, of heading 8703, as under: b)Petrol/LPG/CNG driven motor vehicles of length not exceeding 4m and engine capacity not exceeding 1200cc–1% c)Diesel driven motor vehicles of length not exceeding 4m and engine capacity not exceeding 1500cc–2.5% d)Other higher engine capacity motor vehicles and SUVs and bigger sedans–4%. Three wheeled vehicles,Electrically operated vehicles,Hybrid vehicles, Hydrogen vehicles based on fuel cell technology, Motor vehicles which after clearance have been registered for use solely as taxi, Cars for physically handicapped persons and Motor vehicles cleared as ambulances or registered for use solely as ambulance will be exempt from this Cess.No credit of thisCesswill be available, andcredit of no other duty can be utilized for payment of this Infrastructure Cess. [Clause 159] The changes at 2), 3) and 4) abovewill come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931. RULES AND REGULATIONS UNDER THE CUSTOMS ACT, 1962 1)The existing Baggage Rules, 1998 are being substituted with the Baggage Rules, 2016, so as tosimplify and rationalize multiple slabs of duty free allowance for various categories of passengers. The new Rules are effective from 01.04.2016. 2)The existing Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules,1996 are being substituted with the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 with a view to simplify the rules, including allowing duty exemptions to importer/manufacturer based on self-declaration instead of obtaining permissions from the Central Excise authorities. Need for additional registration is also being done away with. The new Rules will be effective from 01.04.2016. 3)The Customs Baggage Declaration Regulations, 2013 is being amended soas to prescribe filing of Customs declaration only for those passengers who carry dutiable or prohibited goods. AMENDMENTS IN THE CENTRAL EXCISE RULES, 2002 AND THE CENVAT CREDIT RULES, 2004 1)The Central Excise Rules, 2002are being amended so as to: (a)reducethe number of returns to be filed by a central excise assessee above a certain threshold from 27 to 13, that is, one annual and 12 monthly returns. Monthly returns are already being e-filed. CBEC will provide for e-filing of annual return also. This annual return will have to be filed by service tax assessees also, above a certain threshold, taking total number of returns to three in a year for them, (b)extend the facility for revision of return, hitherto available to a service tax assessees only, to manufacturers also. (c)provide that in cases where invoices are digitally signed, the manual attestation of copy of invoice, meant for transporter, is done away with. (d)provide that in case of finalization of provisional assessment, the interest will be chargeable from the original date of payment of duty. 2)The CENVAT Credit Rules, 2004 are being amended, so as to improve credit flow, reduce the compliance burden and associated litigations, particularly those relating to apportionment of credit between exempted and non-exempted final products / services. Changes are also being made in the provisions relating to input service distributor, including extension of this facility to transfer input services credit to outsourced manufacturers, under certain circumstances. The amendments in these Rules will also enable manufacturers with multiple manufacturing units to maintain a common warehouse for inputs and distribute inputs with credits to the individual manufacturing units. 3)Instructions are being issued to Chief Commissioners of Central Excise to file application to Courts to withdraw prosecution in cases involving duty of less than rupees five lakh and pending for more than fifteen years. 4)The existing Central Excise (Removal of Goods at Concessional Rate of Duty forManufacture of Excisable and Other Goods) Rules, 2001 are being substituted with the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable and Other Goods) Rules, 2016, so as to simplify the rules, including allowing duty exemptions to importer/manufacturer based on self-declaration instead of obtaining permissions from the Central Excise authorities. 56 AMENDMENTS TO OTHER ACTS S. No. AmendmentClause of the Finance Bill, 2016 1.THE FINANCE ACT, 2001 (i)To amend theSeventh Schedule which provides for levy on NCCD of excise on specified goods so as to align the tariff lines with the First Schedule to the Central Excise Tariff Act, 1985. [228(i)] (ii)To amend the Seventh Schedule which provides for levy on NCCD ofexcise on specified goods so as to include 2017 Harmonized System of Nomenclature (HSN) editorial changes. These changes will be effective from 01.01.2017. [228 (ii)] 2.THE CENTRAL SALES ACT, 1956 Section 3 of the Central Sales Tax Act, 1956 is beingamended so as to insert an explanation: Explanation.-Where the gas sold or purchased and transported through a common carrier pipeline or any other common transport distribution systems becomes co-mingled and fungible with other gas in the pipeline or system and such gas is introduced into the pipeline or system in one State and is taken out from the pipeline in another State, such sale or purchase of gas shall be deemed to be a movement of goods from one state to another. [221] 3.THE CENTRAL ROAD FUNDACT, 2000 Section 10 of the Central Road Fund Act, 2000 is being amended so as to substitute clause (viii) of sub-section (1) therein to provide a formula for redistribution of the cess for different purposes [227] 4.THE PREVENTION OF MONEY LAUNDERING ACT, 2002, THE SMUGGLERS AND FOREIGN EXCHANGE MANIPULATORS (FORFEITURE OF PROPERTY ACT, 1976 and NARCOTICS DRUGS ANDPSYCHOTROPIC SUBSTANCES ACT, 1985 To merge the three Tribunals established under these Acts and to provide that Appellate Tribunal established under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 shall be the appellate Tribunal for hearing the appeals against the orders made under all these three Acts. [229, 223 & 224] 5.THE FOREIGN EXCHANGE MANAGEMENT ACT, 1999 To insert section 14A in the Foreign Exchange Management Act [FEMA], 1999 to incorporate provisions contained under the Second Schedule appended to the Income-tax Act, 1961, so as to empower an officer notbelow the rank of Assistant Director to recover arrears of penalty under the FEMA 1999 by exercising the powers conferred under the Income-tax Act, 1961. [225 & 226] 57 SERVICE TAX IKrishiKalyan CessExistingProposed 1.An enabling provision is being made to levy Krishi Kalyan Cess on all taxable services with effect from 1stJune, 2016, to finance and promote initiatives to improve agriculture. -0.5% IIBroadening of Tax baseExistingProposed 1.Exemption on services provided by,- (i)a senior advocate to an advocate or partnership firm of advocates providing legal service; and (ii)a person represented on an arbitral tribunal to an arbitral tribunal, is being withdrawn with effect from 1stApril, 2016 and Service Tax is being levied under forward charge. Nil14% 2.Exemption on construction, erection, commissioning or installation of original works pertaining to monorail or metro, in respect of contracts entered into on or after 1stMarch2016, is being withdrawn with effect from 1stMarch, 2016. Nil5.6% 3.Exemption on the services of transport of passengers, with or without accompanied belongings, by ropeway, cable car or aerial tramway is being withdrawn with effect from 1stApril, 2016. Nil14% 4.The Negative List entry that covers ‘service of transportation of passengers, with or without accompanied belongings, by a stage carriage’ is being omitted with effect from 1stJune, 2016. Service Tax is being levied on transportation ofpassengers by air conditioned stage carriage with effect from 1stJune, 2016, at the same level of abatement as applicable to the transportation of passengers by a contract carriage, that is, 60% without credit of inputs, input services and capital goods. Nil5.6% IIINew Exemptions 1.Services by way of construction etc. in respect of- (i)housing projects under Housing For All (HFA) (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY); (ii)low cost houses up to a carpet area of 60 square metresin a housing project under “Affordable housing in Partnership” component of PMAY, (iii)low cost houses up to a carpet area of 60 square metres in a housing project under any housing scheme of the State Government, are being exempted from Service Tax with effect from 1stMarch, 2016. 5.6%Nil 2.The service of life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund Regulatory and Development Authority (PFRDA)of India is being exempted from Service Tax with effect from 1stApril, 2016. 3.5%Nil 58 ExistingProposed 3.Services provided by Employees’ Provident Fund Organisation (EPFO) to employees are being exempted from Service Taxwith effect from 1stApril, 201614%Nil 4.Services provided byInsurance Regulatory and Development Authority (IRDA) of India are being exempted from Service Tax with effect from 1stApril, 2016.14%Nil 5.The regulatory services provided by Securities and Exchange Board of India (SEBI) are being exempted fromService Tax with effect from 1stApril, 2016.14%NIL 6.The rate of Service Tax on single premium annuity (insurance) policies is being reduced from 3.5% to 1.4% of the premium, in cases where the amount allocated for investment, or savings on behalf of policy holder is not intimated to the policy holder at thetime of providing of service, with effect from 1stApril, 2016. 3.5%1.4% 7.The services of general insurance business provided under ‘Niramaya’ Health Insurance scheme launched by National Trust for the Welfare of Persons with Autism, CerebralPalsy, Mental Retardation and Multiple Disability in collaboration with private/public insurance companies are being exempted from Service Tax with effect from 1stApril, 2016. 14%Nil 8.Services provided by National Centre for Cold Chain Developmentunder Department of Agriculture, Cooperation and Farmer’s Welfare, Government of India, by way of knowledge dissemination are being exempted from Service Tax with effect from 1stApril, 2016. 14%Nil 9.Services provided by Biotechnology Industry Research Assistance Council (BIRAC) approved biotechnology incubators to incubatees are being exempted from Service Tax with effect from 1stApril, 2016. 14%Nil 10.Services provided by way of skill/vocationaltraining by training partners under Deen Dayal Upadhyay Grameen Kaushalya Yojana are being exempted from Service Tax with effect from 1stApril, 2016. 14%NIL 11.Services of assessing bodies empanelled centrally by Directorate General of Training,Ministry of Skill Development & Entrepreneurship are being exempted from Service Tax with effect from 1stApril, 2016. 14%NIL 12.The threshold exemption to services provided by a performing artist in folk or classical art forms of music, dance or theatre is being enhanced from Rs 1 lakh to Rs 1.5 lakh charged per event with effect from 1stApril, 2016. 14%Nil IVReliefMeasures 1To provide level playing field to Indian Shipping lines vis-a-vis foreign shipping lines, it is being proposed to: a)zero rate the services provided by Indian Shipping lines by way of transportation of goods by a vessel to outside India witheffect from 1stMarch, 2016, and b)impose Service Tax on services provided by them by way of transportation of goods by a vessel from outside India up to the customs station in India with effect from 1stJune, 2016 so as to complete the credit chain and enable Indian Shipping Lines to avail and utilize input tax credits. No credit Nil Inputs, input services & capital goods credit 14% 59 2Notification No. 41/2012-ST, dated the 29th June, 2012 was amended by notification No.1/2016-ST dated 3rd February, 2016 so as to,inter alia, allow refund of Service Tax on services used beyond the factory or any other place or premises of production ormanufacture of the said goods for the export of the said goods. This amendment is being made effective from the date of application of the parent notification (i.e. 1stJuly 2012). 3The benefit of quarterly payment of Service Tax is being extended to‘One Person Company’ (OPC) and HUF with effect from 1stApril, 2016. 4The facility of payment of Service Tax on receipt basis is being extended to ‘One Person Company’ (OPC) with effect from 1stApril, 2016. 5Exemptions on services of: a)construction provided to the Government, a local authority or a governmental authority, in respect of construction of govt. schools, hospitals etc. b)construction of ports, airports, [which were withdrawn with effect from 01.04.2015], are being restored in respect ofservices provided under contracts which had been entered into prior to 01.03.2015 on payment of applicable stamp duty, with retrospective effect from 01.04.2015. 5.6% of total amountNil 6Services provided by way of construction, maintenance etc. ofcanal, dam or other irrigation works provided to bodies set up by Government but not necessarily by an Act of Parliament or a State Legislature, during the period from the 1stJuly, 2012 to 29th January, 2014, are being exempted from Service Tax with consequential refunds, subject to the principle of unjust enrichment. 5.6% of total amountNil 7Services provided by the Indian Institutes of Management (IIM) by way of 2 year full time Post Graduate Programmein Management (PGPM) (other than executive development programme), Integrated Programme in Management and Fellowship Programme in Management (FPM) are being exempted from Service Tax with effect from 1stMarch, 2016. 14%NIL 8The services provided bymutual fund agent/distributor to a mutual fund or asset management company, are being made taxable under forward charge with effect from 1stApril, 2016, so as to enable the small sub-agents down the distribution chain to avail small scale exemption havingthreshold turnover of Rs 10 lakh per year, subject to fulfillment of other conditions prescribed. 14%14% VInterest Rate 1.Interest rates on delayed payment of duty/tax across all indirect taxes are being rationalized and made uniform at 15%, except in case of Service Tax collected but not deposited to the exchequer, in which case the rate of interest will be 24% from the dateon which the Service Tax payment became due. In case of assessees, whose value of taxable services in the preceding year/years covered by the notice is less than Rs. 60 Lakh, the rate of interest on delayed payment of Service Tax will be 12%. [The abovechanges will come into effect on the day the Finance Bill receives the assent of the President.] Customs 18% Excise 18% Service Tax 18% 24% 30% Customs, Excise & Service Tax 15%; 24% in case of Service Tax collected but not deposited to the exchequer 60 VIRationalization of AbatementsExistingProposed 1Credit of input services is being allowed on transport of passengers by rail at the existing rate of abatement of 70%. 4.2% Without credit 4.2% With input service credit 2Credit of input services is being allowed on transport of goods, other than in containers, by rail at the existing rate of abatement of 70%. 4.2% Without credit 4.2% With input service credit 3 Credit ofinput services is being allowed on transport of goods in containers by rail at a reduced abatement rate of 60%. 4.2% Without credit 5.6% With input service credit 4Credit of input services is being allowed on transport of goods by vessel at the existing rate of abatement of 70%. 4.2% Without credit 4.2% With input service credit 5The abatement rate in respect of services by way of construction of residential complex, building, civil structure, or a part thereof, is being rationalized at 70% by merging the two existing rates (70% for high end flats and 75% for low end flats). 3.5%/ 4.2%4.2% 6The abatement rate in respect of services by a tour operator in relation to packaged tour (defined where tour operator provides to the service recipient transportation, accommodation, food etc) and other than packaged tour is being rationalized at 70%. 3.5%/ 5.6% of amount charged 4.2% of amount charged 7The abatement on shifting of used household goods by a Goods Transport Agency (GTA) is being rationalized at the rate of 60%, without CENVAT credit on inputs, input services and capital goods. (Theexisting rate of abatement of 70% allowed on transport of other goods by GTA continues unchanged). 4.2%5.6% 8The abatement rate on services of a foreman to a chit fund is being rationalised at the rate of 30%, without CENVAT credit on inputs, input services and capital goods. 14%9.8% [The above changes will come into effect from 1stApril, 2016.] VIIReduce litigation and providing certainty in taxation 1Indirect tax Dispute Resolution Scheme, 2016, wherein a scheme in respect of cases pending before Commissioner (Appeals), the assessee, after paying the duty, interest and penalty equivalent to 25% of duty, can file a declaration, is being introduced. In such cases the proceedings against the assessee will be closed and he will also get immunity from prosecution. However, this scheme will not apply in cases: a)where prosecution has already been launched b)involving narcotics & psychotropic substances c)involvingdetention under COFEPOSA. 2Section 67A is being amended to obtain rule making powers in respect of the Point of Taxation Rules, 2011, so as to provide that the point in time when service has been provided or agreed to be provided shall be determined by rules made in this regard. Point of Taxation Rules, 2011 is being amended accordingly. 61 3Section 93A of theFinance Act,1994 is being amended so as to allow rebate by way of notification as well as rules. 4Explanation 2 in section 65B (44) of the Finance Act, 1994 is being amended so as to clarify that any activity carried out by a lottery distributor or selling agent in relation to promotion, marketing, organizing, selling of lottery or facilitating in organizing lottery of any kind, in any other manner, of the State Government as per the provisions of the Lotteries (Regulation) Act, 1998 (17 of 1998), is leviable to Service Tax. 5Notification No. 27/2012–C.E. (N.T.) dated 18.06.2012 is being amendedwith effect from 1stMarch, 2016 so as to provide that time limit for filing application for refund of CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004, in case of export of services, is 1 year from the date of: (a)receipt of payment in convertible foreign exchange, where provision of service has been completed prior to receipt of such payment; or (b)issue of invoice, where payment, for the service has been received in advance prior to the date of issue of the invoice. 6Assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof is being declared as a service under section 66E of the Finance Act, 1994 so as to make it clear that assignment of right to use the spectrum is a service leviable to Service Tax and not sale of intangible goods. 14%14% 7A condition mandating inclusion of cost of fuel in the consideration for availing abatement on the services by way of renting of motor-cab is being prescribed witheffect from 1stApril, 2016. 8Service tax on the services of Information Technology Software on media bearing RSP is being exempted from Service Tax with effect from 1stMarch, 2016 provided Central Excise duty is paid on RSP in accordance with Section4A of the Central Excise Act. NilNil 9Mutual exclusiveness of levy of excise duty and Service Tax on Information Technology Software in respect of software recorded on media “NOT FOR RETAIL SALE” is being ensured by exempting from excise duty only that portion of the transaction value on whichService Tax is paid. 14%14% VIIIService Tax Rules 1To reduce compliance cost, the number of returns to be filed by a central excise assessee, above a certain threshold, is being drastically reduced, from 27 to 13, one annual and 12 monthly returns.Monthly returns are already being e-filed. CBEC will provide for e-filing of annual return also. The annual returnwill also have to be filed byService Tax assessees, above a certain threshold, taking total number of returns to three in a year for them.This change shall come into effect from 1stApril, 2016. IXCENVAT Credit Rules 1The rules are being amended so as to allow banks and other financial institutions to reverse credit in respect of exempted services on actual basis in addition to theoption of 50% reversal. 2The rules are being amended to improve credit flow, reduce the compliance burden and associated litigation, particularly those relating to apportionment of credit between exempted and non-exempted final products / services. Changes are also being made in the provisions relating to input service distributor, including extension of this facility to transfer input services credit to outsourced manufacturers, under certain circumstances. The amendments in these rules will also enablemanufacturers with multiple manufacturing units to maintain a common warehouse for inputs and distribute inputs with credits to the individual manufacturing units. 62 3The rules are being amended to provide for reversal of CENVAT Credit of inputs/input services which have been commonly used in providing taxable output service and an activity which is not a ‘service’ under the Finance Act, 1994. 4The CENVAT credit rules are being amended so as to allow CENVAT credit of Service Tax paid on amount charged forassignment by Government or any other person of a natural resource, over such period of time as the period for which the rights have been assigned. [The above amendment shall come into effect from 1stApril, 2016.] XMiscellaneous Period for issuingdemand notices 1Section 73 of the Finance Act,1994 is being amended so as to increase the limitation period from 18 months to 30 months for short levy/non levy/short payment/non-payment/erroneous refund of Service Tax. Other changes in the Finance Act, 1994 2The Negative List entry covering ‘educational services by way of (a) pre-school education and education up to higher and secondary school or equivalent, (b) education as a part of a curriculum for obtaining a qualification recognized by any lawfor the time being in force and (c) education as a part of an approved vocational education course [Section 66D (l)] and the definition of ‘approved vocational education course’ [section 65B (11)] are being omitted. However, the exemption shall continue byway of exemption notification No. 25/2012–ST. 3In the last Budget, the Customs, Central Excise and Service Tax laws were amended to provide for closure of proceedings where the assessee pays duty/tax due, interest and specified penalty. Further amendments are being made toService Tax lawso as to provide for closure of proceedings against co- noticees, once the proceedings against the main noticee have been closed. 4The power to arrest in Service Tax is being restricted only to situations where thetax payer has collected the tax but not deposited it to the exchequer, and that too above a threshold of Rs 2 crore. The monetary limit for launching prosecution is being increased from Rs. 1crore to Rs. 2 crore of Service Tax evasion.




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