INDIRECT TAXES
CENTRAL EXCISE
Amendments made effective immediately
The Clean Energy cess is to be renamed as Clean Environment cess. The effective rate of
Clean Energy cess proposed to be increased from Rs.200 per tonne to Rs.400 per tonne .
Infrastructure cess is to be levied on motor vehicles under heading 8703 subject to
certain exceptions. Further, this cess is not CENVATable and CENVAT credit cannot
be utilized for its payment.
Amendments to be effective from the date on which Finance Bill receives the assent
of the President
Amendments in the Central Excise Act, 1944
Requirement of publishing and offering for sale any notification issued, by the
Directorate of Publicity and Public Relations of CBEC under section 5A proposed to be
done away with.
The time-limit for issuance of show cause notice under section 11A for recovery of
service tax not levied/paid/short levied/short paid/erroneously refunded, for non-fraud
cases is proposed to be enhanced by 1 year, i.e. from 1 year to 2 years.
It is proposed to empower the Board under section 37B to issue orders, instructions and
directions for the implementation of any other provision of the Central Excise Act, 1944.
Amendments effective from 01.04.2016
Amendments in the CENVAT Credit Rules, 2004
The CENVAT Credit Rules, 2004 have been simplified and rationalized with an endeavor to
improve CENVAT credit flow, reduce the compliance burden and associated litigations,
predominantly those relating to apportionment of credit between exempted and non-
exempted final products/services. Primary amendments include:
Banks and other financial institutions are to be allowed to reverse credit in respect of
exempted services, on actual basis also, in addition to the option of 50% reversal.
Inputs and input services used in an activity which is not a `service' under the Finance
Act, 1994also to attract reversal provisions under rule 6.
CENVAT credit of service tax paid on amount charged for assignment by Government
or any other person of a natural resource available, over such period of time as the
period for which the rights have been assigned.
Amendments in the Central Excise Rules, 2002
The Central Excise Rules, 2002 are proposed to be amended as follows:
(a) Reduction of the number of returns to be filed by a central excise assessee above a
specified threshold to 13, that is, 1 annual return and 12 monthly returns.
The said annual return is also required to be filed by the service tax assessees above a
specified threshold. Thus, now three service tax returns need to be filed instead of two.
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(b) Like under service tax, the facility of revision of return to be available under central
excise also.
(c) Manual attestation of copy of invoice, meant for transporter, is not required in cases
where invoices are digitally signed.
(d) In case of finalization of provisional assessment, the interest will be chargeable from
the original date of payment of duty.
SERVICE TAX
Amendments effective from 01.03.2016
Exemption withdrawn
Exemption with respect to construction, erection, commissioning or installation of
original works pertaining to monorail or metro in respect of contracts entered into
on/after 01.03.2016, has been withdrawn.
New Exemptions
Following services have been exempted:
Services by way of construction, erection, commissioning, etc. in respect of-
a) housing projects under Housing For All (HFA) (Urban) Mission/Pradhan Mantri
Awas Yojana (PMAY)
b) low cost houses up to a carpet area of 60 m2 in a housing project under "Affordable
housing in Partnership" component of PMAY
c) low cost houses up to a carpet area of 60 m2 in a housing project under any housing
scheme of the State Government.
Services provided by the Indian Institutes of Management (IIM) to their students, by way
of the specified educational programmes.
Other Amendments
CENVAT credit is being allowed to service providers providing services by way of
transportation of goods by a vessel from India to abroad
Rule 5 of the Point of Taxation Rules, 2011 has been amended so as to clarify that this
rule shall apply mutatis mutandis in case of new levy on services and new levy or tax shall
be payable on all the cases other than specified in said rule.
Information Technology Software (IT Software) on media bearing RSP is exempted
from service tax provided central excise duty is paid on RSP in accordance with section
4A of the Central Excise Act.
Further, IT Software recorded on media which is "NOT FOR RETAIL SALE" is
exempted from so much of the Central Excise duty/CVD as is equivalent to the duty
payable on the portion of the value of such IT Software recorded on the said media,
which is leviable to service tax. In such cases, manufacturer/importer would therefore
be required to pay Central Excise duty/CVD only on that portion of value representing
the value of the medium on which it is recorded along with freight and insurance.
Thus, levy of excise duty and service tax is mutually exclusive.
Amendments effective from 01.04.2016
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Exemptions withdrawn
With a view to broaden the tax base, following exemptions are to be withdrawn:
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.
Service tax would be payable under forward charge on such services.
transport of passengers, with or without accompanied belongings, by ropeway,
cable car or aerial tramway
New Exemptions
Exemption has been provided with respect to the following services:
Services of life insurance business provided by way of annuity under the National
Pension System.
Services provided by SEBI by way of protecting the interests of investors in
securities and to promote the development of, and to regulate, the securities
market.
Services provided by Employee Provident Fund Organisation (EPFO) to
employees.
Services provided by Biotechnology incubators approved by Biotechnology
Industry Research Assistance Council (BIRAC) approved biotechnology incubators
to the incubatees.
Services provided by National Centre for Cold Chain Development by way of
knowledge dissemination.
Services provided by Insurance Regulatory and Development Authority (IRDA) of
India.
Services of general insurance business provided under Niramaya Health Insurance
scheme launched by National Trust for the Welfare of Persons with Autism,
Cerebral Palsy, Mental Retardation and Multiple Disability in collaboration with
private/public insurance companies.
Services provided by way of skill/vocational training by Deen Dayal Upadhyay
Grameen Kaushalya Yojana training partners.
Services of assessing bodies empanelled centrally by Directorate General of
Training, Ministry of Skill Development & Entrepreneurship.
Amendments in existing exemptions
Hitherto, service tax payable on a performance in folk or classical art forms of
music/ dance/ theatre is exempt provided the consideration therefor exceeds
Rs. 1,00,000. This limit has been increased to Rs. 1,50,000.
Rationalisation of abatements alongwith the conditions for availing such
abatements
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Abatement at the existing rate of 70% will continue to be available on transport of
passengers and goods by rail and on transport of goods by vessel, with the
CENVAT credit of input services now to be allowed [presently, the credit of input
services is not allowed with the abatement being claimed].
A lower rate of abatement of 60% for transport of goods in containers by rail by
any person other than Indian railway, with the CENVAT credit of input services
being allowed.
Uniform rate of abatement of 70% on services by way of construction of residential
complex, building, civil structure, or a part thereof, irrespective of the carpet area of
the units and amount charged for such units.
Abatement on services by a tour operator in respect of a tour only for the purpose
of arranging or booking accommodation for any person, retained at the existing
rate of 90%. However, abatement in respect of any other tour is rationalised from
75% and 60% to 70%.
A lower rate of abatement of 60% on shifting of used household goods by a Goods
Transport Agency (GTA) without CENVAT credit on inputs, input services and
capital goods.
Abatement of 70% on services of a foreman to a chit fund restored, without
CENVAT credit on inputs, input services and capital goods.
Amendments in Service Tax Rules, 1994
Rule 6 of the Service Tax Rules, 1994 to be amended to extend the benefit of
quarterly payment of service tax to One Person Company (OPC) whose aggregate
value of services provided is up to Rs. 50 lakh in the previous financial year and an
HUF. Further, payment of service tax on receipt basis is also extended to such
OPC.
With respect to services provided by mutual fund agents/distributor to a mutual
fund or asset management company, service tax to be payable under forward charge
provisions, i.e. service provider to be liable to pay service tax.
Rule 6(7A) of the Service Tax Rules, 1994 to be amended to provide that an insurer
carrying on life insurance business to have an option to pay tax at 1.4% of the total
premium charged on single premium annuity (insurance) policies, in cases where
the amount allocated for investment/savings on behalf of policy holder is not
intimated to such policy holder at the time of providing of service.
With effect from 01.04.2016, any service (and not only support services) provided
by Government or local authorities to business entities are leviable to service tax.
Consequently, service tax would be payable on any (and not only support services)
service by the service recipient on reverse charge basis from said date.
Amendments to be effective from the date on which Finance Bill, 2015 receives the
assent of the President
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Finance Act, 2015 had inserted Explanation 2 to the definition of "service" under
section 65B(44) of the Finance Act, 1994 to specifically state that service tax is
leviable on activities undertaken by lottery distributors and selling agents, in relation
to lotteries.
The said explanation is proposed to be amended to clarify that it is the activity 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, carried out by a lottery
distributor/selling agent, which is leviable to service tax.
The Negative List entry under section 66D(l) covering `educational services is
proposed to be omitted. The said benefit would continue by way of exemption
under mega exemption Notification No. 25/2012 ST dated 20.06.2012.
Assignment by the Government of the right to use the radio-frequency spectrum
and subsequent transfers thereof is proposed to be declared as a service.
Section 67A is proposed to be amended to obtain specific rule making powers in
respect of Point of Taxation Rules, 2011.
The time-limit for issuance of show cause notice under section 73, for recovery of
service tax not levied/paid/short- levied/short paid/erroneously refunded, for non-
fraud cases is proposed to be enhanced by 1 year, i.e. from 18 months to 30
months.
Interest rates on delayed payment of duty/tax across all indirect taxes are proposed
to be made uniform at 15% p.a. However, under service tax, in case where any
amount is collected as service tax but amount so collected is not paid to the credit
of the Central Government on/before the date on which such payment becomes
due, proposed interest rate is 24% p.a.
Power to arrest under section 91 proposed to be restricted only in case where the
tax payer has collected the tax of more than Rs 2 crore, but not deposited it to
Government. The monetary limit for launching prosecution under section 89
proposed to be increased to Rs. 2 crore of the amount of service tax collected but
not deposited to the credit of the Central Government beyond a period of 6
months from the date on which such payment becomes due.
Section 93A of the Finance Act, 1994 proposed to be amended so as to allow
rebate by way of notification as well as rules.
Amendments to be effective from 01.06.2016
Krishi Kalyan Cess
It is proposed to levy a Krishi Kalyan Cess on ANY OR ALL the taxable services at the
rate of 0.5% of the value of taxable services. It is important to note here that unlike
Swachh Bharat Cess, service provider shall be allowed to utilize the CENVAT credit of
Krishi Kalyan Cess paid on input services for payment of such cess on the output service
provided by it.
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Service tax proposed to be levied on transportation of passengers, with or without
accompanied belongings, by a stage carriage by amending Negative List of services.
However, transportation of passengers by non-air conditioned stage carriage are being
exempted vide mega exemption notification.
Service tax proposed to be levied on transportation of goods by an aircraft or a vessel
from a place outside India up to the customs station of clearance by omitting the
negative list entry to said effect. However, said services are being exempted vide mega
exemption notification.
CUSTOMS
Section 2(43) has been amended so as to include Special Warehouse licensed under
Section 58A for enabling storage of specific goods under physical control of the
department, as control over the other types of warehouses would be only record
based.
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. For this purpose, it has been proposed to provide that every notification
issued shall unless otherwise provided come into force on the date of its issue by the
Central Government for publication in the official Gazette.
The period of limitation has been increased from one year to two years in case of
bonafide error assessment.
Amendments have been proposed in section 28, 47, 51 and 156 of the Customs Act to
provide for deferred payment of customs duties for importers and exporters with
proven track record. It will reduce the cargo release time and transaction cost of
EXIM trade. The details changes in this regard would be prescribed by Rules.
The Principal Commissioner or Commissioner are proposed to be empowered to
license a public and private warehouses in place of Deputy/Assistant Commissioner,
subject to such conditions as may be prescribed. Further, they would also be
empowered for licensing of special warehouse wherein dutiable goods may be
deposited and be locked by the proper officer and no person would enter the
warehouse or remove any goods therefrom without his permission.
The bond amount for the warehousing bonds submitted by importers availing duty
deferred warehousing has been increased to thrice the duty amount as against earlier
requirement of twice the duty amount. In addition to furnishing of bond, security
may also be required. In case of ownership of such goods being transferred to
another person, the transferee would need to execute bond and security
The provisions of Section 61 relating to period of warehousing has been extended 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. Additionally Principal Commissioners and
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Commissioners have been empowered to extend the warehousing period upto one
year at a time.
Provisions relating to control over warehousing goods and payment of rent and
warehousing charges are proposed to be done away with. Further, free samples
from the warehouse can no longer be taken away.
The payment of fees to Customs for supervision of manufacturing facilities under
Bond is no longer required. Principal Commissioner or Commissioner of Customs
empowered to license such activities.
As a step towards Make in India, the rates of customs and excise duty have been
changed on certain inputs to reduce costs and improve competitiveness of domestic
industry in sectors like Information technology hardware, capital goods, defence
production, textiles, mineral fuels & mineral oils, chemicals & petrochemicals, paper,
paperboard & newsprint, Maintenance repair and overhauling [MRO] of aircrafts
and ship repair.
Customs Single Window Project to be implemented at major ports and airports
starting from beginning of next financial year.
Increase in free baggage allowance for international passengers. New Simplified
Baggage Rules, 2016 has been notified which would be effective from 1st April, 2016.
Further Customs Baggage declaration regulation 2013 is also being amended so as to
provide for custom declaration only for those passengers who carry dutiable and/or
prohibited goods.
The rate of interest on delayed payment of duty has been revised to 15% from earlier
rate of 18%.
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