FEBRUARY 03, 2017

By Somesh Arora, Advocate (Amicus Rarus) and Former Commissioner of Customs & Excise

COMING 20 years after the famous dream budget of 1997-98, presented by the Shri P. Chidambaram, under the stewardship of the then PM Shri Deve Gowda, the Budget 2017-18, generated a lot of expectation before it was announced. Reward to the perseverance of the Indian public was expected in the wake of demonetisation. Further, the Finance Minister will have been under pressure as sustained GDP Growth or a growth on an elevated pedestal was the expectation from him so that demonetisation could be justified politically, in medium and long term. When the Budget finally came not much emphasis was laid on indirect fiscal measures and for the first time Indirect taxes were hardly part of the Budget Speech, which had Railways as its part after a gap of 92 years, and for the first time since independence. The New date of Budget Presntation of 1 st February coinciding with the Basant Panchmi augured well for India's fiscal policy as it coincided with an auspicious Sarvarth Siddh Muhurata. May the divine bless this new beginning for India.

It appears that to keep Budget Speech not too long the portion relating to Indirect Taxes was foregone to accommodate Rail Budget. This may become the trend for the future as GST when it comes will be a baby both of Centre and States and Finance Minster of the country may not have much to do in the Budget in relation to GST.

Allocations in Budget:

The good news from FM in the Budget is that there are sufficient outlays available for agriculture, defence, rural sector, roads, railways, hospitalsetc.

But the bad news from the FM is that it still is in the pockets of tax payers and evaders.And Income Tax is going all out to dig it out.

Cheer factors:

Income-tax :

+  Income Tax reduced in first Slab Rate of up to Rs.5 Lakhs from 10% to 5%

+  Corporate Tax rate reduced for medium companies with a turnover of up to 50 Crores from 30% to 25%.

+  MAT Credit can be carried forward for 15 years instead of 10 years.

+  Lock in period for Capital Gains for real estate sector reduced from 3 to 2 years and base year for indexation now changed to 2001 instead of 1981.

+  Presumptive Tax for small traders with turnover up to 2 crore under 44AD now 6% instead of 8% for full non cash turnover (say no to every cash person for whole of the year to earn this.)

+  Cash expenditure now allowed only Rs.10,000/- instead of 20,000 per transaction. (This gets close to the Minimum Wages Act)

+  No transaction above Rs. 3 Lakhs will be allowed in cash. (Simple Marriage Shamiana will do in future)

+  Trust cash donations maximum allowed only upto Rs.2000 instead of 10000 (What about cash in Golaks?- Will God too go cahless?)

+  Political Parties maximum cash donation from one person limited to Rs.2,000/- (In a year/ month or day?- Only Political parties will tell.)

+  Domestic transfer pricing – only if one party enjoys tax benefits.

+  Professionals can pay advance Tax in one instalment if receipts are below 50 Lakhs.

+  Scrutiny time limit reduced to 18 months.

+  No TDS on Insurance Agents if 15H filed

+  Simple 1 Page Income Tax Return for person having non business Income up to Rs.5 Lakhs. (Saral not to be Jatil)

EXCISE:

+ Duty reduced on Catalyst and Resin for use in the manufacture of cast components of Wind Operated Electricity Generator.

+ Excise duty on Membrane Sheet and Tricot / Shaper for use in the

manufacture of Reverse Osmosis (RO) membrane for household type filters is being reduced from 12.5% to 6% %.(Hema Malini advertised Kent water Purifier to become cheaper).

+ Specified Silver articles to enjoy Nil rate of duty if no credit is availed.

+ Excise duty is being exempted on Micro ATMs as per standards version 1.5.1, fingerprint reader/scanner, and Iris Scanner and Micro Card readers. Further, excise duty is also being exempted on parts and components for manufacture of these devices.

+ Cigarette become expensive, (Biris too) duty raised substantially. (Soon cigarettes may have to be procured by smokers on EMI).

+ The Additional duty of Excise levied [commonly known as health cess] on jarda scented tobacco, gutkha and chewing tobacco is being increased from 6% to 12%. Further, the effective rate of additional duty of excise levied on pan masala and unmanufactured tobacco, increased from 6% to 9% and 4.2% to 8.3% respectively. (Spitting on walls of Mumbai, Delhi, Kolkatta becomes expensive). Compounded levy modified accordingly on the higher side.

+ Parts of solar panels to become cheaper.

+ Excise duty on Motor Vehicles falling under tariff items 8702 90 21, 8702 90 22, 8702 90 28 and 8702 90 29 is being reduced from 27% to 12.5% retrospectively from 1st January, 2017

+ EOUs hence forth to be allowed to import material and procure the same form DTA for use in manufacture by availing all exemptions as are available to any Central Excise assessee in India.

CUSTOMS:

+ Customs Duty on Liquefied Natural Gas (LNG) falling under tariff item 2711 11 00 is being reduced from 5% to 2.5%. (Gas sector to benefit).

+ Customs Duty on o-Xylene is being reduced from 2.5% to Nil.

+ Customs Duty on 2-Ethyl Anthraquinone] for use in manufacture of Hydrogen Peroxide (used for ear washing), is being reduced from 7.5% to 2.5%. (Ear cleaning may become cheap-Swachhata Abhiyaan)

+ Concessional 5% Custom Duty is being extended to Clay 2 Powder (Alumax) for use in ceramic substrate for catalytic convertors.

+ Customs Duty on Wattle extract [3201 20 00] and Myrobalan fruit extract [3201 90 20] is being reduced from 7.5% to 2.5%.

+ Custom Duty on Vinyl Polyethylene Glycol falling under tariff item 3404 20 00 for use in manufacture of Poly Carboxylate Ether is being reduced from 10% to 7.5%, subject to actual user condition.

+ Customs duty on Magnesium Oxide (MgO) coated cold rolled steel coils for use in the manufacture of cold rolled grain oriented steel (CRGO) is being reduced to 5%.

+ Custom Duty (BCD) is being reduced from 7.5% to 5% on Catalyst [3815 90 00] and Resin [3909 40 90] for use in the manufacture of cast components of Wind Operated Electricity Generator [WOEG], subject to actual user condition.

+ SAD is being exempted on Catalyst [3815 90 00] and Resin [3909 40 90] for use in the manufacture of cast components of WOEG, subject to actual user condition.

+ Customs Duty on Nylon Monofilament yarn falling under Customs Tariff Item 5404 19 90 for use in Monofilament long line systems for tuna fishing is being reduced from 7.5% to 5%, subject to certain conditions. (Hope the condition is not that only Tuna fish should get caught).

+ Customs Duty (BCD) is being reduced from 5% to Nil on solar tempered glass or solar tempered anti-reflective coating glass for manufacture of Solar cells/panels /modules.

+ Customs duty on Nickel and articles thereof is being reduced from 2.5% to Nil.

+ Parts for the manufacture of all types of CNC machine tools to become cheaper.

+ Custom Duty, CVD and SAD are being exempted on Micro ATMs as per standards version 1.5.1, fingerprint reader /scanner, and Iris Scanner and POS card readers.

+ Goods imported through postal parcels, packets and letters, of CIF value not more than one thousand rupees per consignment are being exempted from BCD, CVD and consequently from SAD.

+ Duty being reduced on LED lights.

+ Duty being reduced on certain select machinery by 2.5% to 5%.

Service Tax :

+  Services provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds by way of life insurance to members of the Army, Navy and Air Force under the Group Insurance Schemes of the Central Government is being exempted from service tax.

+  ST exempts services provided by Indian Institutes of Management (IIMs) by way of two year full time Post Graduate Programmes (PGP) in Management for the Post Graduate Diploma in Management (PGDM), to which admissions are made on the basis of the Common Admission Test (CAT), conducted by IIM.

Tear factors

Income Tax:

+ Exemption Limit of Rs.2.50 Lakh remains unchanged for the last 2 years despite inflation.

+ Time for revising Income Tax Return now reduced

+ Surcharge of 10% on those who earn Income from 50 Lakhs to 1 Crore and 15% for those above Rs. 1 crore.

Customs :

+ Customs duty rate on Cashew nut, roasted, salted or roasted and salted is being increased from 30% to 45% by increasing the tariff rate from 30% to 45%.

+ Export duty is being imposed at an effective rate of 15% on ‘Other aluminium ores, including laterite' falling under tariff item 2606 00 90.

+ CVD exemption on silver medallions and coins having silver content not below 99.9%, other semi –manufactured forms of silver or articles of silver is being withdrawn. Simultaneously, articles of silver are being excluded from the scope of CVD exemption .

+ Customs duty on Hot Rolled Coils 8 for use in the manufacture of welded tubes and pipes falling is being reduced from 12.5% to 10%.

+ Customs duty (BCD) on Co-polymer coated MS tape/ stainless steel tape for manufacture of telecommunication grade optical fibres or optical fibre cables is being withdrawn. To be subjected to 10% duty now. (No more Telecom players on concessional duty-no more competition)

+ Customs duty on Reverse Osmosis (RO) membrane element for household type filters falling under tariff item 8421 99 00 is being increased from 7.5% to 10

+ Populated PCBs for mobiles to become expensive due to tinkering of SAD.

Service Tax:

+Advance Ruling Authority of Service tax being merged with Income tax. Time for getting Ruling gets extended to 6 months. (Delay in Justice)

Fear factor :

Income tax :

+ Transactions likely to be staggered by Political parties and charitable institutions to escape cash limits imposed.

+ Raids, Surveys and bamboo for evaders likely to continue.

Customs:

+ Cashews become expensive. (Kajus on visit may now only be reserved for officers of the rank of Chief Commissioners and above.)

+ Export duty is back-this time on Aluminium ores.

Mr. Arun Jaitley is now most likely to become the Finance Minister, who willherald the GST. The built in mortality of various Excise Notifcations which are valid upto 30 th June, is clear indication that GST is finally kick starting w.e.f 1st July, 2017.

Welcome GST (Finally see you on 1st July - Mehbooba se zyada intezaar karvaya hai)and go to the consigns of archives Excise and Service tax.