Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Central Sales Tax (CST)
Customs
Central Excise
Cenvat Credit
Service Tax
CST AMENDMENT
CST AMENDMENT - Contd.
CST AMENDMENT - Contd.
 Allahabad High Court - Reliance Industries Limited {2012 (194) ECR 293
(All)}
 Gujarat High Court - B.G. Exploration {[2015] 84 VST (1)}
What about other goods which get co-mingled in the common carrier:
 Crude Oil
 ATF
 Chemicals
CST AMENDMENT - Contd.
Customs
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
AMENDMENTS TO PROMOTE MAKE IN INDIA
EXEMPTION WITHDRAWN
1. Parts and Accessories of Mobile Phones
•
•
•
•
Charger or Adapter
Battery
Wired Headsets
Speakers
EXEMPTION GRANTED
Full BCD and CVD Exemption:
• Inputs or parts for use in manufacture of these specified
items
• Inputs or sub-parts of above
IGCR to be followed
BCD, CVD & SAD exemption removed
2. E-Readers
Full BCD Exemption:
• Raw Materials or parts for use in manufacture of e-readers
Specific BCD exemption withdrawn
IGCR to be followed
Will exemption to “Electrical machines with translation or
dictionary functions” under Notification No. 25/2005-Cus
apply?
3. Populated PCBs of mobile phone or table computer
SAD – 2%
SAD exemption withdrawn
IGCR to be followed
4. Populated PCBs of personal computers (laptops/desktops)
SAD exemption withdrawn
New Exemptions Granted – Promote Make in India
 Parts, Components and Accessories (including sub-parts) for use in manufacture of
 Broadband Modem [8517 62 30]
 Routers [8517 62 30]
 Set top boxes for gaining access to internet [8517 69 60]
 Digital Video Recorder (DVR)/ Network Video Recorder (NVR) [8521 90 90]
 Reception apparatus for television but not designed to incorporate video display [8528 71 00]
 CCTV Camera/ IP Camera [8525 80 20]
 Lithium Batteries (other than batteries of mobile phones) [8507 60 00]
 Full BCD and CVD Exemption Granted
 IGCR Procedure to be followed
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Exemptions made subject to IGCR Procedure
Product
Exemptio
n
LCD, LED or OLED panels for manufacture of television classifiable under 8529
BCD – Nil
Solar tempered glass or solar tempered (anti-reflective coated) glass for use in manufacture of solar
cells/panels/modules classifiable under chapter 70
BCD - 5%
Phosphoric Acid [Chapter 28] for manufacture of fertilizers
BCD – 5%
CVD – Nil
Anhydrous ammonia (Chapter 28), for the manufacture of goods falling under Chapter 31, intended for use
as fertilizers
CVD – Nil
Denatured ethyl alcohol (ethanol) for use in manufacture of excisable goods (2207 20 00)
BCD – 2.5%
Machinery, electrical equipment, other instruments and their parts [Chapter 84, 85 & 90] for use in:
• Fabrication of semiconductor wafer and Liquid Crystal Display (LCD)
• Assembly, testing, marking and packaging of semi conductor chips
[except populated Printed Circuit Boards]
BCD – Nil
SAD - Nil
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
New Customs (Import of Goods at Concessional Rate of
Duty for Manufacture of Excisable Goods) Rules, 2016
• Supersedes existing IGCR Rules, 1996
• Applicable from 1st April, 2016
• Key Changes
• Exemption based on self-declaration rather than permission from central excise authorities
• No need for separate registration under these rules
• Manufacturer of non-excisable/ exempted final products –to obtain Central excise registration
under rule 9 of Central Excise Rules
• Information regarding intention to avail benefit to both Excise and Customs authorities.
• Excise to forward the same to Customs.
• Customs to grant benefit on Bill of Entry on this basis itself.
• Continuity bond with surety/ security to be executed to Excise authorities.
• Intimation regarding receipt of goods in factory and maintenance of account of receipt/
consumption and stock
• Specific provision for disposal of unutilized or defective imported goods with 3 months from
import subject to payment of duty and interest
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Telecom Equipment – Exemption Withdrawn
• Budget 2014 excluded certain telecommunication products from the purview of ITA Bound exemption
(Notification No.24/2005-Cus.)
• However, mobile operators claimed alternate exemption in terms of Sl. No. 372 of Notification No.
12/2012-Cus.
• Anomaly now corrected by excluding the same set of telecommunication equipment from Notification
No. 12/2012-Cus. as well
• Impact – The mobile operators exemption is no longer available for major 2G, 3G and 4G
telecommunication equipment.
• Intended to promote the “Make in India” scheme?
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Product Specific
Amendments
Exemption extended on both parts of aircraft imported after repair and parts imported for repair by an MRO
AVIATION SECTOR – KEY CHANGES

agencies under the Standard Exchange Scheme.

8% concessional rate of Excise Duty/ CVD on Aviation Turbine Fuel restricted to supply from Regional
Connectivity Scheme (RCS) airports to Scheduled Commuter Airlines (SCA)



For other rate of 14% applicable
Maximum period of stay of foreign aircrafts for MRO operations in India

Increased from 60 days to 6 months

Further extension as DGCA may deem fit
For Import of tools/ tool kits by MRO agencies:
•
•
BCD, CVD and SAD exemption subject to certification by DGCA.
Procedure for exemption simplified based on records and subject to actual user condition.
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Other Key Amendments
Product
Amendments
Wireless Microphones
•
•
•
Tariff Item 8525 50 50 stands deleted.
Now, all microphones including wireless microphones shall be
covered under Tariff Item 8518 10 00.
Inconsistency with HSN removed.
Smart Watches
•
•
Notified for RSP based assessment.
Abatement allowed 35%
Foreign Satellite Data on storage media
BCD, CVD and SAD exempt on import by National Remote Sensing
Centre (NRSC), Hyderabad.
Disposable sterilized dialyzer and micro barrier of
Artificial Kidney [Chapter 84 or 90]
BCD, CVD and SAD exempt.
Goods for construction of ships of Indian navy or
coast guard, Aircrafts, aircrafts parts, aircraft
engines, aircraft engine parts, Arms, ammunition
and military stores etc.
BCD and CVD exemption withdrawn
Polyester staple fibre manufactured from plastic
scrap or plastic waste
6% concessional rate of excise duty / CVD withdrawn from
Notification No. 12/2012-CE.
“Clean Energy Cess” renamed as “Clean
Environment
Cess” – Coal,
Lignite
& Peat
Copyright 2016, Lakshmikumaran
& Sridharan
/ Confidential
Rs.200 PMT increased to Rs.400 PMT
EXPORT DUTY – WITHDRAWN/ REDUCED
Product
Existing Rate
New Rate
Iron Ore Fine (Fe Content below 58%)
10%
Nil
Iron Ore Lumps (Fe Content below 58%)
30%
Nil
Chromium ores and concentrates
30%
Nil
Bauxite
20%
15%
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
LEGISLATIVE CHANGES
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
GENERAL AMENDMENTS
 Amendment to Section 28, Customs Act
• Normal period of limitation for issuing a Show Cause Notice is increased from 1 year to 2 years
• ‘Short paid/non paid’ added in the Section to cover default in case of deferred payment of duty
under Section 47 of the Customs Act, 1962
 Amendment to Section 25 – Power to grant exemption from duty
• No requirement to publish the Notification and offer the Gazette for sale – Param Industries –
SC – redundant
 Amendment to Section 47, 51 and 156 – Deferred payment of Customs duty
• By notification, a certain class of importers may now be permitted to make deferred payment of
duty in a manner specified by way of rules.
• Central Government to make rules on due date and manner of making deferred payment
 Section 53, Customs Act is amended where a proper officer may allow transit of certain goods and
conveyance without payment of duty only subject to the conditions as may be prescribed by the
Board.
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
AMENDMENTS TO WAREHOUSING PROVISIONS
 Introduction of a special warehouse licensed under Section 58A, where goods are kept
under continued physical control of the department
 Existing private bonded warehouse and public bonded warehouse have become
record-based warehouses
 Requirement of notifying warehousing stations dispensed with by deleting Section
2(45) and Section 9 and the words ‘warehousing station’ from Chapter Heading of
Chapter III, thereby removing ‘warehousing station’ from the Customs Act
INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016
 A common dispute resolution scheme for Customs, Central Excise and Service Tax.
 Available as an option in respect of disputes (appeals) pending before
Commissioner (Appeals) only.
 Benefit restricted to appeals pending as on 1st March, 2016.
 Effect of order passed under the scheme
•
•
•
Appeal stands disposed off
Complete immunity from all proceedings under the Act in respect of the dispute.
The order will not be deemed to be an order on merits.
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016
 Steps to follow:
• The Assessee has to make a declaration upto 31st December, 2016 before the Designated
Authority. Designated Authority means an Officer not below the rank of Assistant Commissioner
designated under the scheme.
• Declaration to be acknowledged by Designated Authority.
• Within 15 days of receipt of acknowledgement, Declarant has to deposit duty/Tax along with
interest and 25% of penalty imposed under the Order-In-Original.
• Intimate Designated Authority within 7 days of such payment.
• Order of discharge - Order to be passed by Designated Authority within 15 days of receipt of
such proof of payment.
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016
 Exclusions under the scheme:
•
Orders in respect of search and seizure proceeding
•
Orders in respect narcotic drugs or other prohibited goods.
•
Order is in respect of offence punishable under the Indian Penal Code, Narcotic Drugs and
Psychotropic Substances Act, 1985 or the Prevention of Corruption Act, 1988.
•
Any detention order passed under Conservation of Foreign Exchange and Prevention of
Smuggling Act, 1974.
•
Prosecution instituted before the 1st June, 2016.
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Change in Rate
Expansion of Levy
New Exemption : RMC
Rationalisation of Cess
Interest on Provisional Assessment
Ease of Doing Business
Cenvat Credit
Rate of excise duty
 No change in Excise Duty Rate of 12.5%
 Increase in Rate
Sl.
No.
Product
Earlier rate of duty
New rate of duty
1
Polyester Staple fibre or Polyester filament yarn
manufactured from plastic waste and scrap (Ch. 54 or 55)
2% (without credit)
2% (without credit)
6% (with credit)
12.5% (with credit)
2
Sacks and bags (Tariff Item 3923 21 00 and Ch. 3923 29)
15% & 12.5%
15%
3
Waters, including mineral waters and aerated waters,
containing added sugar or other sweetening matter or
flavoured (Ch. 2202 10)
18%
21%
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 01.03.2016
Reduction in rate of excise duty
Sl. No.
Product
Earlier rate of duty
New rate of duty
1
Solar Lamp (Tariff Item 9405 50 40)
12.5%
Nil
2
Rubber sheets and resin rubber sheets for soles and heels
(Tariff item 4008 29 10)
12.5%
6%
3
Specified goods for use in manufacture of centrifugal pumps
under tariff item 8413 70 10 (Ch. 8413 91 or 8501 31 19)
12.5%
6%
4
Micronutrients (Ch. 28, 29 or 38) (falling under Sr. No. 1(f) of
Schedule 1 Part (A) of the Fertilizer Control Order
12.5%
6%
5
Mixture of Fertilizers (Ch. 31) [Co-operative Societies holding
certificate of manufacture for mixture of fertilizers under
Fertilizer Control Order]
12.5%
NIL
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 01.03.2016
Readymade Garments
Jewellery
Aluminium foils
Other items
Ready made garments
Branded Goods + RSP ≥
Rs. 1,000
Branded Goods +
RSP < Rs. 1,000
OR
Unbranded Goods (irrespective of
RSP)
Other than
Cotton
Cotton
2 % (Without CENVAT)
OR
12.5 % (With CENVAT)
Nil (Without CENVAT)
OR
6 % (With CENVAT)
Nil (Without CENVAT)
OR
12.5 % (With CENVAT)
Effective from 1.3.2015
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Ready made garments…….contd.
 SSI – for March 2016 upto Rs. 12.5
Lakhs
 Tariff value – 60% of RSP
 Registration- Option available to brand
owner as well as job worker
 Retail Tailors taxable?
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 1.3.2015
Jewellery sector
Centralised registration to
manufacturers of articles of jewellery
other than plain silver jewellery
other than plain silver jewellery increased to
Rs. 6 crores with an eligibility limit of Rs. 12
crores – for March 2016 Rs. 50 lakh
Articles of silver jewellery, other than those studded with
diamonds, ruby, emerald or sapphire (“plain silver
jewellery”)
Nil (no change from present
position)
Articles of jewellery – of precious metals other than silver
jewellery not studded
1% without credit on inputs and
capital goods
OR
12.5% with credit
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 01.03.2016
Alum iminium foils of thickness 0.2mm or less – included under Third
Schedule
packing or repacking of such goods in a unit container or labelling or re-labelling of containers
including the declaration or alteration of retail sale price on it or adoption of any other treatment
on the goods to render the product marketable to the consumer
S.R. Tissues
Pvt. Ltd. 2002
(139) E.L.T.
A81 (S.C)
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Effective from 01.03.2016
Accessories of vehicles, fork lift trucks and other
self propelled machineries
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 01.03.2016
Expansion of Levy : Other items
Description of goods
Abatement
Smart watches
35
All goods of 3401 and 3402 (earlier only specified were
covered) Soaps and other active agents
30
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 1.3.2015
Ready-mix Concrete
 Excise duty on Ready-mix Concrete
manufactured at site of construction (Ch.
3824): Nil
 Existing entry:
“Concrete mix manufactured at the site of
construction for use in construction work at
such site”
 Substituted entry:
“Concrete mix or Ready-mix Concrete
(RMC), manufactured at site of construction
for use in construction work at such site”
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 1.3.2015
Ready-mix Concrete….contd.

Larson & Tubro Ltd.- 2015 (324) E.L.T. 646 (S.C.)

W.P.I.L. Ltd.- 2005 (181) E.L.T. 359 (S.C.): Amendment
clarificatory?
“A clarificatory notification would take effect
retrospectively. Such a notification merely clarifies the
position and makes explicit what was implicit.
Clarificatory notifications have been issued to end the
dispute between the parties.”
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 1.3.2015
Rationalization of cess
Cess introduced or
increased
Cess withdrawn or reduced
i.
Cess under The Mica Mines Labour Welfare Fund Act, 1946
ii.
Cess under The Salt Cess Act, 1953
• Infrastructure
Cess introduced
(1.3.2016)
iii.
Passenger Welfare Cess under The Merchant Shipping Act,
1958
iv.
Cess under The Textiles Committee Act, 1963
v.
• Clean
Environment
Cess increased
from Rs 300 to
Rs. 400 per tonne
(1.3.2016)
Cess under The Limestone and Dolomite Mines Labour
Welfare Fund Act, 1972
vi.
Cess under The Tobacco Cess Act, 1975
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
vii. Cess under The Iron Ore, Manganese Ore Mines and Chrome
Ore Mines Labour Welfare Cess Act, 1976
viii. Cess under The Cine-workers Welfare Cess Act, 1981
Oil Industries Development Cess reduced from 4500 PMT to 20% ad
valorem
Automobile industry – Infrastructure cess
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 01.03.2016
Automobile industry – infrastructure cess
Description of motor vehicle falling under
8703
Rate of
Cess
Petrol/ LPG/CNG driven motor vehicles of length
not exceeding 4m and engine capacity not
exceeding 1200cc
1%
Diesel driven motor vehicles of length not
exceeding 4m and engine capacity not
exceeding 1500cc
2.5%
All categories of motor vehicles of 8703 other
than the ones mentioned above and exempted
under Notification No. 1/2016-CE
4%
Exemption- ambulances, Electrically operated,
three wheeled, Hybrid Vehicles, taxi, Cars for
physically handicapped persons
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Effective from 01.03.2016
Automobile industry – infrastructure cess
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 01.03.2016
Interest on amount paid under provisional assessment
Interest payable for the period starting with
the first day after the due date till the date of
actual payment, whether such amount is paid
before or after the issue of order for final
assessment.
Bombay High Court - Commissioner of Central
Excise & Customs, Mumbai Vs. CEAT Limited
has been overcome
Effective from 1.3.2015
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Ease of Doing Business

Reduction in number of statutory returns
•
No requirement of filing
•
Annual Financial Information Statement
•
Annual Installed Capacity Statement.
Assesse required to file Annual Return under provisions of Excise
Rules and Credit Rules

Facility of revision of return
•
Revision of ER-1 Return and Annual Return filed within the due dateby the end of calendar month in which original return is filed.
•

Rationalization of rate of interest
•
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Facility available to EOU also
Different rates of interest prescribed under Excise Act, 1944 and
other rules rationalized. Interest is now payable at the rate of 15% pa
Ease of Doing Business


Distribution of credit on inputs by warehouse of manufacturer
•
Manufacturer having one or more factories allowed to take credit on inputs received under an invoice issued
by a warehouse of the manufacturer which receives the inputs
•
Rules applicable to First Stage Dealer/Second Stage Dealer to apply mutatis mutandis to a warehouse of
manufacturer
Chartered Engineer (CE) Certificate for claiming rebate on inputs
•
Assessee claiming rebate on inputs to file Chartered Engineer Certificate for correctness of ratio of output
and input where SION is notified. AC/DC may grant permission for manufacture of export goods on basis of
such certificate. In case of doubt, AC/DC may visit the factory
•
Earlier, AC/DC had to verify the correctness of ratio of output and input by calling samples or by visiting the
factory.
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Ease of Doing Business
• Earlier RGCR Rules, 2001 rescinded. New Rules effective
from 01.04.2016.
• The new Rules are intended to simplify the procedures,
including
allowing
duty
exemptions
to
importer/manufacturer based on self-declaration instead
of obtaining permissions from the Central Excise
authorities.
• Rules now provide that the demand of duty will be raised
on the supplier manufacturer if the recipient manufacturer
is found to be non-existent. This provision has been
inserted for the first time in the proposed Rules
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 1.4.201
Definitions
NCCD and Infrastructure Cess
Rule 4(5)(b) and Rule 4 (6)
Rule 6 and Rule 7
Rule 14 of Interest on credit
Definition Amended
• Capital goods definition amended to include
• Wagons falling under 860692
• Office equipment and Appliances
• Specific mention for capital goods used outside factory for
pumping of water
• Earlier only for generation of electricity
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Definition Amended
• Inputs
• Capital goods having value upto
Rs. 10,000/ piece
• Specific mention for pumping of
water
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
NCCD and Infrastructure Cess
•
No credit other than NCCD be utilized
for payment NCCD for all product
• Earlier restriction was limited to
mobile phones only
• Dharmapal Satyapal 323 ELT 55
(Gau.)
• KamakHaya Cosmetics 232 ELT
33 (Gau.)
• Prag Bosini 295 ELT 682 (Gau.)
No
Longer
Applicable
Effective 1.3.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
NCCD and Infrastructure Cess
•
Infrastructure Cess
• To be Paid in Cash
• No credit of Cess
• No specific mention under Rule 3(1)
•
Can manufacturer of automobile take
credit of cess under Rule 16?
Effective 1.3.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rule 4(5)(b) And Rule 4 (6)
•
Rule 4(5)(b) substituted
• To allow tools in addition to jigs, fixtures, moulds and dies sent to
contract manufacturer or job-worker
• Such goods can be directly sent without receiving in the factory
•
Rule 4(6) permission can be granted for three years in place of one
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rule 6 amended
•
New Rule 6(1) to Rule 6(4) substituted
•
Options of Separate book of accounts
removed
•
Two Options available
• 6% / 7% on value of exempted goods
and exempted service respectively
•
Proportionate credit reversal
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rule 6 amended
•
6%/7% payable upto maximum of total credit available in the account at the
end of period to which payment relates.
•
Total credit available means what?
(iv) The maximum limit prescribed in the first option would ensure that the amount
to be paid does not exceed the total credit taken. The purpose of the rule is to
deny credit of such part of the total credit taken, as is attributable to the exempted
goods or exempted services and under no circumstances this part can be greater
than the whole credit. (TRU-2)
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rule 6 amended
•
Proportionate Credit Reversal
•
Applicable to Common inputs and input services only and not to exclusively
used for dutiable goods or taxable service
• Thyssenkrupp Industries (I) Pvt. Ltd. 310 ELT 317- taken care of
•
No final products manufactured or no output service provided in preceding
financial year, provisional credit admissible upto 50% only
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rule 6 amended
•
No option exercised and Intimation for proportionate credit reversal not
filed, option for proportionate credit can be exercised on payment of
interest
•
Transition provision provided till 30th June, 2016 for financial year 20152016.
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rule 6 amended
•
Exempted goods to include non excisable
goods (Same as earlier provision)
•
Exempted service to include activity not a
service under Section 65B(44)
•
Value to be invoice/ agreement/ contract value
and where value is not available, value to be
determined by using reasonable
means
consistent with principle of valuation contained
in Finance Act and rules made thereunder
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rule 6 amended
•
Service under Section 65B(44) defined as under :“service” means any activity carried out by a person for another for consideration, and includes a
declared service, but shall not include—
(a) an activity which constitutes merely,—
(i)
a transfer of title in goods or immovable property, by way of sale, gift or in any other
manner; or
(ii)
such transfer, delivery or supply of any goods which is deemed to be a sale within the
meaning of clause (29A) of article 366 of the Constitution; or
(iii) a transaction in money or actionable claim;
(b)
a provision of service by an employee to the employer in the course of or in relation to his
employment;
(c) fees taken in any Court or tribunal established under any law for the time being in force.
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rule 6 (4) amended
•
No credit on Capital Goods used exclusive in manufacture of exempted
goods or provision of exempted service for a period of 2 years from date of
commencement of commercial productions/ date of installation
or
provision of exempted service
•
•
•
•
Spenta International 216 ELT 133 Tri-LB
Gujarat Propack 313 ELT 152 (Guj)
Kailash Auto 280 ELT 49 (Kar.)
Hindustan Coca Cola 313 ELT 152
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rule 7 amended
•
Credit can be distributed to outsourced manufacturing unit
•
Outsourced manufacturing unit means job-worker paying duty under 10A of
valuation rules or contract manufacturer paying under Section 4A
•
Credit common to more than one unit to be distributed to respective unit
•
Credit common to all units to be distributed to all the units
•
Credit on services with ISD upto 31.3.2016 not to be distributed to
outsourced manufacturing unit
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rule 7 amended
•
Outsourced manufacturer to maintain separate account for ISD credit
received and can be utilized for payment of duty on goods manufactured
for ISD
•
Provision of Rule 6 to apply to manufacturing units or provider of output
service and not at ISD
•
Can ISD take credit post 1.4.2016 and distribute to outsourced units
even in respect of services received prior to 1.4.2016?
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rule 14 : Interest
•
Rule 14 (2) of Credit Rule Deleted
“The existing sub- rule (2) of rule 14 prescribes a procedure based on FIFO
method for determining whether a particular credit has been utilized. The said
sub-rule is being omitted. Now, whether a particular credit has been utilised or
not shall be ascertained by examining whether during the period under
consideration, the minimum balance of credit in the account of the
assessee was equal to or more than the disputed amount of credit”. TRU
Circular
Effective 1.4.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Change in Rate
Rationalization of abatement
Negative List
Declared Services
Exemptions
Other legislative changes
Cenvat Credit – Relevant changes
Tax Rates
Change in the rate of service tax
• Krishi Kalyan Cess
• Abatements rationalized
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Krishi Kalyan Cess
• Rate - 0.5% on the value of taxable services
• Levied over and above the service tax making effective rate
to 15%. (Service tax @ 14% + Swachh Bharat Cess @ 0.5%+
Krishi Kalyan Cess @0.5%)
• Set-off against input cess paid
• Provisions of Chapter V of Finance Act, 1994 to apply
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Krishi Kalyan Cess
Issues:
• Treatment in specified cases:
• Special Economic Zone (SEZ),
• Rebate in case of exports
• Applicability – Point of Taxation?
• Service provided earlier
• Clarifications/Notification of Swachh Bharat Cess – Applicable?
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Exemptions: Legal Services
Levy of service tax on legal services?
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Exemptions: Legal Services ..
Senior Advocate
Exemption Withdrawn
• Legal service provided to:
• An advocate or partnership firm of advocates
• Any person other than a business entity
• Business entity with a turnover up to rupees ten lakh in the
preceding financial year
Exemption Introduced
• Legal services provided by a senior advocate to a person other
than a person ordinarily carrying out any activity relating to
industry, commerce or any other business or profession
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 01.04.2016
Exemptions: Legal Services ..
• Services provided by a person represented on an arbitral
tribunal to an arbitral tribunal
(Exemption withdrawn)
Effective from 01.04.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Exemptions: Construction Sector
Low Cost Houses: Exemption
Extended
Exemption provided for
low cost houses up to a
carpet area of 60 square
meters per house in a
housing project
Approved under
 The
‘Affordable
Housing in partnership’
component
of
the
housing for All (Urban)
Mission/Pradhan
Mantri Awas Yojna
 Any housing scheme of
a State Government
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 01.03.2016
Exemption : Software
Position prior to 1st March, 2016
(A) RSP affixation required
 Excise duty/CVD leviable
 Service tax exemption not available
(B) RSP affixation not required
 Excise duty/CVD exempted
 Service tax exemption not available
Position with effect from 1st March,
2016
(A) RSP affixation required
 Excise duty/CVD leviable
 Service tax exemption available
(B) RSP affixation not required
 Excise duty/CVD leviable on value
of medium (including value of
freight and insurance)on which
software is loaded
 Service tax leviable on the value of
software
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Software : Issues
 Packaged/canned software –
 Goods or services?
 Requirement for exemption from service tax?
 Taxability of software loaded on media with multi-user
licenses?
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Exemption to services to Govt/Governmental
authority/local authority
 Exemption restored for the following services provided under contract entered
prior to 1.03.2015 on which stamp duty has been paid:
 Other original works meant predominantly for use other than for commerce, industry, or any
other business or profession
 a structure meant predominantly for use as an educational, a clinical or an art or cultural
establishment
 a residential complex predominantly meant for self-use or the use of their employees or
other persons specified in the Explanation 1 to clause 44 of section 65B of the said Act
 Above exemption is restored till 31.03.2020
Effective from 01.03.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Exemption to services to Govt/Governmental
authority/local authority
• Proposal to provide exemption during the period between 01.04.2015 and
29.02.2016
(Section 102 of the Finance Bill, 2016)
• Refund of service tax paid in respect of the services provided during the above
period shall be available.
• Application of refund shall be made with six months from the date on which the
Finance Bill, 2016 receives the assent of the President
• Issues:
• Procedure for claiming refund?
• Unjust enrichment?
• Meaning of appropriate stamp duty?
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Exemption to ports/airports
• Exemption to services by way of construction, erection, commissioning or installation
of original works pertaining to an airport or port is now being restored till 1.04.2020.
• Conditions:
• Applicable for the contract entered prior to 01.03.2015
• Appropriate stamp duty to be paid, and
• Certificate required from Ministry of Civil Aviation or the Ministry of Shipping
certifying that the contract had been entered into before 01.03.2015.
• Proposal to provide exemption for the period between 01.04.2015 and 29.02.2016
(Section 103 of the Finance Bill, 2016)
• Refund of service tax paid in respect of the services provided during the above period
shall be available.
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Exemption withdrawn
• Transport of passenger by ropeways, cable car or aerial tramway
Effective from 01.04.2016
• Monorail and metro
• Original works pertaining to monorail or metro withdrawn with effect from
1.03.2016
• Exemption continues for contracts entered prior to 1.03.2016
Effective from 01.03.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
New Exemptions –Others
• Services by way of construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance, renovation, or alteration of:
• a civil structure or any other original works pertaining to the In-situ
rehabilitation of existing slum dwellers using land as a resource through
private participation under the Housing for All (Urban) Mission/Pradhan
Mantri Awas Yojana, only for existing slum dwellers
• a civil structure or any other original works pertaining to the Beneficiary-led
individual house construction / enhancement under the Housing for
All(Urban) Mission/Pradhan Mantri Awas Yojana
Effective from 01.03.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
New Exemptions – Others…
• Exemptions provided in respect of services provided by Employees’ Provident
Fund Organization to persons governed under the Employees’ Provident Fund
and Miscellaneous Provisions Act, 1952
• Exemption provided to services provided by Securities and Exchange Board of
India 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 National Centre for Cold Chain Development under
Ministry of Agriculture, Cooperation and Farmer’s Welfare by way of cold chain
knowledge dissemination
Effective from 01.04.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rationalization of Abatement
Abatement Reduced
SERVICE
PRESENT
ABATEMENT
PROPOSED
ABATEMENT
CONDITION
Transportation of goods in containers
by rail by any person other than
Indian Railways
70%
60%
 Cenvat credit on inputs and
capital goods not available
 Credit on input services
available
Services of goods transport agency in
relation to transportation of used
household goods
70%
60%
 Cenvat credit on inputs,
capital goods and input
service not available
Services
(ii) a tour, if the tour operator is
providing services solely of arranging
or booking accommodation for any
person in relation to a tour
Tours other than (i) above
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
90%
90%
75%/60%
70%
 Conditions continue
provided earlier
as
Rationalization of Abatement
Abatement Reduced
SERVICE
Construction service
PRESENT
ABATEMENT
PROPOSED
ABATEMENT
CONDITION
70%/75%
70%
 Conditions continue as provided
earlier
Effective from 01.04.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rationalization of Abatement
Abatement Introduced
SERVICE
ABATEMENT
PROPOSED
IMPLICATIONS
Services provided by a
foreman of chit fund in
relation to chit
30%
Condition : No credit
on
inputs,
capital
goods
and
input
services.
Transport of passengers with or
without
accompanied
belongings by stage carriage
60%
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Condition : No credit
on
inputs,
capital
goods
and
input
services.
EFFECTIVE DATE
01.04.2016
01.06.2016
Rationalization of Abatement
Transport of goods by rail
by Indian Railways
Credit on
input services
made
available
Transport of passengers, with
or without accompanied
belongings by rail
Transport of goods in a vessel
Effective from 01.04.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Negative List: Pruned
Entries Omitted
Present Status
Services by way of pre-school education and
higher secondary school, education to obtain
a qualification and approved vocational
education courses
 Exemption available (S. No. 9)
 Definition of “educational
provided
Service of transportation of passengers with
or without accompanied belongings by “a
stage carrier”
 Exemption
introduced
for
non-air
conditioned stage carriage (S. No. 23(bb))
Services by way of transportation of goods by
an aircraft or vessel from a place outside
India up to the customs station of clearance
 Exemption introduced for transportation of
goods by an aircraft (S. No. 53)
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
institution
Declared Service : Right to use the spectrum
• Assignment by the Government of the right to use the radio-frequency spectrum and
subsequent transfers thereof to be declared as a service.
Effective Date:
Assignment of right to useWhether TRUG?
 1st April, 2016
 Date of enactment of
Finance Bill
 Currently taxable?
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Rebate for services used for export
Rebate claim:
• Refund of service tax on services used beyond the factory for export of goods
for the period from 1.7.2012 to 2.3.2016 (both days inclusive).
• Application for claim of rebate of service tax to be made within one month
from the date of commencement of Finance Act, 2016
Issues
 Manner in which such claim for rebate to be filled?
 Authority before whom the rebate claim to be filed?
 Rebate – Where credit availed earlier?
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Other legislative changes : Increase in limitation
period
Service Tax
The time period for assessment in normal periods in section 73 proposed to be
increased to 30 months from 18 months
Issues:
Revised time limit applicable for pending matters?
Uttam Steels 2015 (319) ELT 598 (SC)
Excise Duty
The limitation period for demand of duty increased from one year to 2 years, in cases
not involving fraud or collusion or any willful mis-statement or suppression of facts
etc
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Increase in limitation period
Introduced in
Finance Act, 1994
as 6 months in S.
73 (value of
taxable services
escaping
assessment)
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Amended to one
year vide Finance
Act, 2002
Amended to 18
months vide
Finance Act, 2012
Proposed to be
amended to 30
months vide
Finance Bill, 2016
Interest payable on delayed payment
Proviso to section 75 substituted
 Where assesse collects service tax but does not deposit the amount with the Central
Government then rate of interest on delayed payment may be specified by way of notification.
 Notification No. 13/2016 provides:
S. No.
Situation
Rate of
interest
1
Collection of amount as service tax but failing to pay
the amount to Central Government
24%
2
Any situation other than above
15%
Effective from date of assent of Finance Bill, 2016
Issues:
 Situations where S. No. 2 will be attracted?
 Case where amount is charged as cum-tax?
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Interest payable on delayed payment- history
1.5% simple
interest per
month vide
Finance Act,
1994
Amended to
15% per annum
vide Finance
Act, 2001
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Section 75
amended and
interest payable
reduced to 13%
vide Notification
No. 26/2014-ST
Amended vide
Notification No.
12/2014:
Up to 6 months:
18%
6 months to 12
months: 24%
Beyond 12
months: 30%
Amended vide
Notification No.
13/2016:
Amount collected
but not paid: 24%
Any other case:
15%
Provisions relating to arrest
Section 89
Offences and penalties
•
Monetary limit for prosecution of In sub-section (1), the word “rupees fifty
lakhs” is proposed to be substituted with “rupees two hundred lakhs”
“in case of offence specified in clauses (a), (b) or (c) where the amount
exceeds fifty lakh rupees, with an imprisonment for a term which may
extend to three years”
(i)
(ii) in case of offence specified in clause (d) where the amount exceeds
fifty lakh rupees, with imprisonment for a term which may extend to
seven year”
Effective from date of enactment of Bill
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Provisions relating to arrest
Section 90
Cognizance of offences
• Sub-section (2) which provides that offences apart from those under section
89(1)(ii) are non-cognizable and bailable to be omitted
Section 91
Power to arrest
• In sub-section (1), “clause (i) or” to be omitted
• Sub-section (3) pertaining to power of Assistant/Deputy Commissioner in
case of a non-cognizable and bailable offence to be omitted
Effective from date of enactment of Bill
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Provisions relating to arrest
Impact of the amendments
 Power to arrest will be extended only where the amount is in excess of Rs. 2 crore instead of Rs. 50
lakhs
 Such power of arrest limited to cases where the assesse collects any amount but fails to pay the
amount to the Central Government beyond a period of 6 months and will not cover offences
under S. 89(1)(a)(b) and (c)
Issues
 Whether power of arrest for offences under S. 89(1)(a)(b) and (c) will directly be covered by the
CrPC?
Effective from date of enactment of Bill
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Reverse Charge: Government Services
Section 66D excludes any service by
Government/local authority to a business
entity
• Made effective from 1.4.2016
• Scope/Coverage:
•
•
•
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Licenses?
Statutory fees?
Permissions?
Section 67A & Point of Taxation
Section 67A : Determination of rate of tax
• Sub-section (2) inserted to provide specific rule making powers in respect of rate of tax
in accordance with Point of Taxation Rules, 2011
Effective from date of enactment of Bill
Point of Taxation (POT)
• Explanation to Rule 5 inserted to provide:
• POT in case of new levy on service.
Issues:
• Whether Krishi Kalyan Cess, Swachh Bharat Cess, etc are new levy?
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Effective from 01.03.2016
Cenvat credit rules relating to service tax
Amendments relating to transportation of goods by a vessel for export
 Rule 2(e) amended to exclude transportation of goods by a vessel from customs station in India to
outside India from definition of exempted service
Effective from 01.03.2016
 Sub-rules (1), (2), (3) and (4) of rule 6 inapplicable to transportation of goods by a vessel from
customs station in India to outside India by way of rule 6(7).
Effective from 01.04.2016
Amendments relating to assignment of right to use natural resources
 Sixth proviso to rule 4(7) added to provide formula for availment of Cenvat credit of service tax
paid on consideration paid for assignment of right to use natural resources:
Cenvat credit to be availed in FY= ST on charges payable for assignment of right to use/No.
of years of assignment
Effective from 01.04.2016
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Cenvat credit rules relating to service tax
Amendments relating to assignment of right to use natural resources
(cont.)
 Seventh proviso to rule 4(7): in case of further assignment of right to use spectrum against
consideration, amount of balance of Cenvat credit as does not exceed service tax payable on
consideration charged shall be allowed in the same financial year.
Effective from 01.04.2016
 Eighth proviso to rule 4(7): in case of annual or monthly user charges for assignment of right to
use natural resources, the Cenvat credit shall be allowed in the same financial year in which they
are paid.
Effective from 01.04.2016
Impact:
• The amendments in rule 2(e) and 6(7) will ensure continuity of the Cenvat credit chain with respect
to service of transportation of goods by sea by a vessel by way of export of goods even though
such services are not subject to the levy of service tax.
• Cenvat credit of service tax paid on charges paid for the assignment of right to use natural
resource shall be spread over the period of usage of such right.
Copyright 2016, Lakshmikumaran & Sridharan / Confidential
Questions ?
Founded by V. Lakshmikumaran
and V. Sridharan in 1985,
Lakshmikumaran & Sridharan (L&S)
is one of the largest integrated law
firms in India with over 300
professionals including 46 partners.
The firm has nine offices located
across India in New Delhi, Mumbai,
Chennai, Bengaluru, Hyderabad,
Ahmedabad, Pune, Kolkata and
Gurgaon. It specializes in the areas
of Customs & International Trade,
Taxation, Intellectual Property and
Corporate law.
The firm has handled more than
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various fora both in India and
abroad including 2,000 cases before
the Supreme Court of India.
For more information, visit us at
www.lakshmisri.com
NEW DELHI
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Opp. Jangpura Metro Station,
New Delhi 110014
--B-6/10, Safdarjung Enclave
New Delhi - 110 029
Phone : +91-11-4129 9811
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MUMBAI
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132, Dr. Annie Besant Road, Worli,
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Phone : +91-22-2491 4382
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CHENNAI
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BENGALURU
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KOLKATA
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GURGAON
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Email: lsgurgaon@Lakshmisri.com
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Sridharan does not intend to advertise its services through this update. Lakshmikumaran & Sridharan or its associates are not responsible for any error or omission in
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