Budget PLUS 2013
Key features of India’s Union Budget 2013-14
February 2013
Page 1
Budget PLUS 2013
GST
Fiscal deficit
Taxing
Contents
1. Budget backdrop
2. Budget 2013
►
Key policy
announcements
►
Direct Tax proposals
►
Indirect Tax proposals
Budget PLUS
2013
Retrospective amendments
Super rich tax
GAAR
February 2013
Indirect tax
Page 2
Budget PLUS 2013
Macro view
►
Economy expected to grow at around 5.0% in FY 2012-13
►
►
►
►
►
►
►
Agriculture – 1.8%
Industry – 3.1%
Services – 6.5%
GDP growth remains sluggish with higher inflation
GDP Growth at 6.1% - 6.7%
Nominal GDP Growth at 13.4%
Assumed inflation rate at 7% if real GDP growth is about
6.4%
Page 3
Budget 2013–2014— Thought sharing by EY
Non Plan Expenditure / Subsidies
Rs crores
Expenditure
(1)
BE 2012-13
(2)
RE 2012-13
(3)
BE 2013-14
(4)
% change in
(4) over (3)
Non Plan
969900
1001638
1109975
10.8
Plan
521025
429187
555322
29.4
1490925
1430825
1665297
16.4
TOTAL
Major
Subsidies
(2)
RE 2012-13
(3)
BE 2013-14
(4)
% change in (4)
over (3)
Food
85000
90000
5.9
Fertilisers
65974
65972
0
Petroleum
96880
65000
(33)
247854
220972
(10.8)
TOTAL
Page 4
Budget 2013–2014— Thought sharing by EY
Revenue
Rs crores
Revenue
RE 2012-13
Gross Tax Revenue
BE 2013-14
% change
1038037
1235870
19.1%
129713
172252
32.8%
8718276
1056331
21.2%
333417
376782
13%
Surcharge
15004
30519
103%
Education Cess
10453
12219
16.9%
Taxes on income
193932
229502
18.3%
-
4400
-
5998
7017
17%
Customs
164853
187308
13.6%
Excise
171996
197554
14.9%
Service Tax
132697
180141
35.8%
Non tax Revenue
Total Revenue Receipts
Corporate Tax
Surcharge
Education Cess
Page 5
Budget 2013–2014— Thought sharing by EY
Implied tax buoyancies
FY14 Tax buoyancy (% change in tax
revenue/ % change in GDP at market
prices)
#
Type of tax
1
Gross Tax Revenue
1.48
2
Corporation Tax
1.26
4
T axes on Income other than
Corporation Tax
Customs
5
Union Excise duties
1.11
6
Service Tax
2.67
►
Overall expenditure increase of 16.4% is being financed by assuming a
nominal growth of 13.4% and a buoyancy of nearly 1.5 in gross tax
revenues. This seems unrealistic.
This buoyancy was 0.93 in FY12 and 1.3 with respect to RE in FY13.
3
►
Page 6
Budget 2013–2014— Thought sharing by EY
1.53
1.02
GST
Fiscal deficit
Taxing
Contents
1. Budget backdrop
2. Budget 2013
►
Key policy
announcements
►
Direct Tax proposals
►
Indirect Tax proposals
Budget PLUS
2013
Retrospective amendments
Super rich tax
GAAR
February 2013
Indirect tax
Page 7
Budget PLUS 2013
Key policy announcements
‘Higher growth leading to inclusive and sustainable development’ to be
the mool mantra
Government believes in inclusive development with emphasis on
improving human development indicators specially of women, the SC,
the ST, the minorities and some backward classes.
Fiscal deficit, current account deficit and inflation
►
Foreign investment is imperative in view of the high current account
deficit (‘CAD’). FII, FDI and ECB three main sources of CAD
Financing. Foreign investment to be encouraged.
Financial sector
►
Standing Council of Experts in the Ministry of Finance to be
constituted to analyse the international competitiveness of the Indian
financial sector
February 2013
Page 8
Budget PLUS 2013
Key policy announcements
Capital markets
►
Simplification by SEBI of procedures and uniform registration and
other norms for entry for foreign portfolio investor to be prescribed
►
Clarity of what constitutes FII and FDI investment
►
FIIs to be permitted to participate in exchange traded currency
derivative segment
►
SEBI to prescribe requirement for angel investor pools to be
recognised as Category I AIF venture capital fund
►
Stock exchanges allowed to introduce a dedicated debt segment
February 2013
Page 9
Budget PLUS 2013
Key policy announcements
Banking
►
Compliance of public sector banks with Basel III regulations to be
ensured
►
India’s first Women’s Bank as a public sector bank to be set-up
Insurance sector
►
A multi-pronged approach to increase the penetration of insurance,
both life and general
►
Insurance companies to be permitted to open branches in Tier II cities
and below without the prior approval of IRDA
►
Banks to be permitted to act as insurance brokers
►
Hope for consensus to pass insurance and pension amendment bill
February 2013
Page 10
Budget PLUS 2013
Key policy announcements
Tax reforms
►
Endeavour to re-introduce DTC before the end of the Budget session
►
Work on draft GST Constitutional Amendment Bill and GST Law
expected to be taken forward
►
Rules on Safe Harbour to be issued shortly
►
Fifth large tax payer unit to open at Kolkata shortly
►
Number of administrative measures such as extension of refund
banker system, extension of e-payment through more banks,
expansion in the scope of AIR to be introduced
February 2013
Page 11
Budget PLUS 2013
Key policy announcements
Investment, Infrastructure and Industry
►
Infrastructure Debt Funds (IDF) to be encouraged
►
IIFCL to offer credit enhancement
Road construction
►
A regulatory authority for road sector
Savings
►
Rajiv Gandhi Equity Savings Scheme to be liberalised
February 2013
Page 12
Budget PLUS 2013
GST
Fiscal deficit
Taxing
Contents
1. Budget backdrop
2. Budget 2013
►
Key policy
announcements
►
Direct Tax proposals
►
Indirect Tax proposals
Budget PLUS
2013
Retrospective amendments
Super rich tax
GAAR
February 2013
Indirect tax
Page 13
Budget PLUS 2013
Rates of tax – individuals
►
No change in tax rates and tax slabs for individuals
►
Rebate upto INR 2,000 for resident individuals earning up
to INR 0.5 million
►
Surcharge of 10% on tax on INR 10 Million plus income
earners (marginal relief available)
►
Education cess of 3% to continue
February 2013
Page 14
Budget PLUS 2013
Rates of tax - companies
►
No change in corporate tax rates
►
Rate of surcharge on domestic companies with income
exceeding INR 100 million increased from 5% to 10%
►
Rate of surcharge on non-resident companies with income
exceeding INR 100 million increased from 2% to 5%
►
Rate of surcharge on dividend distribution tax increased
from 5% to 10%; effective rate would now be 16.995%
►
Where book profits of a domestic company exceed INR
100 million, the rate of MAT to increase to 20.96%
February 2013
Page 15
Budget PLUS 2013
Rates of tax - companies
Foreign dividend
►
Beneficial tax rate of 15% on dividend declared, distributed or paid by
specified foreign company again extended for one more year
►
The above foreign dividend if received from subsidiary, is to be
reduced for the purpose of DDT payable by the domestic company
February 2013
Page 16
Budget PLUS 2013
Securities Transaction Tax (STT)
STT rates revised as follows:
Nature of transaction
Payable by Present (%)
Proposed (%)*
Delivery based purchase of
Purchaser
units of an equity oriented fund
on a recognized stock exchange
0.1
Nil
Delivery based sale of units of
an equity oriented fund on a
recognized stock exchange
Seller
0.1
0.001
Sale of futures in securities
Seller
0.017
0.01
Sale of a unit of an equity
oriented fund to the mutual fund
Seller
0.25
0.001
*Effective
from 1st June, 2013
February 2013
Page 17
Budget PLUS 2013
Commodities Transaction Tax (CTT)
►
CTT to be levied on taxable commodities transactions
(other than in agricultural commodities) from the date the
Finance Bill is notified
►
CTT to be levied at 0.01% and would be payable by the
seller
►
CTT paid to be deductible in computing business income
from taxable commodities transactions
February 2013
Page 18
Budget PLUS 2013
Dividend Distribution Tax
►
Tax on income distribution by mutual funds
►
Tax on distribution of income by mutual funds (other than equity
oriented funds) to individuals or HUFs to be increased from 12.5% to
25%
►
Tax on income distributed by infrastructure debt funds set up as
mutual funds to be reduced to 5% for parity with infrastructure debt
funds set up as NBFCs
February 2013
Page 19
Budget PLUS 2013
Key international tax proposals
Royalty and fees for technical services
►
Tax on royalty and fees for technical services earned by non resident
taxpayers increased from 10% to 25%
►
Above rate applicable to all agreements entered post 31 March 1976
►
Tax treaty protection available
Tax Residency Certificate
►
Submission of tax residency certificate a necessary but not a
sufficient condition for claiming benefits under tax treaty
►
Amendment to take effect from FY 2012-13
February 2013
Page 20
Budget PLUS 2013
Widening of tax net
Business income on transfer of immoveable property
►
Higher of stamp duty value or consideration received or accruing on
transfer of land and/ or building (not being capital assets) to be taken
as full value of consideration
►
In case of difference between date of agreement and date of
registration, stamp duty value as on date of agreement to be
considered
►
►
Applicable only if consideration (in non-cash mode) is paid on or before
date of such agreement
Buyer to withhold tax at the rate of 1% in case of transfer of
immovable property (other than agricultural land) to a resident
where sale consideration exceeds INR 5 million
February 2013
Page 21
Budget PLUS 2013
Widening of tax net
Additional income-tax tax on buyback of shares
►
Effective 1 June 2013, unlisted company liable to pay additional
income-tax of 20% on distribution of income through buyback of its
shares
►
Tax payable on difference between consideration paid on buyback of
shares and amount received by company at the time of issue of such
shares
►
Consideration received by shareholder is exempt from further
income-tax
►
No deduction allowed on the distribution tax paid by the company
February 2013
Page 22
Budget PLUS 2013
Widening of tax net
Taxability of immovable property received for inadequate
consideration
►
Where an Individual or HUF receives immovable property for
consideration less than stamp duty value of property, then the
differential amount will be subject to tax in the hands of individual or
HUF
►
Stamp duty value will be considered as on date of agreement fixing the
amount of consideration as long as the consideration, or part thereof, has
been paid by any mode other than cash on or before date of agreement
►
Otherwise, the date of registration of agreement will be considered for
computing stamp duty value
February 2013
Page 23
Budget PLUS 2013
Provisions relating to venture capital funds
Category 1 AIF registered under the sub-category
‘Venture Capital Funds’ granted pass through status,
subject to the following:
►
the units/ shares (of the fund) are not listed on a recognized stock
exchange
►
the fund invests atleast 2/3rd of investible funds in unlisted equity shares/
equity linked instruments of Venture Capital Undertakings (VCUs)
►
the fund does not invest in any VCU in which the director/ substantial
shareholder (>10% of equity share capital) holds (in aggregate) more than
15% of paid-up equity capital of the VCU
VCFs registered before 21 May 2012 under the SEBI
(Venture Capital Fund) Regulations 2012 will continue
to enjoy the pass through status
Amendment proposed retrospectively from 1 April 2012
February 2013
Page 24
Budget PLUS 2013
Provisions relating to securitization trusts
Income earned by specified securitization trusts to be
exempt from tax
►
‘Specified purpose distinct entity’ regulated under the SEBI (Public Offer
and listing of Securitized Debt Instruments) Regulations, 2008 and
‘Special Purpose Vehicles’ regulated by the guidelines on securitsation of
standard assets issued by the RBI, to qualify for the exemption
Distributions by the specified securitization trusts to be
liable to additional income-tax at the following rates:
►
►
►
25% in case of income distributed to individuals and Hindu Undivided Families
30% in case of income distributed to others
No additional income-tax to be payable in respect of any income distributed to any
person whose income is not chargeable to tax under the Act
February 2013
Page 25
Budget PLUS 2013
General Anti Avoidance Rules (GAAR)
►
Certain recommendations of the Expert Committee accepted with
modifications
►
GAAR to be deferred to FY 2015-16
►
Only arrangements which have the main purpose (as opposed to one
of the main purposes) of obtaining tax benefit would be covered by
GAAR
►
Treaty override provisions applicable in case GAAR is invoked
►
The Commissioner of Income-tax to issue a notice to the taxpayer
setting out the reasons and basis of invoking GAAR and the taxpayer
to be given an opportunity to prove that obtaining tax benefit is not the
main purpose of the arrangement
►
Directions of the Approving Panel to be binding on the taxpayer as
well as the Income-tax authorities
February 2013
Page 26
Budget PLUS 2013
GAAR
►
Following conditions relevant though not sufficient to determine
whether an arrangement is an Impermissible Avoidance Arrangement
►
Period of time for which an arrangement exists
►
Payment of taxes, directly or indirectly, under the arrangement
►
Availability of exit route under the arrangement
►
An arrangement shall also be considered to be lacking commercial
substance, if it does not have a significant effect upon business risks,
or net cash flows apart from the tax benefit
►
Term of the Approving Panel to be one year (extendable to three
years)
►
Definition of “associated person” and “connected person” combined
under an inclusive definition of “connected person”
►
Central Board of Direct Taxes empowered to make rules in relation to
GAAR provisions and matters relating to Approving Panel
February 2013
Page 27
Budget PLUS 2013
Exemptions and deductions
Deduction in respect of generation, distribution and
transmission of power
►
Sunset clause extended to 31 March 2014
Additional investment allowance for manufacturing
companies investing INR 1000 million in specified new
assets between 1 April 2013 and 31 March 2015
►
15% of the actual cost of specified new assets acquired between
1 April 2013 and 31 March 2014 in assessment year 2014-15; and
►
15% of the actual cost of specified new assets acquired between
1 April 2013 and 31 March 2015 in assessment year 2015-16, as
reduced by the amount of deduction allowed, if any in assessment year
2014-15
February 2013
Page 28
Budget PLUS 2013
Exemptions and deductions
Deduction of wages to workmen (100 or more) to be
restricted to Indian companies deriving profits from
manufacture of goods in factories only
►
Deduction would not be available if the factory is hived off, transferred
or acquired by amalgamation with another company
Deduction of health insurance premium payments up to
INR 15,000 extended to other Central and State
Government Health schemes (to be notified) similar to
the existing Central Government Health Scheme (CGHS)
February 2013
Page 29
Budget PLUS 2013
Exemptions and deductions
►
Deduction of investment made under equity savings
scheme subject to lower of 50% of investment or INR
25,000
►
►
►
Extended to listed equity oriented fund units
Made applicable for resident individuals with gross total
income not exceeding INR 1.2 million
Deduction available for three consecutive years beginning
with the year of investment
February 2013
Page 30
Budget PLUS 2013
Exemptions and deductions
Tax incentive for funding of Infrastructure bonds
►
Reduced tax rate of 5% for interest received by a non-resident has
been extended to include the following
►
►
Where the non-resident deposits foreign currency in a designated bank
account and such money as converted in rupees is utilized for subscription
to long term infrastructure bonds issued by the Indian company
Claims for bad debts written off by banks and specified
financial institutions to be allowed only to the extent the
write off exceeds the credit balance in the provision for
bad and doubtful debts account created from all types of
advances including advances made by rural branches.
February 2013
Page 31
Budget PLUS 2013
Exemptions and deductions
►
Exemption under section 10(10D) not available to any sum
received under keyman insurance policy
►
►
Keyman insurance policy assigned to any person with or without
consideration during its term now to be treated as a keyman
insurance policy
Deduction of contribution to National Children’s Fund
to be increased from 50% to 100% of the amount
donated
February 2013
Page 32
Budget PLUS 2013
Assessments, appeals and other provisions
Liability of directors of private company in liquidation
►
Definition of ‘tax due’ from directors of a private company in
liquidation expanded to include penalty, interest or any other sum
payable under the Act
Penalty for non-filing of Annual Information Return (AIR)
►
INR 100 for every day of delay if a person fails to furnish AIR within
prescribed time
►
INR 500 per day proposed to be levied for delay in filing AIR beyond
time specified in the notice requiring AIR filing
February 2013
Page 33
Budget PLUS 2013
Exemptions and deductions
►
New Section 80EE to be introduced to provide for additional
deduction of INR 100,000 for interest on housing loan from any
financial institution provided
►
individual does not own any residential house property on the date of
sanction
►
the loan is sanctioned between 1 April 2013 and 31 March 2014
►
loan amount is not exceeding INR 2.5 million
►
value of house property is not exceeding INR 4 million
►
Unutilized deduction to be carried forward till 31 March 2015
February 2013
Page 34
Budget PLUS 2013
Assessments, appeals and other provisions
►
Seized assets not to be allowed to be adjusted against
advance tax liability
►
Return filed without payment of tax (along with interest, if
any) to be regarded as defective return
►
Scope of direction for special audit to be extended to
include parameters like volume of accounts, correctness
of accounts, multiplicity of transactions and specialized
nature of business activity of the taxpayer
►
In case of payments to non resident individuals exceeding
INR 10 million, rate of TDS to be increased by a 10%
surcharge
February 2013
Page 35
Budget PLUS 2013
Assessments, appeals and other provisions
►
Extension of time limit from 31 March 2013 to 31 March
2014 for Provident Funds to get approval from Provident
Fund Authorities for continuation of income tax recognition
February 2013
Page 36
Budget PLUS 2013
GST
Fiscal deficit
Taxing
Contents
1. Budget backdrop
2. Budget 2013
►
Key policy
announcements
►
Direct Tax proposals
►
Indirect Tax proposals
Retrospective amendments
Super rich tax
GAAR
February 2013
Indirect tax
Page 37
Budget PLUS 2013
Budget PLUS
2013
Customs duty
►
Peak rate of BCD maintained at 10%
►
►
Peak rate of CVD and SAD rate also maintained
Passenger Baggage
►
Duty free limits on jewellery for Indian passenger residing abroad
for over 1 year enhanced
►
Men – INR 10,000 to INR 50,000
►
Lady – INR 20,000 to INR 100,000
February 2013
Page 38
Budget PLUS 2013
Customs duty – effective 1 March 2013
►
BCD increased on certain products such as
Products
Present
Proposed
Rate
Rate
Cars /motor vehicles (CIF > USD 40000
regardless of engine capacity)
75%
100%
Cars /motor vehicles (capacity > 3000cc
for petrol-run/ 2500cc diesel run
regardless of value)
75%
100%
Luxury motorcycles (capacity > 800cc)
60%
75%
100%
125%
Old cars
►
BCD reduced on certain products such as
Products
Present
Proposed
Rate
Rate
20 specified machinery for leather and
footwear industry
7.5%
5%
Textile machinery and parts
7.5%
5%
February 2013
Page 39
Budget PLUS 2013
Customs duty – effective 1 March 2013
►
Bituminous and steam coal to attract uniform BCD and
CVD of 2% each to avoid mis-classification
►
BCD and CVD exemption extended to parts and testing
equipments for MRO of aircraft parts
►
►
Similar exemption extended to private aircrafts and parts
►
Time consumption /installation extended from 3 months to 1 year
CVD exempted on specified ships and vessels
February 2013
Page 40
Budget PLUS 2013
Customs duty
►
Amendments from date of enactment of Finance Bill
►
►
►
Scope of Advance Ruling expanded to allow existing
importer/exporter to seek ruling for a new line of business
Arrest provisions amended to make certain offences non-bailable
Power of Tribunal to grant stay limited to a maximum of 365 days
►
►
►
Post 365 days, stay order shall stand vacated even if disposal of case
pending
Interest free period for payment of import duty reduced from 5
days to 2 days
Responsibility on ‘agents’ to make correct self-assessment on
behalf of importer / exporter
February 2013
Page 41
Budget PLUS 2013
Central excise
►
No change in median rate of central excise duty
►
Rate movement
Products
Present
Proposed
Rate
Rate
SUV (except those registered as taxi)
27%
30%
Chassis fitted with engines for trucks
and lorries (other than petrol driven)
14%
13%
Mobile phones with RSP > INR 2,000
1%
6%
Ships & other vessels
(including cargo ships, barges, Tugs,
Light-vessels, Dredgers, floating cranes,
floating docks, floating or submersible
drilling or production platforms)
2%
Nil
February 2013
Page 42
Budget PLUS 2013
Central excise
►
Option of NIL excise duty or CENVAT credit reintroduced
for branded readymade garments and made ups
►
MRP based assessment expanded to include branded
Ayurvedic/ Unani/ Siddha/ Homeopathic/ Bio-chemic
system medicaments with abatement of 35%
►
Dues of excise can now be recovered
►
►
Against customs receivables; and
►
From any other person who holds or would be holding money for or
on behalf of assessee
Power of Tribunal to grant Stay limited to a maximum of
365 days
February 2013
Page 43
Budget PLUS 2013
Central excise
►
For Advance Ruling, definition of ‘activity’ to also include
any new business or production or manufacture proposed
to be undertaken by existing producer or manufacturer
►
Advance Ruling extended to resident public limited
companies
►
Advance Ruling may also be sought for determining
admissibility of credit of service tax paid on input services
used in manufacture of goods
February 2013
Page 44
Budget PLUS 2013
Cenvat credit
►
Amendment to clearly provide recovery in case of non
reversal of CENVAT credit on:
►
►
►
February 2013
‘As such’ removal of inputs or capital goods;
Removal after use of capital goods; or
Full/ partial write off of inputs or capital goods.
Page 45
Budget PLUS 2013
Service tax
►
►
Service tax rate unchanged at 12%
Negative List basis of levy of service tax to include
(enactment of Finance Bill):
►
►
►
Vocational courses offered by institutes affiliated to State Council
of Vocational Training
All testing in relation to agricultural produce
Process under Medicinal and Toilet Preparations (Excise Duties)
Act, 1955
February 2013
Page 46
Budget PLUS 2013
Service tax
►
Exemptions withdrawn (effective 1 April 2013)
►
►
►
►
►
►
All temporary transfer of copyright relating to cinematography
films taxable except films exhibited in cinema halls
Services provided to Government, local / government authority
by way of repair or maintenance of aircraft
Services by way of vehicle parking to general public
Services provided by air conditioned restaurants taxable even if
no license to serve alcohol
Renting of immovable property and other auxiliary education
services provided by an education institution
Charities providing services for advancement of any other object
of general public utility (upto INR 2.5 million)
February 2013
Page 47
Budget PLUS 2013
Service tax
►
Exemptions amended (effective 1 April 2013)
►
►
►
Exemption for items covered by goods transport agencies
expanded to include agricultural produce, food stuff , chemical
fertilisers, newspapers / magazines and defense equipment
Exemption to petroleum products, postal / mail bags and
household effects by rail or coastal transport withdrawn
Impact on Valuation Rules
►
Construction contracts for property with carpet area of 2000
square feet or more or value of Rs 10 million
►
February 2013
Abatement reduced from 75% to 70% (effective 1 March 2013) –
3.09% to 3.708%
Page 48
Budget PLUS 2013
Service tax
►
►
►
Punitive measures for offences
New provisions to prescribe penalty on directors and
officials for specified willful actions upto INR 100,000
One time amnesty scheme for tax payment and return
filing from October 2007 to December 2012
►
Amnesty from interest, penalty and prosecution
►
Advance ruling extended to resident public limited
companies
►
Power of Tribunal to grant stay limited to a maximum of
365 days
►
Post 365 days, stay order shall stand vacated even if disposal of
case pending
(Above provisions applicable on enactment of Finance Bill)
February 2013
Page 49
Budget PLUS 2013
Goods and Service Tax (GST)
►
Announcements suggest that a fair majority of states are
in favour of GST
►
Positive move - Provision of INR 90 billion for CST
compensation
►
Efforts for early introduction of draft Constitutional
amendment bill / GST legislation – a welcome step
February 2013
Page 50
Budget PLUS 2013
Questions?
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our published thought leadership series on the Union
Budget 2013-14.
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the appropriate advisor.
February 2013
Page 51
Budget PLUS 2013
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February 2013
Page 52
Budget PLUS 2013