7/31/2019 Indirect Taxation- Budget 2011 Hiregange
1/42
S UCCESS THRU ETHICS Madhukar N Hiregange FCA
Madhukar N Hiregange FCAIndirect Taxation- Budget 2011
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
2/42
COVERAGE TODAY
CustomsCentral Excise
Service Tax TariffService Tax ProceduresIdeal Budget ComponentsFM objectivesHow it is in Reality?Empower Your EnvironmentQ/A after each segment
5 / 3 0 / 2 0 1 2
2
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
3/42
CUSTOMS
Major Reform Self Assessment- Avoidsdemurrage, corruption- legalised dacoity, fastturnaround for exporters/ domestic players, avoiddependence on intermediaries [ CHA]- finallyreduced transaction cost.
Rationalization of rates- BCD of 2 & 3 % to 2.5%.
Peak rate held Good for country
5 / 3 0 / 2 0 1 2
3
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
4/42
CENTRAL EXCISE
Major Reform- 130 items mainly consumer goods innet @ 1% without cenvat credit benefit. [ icai-articles section]Out of above 76 items @5% with cenvat creditAre all eligible for initial 150 Lakhs limit?
- Only specified items [ see list]- Branded Goods of Others NO unless OEM or
located in rural area- Previous year manufactured goods exceeds Rs. 400
lakhs [ traded or exported goods not to beconsidered]
5 / 3 0 / 2 0 1 2
4
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
5/42
SSI EXEMPTION
- Job work unless exempted [ valued at sellers priceor if captively consumed by buyer then atCOP+10% ]
- Manufactured/ Job work goods removed at full rateof duty not to be reckonedIf eligible then declaration on reaching 90 lakhs ofvalue of clearances
5 / 3 0 / 2 0 1 2
5
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
6/42
BRANDED TEXTILE GOODS
Excise duty at 10% applicable to ready-madebranded Garments and made-up articles of textilesRule4(1A) Central Excise Rules: pay duty andcomply with Central Excise procedure by theperson for whom the goods are manufactured by
job-workersAlternatively job worker registers & discharges dutyCC Rules, 2004 amended to enable merchantmanufacturers to avail of credit of duty paid oninputs, input services and capital goodsSSI exemption can be availed
5 / 3 0 / 2 0 1 2
6
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
7/42
REGISTRATION + OTHERS
Registration applied if not eligible for SSI exemptionimmediately [ 1 st march over??}Examine the possibility of passing on duty cost tobuyerExamine the quantum of credit available?Exercise and intimate the optionPay the duty by 5 th / 6 th every month
File the returns monthly/ quarterly [ SSI}
5 / 3 0 / 2 0 1 2
7
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
8/42
DISCLOSURES
Intimate the records maintained, methods ofaccounting, process of manufacture, streams ofincome, option taken, doubtful issues.- Ensuredated acknowledgement.Follow meticulous movement recording andreconciliationBranded Garments Option to job worker todischarge the duty and comply.
5 / 3 0 / 2 0 1 2
8
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
9/42
WITHDRAWAL OF EXEMPTIONS
About 130 exemption entries withdrawn(Notfnno.1/2011)Including cases of Nil Tariff rates
A duty of 1% ad valorem imposed on these itemsThe condition that no credit of the duty paid oninput and input services.Rate for items hitherto Nil rate (by tariff) fixed at 5%ad valorem
Remaining items where tariff rate is not Nil-a rate of5% (without any condition)(Notfn 2/2011-CE)
5 / 3 0 / 2 0 1 2
9
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
10/42
INITIATIVE FOR REDUCED LITIGATION
No appeal by Govt below stated figures
No demand even if mistake observed by audit
party- rectified.
Settlement Commission
5 / 3 0 / 2 0 1 2
10
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
11/42
CENVAT CREDIT RULES 2004
Exempted goods amended -Includes goods where option exercised by themanufacturer to pay duty at concessional rate of1% on 130 specified entries.exempted services amended.Includes services for which service provider optedfor exemption on part of the value
Exempted service includes trading activity
5 / 3 0 / 2 0 1 2
11
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
12/42
CENVAT CREDIT CAPITAL GOODS
Scope Expanded-capital goods as defined at rule2(A)outside factory of manufacture of final products foruse in captive generation of power in factoryThis could lead to credits on windmills, turbines,hydel power stations
5 / 3 0 / 2 0 1 2
12
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
13/42
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
14/42
EXCLUSIONS
Any goods used for the construction of a buildingor a civil structure or laying of foundationor making of structure for support of capital goods
have been excluded.Capital goods except when used as parts andcomponents in manufacture of final products andalso does not include the motor vehicles
Goods used primarily for personal use orconsumption of any employee.
5 / 3 0 / 2 0 1 2
14
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
15/42
CENVAT CREDIT INPUT S ERVICES
Excludes few services such as architect, port, airport , other port, commercial or industrialconstruction, works contract service andconstruction of residential complex used inconstruction of building or civil structure or layingfoundation or making support structure of capitalgoodsExcludes services such as rent a cab, general
insurance, authorised service station and supply oftangible goods unless used by service providersallowed to take Cenvat credit of duty paid on capitalgoods
5 / 3 0 / 2 0 1 2
15
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
16/42
Excludes services of outdoor catering, beautytreatment, health service, cosmetic surgery,membership of club, etc when used primarily forpersonal use/consumption by employee
Question the very purpose of cenvat credit beingto avoid the cascading effect of multi point levy hasbeen defeated.
Example of coercion by the bureaucracy. Almost10k+ cases would now be revisited???
5 / 3 0 / 2 0 1 2
16
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
17/42
COMMON CREDIT
The heading of the rule changed as Obligation of amanufacturer or producer of final products and aprovider of taxable serviceCenvat credit benefit would not be allowed oninputs or input services used in or in relation to manufacture of exempted goods or for provision ofexempted service (Rule6(1))The sub rule 2 provides for separate records forreceipt, consumption an inventory of inputs and thereceipt and use of input services usedin or in relation to manufacture of
exempted/dutiable- goods & Output and exempted
services
5 / 3 0 / 2 0 1 2
17
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
18/42
COMMON CREDIT
the provider of output service providing exemptedservice to pay 5% on the value of exempted serviceand avail the Cenvat credit fully(Rule6(3))
a new option to maintain separate accounts for thereceipt, consumption and inventory of inputs &
and pay an amount as determined under sub-rule(3A) in respect of only input services (rule 6(3A)
5 / 3 0 / 2 0 1 2
18
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
19/42
COMMON CREDIT
The value of trading (exempted service) consideredfor availment of proportionate credit [ sales- pur]
Banking and financial services -50% of the creditavailed
Services relating to life insurance or managementof ULIPs -20% of credit availed
Rule 6(5) omitted
5 / 3 0 / 2 0 1 2
19
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
20/42
SERVICE TAX-NEW SERVICES
Restaurant Service- provided by a restaurantServing of food & beverages (including alcohol) toany person
Air conditioned Restaurant Licensed to serve LiquorAbatement of 70%Hotel Accommodation
Accommodation for a continuous period less than 3
monthsA hotel, inn, guest house, club or campsiteDeclared Tariff >Rs 1000 per day50% abatement
5 / 3 0 / 2 0 1 2
20
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
21/42
HEALTH SERVICE- EXTENSIONPRESENT
All services-including diagnostic servicesThe service provider -Clinical EstablishmentCentral AC & >25 beds at any time in FY.
Diagnostic Services
By clinical establishment+ aid of lab/medicalequipmentThe service provider is any entity independent/part ofclinical establishment.
DoctorThe diagnosis, treatment or care for illness, disease,injury, deformity, abnormality or pregnancy.Doctor, not employee of the clinical establishmentThe service provided in clinical establishment.
Exclusion: Government or a local authority.
5 / 3 0 / 2 0 1 2
21
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
22/42
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
23/42
ST- E XPANSION
Clubs & Association:To include services provided to members as well asothers
Exemption for the membership fee of associationrepresenting the industry or commerce- from16.06.2005 to 31.03.2008(both inclusive) Section96JRefund within 6 months can be gotten
Life Insurance Business:Any service in relation to life insurance businessEarlier only risk cover
Business Support Services: Administrative
5 / 3 0 / 2 0 1 2
23
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
24/42
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
25/42
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
26/42
RESTRICTIVE CREDITS
Sub Contractors opting to pay ST on gross amountafter availing credit on inputs as well. Maincontractor availing abatement under Not 12/2003 orComposition- able to avail the credit indirectly ininputsService Tax Paid on: Input ServicesErection, commissioning, installation; commercial orindustrial construction; construction of complexserviceNotfn. 1/2011-ST- limited to 40%
5 / 3 0 / 2 0 1 2
26
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
27/42
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
28/42
EXEMPTIONS
Construction/completion services of newResidential Complex Jawahar Nehru Nationalurban Revival, Rajiv Avaas YoganaExhibitor Outside India-service by organiser ofbusiness exhibition.Transportation from Outside India to O/I-byAircraft/Road/RailGeneral Insurance Business Rastriya SwasthiyaBima Yogana
5 / 3 0 / 2 0 1 2
28
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
29/42
EXEMPTIONS
Works Contract within wholly within the AirportWorks Contract provided wholly withinThe port or other port, for construction, repair,alteration and renovation of wharves, quays, docks,stages, jetties, piers and railways25%a ppilcable -75 % Abatement- service providedfor transport of:
Coastal goods;Goods through national waterway; orGoods through inland water.
5 / 3 0 / 2 0 1 2
29
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
30/42
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
31/42
P OINT OF TAXATION- R ULES
Accrual Concept 20% more revenue in 2011-12, movetowards GST
Taxable Event Providing Service; Receipt of Advance-postponing billing risky
Credits also on accrual basisWhat about professionals accounting on cash basis, whatabout accounting standards on revenue recognition, whatabout the fact that services cannot be taken back unlikegoods. What about the huge discounts which have to begiven? What about the bad debts?
5 / 3 0 / 2 0 1 2
31
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
32/42
WHAT CAN BE DONE ?
Billing for the current year to be completed fully toavoid unnecessary billing next year, even ifaccounting on cash basis.Individual representation thru known electedmembersAssociations to take up stronglyICAI representationGroundsCash basis of accounting as receipt unsureRevenue Recognition AS9Service cannot to taken back
5 / 3 0 / 2 0 1 2
32
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
33/42
INTEREST & PENALTY
Earlier 13 % increased to 18%-For delayed paymentFor amounts collected in excess- Notfn. 15/2011
For SP below Rs.60 lakhs [payt period 90 daysfrom order date} limited to 15%.Increased to Rs.20,000/- For late filing of returnsUnaccounted transactions-mandatory 100% penalty
Penalty u/s 78 waived only where transactionscaptured in records
5 / 3 0 / 2 0 1 2
33
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
34/42
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
35/42
OTHER INITIATIVES
Exporters of services drawback scheme when??85,000 Crores outstanding!!!!!- promissory estoppelapplicable?? EOSR 2005
SEZ Exemption-provided and wholly consumedwithin SEZSEZ Special Refund Scheme-authorized operationsSpecified Services listed in Rule3(1)(i)/(ii)Export ofService Rules & Other servicesService providers to SEZ No need to reverseinputs/ capital goods/ input services?
5
/ 3 0 / 2 0 1 2
35
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
36/42
IDEAL BUDGET
Simple = Understood by a literate person, by some of STauthority, at least by a man of commerce, certainly by anadvisor, without doubt by a specialised advocate/ CA.
Fair = Economically challenged safeguarded and othersequally applicable, no different interpretation in differentstates, divisions, range, Audit parties; drafted considering
stakeholders concerns/ suggestions; law exposed beforeimplementation ; rules fair; enough time to comply
5
/ 3 0 / 2 0 1 2
36
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
37/42
IDEAL BUDGET
Certain = No changes frequently, at leastfundamental direction, not upsetting judicialprecedents, anterioirity a part of law or at least onlyprospective application and no retrospectivity
Transparent= Game plan known in advance,budget exercise involved, Integrity of FM/ CBECbuilt, no secrecy, tax payer can plan hisinvestments, direction
5
/ 3 0 / 2 0 1 2
37
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
38/42
IDEAL BUDGET
Used as tool to Steer the Economy: Lower rates,remove multiplicity of taxes and rates, protect localmanufacturing/ agriculture, build world classinfrastructure, be transparent on own expenditure
Maker Checker principle: Law to be laid down byparliament, administered by the executive. Thisdivide is not evident anymore.
Good Governance: Accountability of the executive,no corruption, no inordinate delays, no frivolousdemands
5
/ 3 0 / 2 0 1 2
38
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
39/42
IDEAL AS P ER FMModerate Taxation
Simple ST law?, Changes every year based onTribunal/ Higher judgments? Taxing saletransactions also?
Easy for Tax Collector??? Whom are we serving
Medium term objectives: Maintain growth, Inclusivemethodology, Governance emphasis.
Action important not rhetoric's
5
/ 3 0 / 2 0 1 2
39
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
40/42
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
41/42
Ive failed over and over and over again in my life,
and thats why I succeed. - Michael Jordan
5
/ 3 0 / 2 0 1 2
41
H i r e
g an
g e
7/31/2019 Indirect Taxation- Budget 2011 Hiregange
42/42
QUESTIONS ??MHIREGANGE @GMAIL.COM
Have an Empowered 2011
Top Related