In recent times, the law abiding assesses have to contend with large number of target based queries/notices, audits and summons generally high amount of tax terrorism. Infructuos demands [90-95% bound to fail as per revenue officers themselves ] in VAT & Service Tax have been observed. These lead to demands and
disputes which go on for years leading to killing the golden goose. Most of the matters may not be resolved at departmental adjudication and appellate levels and some relief only at Tribunals, High Courts and many at the Supreme Court.
A majority of the demands in the last decade were raised due to the high revenue targets which are the base for promotions, almost 80% corruption in tax departments and added to that the tax laws being made extremely complicated year after year leading to different interpretations and consequent disputes.
All decisions in favour as a routine are appealed to higher forums. Officers give scant regard to decided case laws inspite of departmental instruction to do so. No pre deposit prior to hearing at stage of Commissioner Appeals is indeed a good move as 90% of the cases are confirmed routinely. Tax terrorism continues under this government in fine print which is written by the CBEC.
Retrospective amendment due to even Tribunal judgment were common and now we have a assure they would not be done unless absolutely necessary.
At this juncture, when there is a general slowdown in economy the paper writers would like to set out a list of the changes proposed by the new Government. The same are discussed under broad headings of Central excise, Service tax and Customs law, GST and CST. It needs to be determined from which date changes are applicable. The amendments could be (i) changes come into effect immediately; and (ii) changes applicable based on periodicity of returns or from date when the Bill gets the presidential assent.
MAJOR CHANGES AND IMPACT UNDER CENTRAL EXCISE
Excise duty rate changes:
• Changes in excise duty rates for some goods: There has been reduction in rates on certain specified Capital Goods and non-consumer durables. All changes in rates of duty take effect from the midnight of 10th/11th July, 2014.
Increases in rates:
• An additional duty of excise is being levied at the rate of 5% on waters, including aerated waters, containing added sugar.
• Excise duty increase on cigarettes, pan masala, unmanufactured tobacco and gutkha and chewing tobacco.
Concession in rates:
• Concessional excise duty of 2% without CENVAT credit and 6% with CENVAT credit is being extended to gloves specially designed for use in sports
Withdrawn concession:
• Optional excise duty of 2% (without CENVAT) / 6% (with CENVAT) on writing and printing paper for printing of educational textbooks withdrawn and instead a uniform excise duty of 6% with CENVAT is being levied
Exemptions:
• Full exemption from excise duty is being provided to backsheet and EVA sheet used in the manufacture of solar photovoltaic cells or modules.
• Full exemption from excise duty to machinery, equipments, etc. required for initial setting up of solar energy production projects + compressed biogas plant (Bio-CNG).
Reduction in ED:
• Excise duty reduced from 12% to 6% on footwear of retail price exceeding Rs.500 per pair not more than Rs.1,000 per pair.
• Footwear of retail price upto Rs.500 per pair continues to be exempted.
• Excise duty on machinery for the preparation of meat, poultry, fruits, nuts or vegetables,and on presses, crushers and similar machinery used in the manufacture of beverages and on packaging machinery is being reduced from 10% to 6%.
• Fall in Excise duty on Branded Petrol from Rs.7.50 per litre to Rs. 2.35 per litre Refer Notification nos 8-20/2014-CE for full details of changes in rates/extending of exemptions from excise duty.
Abatements
• MRP abatement rates promised that the Third Schedule and MRP schedule would be aligned though the time for this government was quite short.
Effect of changes in rates:
a. Consumer durables become cheaper: This could lead to increase in demand. Similar thing had happen when automobile and machineries rates were reduced earlier in the year.
b. Increase in tax collections: Due to new entrants coming into tax net due to lesser rates, could cause more duties being collected.
c. Growth of new industries: As machineries are now more cheaper than ever what with even reduction in customs duties peak rates for same discussed later.
Substitution of Section 35F of the Central Excise Act
• To prescribe a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both for filing of appeal before the Commissioner(Appeal) or the Tribunal at the first stage, and
• 10% of the duty demanded or penalty imposed or both for filing second stage appeal before the Tribunal.
• The amount of pre-deposit payable would be subject to a ceiling of Rs 10 Crore.
• All pending appeals/stay application would be governed by the statutory provisions prevailing at the time of filing such stay applications/appeals.
• This new provisions would apply to Service Tax.
• This unfair provision could be made applicable only when the demand is in excess of Rs 50 Lakhs to a Crore. A representation in this regards to be made. The Centre is following the state in making law draconiona!!!
Amendment in CE Rules:
As per section 8(3A), If the assessee does not pay excise duty payable as per excise return within 1 month from the due date, then the assessee is liable to pay the penalty at the rate of 1% on such amount of the duty not paid, for each month or part thereof from the due date, for the period during which such failure continues. Effective 30% as compared to 6% for delayed refund.
Earlier the credit facility was being denied till such ED payment not made.Refer notification no.19/2014-CE(NT).
Amendments in the Central Excise Valuation Rules, 2004:
The Valuation Rules, 2000 amended to provide that in cases where excisable goods are sold at a price below the manufacturing cost and profit and there is no additional consideration flowing from the buyer to the assessee directly or from a third person on behalf of the buyer, value for the assessment of duty shall be deemed to be the transaction value. This is heartening and could reduce the harassment caused to auto sector in line with decision held by Apex Court in Guru Nanak case.Please refer notification No.20/2014- CE(NT). To come into effect immediately. Effectively dealt with the FIAT case to encourage investments and assure FDI.
Other:
The assesee eligible for SSI exemption to pay ED on periodicity of monthly basis.
Changes in Service Tax:
Negative List:
a. Sale of space or time for advertisements extended to cover all sale of space or time for advertising other than broadcasting or print media:
• Earlier covered in negative list.
• Impacts on internet websites, on film screen in theatres, bill boards, buildings, etc.Recognizing the freedom of press which was upheld in landmark Indian Express case, the sale of space for advertisements in print media is excluded from service tax.
• Print media is being defined in service tax law for the purpose.
b. Service tax on services by radio taxis or radio cabs:
Direct impact on cabs whether AC or non-AC.
Note: The above changes are effective from date when Finance bill receives presidential
assent.
Changes in mega exemption:
a. Air-conditioned contract carriages taxed: The inter-city AC bus services could be taxed.• Impact is any service provided for transport of passenger by air-conditioned contract carriage including point to point travel, leviable to service tax, with immediate effect. Service tax on abated value of 40% effectively tax rate of 4.944%.
• Services by non-air conditioned contract carriages for purposes other than tourism,conducted tour, charter or hire is still exempted.
b. Removal of Exemption to services by way of technical testing or analysis of new developed drugs, on human participants: There was an exemption to testing on human subjects in clinical trials by a clinical research organization(CRO) approved to conduct clinical trials by the Drug Controller General of India. Now made taxable.
c. Changes in exemption to Education: All services provided by educational institutions providing education specified in the negative list remains.
• The exemption which was earlier given to auxiliary education services as defined is omitted.
• In future, the following services received by education institutions are exempted from service tax:
(i) transportation of students, faculty and staff of the eligible educational institution;
(ii) catering service including any mid-day meals scheme sponsored by the Government;
(iii) security or cleaning or house-keeping services in such educational institution;
(iv) services relating to admission to such institution or conduct of examination.
• The exemption extended to cover services to students/staff by education institution providing education covered in negative list.
• The exemption hitherto available to services provided by way of renting of immovable property to educational institutions removed.
d. Services ordinarily provided by a Municipality:
• The exemption in respect of services provided to Government or local authority or governmental authority which earlier covered services in relation to water supply etc has been made more limited in scope.
• This exemption would be available only to Services of water supply, public health, sanitation conservancy, solid waste management or slum improvement and up-gradation will continue to remain exempted.
• Example when consultancy, designing, of water supply done to local municipality liable to service tax as it used to be.
e. Services by a Hotel, Inn or Guest House:
• According to the present entry at Sl. No. 18, “service by way of renting done by commercial places meant for residential or lodging purposes, having a declared tariff of a unit of accommodation below Rs 1000 per day or equivalent” was exempted from service tax.
• To remove any ambiguity, the word commercial is being omitted.
• Now due to this omission, the exemption could be available upto specified limits is available to any entity providing service by way of accommodation, including dharmashalas or ashram or such other entities.
Other changes in mega exemption notification:
• Transport of organic manure by vessel, rail or road (by GTA) similar to fertilizer which is already exempted. This exemption is not just for GTA but all categories.
• Services by way of loading, unloading, packing, storage or warehousing, transport by vessel, rail or road (GTA), of cotton, ginned or baled, is exempted. Extending benefit which was available to other agri produce.
• Services by Common Bio-medical Waste Treatment Facility operators by way of treatment,disposal of bio medical waste or processes incidental to such treatment or disposal are being exempted. This has recognized the representation made by this segment.
• Service provided by Employees State Insurance Corporation (ESIC) prior to 1.7.2012 is exempted from service tax.
This exemption effective from the date the Finance (No.2) Bill, receives the assent of the President.
• Services by the Indian tour operators to foreign tourists in relation to tours wholly conducted outside India are being exempted. Anyway this would have been not liable as services provided to recipient located outside India.
• Special financial services received by RBI from outside India, in the course of management of foreign exchange reserves, e.g. external asset management, custodial services, securities lending services, are being exempted.
The exemptions other than for which presidential assent required above to be implemented .
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