Finance Budget 2012-13: Presented at the Parliament by Mr.Pranab Mukherjee, the Finance Minister of India, on 16th March 2012. Article contributed by CA Varun Nirmal DIRECT TAXES • DTC rates proposed to be introduced for personal income tax. • Exemption limit for the general category of individual taxpayers proposed to be enhanced • From INR 1,80,000 to INR 2,00,000 giving tax relief of INR2,000. • Upper limit of 20 per cent tax slab proposed to be raised from INR 8 lakh to INR10 lakh. • Proposal to allow individual tax payers, a deduction of upto INR10,000 for interest from savings bank accounts. • Proposal to allow deduction of upto INR 5,000 for preventive health check up. • Senior citizens not having income from business proposed to be exempted from payment of advance tax. • To provide low cost funds to stressed infrastructure sectors, rate of withholding tax on interest payment on ECBs proposed to be reduced from 20 per cent to 5 per cent for 3 years for certain sectors. • Restriction on Venture Capital Funds to invest only in 9 specified sectors proposed to be removed. • Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent upto 31.3.2013. • Investment link deduction of capital expenditure for certain businesses proposed to be provided at the enhanced rate of 150 per cent. • New sectors to be added for the purposes of investment linked deduction. • Proposal to extend weighted deduction of 200 per cent for R&D expenditure in an inhouse • Facility for a further period of 5 years beyond March 31, 2012. • Proposal to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services. • Proposal to extend the sunset date for setting up power sector undertakings by one year for claiming 100 per cent deduction of profits for 10 years. • Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from `60 lakhs to `1 crore. • Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery. • Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector. • Reduction in securities transaction tax by 20 per cent on cash delivery transactions. • Proposal to extend the levy of Alternate Minimum Tax to all persons, other than companies, claiming profit linked deductions. • Proposal to introduce General Anti Avoidance Rule to counter aggressive tax avoidance scheme. • Measures proposed to deter the generation and use of unaccounted money. • A net revenue loss of `4,500 crore estimated as a result of Direct Tax proposals. INDIRECT TAXES Service Tax • Service tax confronts challenges of its share being below its potential, complexity in tax law, and need to bring it closer to Central Excise Law for eventual transition to GST. • Overwhelming response to the new concept of taxing services based on negative list. • Proposal to tax all services except those in the negative list comprising of 17 heads. • Exemption from service tax is proposed for some sectors. • Service tax law to be shorter by nearly 40 per cent. • Number of alignment made to harmonise Central Excise and Service Tax. A common simplified registration form and a common return comprising of one page are steps in this direction. • Revision Application Authority and Settlement Commission being introduced in Service Tax for dispute resolution. • Utilization of input tax credit permitted in number of services to reduce cascading of taxes. • Place of Supply Rules for determining the location of service to be put in public domain for stakeholders’ comments. • Study team to examine the possibility of common tax code for Central Excise and Service Tax. • New scheme announced for simplification of refunds. • Rules pertaining to point of taxation are being rationalised. • To maintain a healthy fiscal situation proposal to raise service tax rate from 10 per cent to 12 per cent, with corresponding changes in rates for individual services. • Proposals from service tax expected to yield additional revenue of `18,660 crore. Other proposals for Indirect Taxes • Given the imperative for fiscal correction, standard rate of excise duty to be raised from 10 per cent to 12 per cent, merit rate from 5 per cent to 6 per cent and the lower merit rate from 1 per cent to 2 per cent with few exemptions. • Excise duty on large cars also proposed to be enhanced. • No change proposed in the peak rate of customs duty of 10 per cent on non-agricultural goods. • To stimulate investment relief proposals for specific sectors – especially those under stress. Agriculture and Related Sectors • Basic customs duty reduced for certain agricultural equipment and their parts; Full exemption from basic customs duty for import of equipment for expansion or setting up of fertiliser projects upto March 31, 2015. Infrastructure • Proposal for full exemption from basic customs duty and a concessional CVD of 1 per cent to steam coal till 31st March, 2014. • Full exemption from basic duty provided to certain fuels for power generation. Mining • Full exemption from basic customs duty to coal mining project imports. • Basic custom duty proposed to be reduced for machinery and instruments needed for surveying and prospecting for minerals. Railways • Basic custom duty proposed to be reduced for equipments required for installation of train protection and warning system and upgradation of track structure for high speed trains. Roads • Full exemption from import duty on certain categories of specified equipment needed for road construction, tunnel boring machines and parts of their assembly. Civil Aviation • Tax concessions proposed for parts of aircraft and testing equipment for third party maintenance, repair and overhaul of civilian aircraft. Manufacturing • Relief proposed to be extended to sectors such as steel, textiles, branded ready made garments, low-cost medical devices, labour-intensive sectors producing items of mass consumption and matches produced by semi-mechanised units. Health and Nutrition • Proposal to extend concessional basic customs duty of 5 per cent with full exemption from excise duty/CVD to 6 specified life saving drugs/vaccines. • Basic customs duty and excise duty reduced on Soya products to address protein deficiency among women and children. • Basic customs duty and excise duty reduced on Iodine. • Basic customs duty reduced on Probiotics. Environment • Concessions and exemptions proposed for encouraging the consumption of energy-saving devices, plant and equipment needed for solar thermal projects. • Concession from basic customs duty and special CVD being extended to certain items imported for manufacture for hybrid or electric vehicle and battery packs for such vehicles. • Proposal to increase basic customs duty on imports of gold and other precious metals. Additional resource mobilisation • Proposals to increase excise duty on ‘demerit’ goods such as certain cigarettes, hand-rolled bidis, pan masala, gutkha, chewing tobacco, unmanufactured tobacco and zarda scented tobacco. • Cess on crude petroleum oil produced in India revised to INR 4,500 per metric tonne. • Basic customs duty proposed to be enhanced for certain categories of completely built units of large cars/MUVs/SUVs. Rationalization measures • Excise duty rationalised for packaged cement, whether manufactured by mini-cement plants or others. • Levy of excise duty of 1 per cent on branded precious metal jewellery to be extended to include unbranded jewellery. Operations simplified and measures taken to minimise impact on small artisans and goldsmiths. • Branded Silver jewellery exempted from excise duty. • Chassis for building of commercial vehicle bodies to be charged excise duty at an ad valorem rate instead of mixed rate. • Import of foreign-going vessels to be exempted from CVD of 5 per cent retrospectively. • Duty-free allowances increased for eligible passengers and for children of upto 10 years. • Proposals relating to Customs and Central excise to result in net revenue gain of INR 27,280 crore. • Indirect taxes estimated to result in net revenue gain of `45,940 crore. • Net gain of INR 41,440 crore in the Budget due to various taxation proposals.