TMI Tax Updates - e-Newsletter
April 21, 2012
Case Laws in this Newsletter:
Articles
By: Dr. Sanjiv Agarwal
Summary: Individual taxpayers with total income up to Rs. 5 lakh are exempt from filing income tax returns for the financial year 2011-12, subject to specific conditions. This exemption applies only to individuals with salary income and bank interest not exceeding Rs. 10,000. Eligible individuals must have a permanent account number, report their PAN and interest income to their employer, and have tax deducted at source by the employer. They must have worked for only one employer and not be due any tax refunds. Firms and HUFs are excluded, and the exemption is void if a return filing notice is issued.
By: Dr. Sanjiv Agarwal
Summary: The Finance Act, 2012 introduced Section 65B, defining key terms related to service tax for the first time in India, including the term 'service'. This section comprises 55 clauses, borrowing some definitions from other legislations and refining others from the earlier Finance Act, 1994. Additionally, Notification No. 12/2012-ST exempts 34 services from service tax, defining 30 related terms. Definitions can be statutory, inclusive, exhaustive, or market-based. The article details the meanings of various terms, such as 'actionable claim', which refers to unsecured debts or beneficial interests in movable property not in the claimant's possession.
News
Summary: Dr. Kaushik Basu, Chief Economic Advisor, clarified his remarks from a lecture at the Carnegie Endowment, highlighting that his views may not reflect those of the Indian government. He discussed a potential global economic crisis in 2014 due to European banks repaying loans, suggesting this could lead to India becoming the world's fastest-growing economy post-crisis. Basu noted India's economic slowdown due to coalitional democracy, affecting reforms like GST. He suggested that reforms such as FDI in multi-brand retail might proceed without opposition support, potentially boosting economic sentiment. Misreporting linked his comments on Europe with the 2014 Indian elections.
Summary: The Finance Minister of India addressed the BRICS Finance Ministers' meeting in Washington D.C., focusing on global economic challenges and cooperation. Key topics included the need for a credible action plan for economic recovery, strengthening the Global Financing Safety Nets, and IMF governance reforms. The minister emphasized addressing global unemployment, enhancing investment in infrastructure, and international taxation issues, including tax avoidance and transfer pricing. The meeting also discussed the proposal for a new Development Bank to support global growth, with plans for a working group to explore its feasibility, aiming to report findings at the next BRICS Summit.
Summary: The G-24 Ministers met in Washington D.C. to discuss the global economy, international financial institution reform, and infrastructure financing. Concerns were raised about the fragile global economic recovery, high oil prices, and the impact on emerging markets. The group emphasized the need for immediate actions to boost growth and job creation, and called for the fulfillment of ODA commitments to low-income countries. They expressed reservations about the IMF's proposed approach to capital flow management and stressed the importance of IMF quota reforms. The group also urged the World Bank to enhance its financial capacity and responsiveness, and supported infrastructure investment and the exploration of a new Development Bank by BRICS.
Summary: The Finance Minister of India addressed the BRICS Finance Ministers' Meeting in Washington, D.C., focusing on global economic challenges and cooperation. Key topics included the need for a credible action plan for economic recovery, addressing global employment issues, and enhancing investment in infrastructure. Discussions also covered strengthening the Global Financing Safety Nets, IMF governance reforms, and international taxation issues. The Minister emphasized the importance of a unified BRICS approach in international forums and proposed a working group to explore the feasibility of a new Development Bank, aiming to report progress by the next BRICS Summit in South Africa.
Summary: The Union Finance Minister addressed the G-20 Finance Ministers and Central Bank Governors, highlighting global economic challenges such as volatility in commodity prices, high oil prices, and rising sovereign debt. He emphasized the need for coordinated efforts to address deflationary and inflationary pressures and stressed the importance of fiscal consolidation and vigilant monetary policy in India. The minister called for a credible and ambitious action plan to promote global recovery, job creation, and sustainable growth. He underscored the necessity of focusing on employment issues and increasing investment in infrastructure to support global demand and job creation.
Summary: India's Finance Minister emphasized the robust strategic partnership between India and the United States, highlighting cooperation in defense, counter-terrorism, trade, and other sectors. During a meeting with the US Treasury Secretary, discussions focused on economic and financial cooperation, including recent tax amendments in India. The Finance Minister clarified that the tax amendments are intended to clarify legislative intent, not introduce substantive changes. He assured that tax cases cannot be reopened beyond six years and reiterated that companies with capital gains from Indian assets must pay taxes in either their home country or India, avoiding double taxation.
Summary: The Indian government approved 22 foreign direct investment (FDI) proposals totaling approximately Rs. 586.137 crore, following recommendations from the Foreign Investment Promotion Board. These approvals span various sectors, including electronics, steel, health, defence, and telecommunications. Notable approvals include increased foreign equity in a pharmaceutical company and the establishment of joint ventures in defence systems. Additionally, 18 proposals were deferred, 5 were rejected, and 1 was withdrawn. The deferred and rejected proposals involved sectors such as aerospace, pharmaceuticals, telecommunications, and real estate, highlighting ongoing regulatory scrutiny in these areas.
Summary: Trade ministers from Brazil, Russia, India, China, and South Africa (BRICS) welcomed Mexico's initiative in hosting the first G20 Trade Ministers Meeting, emphasizing the importance of strengthening the multilateral trading system for sustainable growth. They highlighted the role of global value chains in trade and stressed the need for equitable participation and development impact. The ministers urged for balanced services liberalization, adequate trade facilitation support, and stable financial environments to promote trade. They called for resisting protectionism, enhancing trade policies, and concluding the Doha Development Round to ensure inclusive global economic integration, urging G20 cooperation for a sustainable trade system.
Summary: The Indian Minister of Commerce, Industry, and Textiles emphasized the importance of maintaining the development agenda central to the Doha Round discussions at the G-20 Trade Ministers Meeting in Puerto Vallarta, Mexico. He cautioned against forming exclusive agreements on services that could disrupt the balance of the Doha Round and undermine the WTO. The Minister highlighted the need for equitable trade negotiations, addressing issues like restricted mobility of natural persons due to visa and qualification barriers. He stressed the significance of manufacturing growth for job creation and the simplification of trade procedures following tariff reductions.
Summary: The Indian government has permitted aviation companies to access External Commercial Borrowings (ECBs) for one year to address working capital needs and refinance existing loans. This decision, announced by the Finance Minister, aims to ease financial pressures due to high operating costs, particularly fuel. The total ECB limit for the aviation sector is set at USD 1 billion, with individual airlines allowed up to USD 300 million. The Reserve Bank of India (RBI) will evaluate proposals based on cash flow and repayment capacity, and may relax maturity periods for ECBs exceeding USD 20 million. The RBI will issue further guidelines shortly.
Summary: India's exports from April 2011 to March 2012 grew by 21%, reaching USD 303.7 billion, according to the Commerce Secretary. During the same period, imports increased by 32.1% to USD 488.6 billion, resulting in a trade deficit of USD 184.9 billion. Key export sectors included engineering, petroleum products, gems and jewelry, and pharmaceuticals. Import growth was notable in petroleum, gold and silver, coal, machinery, and electronics. The figures provided are preliminary estimates and may be subject to revision.
Notifications
Central Excise
1.
24/2012 - dated
19-4-2012
-
CE (NT)
Regarding CENVAT credit taken or utilized on the process cutting, slitting or printing of aluminium foils.
Summary: The Government of India issued Notification No. 24/2012 under the Central Excise Act, 1944, stating that CENVAT credit taken or utilized for the processes of cutting, slitting, and printing of aluminium foils will not need to be reversed. This applies even though such processes are not considered manufacturing, as per a tribunal and Supreme Court ruling. This non-reversal applies to credits taken up to March 15, 2012, provided excise duty was paid on the final product's removal, and no refund claims are made. Credits taken by buyers up to the same date also do not require reversal.
2.
23/2012 - dated
18-4-2012
-
CE (NT)
Central Excise (Fourth Amendment) Rules, 2012.
Summary: The Central Government, under the Central Excise Act, 1944, has amended the Central Excise Rules, 2002, effective April 18, 2012. The amendment specifies that assessees availing exemptions under certain notifications (No. 1/2011 and No. 12/2012) and not manufacturing other excisable goods must file a quarterly return in a specified form. This return, detailing the production and removal of goods, must be submitted within ten days after the quarter's end. The principal rules were initially published on March 1, 2002, and were last amended on March 30, 2012.
Customs
3.
27 /2012-Customs - dated
18-4-2012
-
Cus
Seeks to amend Notification 09/2012 – Customs - Duty free re-import of cut & polished diamonds into India after certification/grading by the laboratories / agencies as notified in the Foreign Trade Policy.
Summary: The Government of India, through the Ministry of Finance, has amended Notification 09/2012-Customs concerning the duty-free re-import of cut and polished diamonds into India after certification or grading by designated laboratories or agencies, as per the Foreign Trade Policy. The amendment specifies that a variance of up to +/-1 mm in height and circumference and +/-1 cent in weight is permissible. The term "Foreign Trade Policy" refers to the policy published by the Ministry of Commerce and Industry, as amended over time. This amendment is enacted under the powers conferred by the Customs Act, 1962.
4.
26/2012 - Customs - dated
18-4-2012
-
Cus
Seeks to amend Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods.
Summary: The Government of India, through the Ministry of Finance, has issued Notification No. 26/2012-Customs to amend Notification No. 12/2012-Customs. This amendment prescribes the effective rate of duty on the import of goods, specifically addressing electrical energy removed from a Special Economic Zone into the Domestic Tariff Area. The duty rates vary based on the type of fuel used and the capacity of power projects. Additionally, the amendment modifies the conditions for importing gold and silver, setting limits on quantities per eligible passenger. These changes are enacted under the Customs Act, 1962, in the public interest.
DGFT
5.
111(RE-2010) / 2009-14 - dated
18-4-2012
-
FTP
Indian Trade Classification(Harmonised System) of Export and Import Items, 2012 [ITC(HS),2012].
Summary: The Indian government, under the Ministry of Commerce and Industry, has issued Notification No. 111(RE-2010)/2009-14, dated April 18, 2012, announcing the Indian Trade Classification (Harmonised System) of Export and Import Items, 2012 (ITC (HS), 2012). This classification includes Schedule 1, detailing the Import Policy, and Schedule 2, outlining the Export Policy. Each item in these schedules is accompanied by the current import/export policy and any applicable policy conditions. The notification aligns with the HS 2012 of the World Customs Organisation and the Customs Tariff Schedule, effective immediately.
Highlights / Catch Notes
Customs
-
Amendment to Customs Notification 09/2012: Duty-Free Re-Import of Certified Cut and Polished Diamonds into India Approved.
Notifications : Seeks to amend Notification 09/2012 – Customs - Duty free re-import of cut & polished diamonds into India after certification/grading by the laboratories / agencies as notified in the Foreign Trade Policy. - Ntf. No. 27 /2012-Customs Dated: April 18, 2012
-
Amendment to Notification 12/2012: Changes in Customs Duty Rates on Imports as per Notification 26/2012.
Notifications : Seeks to amend Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods. - Ntf. No. 26/2012 - Customs Dated: April 18, 2012
DGFT
-
DGFT Updates 2012 ITC(HS) Classification for Import/Export, Standardizing International Trade in India.
Notifications : Indian Trade Classification(Harmonised System) of Export and Import Items, 2012 [ITC(HS),2012]. - Ntf. No. 111(RE-2010) / 2009-14 Dated: April 18, 2012
Central Excise
-
CENVAT Credit Guidelines on Cutting, Slitting, Printing Aluminum Foils Refer to Notification No. 24/2012 by Central Excise.
Notifications : Regarding CENVAT credit taken or utilized on the process cutting, slitting or printing of aluminium foils. - Ntf. No. 24/2012 - Central Excise (N. T.) Dated: April 19, 2012
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Central Excise Rules Amended: Notification No. 23/2012 Streamlines Tax Processes and Enhances Compliance Effective April 18, 2012.
Notifications : Central Excise (Fourth Amendment) Rules, 2012. - Ntf. No. 23/2012 - Central Excise (N.T.) Dated: April 18, 2012
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