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Union Budget 2017-18 Key expectations and highlights

Budget - By: - Bimal jain - Dated:- 31-1-2017 - Dear Professional Colleague, With complete washout of Winter Session of the Parliament in the awake of demonetisation issue coupled with tug of war on dual control issue (which finally got the consensus in 9th GST Council meeting held on January 16, 2017), all eyes are now on the Budget session of the Parliament, where the Model GST Laws are likely to be placed for approval of both the Houses of Parliament, commencing from January 31, 2017. The Uni .....

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conomy forward. Apart from these, for bringing the trend of cashless transactions, certain benefit measures can be taken in form of incentives for digital payments. The government has already taken a number of steps to encourage electronic payments like Service tax on payments made through debit and credit cards upto ₹ 2000 have been removed, cheaper petrol and diesel when paid electronically, etc. With the realistic date, as stated by the Hon ble Finance Minister, Mr. Arun Jaitley regardi .....

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ble taxation on Ocean freight paid for import of goods: Ocean freight paid for import of goods suffers from double taxation. Firstly, it is included in the assessable value for calculating Basic Customs duty which is done on CIF basis. Secondly, Service tax is charged under reverse charge after the amendment made by Finance Act, 2016, by removing services by way of transportation of goods by an aircraft or a vessel from a place outside India to the customs station of clearance in India , from th .....

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ervices is the location of service provider. Recommendation: Amendment in Rule 9 of the POP Rules is required in case of intermediaries providing services to foreign companies, as, they are often unable to collect Service tax from foreign service importer and tax becomes their cost, which, reduces the competitiveness and profit margin. Clarification on manner to register under Service tax of a person located in a non-taxable territory in India Recent amendments have been made in Service tax w.e. .....

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transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, person liable for paying Service tax other than the service provider, shall be the person in India who complies with Sections 29 (Arrival of vessels and aircrafts in India), 30 (Delivery of import manifest or import report) or 38 (Power to require production of documents and ask questions) read with Section 148 (Liability of agent appointed by the person in charge of a conveyance) of t .....

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rson located in non-taxable territory, by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India With the recent amendment w.e.f. January 22, 2017, in respect of services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory, by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India (discussed supra), w .....

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ry fees paid to Foreign Government s/agencies: As a result of insertion of the definition of Government vide the Finance Act, 2015, Service tax is to be paid under reverse charge basis by Chemical/Pharma companies, who are required to pay statutory fees to the Foreign Government for registration of their product etc, resulting in huge Service tax outflow. Recommendation: Exemption from levy of Service tax under reverse charge on statutory fees paid by Chemical/Pharma companies to Foreign Governm .....

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ices relating to events), is provided at more than one location, including a location in the taxable territory, its place of provision shall be the location in the taxable territory where the greatest proportion of the service is provided. Recommendation: Exemption from Service tax to be provided for the services provided by SEZ units to recipients located outside India but who are taxable in India under Rule 4 or Rule 7 of the POP Rules. Clarification on the applicability of Service tax on shar .....

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provided on the applicability of Service tax for sharing of expenses between two associated companies/sister concerns where there is no margin. PART II: EXCISE DUTY Exemption for tax on goods/services used for sewerage projects: Swachh Bharat is one of the major Government s initiative and in this regard sewerage and sewerage projects are important aspect in Public Health and Sanitation. Recommendation: Exemption from payment of Excise duty & Swachh Bharat Cess ( SB Cess ) on goods and serv .....

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e brunt of inverted duty structure. Some chemicals used in the manufacture of medicines draw a duty of as high as 12%, while free trade agreements (FTAs) ensure the finished products draw negligible duty. This inverted duty structure results in accumulation of credit as the complete amount of duty paid on inputs cannot be set off against the output tax liability. Recommendation: Inverted duty structure for Active Pharmaceutical Ingredients (APIs) and other pharmaceutical inputs/raw materials sho .....

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ation: The activity of change in label of the product without altering its MRP and thus providing only additional information on the product should not be considered as manufacturing activity liable to Excise duty. Further, in case of reduction in prices, as duty is already deposited on MRP value, there should not be any additional duty liability by considering it to be manufacture. Prescribed time limit for granting remission of duty: As per Rule 21 of the Central Excise Rules, 2002, remission .....

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et, 2016, Tariff rate of BCD was increased from 7.5% to 10% on 206 specified tariff lines falling in Chapters 84 and 85 of the Customs Tariff Act, 1975. Recommendation: It is suggested to restore Basic Customs duty from 10% to 7.5% on specified goods required for make in India initiatives, in Chapters 84 and 85 of the Customs Tariff Act, 1975. Education cess (EC) & Secondary Higher Education cess (SHEC) levied on Import duty charged on imported material should be abolished The EC and SHEC on .....

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ssed above. Recommendation: Clarification is required on the inclusion of value of services and intangible rights procured in relation to imported goods so as to avoid double taxation under the Customs Act, 1962 and the Finance Act, 1994. Increase in the interest-free warehousing period for imported goods: The facility of warehousing of imported goods in Customs Bonded Warehouses, without payment of Customs duty otherwise leviable on import, is permitted under the Customs Act, 1962 and Rules mad .....

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nch procedures: The Special Valuation Branch ( SVB ) is an institution specialising in investigation of transactions involving special relationships and certain special features having bearing on value of import goods. Recommendation: Proper guidelines should be provided for reducing multiple procedural compliances by introduction of a single window co-ordination for faster closure of SVB procedures. PART IV: CENVAT CREDIT Utilization of balance of accumulated EC & SHEC: Levy of EC and SHEC .....

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payment of Service tax. Input services consumed by employee during employment: Rule 2(l) of the Cenvat Credit Rules, 2004 ( the Credit Rules ), restricts availment of Cenvat credit on input services such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, whe .....

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