TMI BlogPROVISIONS RELATING TO DIRECT TAXES & RELATED LAWSX X X X Extracts X X X X X X X X Extracts X X X X ..... distressed companies (F) Improving effectiveness of tax administration (G) Strengthening anti-abuse measures (H) Removing difficulties faced by taxpayers (I) Rationalisation of provisions (J) Miscellaneous DIRECT TAXES A. RATES OF INCOME-TAX I. Rates of income-tax in respect of income liable to tax for the assessment year 2019-20. In respect of income of all categories of assessees liable to tax for the assessment year 2019-20, the rates of income-tax have been specified in Part I of the First Schedule to the Bill. These are the same as those laid down in Part III of the First Schedule to the Finance Act, 2018 for the purposes of computation of advance tax , deduction of tax at source from Salaries and charging of tax payable in certain cases. (1) Surcharge on income-tax The amount of income-tax shall be increased by a surcharge for the purposes of the Union,- (a) in the case of every individual or Hindu undivided family or every association of persons or body of individ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five per cent. of such income tax; and (iii) surcharge will also be levied at the appropriate rates in cases where the company is liable to tax under section 115JB of the Act. (e) In other cases (including cases where provisions of sections 115-O, 115QA, 115R, 115TA or 115TD are applicable), the surcharge shall be levied at the rate of twelve per cent. Surcharge shall also be levied at the rate of twelve per cent. on additional Income-tax chargeable under newly inserted sub-section (2A) in existing section 92CE. (2) Marginal Relief- Marginal relief has also been provided in all cases where surcharge is proposed to be levied. (3) Health and Education Cess- For assessment year 2019-20, Education Cess on income-tax and Secondary and Higher Education Cess on income-tax has been discontinued. However, a new cess, by the name of Health and Education Cess has been levied at the rate of four per cent. on the amount of income tax so computed, inclusive of surcharge, wherever applicable, in all cases. No marginal relief is available in respect of such cess. II. Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted, in the case of a company other than a domestic company, shall be increased by a surcharge,- (a) at the rate of two per cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crore rupees but does not exceed ten crore rupees; (b) at the rate of five per cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds ten crore rupees. No surcharge will be levied on deductions in other cases. (2) Health and Education Cess- Health and Education Cess shall continue to be levied at the rate of four per cent. of income-tax including surcharge wherever applicable, in the cases of persons not resident in India, including company other than a domestic company. III. Rates for deduction of income-tax at source from Salaries , computation of advance tax and charging of income-tax in special cases during the financial year 2019-20 . The rates for deduction of income-tax at source from Salaries during the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Above ₹ 10,00,000 30 per cent.. (iii) in the case of every individual, being a resident in India, who is of the age of eighty years or more at any time during the previous year,- Upto ₹ 5,00,000 Nil. ₹ 5,00,001 to ₹ 10,00,000 20 per cent.. Above ₹ 10,00,000 30 per cent.. The amount of income-tax computed in accordance with the preceding provisions of this Paragraph shall be increased by a surcharge at the rate of,- (i) ten per cent. of such income-tax in case of a person having a total income exceeding fifty lakh rupees but not exceeding one crore rupees; (ii) fifteen per cent. of such income-tax in case of a person having a total income exceeding one crore rupees but not exceeding two crore rupees; (iii) twenty five per cent. of such income-tax in case of a person having a total income exceeding two crore rupees but not exceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied for financial year 2018-19. The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a firm having a total income exceeding one crore rupees. However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. D. Local authorities The rate of income-tax in the case of every local authority has been specified in Paragraph D of Part III of the First Schedule to the Bill. This rate continue to be the same as that specified for the financial year 2018-19. The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a local authority having a total income exceeding one crore rupees. However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o marginal relief shall be available in respect of such cess. [Clause 2 First Schedule] B. WIDENING AND DEEPENDING OF TAX BASE Tax Deduction at Source (TDS) on payment by Individual/HUF to contractors and professionals At present there is no liability on an individual or Hindu undivided family (HUF) to deduct tax at source on any payment made to a resident contractor or professional when it is for personal use. Further, if the individual or HUF is carrying on business or profession which is not subjected to audit, there is no obligation to deduct tax at source on such payment to a resident, even if the payment is for the purpose of business or profession. Due to this exemption, substantial amount by way of payments made by individuals or HUFs in respect of contractual work or for professional service is escaping the levy of TDS, leaving a loophole for possible tax evasion. To plug this loophole, it is proposed to insert a new section 194M in the Act to provide for levy of TDS at the rate of five per cent. on the sum, or the aggregate of sums, paid or credited in a year on account of contractual work or profes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property is taxed in the hands of donee, except for certain exemptions provided in clause (x) of sub-section (2) of section 56. It has been reported that gifts are made by persons being residents in India to persons outside India and are claimed to be non-taxable in India as the income does not accrue or arise in India. To ensure that such gifts made by residents to persons outside India are subject to tax, it is proposed to provide that income of the nature referred to in sub-clause (xviia) of clause (24) of section 2, arising from any sum of money paid, or any property situate in India transferred, on or after 5th July, 2019 by a person resident in India to a person outside India shall be deemed to accrue or arise in India. However, the existing provision for exempting gifts as provided in proviso to clause (x) of sub-section (2) of section 56 will continue to apply for such gifts deemed to accrue or arise in India. In a treaty situation, the relevant article of applicable DTAA shall continue to apply for such gifts as well. This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [Clause 39] Inter-changeability of PAN Aadhaar and mandatory quoting in prescribed transactions. Existing sub-section (1) of section 139A of the Act, inter alia, provides that every person specified therein, who has not been allotted a PAN, shall apply to the Assessing Officer for allotment of PAN. It has been observed that in many cases persons entering into high value transactions, such as purchase of foreign currency or huge withdrawal from the banks, do not possess a PAN. In order to keep an audit trail of such transactions, for widening and deepening of the tax base, it is proposed to insert a new clause (vii) in the aforesaid sub-section so as to provide that every person, who intends to enter into certain prescribed transactions and has not been alloted a PAN, shall also apply for allotment of a PAN. To ensure ease of compliance, it is also proposed to provide for inter-changeability of PAN with the Aadhaar number. Accordingly the provisions of section 139A are proposed to be amended so as to provide that,- (i) every person who is required to furnish or intimate or quote his PAN under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nter alia, provide for furnishing of statement of financial transaction (SFT) or reportable account by person specified therein. In order to enable pre-filling of return of income, it is proposed to obtain information by widening the scope of furnishing of statement of financial transactions by mandating furnishing of statement by certain prescribed persons other than those who are currently furnishing the same. It is also proposed to remove the current threshold of rupees fifty thousand on agragate value of transactions during a financial year, for furnishing of information, with a view to ensure pre-filling of information relating to small amount of transactions as well. In order to ensure proper compliance, it is also proposed to amend the provisions of sub-section (4) of aforesaid section so as provide that if the defect in the statement is not rectified within the time specified therein, the provisions of the Act shall apply as if such person had furnished inaccurate information in the statement. Consequently, it is also proposed to amend the penalty provisions contained in section 271FAA so as to ensure correct furnishing of information in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of such transfer of asset are different, then the full value of consideration for transfer of such asset shall be the stamp duty value on the date of the agreement provided the amount of consideration or a part thereof has been received by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account on or before the date of agreement for transfer of the asset. Similar provision is made in the second proviso to sub-section (1) of section 50C and the second proviso to sub-clause (b) of clause (x) of sub-section (2) of section 56. Section 44AD of the Act relates to presumptive taxation scheme for eligible businesses and provides that in case of an assessee engaged in an eligible business shall be eligible to avail the benefit of the presumptive taxation scheme if the profit from such business is declared at at the rate of eight per cent. or higher of the total turnover or gross receipts in the previous year from such business. The proviso to sub-section (1) of the said section provides that the eligible assessee can opt for the presumptive taxation scheme if he declares profit at the rate of six per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived by it, in any mode other than by an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account, if the amount being repaid is rupees twenty thousand or more. In order to encourage other electronic modes of payment, it is proposed to amend the above sections so as to include such other electronic mode as may be prescribed, in addition to the already existing permissible modes of payment/receipt in the form of an account payee cheque or an account payee bank draft or the electronic clearing system through a bank account. These amendments will take effect from 1st September, 2019. [Clauses 57, 58 60] TDS on cash withdrawal to discourage cash transactions In order to further discourage cash transactions and move towards less cash economy, it is proposed to insert a new section 194N in the Act to provide for levy of TDS at the rate of two per cent on cash payments in excess of one crore rupees in aggregate made during the year, by a banking company or cooperative bank or post office, to any person from an account maintained by the recipie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendment will take effect from 1st November, 2019. [Clause 194] D.TAX INCENTIVES Incentives to International Financial Services Centre (IFSC): In order to promote the development of world class financial infrastructure in India, some tax concessions have already been provided in respect of business carried on from an IFSC. To further promote such development and bring these IFSC at par with similar IFSC in other countries, following additional benefits are proposed: A) Under the existing provisions of the section 47 of the Act, any transfer of a capital asset, being bonds or Global Depository Receipts or rupee denominated bond of an Indian company or derivative, made by a non-resident through a recognised stock exchange located in any IFSC and where the consideration for such transaction is paid or payable in foreign currency shall not be regarded as transfer. With a view to provide tax-neutral transfer of certain securities by Category III Alternative Investment Fund (AIF) in IFSC, it is proposed to amend the said section so as to provide that any transfer of a capital asset, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In order to incentivize relocation of Mutual Fund in IFSC, it is proposed to amend the said section so as to provide that no additional income-tax shall be chargeable in respect of any amount of income distributed, on or after the 1st day of September, 2019, by a Mutual Fund of which all the unit holders are non-residents and which fulfills certain other specified conditions. This amendment will take effect, from 1st September, 2019. [Clause 37] E) The existing provisions of the section 80LA of the Act, inter alia, provide profit linked deduction of an amount equal to one hundred per cent of income for the first five consecutive assessment years and fifty per cent of income for the next five consecutive assessment years, to units of an IFSC. With a view to further incentivize operation of units in IFSC, it is proposed to amend the said section so as to provide that the deduction shall be increased to one hundred per cent for any ten consecutive years. The assessee, at his option, may claim the said deduction for any ten consecutive assessment years out of fifteen years beginning with the year in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tially, as per matching principle in taxation, it is proposed to amend section 43B of the Act to provide that any sum payable by the assessee as interest on any loan or advances from a deposit-taking NBFCs and systemically important non deposit-taking NBFCs shall be allowed as deduction if it is actually paid on or before the due date of furnishing the return of income of the relevant previous year. These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent years. [Clauses 13 15] Relaxation in conditions of special taxation regime for offshore funds Section 9A of the Act provides for a safe harbour in respect of offshore funds. It provides that in the case of an eligible investment fund, the fund management activity carried out through an eligible fund manager located in India and acting on behalf of such fund shall by itself not constitute business connection in India of the said fund. Further, an eligible investment fund shall not be said to be resident in India merely because the eligible fund manager undertaking fund manageme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other assessment year. This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to assessment year 2020-2021 and subsequent assessment years. [Clause 25] Exemption of interest income of a non-resident arising from borrowings by way of issue of Rupee Denominated Bonds referred to under section 194LC The existing provisions of section 194LC of the Act provide that the interest income payable to a non-resident by a specified company on borrowings made by it in foreign currency from sources outside India under a loan agreement or by way of issue of any long-term bond including long-term infrastructure bond, or rupee denominated bond shall be eligible for TDS at a concessional rate of five per cent. In order to incentivise low cost foreign borrowings through Off-shore Rupee Denominated Bond, the press release dated 17th September, 2018, inter alia, announced that interest payable by an Indian company or a business trust to a non-resident, including a foreign company, in respect of rupee denominated bond issued outside India during the period from September 17, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of an amount equal to hundred per cent of the profits and gains derived from such business. With a view to align the definition of affordable housing under section 80-IBA with the definition under GST Act, it is proposed to amend the said section so as to modify certain conditions regarding the housing project approved on or after 1st day of September, 2019. The modified conditions are as under: (i) the assessee shall be eligible for deduction under the section, in respect of a housing project if a residential unit in the housing project have carpet area not exceeding 60 square meter in metropolitan cities or 90 square meter in cities or towns other than metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region); and (ii) the stamp duty value of such residential unit in the housing project shall not exceed forty five lakh rupees; These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to assessment year 2020-21 and sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies, except an eligible start-up as referred to in section 80-IAC, while clause (b) applies only to such eligible start-up. Under clause (a), no loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year, unless on the last day of the previous year, the shares of the company carrying not less than fifty-one per cent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than fifty-one per cent of the voting power on the last day of the year or years in which the loss was incurred. Under clause (b), the loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year, if, all the shareholders of such company who held shares carrying voting power on the last day of the year or years in which the loss was incurred, continue to hold those shares on the last day of such previous year and such loss has been incurred during the period of seven years beginning from the year in which such company is incorporated. The said clause was inserted vide Finance Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears. This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years. [Clauses 20 22] Incentives for Category II Alternative Investment Fund (AIF) The existing provisions of the said section 56 of the Income-tax Act, inter alia, provide that where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be charged to tax. However, exemption from this provision has been provided for the consideration for issue of shares received by a venture capital undertaking from a venture capital company or a venture capital fund or by a company from a class or classes of persons as may be notified by the Central Government in this behalf. Currently the benefit of exemption is available to Category I AIF. With a view to facilitate venture capital undertakings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2020-21 and subsequent assessment years. [Clauses 22 34] Prescription of exemption from deeming of fair market value of shares for certain transactions: The existing provisions of the section 56(2)(x) of the Income-tax Act, inter alia, provide for chargeability of income in case of receipt of money or specified property for no or inadequate consideration. For determining the amount of income for receipt of certain shares, the fair market value of the shares is taken into account. Similarly, section 50CA provides for deeming of fair market value of unquoted shares for computing the capital gains from the transfer of such shares. For both these provisions, the fair market value is determined based on the prescribed method. Currently, the provisions of section 56(2)(x) are not applicable to certain specified transactions. However, no such exemption is available under section 50CA. Determination of fair market value based on the prescribed rules may result into genuine hardship in certain cases where the consideration for transfer of shares is approved by certain authorities and the person transferring th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At present, the section provides for filing of such statements on a floppy, diskette, magnetic tape, CD-ROM, or any other computer readable media. To enable online filing of such statements, it is proposed to substitute this section so as to provide for filing of statement (where tax has not been deducted on payment of interest to residents) in prescribed form in the prescribed manner. It is also proposed to provide for correction of such statements for rectification of any mistake or to add, delete or update the information furnished. It is also proposed to make a consequential amendment arising out of amendment carried out by Finance Act, 2019 whereby threshold for TDS on payment of interest by a banking company or cooperative society or public company was raised to forty thousand rupees. These amendments will take effect from 1st September, 2019. [Clause 50] G. STRENGTHENING ANTI-ABUSE MEASURES Tax on income distributed to shareholder in case of listed companies Section 115QA of the Act provides for the levy of additional Income-tax at the rate of twenty per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner is satisfied that activities of the exempt entity are not genuine or are not being carried out in accordance with its objects; and (b) it is noticed that the activities of the exempt entity are being carried out in a manner that either whole or any part of its income would cease to be exempt . In order to ensure that the trust or institution do not deviate from their objects, it is proposed to amend section 12AA of the Income-tax Act, so as to provide that,- (i) at the time of granting the registration to a trust or institution, the Principal Commissioner or the Commissioner shall, inter alia, also satisfy himself about the compliance of the trust or institution to requirements of any other law which is material for the purpose of achieving its objects; (ii) where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A and subsequently it is noticed that the trust or institution has violated requirements of any other law which was material for the purpose of achieving its objects, and the order, directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 201 specifies that the deductor shall not be deemed to be an assessee in default if he fails to deduct tax on a payment made to a resident, if such resident has furnished his return of income under section 139, disclosed such payment for computing his income in his return of income, paid the tax due on the income declared by him in his return of income and furnished an accountant s certificate to this effect. This relief in section 201 is available to the deductor, only in respect of payments made to a resident. In case of similar failure on payments made to a non-resident, such relief is not available to the deductor. To remove this anomaly, it is proposed to amend the proviso to sub-section (1) of section 201 to extend the benefit of this proviso to a deductor, even in respect of failure to deduct tax on payment to non-resident. Consequent to this amendment, it is also proposed to amend the proviso to sub-section (1A) of section 201 to provide for levy of interest till the date of filing of return by the non-resident payee (as is the case at present with resident payee). These amendments will take effect from 1st Septe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the assessees who have modified their returns of income in accordance with the APA entered into by them, while the intention of the legislature is for Assessing Officer to merely modify the total income consequent to modification of return of income in pursuance to APA. It is, therefore, proposed to amend sub-section (3) of section 92CD to clarify that in cases where assessment or reassessment has already been completed and modified return of income has been filed by the tax payer under sub-section (1) of said section, the Assessing Officers shall pass an order modifying the total income of the relevant assessment year determined in such assessment or reassessment, having regard to and in accordance with the APA. This amendment will take effect from 1st September, 2019. [Clause 29] Clarification with regard to provisions of secondary adjustment and giving an option to assessee to make one-time payment In order to align the transfer pricing provisions with international best practices, section 92CE of the Act provides for secondary adjustments in certain cases. It, inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the amount of tax so paid; (vii) the deduction in respect of the amount on which such tax has been paid , shall not be allowed under any other provision of this Act; and (viii) if the assessee pays the additional income-tax, he will not be required to make secondary adjustment or compute interest from the date of payment of such tax. The amendments proposed in para (i) to (iv) above will take effect retrospectively from the 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years. Further, the amendments proposed in para (v) to (viii) will be effective from 1st September, 2019. [Clause 30] Concessional rate of Short-term Capital Gains (STCG) tax to certain equity-oriented fund of funds. In order to incentivise fund of funds set up for disinvestment of Central Public Sector Enterprises (CPSEs), Finance Act, 2018 has provided concessional rate of long-term capital gains tax under section 112A of the Act for the transfer of units of such fund of funds. In order to further incentivise t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These amendments will take effect from the 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years. [Clause 38] Provision of credit of relief provided under section 89 Section 89 of the Income-tax Act contains provisions for providing tax relief where salary, etc. is paid in arrears or in advance. The existing provisions of section 140A, section 143, section 234A, section 234B and section 234C contain provisions relating to computation of tax liability after allowing credit for prepaid taxes and certain admissible reliefs, credits etc. However, the relief under section 89 is not specifically mentioned in these sections, which is resulting into genuine hardship in the case of taxpayers who are eligible for this relief. In view of the above, it is proposed to amend section 140A, section 143, section 234A, section 234B and section 234C so as to provide that computation of tax liability shall be made after allowing relief under section 89. These amendments will take effect retrospectively from 1st April, 2007 and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cannot be the previous year of the entity resident in India. Accordingly, it has been requested that this unintended anomaly as regards the interpretation of accounting year in case of ARE, resident in India may be removed. In order to address such concerns and to bring clarity in law, it is proposed to suitably amend section 286 so as to provide that the accounting year in case of the ARE of an international group, the parent entity of which is not resident in India, the reporting accounting year shall be the one applicable to such parent entity. This amendment is clarificatory in nature. The amendment will take effect retrospectively from the 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years. [Clause 67] I: RATIONALISATION OF PROVISIONS Rationalisations of provisions relating to maintenance, keeping and furnishing of information and documents by certain persons Section 92D of the Act inter alia, provides for maintenance and keeping of information and document by persons entering into an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the face value of such shares shall be deemed to be the income of the company chargeable to income-tax for the previous year in which the failure to comply with any of the said conditions has taken place. These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years. [Clause 21] Consequential amendment to section 56 The existing provisions of the section 56 of the Income-tax Act, inter alia, provide that income by way of interest received on compensation or on enhanced compensation referred to in section 145A(b) shall be chargeable to tax. The Finance Act, 2018 substituted the provisions of section 145A with sections 145A and section 145B. However, no consequential amendment is made in section 56. It is proposed to amend section 56 of the Act to provide the correct reference of section 145B(1) in section 56, in place of the existing reference of section 145A(b). This amendment will take retrospective effect from 1st April, 2017 and will accordingly apply in relation to assessment year 2017-18 and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rupees three thousand to rupees ten thousand. These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to assessment year 2020-21 and subsequent assessment years. [Clause 65] Rationalisation of provision relating recovery of tax in pursuance of agreements with foreign countries The existing provisions of section 228A of the Act provide inter alia that where an agreement is entered into by the Central Government with the Government of any foreign country for recovery of income-tax under the Income-tax Act and the corresponding law in force in that country and where such foreign country sends a certificate for the recovery of any tax due under such corresponding law from a person having any property in India, the Board, on receipt of such certificate may, forward it to the Tax Recovery Officer within whose jurisdiction such property is situated for the recovery of tax in pursuance of agreement with such foreign country. In order to provide assistance in recovery of tax as per treaty obligation with the other country, it is proposed to amend the said section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 1st September, 2019. [Clause 68] Rationalisation of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 The existing provisions of section 2 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (the BM Act) provide inter alia that the assessee means a person who is resident in India within the meaning of section 6 of the Income-tax Act. In order to clarify the legislative intent behind enacting the BM Act, which was to tax such foreign income and assets, which were not charged to tax under the Income-tax Act, it is proposed to amend the said section so as to provide that the assessee shall mean a person being a resident in India within the meaning of section 6 of the Income-tax Act, in the previous year, or a person being a non-resident or not ordinarily resident in India within the meaning of clause (6) of section 6 of the Income-tax Act, in the previous year, who was resident in India either in the previous year to which the income referred to in section 4 relates, or in the previous year in which the undisclosed asset located out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 2016 provides, inter alia, that any amount of tax, surcharge or penalty paid in pursuance of a declaration made under the Scheme shall not be refundable. In order to address genuine concern of the declarants, it is proposed to amend the said section so as to provide that the Central Government may notify the class of persons to whom the amount of tax, surcharge and penalty, paid in excess of the amount payable under the Scheme shall be refundable. This amendment will take effect retrospectively from 1st June, 2016. [Clauses 199 200] Rationalisation of provisions relating to STT As per the existing provisions section 99 of the Finance (No.2) Act, 2004, the value of taxable securities transaction in respect of sale of an option in securities, where option is exercised, shall be, the settlement price. In order to rationalise the levy of STT where the option is exercised, it is proposed to amend the said section so as to provide that value of taxable securities transaction in respect of sale of an option in securities, where option is exercised, shall be the difference between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quate time to pass the order or make the reference, it is proposed to suitably amend the provisions of sections 24 and 26. This amendment will take effect from 1st September, 2019. [Clauses 173 174] With a view to ensure compliance with the summons issued and information required to be furnished under the PBPT Act, it is proposed to insert a new section 54A in the PBPT Act so as to provide for levy of penalty of rupees twenty five thousand for failure to comply with the summons issued or to furnish information under section 19 or section 21 respectively of the PBPT Act. This amendment will take effect from 1st September, 2019. [Clause 175] With a view to enable admissibility of certified copies of records or other documents in the custody of the authority as evidence in any proceeding under the PBPT Act, it is proposed to insert a new section 54B in the said Act so as to provide that entries in the records or other documents in the custody of an authority shall be admitted in evidence in any proceedings for the prosecution of any person for an offence under the PBPT Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019 1 Section 41 is being amended so as to provide a facility, that the departure manifest can also be furnished to a person notified by the Central Government, in addition to the person-in- charge of the conveyance. [69] 2 A new chapter XIIB titled Verification of Identity and Compliance is being inserted. New section 99B introduced under this chapter empowers proper officer of Customs to carry out verification of a person for ascertaining compliance with the provision of the Customs Act or any other law for the time being in force, for protecting the interests of revenue or to prevent smuggling in the manner as may be prescribed. It is proposed to do the verification of the person through the Aadhaar number or through such other alternative and viable means of identification as may be prescribed through the regulations. It also empowers the Board interalia to make regulations to exempt such persons or class of persons who may not be required to undergo the said verification. Failure to comply with the specified provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to six months. [73] 6 Section 110A is being amended so as to empower an adjudicating authority to release bank account provisionally attached under section 110 to the accountholder on fulfilment of certain conditions. [74] 7 A new section 114AB is being inserted so as to provide that any person who has obtained any instrument by fraud, collusion, wilful misstatement or suppression of facts and such instrument has been utilized by such person or any other person for discharging duty, such person to whom the instrument was issued shall be liable for penalty not exceeding the face value of such instrument. An Explanation to define the term instrument is also being inserted. [75] 8 Section 117 is being amended so as to increase the maximum limit of penalty from one lakh rupees to four lakh rupees. [76] 9 First proviso to section 125 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that appeal against an order of determination or review regarding the existence, degree and effect of increased volume of imports of any article requiring imposition of safeguard duty, shall lie with Customs Excise and Service Tax Appellate Tribunal. [86] III. AMENDMENTS IN THE FIRST SCHEDULE TO THE CUSTOMS TARIFF ACT, 1975 AMENDMENTS A. Tariff rate changes for Basic Customs Duty [to be effective from 06.07.2019]* [Clause [87(a)] of the Finance (No. 2) Bill, 2019] Rate of Duty S. No Heading, sub-heading tariff item Commodity From To Construction Materials 1 3918 Floor covering of plastics, Wall or ceiling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Waste and scrap of precious metals or of metal clad with precious metals; other waste and scrap containing precious metal compounds, of a kind used principally for the recovery of precious metal 10% 12.5% Automobile parts 11 6813 Friction material and articles thereof (for example, sheets, rolls, strips, segments, discs, washers, pads), not mounted, for brakes, for clutches or the like, with a basis of asbestos, of other mineral substances or of cellulose, whether or not combined with textile or other materials. 10% 15% 12 7009 Glass mirrors, whether or not framed, including rear-view mirrors 10% 15% 13 8301 20 00 Locks of a kind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10% 15% 23 8707 Bodies (including cabs), for the motor vehicles of headings 8701 to 8705 10% 15% Electronics and Electrical equipments 24 8415 90 00 Indoor and outdoor unit of split system air conditioner 10% 20% 25 8518 21 00, 8518 22 00 Loudspeaker 10% 15% 26 8521 90 90 Digital Video Recorder (DVR) and Network Video Recorder (NVR) 15% 20% 27 8525 80 CCT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Medical Devices 2 Any Chapter Raw material, parts or accessories for use manufacture of artificial kidneys, disposable sterilized dialyzer and micro-barrier of artificial kidney Applicable rate Nil Food processing 3 0801 32 10 Cashew kernel broken ₹ 60/ Kg or45%, whichever is higher 70% 4 0801 32 20, 0801 32 90 Cashew kernel whole, Cashew nuts shelled, others ₹ 75/ Kg or 45%, whichever is higher 70% Nuclear Fuels and Nuclear Energy projects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2903 15 00 Ethylene dichloride (EDC) 2% Nil 12 2910 20 00 Methyloxirane (Propylene Oxide) 7.5% 5% 13 Plastic and Rubber 14 3904 Poly Vinyl Chloride 7.5% 10% 15 3926 90 91, 3926 90 99 Articles of plastics 10% 15% 16 4002 31 00 All goods i.e. Butyl Rubber 5% 10% 17 4002 39 00 Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28 or 70 Raw materials used in manufacture of Preform of Silica:- (i)Refrigerated Helium Liquid (2804 29 10) (ii)Silicon Tetra Chloride and Germanium Tetra Chloride (2812 19 20, 2812) (iii)Silica Rods (7002 20 90) (iv)Silica Tube (7002 31 00) Applicable Rate Nil 24 5603 94 00 Water blocking tapes for manufacture of optical fiber cable Nil 20% Precious Metals 25 7106 Silver dore bar, having silver content not exceeding 95% 8.5% 11% 26 7108 Gold dore bar, having gold content not exceeding 95% 9.35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34 8474 20 10 Stone crushing (cone type) plants for the construction of roads Nil 7.5% 35 82, 84, 85 or 90 Capital goods used for manufacturing of following electronic items, namely- (i)Populated PCBA (ii)Camera module of cellular mobile phones (iii)Charger/Adapter of cellular mobile phone (iv)Lithium Ion Cell (v)Display Module (vi)Set Top Box (vii)Compact Camera Module Applicable rate Nil 36 84, 85 or 90 Capital goods used for manufacturing of specified electronic items, namely- (i)Cathode Ray tubes; (ii)CD/CD-R/DVD/DVD-R; (iii)Deflection components, CRT monitors/CTVs; (iv)Plasma Display Panel Nil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coal bed Methane operations where such disposal is made in unserviceable and mutilated condition Applicable rate on depreciated value 7.5% on transaction value Export Promotion for Sports goods 44 39 , 4407 Foam/EVA foam (39) and Pine Wood (4407) are being included in the list of items allowed duty free import upto 3% of FOB value of sports goods exported in the preceding financial year subject to specified conditions Applicable rate Nil Clarifications and Miscellaneous changes regarding Basic Customs Duty Fisheries 45 2309 Clarification is being issue that prawn feed and shrimp larvae ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Motor spirit commonly known as petrol ₹ 8 per litre ₹ 9 per litre 2 High speed diesel oil ₹ 8 per litre ₹ 9 per litre VIII. RETROSPECTIVE AMENDMENTS OF RATE NOTIFICATIONS S. No. Amendment Clause of the Finance (No. 2) Bill, 2019 1 (i) Notification Nos. 46/2011-Customs, dated 01.06.2011, 53/2011-Customs, dated 01.07.2011, 12/2012-Customs dated 17.03.2012 are proposed to be amended retrospectively to insert correct CTH of Stearic Acid in the notifications with effect from 31.03.2017. (ii)Notification No. 50/2017-Customs dated 30.06.2017 is also proposed to be amended retrospectively to insert correct CTH of Stearic Acid in the notifications with effect from 01.07.2017. [82] [83] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, by changing the description of goods against tariff sub heading 8518 30 00 4 To amend entry at S. No. 6A of the notification No. 57/2017-Customs so as to explicitly exclude microphones, receivers, speaker, connectors and SIM socket from the said entry EXCISE Note: (a) Basic Excise Duty means the excise duty set forth in the Fourth Schedule to the Central Excise Act, 1944. (b) Road and Infrastructure Cess means the additional duty of central excise levied under section 112 of the Finance Act, 2018. (c) Special Additional Excise Duty means a duty of excise levied under section 147 of the Finance Act, 2002. (d) Clause Nos. in square brackets [ ] indicate the relevant clause of the Finance (No. 2) Bill, 2019. (e) Amendments carried out through the Finance (No. 2) Bill, 2019 come into effect on the date of its enactment, unless otherwise specified. I. AMENDMENTS IN THE FOURTH SCHEDULE TO THE CENTRAL EXCISE ACT, 1944 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2402 20 50 Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimeters or its actual length, whichever is more) exceeding 70 millimeters but not exceeding 75 millimeters Nil ₹ 5 per thousand 6 2402 20 90 Other (Cigarettes containing tobacco) Nil ₹ 10 per thousand 7 2402 90 10 Cigarettes of tobacco substitutes Nil ₹ 5 per thousand 8 2403 11 10 Hookah or gudaku tobacco Nil 0.5% 9 2403 19 10 Smoking mixtures for pipes and cigarettes Nil 1% 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exploration Licensing Policy (NELP) through international competitive bidding Re. 1 per tonne Nil III. AMENDMENT IN THE EIGHTH SCHEDULE TO THE FINANCE ACT, 2002: S. No. Amendments in scheduled rate of Special Additional Excise Duty on Petrol and Diesel [to be effective from 06.07.2019]* [Clause [185] of the Finance (No. 2) Bill, 2019][effective rate is prescribed by notification as detailed in V-A below] Rate of Duty From To 1 Motor spirit commonly known as petrol ₹ 7 per litre ₹ 10 per litre 2 High speed diesel oil ₹ 1 per litre ₹ 4 per litre * Will come into effect immediately owing to a declaration und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re ₹ 9 per litre 2 High speed diesel oil ₹ 8 per litre ₹ 9 per litre SERVICE TAX Note: (a) Service Tax means the service tax levied under section 66B of the Finance Act, 1994 (b) Amendments carried out through the Finance (No. 2) Bill, 2019 come into effect on the date of its enactment, unless otherwise specified. S. No. Retrospective exemptions Clause of Finance (No.2) Bill, 2019 1 Services provided or agreed to be provided by the State Government by way of grant of liquor licence, against consideration in the form of licence fee or application fee or by whatever name it is called, are proposed to be exempted from service tax for during the period commencing from 1st April, 2016 and ending with the 30th June, 2017. [116] 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) UTGST Act means Union Territory Goods and Services Tax Act, 2017 (d) Amendments carried out through the Finance (No. 2) Bill, 2019 come into effect on the date of its enactment, unless otherwise specified. Amendments carried out in the Finance Bill, 2019 will come into effect from the date when the same will be notified, concurrently with the corresponding amendments to the Acts passed earlier by the States Union territories with legislature. I. AMENDMENTS IN THE CGST ACT, 2017: S. No. Amendment Clause of the Finance (No.2) Bill, 2019 1 The definition of adjudicating authority in clause (4) of section 2 of the CGST Act is being amended so as to exclude the National Appellate Authority for Advance Ruling (which is being created by various amendments in Chapter XVII of the CGST Act) from the definition of adjudicating authority . [91] 2 A new sub-section is being i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nish annual return along with quarterly payment of taxes; and other specified taxpayers may be given the option for quarterly or monthly furnishing of returns and payment of taxes under the proposed new return system. [96] 7 New provisos are being inserted in sub-section (1) of section 44 of the CGST Act so as to empower the Commissioner to extend the due date for furnishing Annual return (prescribed FORM GSTR-9/9A) and reconciliation statement (prescribed FORM GSTR-9C). [97] 8 New sub-sections are being inserted in section 49 of the CGST Act to provide a facility to the registered person to transfer an amount from one (major or minor) head to another (major or minor) head in the electronic cash ledger. [98] 9 New proviso in sub-sections (1) is being inserted in section 50 of the CGST Act so as to provide for charging interest only on the net cash tax liability, except in those cases where returns are filed subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances. [105] 16 Section 103 of the CGST Act is being amended so as to provide that the advance ruling pronounced by the National Appellate Authority shall be binding, unless there is a change in law or facts, on the applicants, being distinct person and all registered persons having the same Permanent Account Number and on the concerned officers or the jurisdictional officers in respect of the said applicants and the registered persons having the same Permanent Account Number. [106] 17 Section 104 of the CGST Act is being amended so as to provide that advance ruling pronounced by the National Appellate Authority shall be void where the ruling has been obtained by fraud or suppression of material facts or misrepresentation of facts. [107] 18 Section 105 of the CGST Act is being amended so as to provide that the National Appellate Authority shall have all the powers of a civil court under the Code of Civil Proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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