From an indirect tax perspective, a major expectation was a concrete action plan for introduction of the much awaited Goods and Service Tax (GST) Law. While the Finance Minister spoke about placing Constitutional Amendment Bill for discussion in the Parliament and also mentioned about allocation of Rs 9,000 crore towards compensation to States for loss of Central Sales Tax ( CST) revenue, he urged the States to come forward and cooperate in introducing this major reform. Unfortunately, no specific deadlines were clearly spelt out for achieving this objective, leaving the trade and industry clueless about the way forward.

Considering that the Government is keen to implement GST at the earliest, minimal changes are proposed from an indirect tax perspective.

While there has been no change in peak rate of Basic Customs Duty (BCD) and it has remained unchanged for non-agricultural products, import duty on high-end motor vehicles and motor cycles has been increased. BCD on set-top boxes for TV has been increased from 5 per cent to 10 per cent. BCD is reduced on textile machinery and parts and on 20 specified machinery for use in leather and footwear industry, apart from zero customs duty for electrical plants and machinery. Generation-based tax incentives for wind energy projects have also been proposed.

Similarly, there has been no change in the standard rate of excise duty and service tax. However, excise duty on SUVs has been increased from 27 per cent to 30 per cent, except those registered as taxis. The definition of SUVs is misleading compared to what is generally understood. For transportation sector, reduction of excise duty on truck chassis of 1 per cent comes as a small relief, provided the benefit is passed on to the end user. Ships and other vessels have been exempted. Consequently, there will be no CVD on these ships and vessels when imported. Full exemption from excise duty is being provided to intermediate goods manufactured and consumed captively by exempted units under area based exemption scheme in Himachal Pradesh and Uttarakhand.

As an additional Revenue collection measure, excise duty on tobacco products, mobiles phones (priced more than Rs 2,000) has been increased.

Under service tax, vocational courses by institutes that are affiliated to State Vocational Training Centres and Testing Services in relation to agricultural activities are covered under the Negative List. Earlier, only those restaurants licensed to serve liquor and having air-conditioning or central air heating facility were covered under service tax.

However, from April 1, 2013, all air-conditioned or centrally-heated restaurants will now be covered under service tax. Effective from the March 1, 2013, for residential units exceeding 2,000 sq ft or where amount charged is more than Rs 1 crore and all commercial properties, service tax will be payable on 30 per cent of the value, instead of 25 per cent earlier. One time amnesty scheme has been introduced for encouraging voluntary compliance to those who have not remitted the service tax dues. If service tax payments are made in 1 or 2 instalments, interest, penalty and other consequences would be waived off.

The Mega Exemption Notification under Service Tax has been amended from April 1, 2013 whereby services provided by an educational institution by way of renting of immovable property, temporary transfer or permitting the use or enjoyment of a copyright relating to cinematographic films, (other than those exhibited in cinema hall or a cinema theatre), services by way of vehicle parking to general public and services provided to Government, a local authority or a Governmental authority, by way of repair or maintenance of aircraft, have been deleted, therefore making these services taxable. Temporary transfer of cinematographic films for exhibition through TV, Satellite or Internet, would therefore be subjected to service tax, going forward.

(The author is Partner & National Head of Indirect Tax, KPMG in India.)

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