DIRECT TAXES PROPOSALS

• Tax proposals for 2012-13 mark progress in the direction of movement towards DTC and GST.
• DTC rates proposed to be introduced for personal income tax, with exemption limit for the general category of individual taxpayers proposed to be enhanced from `1,80,000 to `2,00,000 giving tax relief of `2,000. Upper limit of 20 per cent tax slab proposed to be raised from `8 lakh to `10 lakh.
• Proposal to allow individual tax payers, a deduction of upto `10,000 for interest from savings bank accounts.
• Proposal to allow deduction of upto `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 in-house 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 thancompanies, claiming profit linked deductions.
• Proposal to introduce General Anti Avoidance Rule to counter aggressive taxavoidance 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 PROPOSALS

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 onepage 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 expansioor 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 equipmentneeded 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 readymade 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 `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 minicement 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 atan ad valorem rate instead of mixed rate.
• Import of foreign-going vessels to be exempted from CVD of 5 per centretrospectively.
• 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 `27,280 crore.
• Indirect taxes estimated to result in net revenue gain of `45,940 crore.
• Net gain of `41,440 crore in the Budget due to various taxation proposals.