Union Budget 2017 Impact

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Budget 2017 Impact
Indias Leading e Compliance Solutions
Company http//gstinindia.in/
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MAJOR CHANGES DIRECT TAX
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INDIVIDUALS

• Tax rate for individuals in the 2.50- 5 lacs
  income slab slashed to 5 from 10.
• Rebate u/s 87A available to resident individual
  reduced from Rs. 5,000 to Rs. 2,500 and
  applicable upto income of Rs. 3.50 lacs only.
• 10 surcharge for income of individuals between
  Rs.  50 Lakh to Rs. 1 crores.
• 15 surcharge on individual income above Rs. 1
  crore to remain.
• Single page Income Tax return proposed for small
  non-business assessees having income uptoRs. 5
  lacs. People filing I-T returns for the first
  time under this category will not come under
  govt. scrutiny unless there is specific
  information regarding his high value
  transactions.

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• Section 10 to be amended to provide exemption to
  partial withdrawal upto 25 from National Pension
  System (NPS).
• In order to provide parity between an individual
  who is an employee and an individual who is
  self-employed, it is proposed to amend section
  80CCD so as to increase the upper limit of 10 of
  gross total income to 20 in case of individual
  other than employee.
• No deduction u/s 80CCG from assessment year
  2018-19 to a resident individual for investment
  made in listed equity shares etc.
• 6 presumptive tax for turnover uptoRs. 2 crores
  for non-cash payments.

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CORPORATES

• For companies with turnover upto Rs. 50cr, income
  tax _at_ 25.
• MAT/AMT Credit can be carried forward for 15
  years instead of 10 years.
• Sec 115JB to be amended to provide the framework
  for computation of book profit for Ind AS
  compliant companies in the year of adoption and
  thereafter.
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PROFESSIONALS

• Professional who declares profits and gains in
  accordance with presumptive taxation regime
  provided under section 44ADA shall also be liable
  to pay advance tax in one instalment on or before
  the 15th of March.
• In order to ensure that the person furnishing
  report or certificate undertakes due diligence
  before making such certification, it is proposed
  to insert a new section 271J so as to provide
  that if a Chartered Accountant or a Merchant
  Banker or a Registered Valuer, furnishes
  incorrect information in a report or certificate
  under any provisions of the Act or the rules, he
  shall have to pay a sum of Rs. 10,000/- for each
  such report or certificate by way of penalty.

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INCOME TAX RETURNS

• Set-off of loss under the head "Income from house
  property" against any other head of income shall
  be restricted to Rs. 2 lacs for any assessment
  year. However, the unabsorbed loss shall be
  allowed to be carried forward for set-off in
  subsequent years.
• Change in period of limitation for scrutiny
  assessment to 18 months for AY 18-19 12 months
  from AY 19-20.
• Time period for revising a tax return is being
  reduced to 12 months.
• Late filing fee of Rs. 5,000/- if the return is
  furnished by 31st December of assessment year
  Rs. 10,000/- after that. However, if the total
  income does not exceed Rs. 5 lacs, late fee shall
  be Rs. 1,000/-.
• Provisions of section 271F in respect of penalty
  for failure to furnish return of income shall not
  apply in respect of assessment year 2018-19 and
  onwards.
• Simple interest to be paid on refund _at_1.50 pm
  in the period, from the date on which claim for
  refund is made or in case of an order passed in
  appeal, from the date on which the tax is paid,
  to the date on which refund is granted.

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 CAPITAL GAINS

• Period of holding for land and building for LTCG
  reduced from 36 to 24 months.
• Shifting base year from 1981 to 2001 for
  computation of capital gains.
• Where consideration for transfer of unquoted
  share of a company is less than the Fair Market
  Value (FMV) of such share, FMV shall be deemed to
  be the full value of consideration for the
  purposes of computing Capital gains. (Sec 50CA).
• Conversion of preference share of a company into
  its equity share shall not be regarded as
  transfer.
• STT left untouched.
• In case of an individual or Hindu undivided
  family, who enters into a joint development
  agreement for a project, the capital gains shall
  be chargeable to income-tax as income of the
  previous year in which the certificate of
  completion for the whole or part of the project
  is issued by the competent authority.

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TDS/TCS

• No deduction u/s 194LA where such payment is made
  in respect of any award or agreement which has
  been exempted from levy of income-tax under
  section 96 (except those made under section 46)
  of RFCTLARR Act. (New law namely Right to Fair
  Compensation and Transparency in Land
  Acquisition, Rehabilitation and Resettlement Act,
  2013).
• TDS _at_ 5 to be deducted by individuals and HUF
  not liable to tax audit on rent payments
  exceeding Rs. 50,000/- p.m. once in a year. No
  requirement of TAN.
• TDS _at_ 10 u/s 194-IC to be deducted by developer
  on amount credited or paid by developer to
  resident as consideration in Joint Development
  Agreement.
• TCS at 1 of sale consideration on cash sale of
  jewellery exceeding Rs. 5 lacs withdrawn.
• TCS _at_ twice the rate or 5, whichever is higher,
  if PAN not furnished to collector. (section
  206CC).
• Individuals and HUFs can file self-declaration in
  Form.No.15G/15H for non-deduction of tax at
  source in respect insurance commission referred
  to in section 194D.

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• No TCS for purchase of motor vehicles exceeding
  Rs. 10 lacs by Central Government, a State
  Government, an embassy, a High Commission,
  legation, commission, consulate and the trade
  representation of a foreign State local
  authority, a public sector company which is
  engaged in the business of carrying passengers.
• TDS reduced u/s 194J from 10 to 2 in case of
  payments to call centres.

MISCELLANEOUS

• Maintenance of books of accounts if sale proceeds
  exceed 25 lacs (10 lacs) or if income exceeds Rs.
  2.50 lacs (1.20 lacs).
• Penalty equal to amount of cash transactions
  above Rs 3 lakh.
• No deduction for expenditure of more than Rs.
  10,000 in cash (halved from Rs. 20,000 now).
• No deduction u/s 80G for donation exceeding Rs.
  2,000 in cash (reduced from Rs. 10,000/-
  earlier).
• 'Reason to believe' or 'reason to suspect' to
  conduct a search etc, shall not be disclosed to
  any person or any authority or the Appellate
  Tribunal.
• No notional rent for first year on buildings held
  in stock by builders.
• No anonymous donations exceeding Rs. 2000 can be
  received by political parties from a single
  source.

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MAJOR CHANGES INDIRECT TAX
The Union Finance Minister reiterated resolve to
implement the Goods and Service Tax (GST) by
stating that the GST Council has reached to a
consensus on most of the issues and that the
Government is prepared for the change. The
highlight is that he did not mention any
prospective date for GST. As per the Minister, on
the fiscal front, not many changes have been made
in the Service Tax and Central Excise Law in view
of the prospective GST which would replace the
respective legislations. Some Changes, however,
have been made in the tax law to rationalize few
tax positions and structure of quasi-judicial
bodies.
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Service Tax
Shifting an entry from Negative list to exemption
list (w.e.f. date of enactment of the Finance
Bill, 2017)

• The activity of the process amounting to
  manufacture in the negative list has been
  excluded from the list. For this purpose, entry
  (f) of Section 66D of the Finance Act, 1994
  omitted.
• The same activity has been brought under
  exemption list under NN. 25/2012-ST.
• The definition of process amounting to
  manufacture in Section 65B (40) has also been
  omitted and got mention as clause (ya) of Para 2
  of NN. 25/2012-ST, dated 20-06-2012.
• In essence, no change in the effective tax
  position the only change is in the placement of
  the provision in the exemption list rather than
  negative list.

Retrospective exemption for long lease of
Industrial Plot (w.e.f. date of enactment of the
Finance Bill, 2017)

• Exemption granted from Service Tax on onetime
  upfront amount (premium, salami, cost, price,
  development charge or by whatever name called)
  charged for long term lease (30 years or above)
  of industrial plot by State Government Industrial
  Development Corporation / Undertaking to
  industrial units.

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• The period of exemption is from 01st June 2007 to
  21st September 2016 (both days inclusive). This
  is a retrospective exemption.
• Since exemption is retrospective, refund
  application can be made within six months of the
  enactment of the Finance Bill, 2017.

Retrospective exemption for Services of Life
Insurance to Armed Forces (w.e.f. date of
enactment of the Finance Bill, 2017)

• Exemption granted from Service Tax on the
  services of Life Insurance to members of the
  Army, Navy and Airforce, by the Army, Naval,
  Airforce Group Insurance Funds under the Group
  Insurance Scheme of the Central Government.
• The period of exemption is from 10th September
  2004 to 1st February 2016 (there seems is to be
  an error, the date should have been 1st February
  2017). This is a retrospective exemption.
• Since exemption is retrospective, refund
  application can be made within six months of the
  enactment of the Finance Bill, 2017.
• A prospective exemption has been granted for the
  same activity by amending NN. 25/2012-ST, dated
  20-06-2012 effective from 02nd February 2017
  (Ref. Notification No. 07/2017-ST).

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Prospective exemptions granted (w.e.f. 02nd
February 2017)

• Exemption from Service Tax provided in respect of
  the amount of Viability Gap Funding (VGF) payable
  to the selected Airline Operators for services of
  transport of Passengers by Air, embarking from or
  terminating in Airport under the Regional
  Connectivity Scheme (RCS). The exemption is
  available for a period of one year from the date
  of commencement of operations of the Airport
  under RCS as notified by the Ministry of Civil
  Aviation. (Entry 23A inserted in NN. 25/2012-ST)
• Exemption to services of life insurance provided
  by the Army, Naval Airforce group insurance
  funds to the members of these forces. (Entry 26D
  inserted in NN. 25/2012-ST)

Scope of existing exemption extended (w.e.f. 02nd
February 2017)

• The existing exemption under entry 9B of NN.
  25/2012-ST for the specified courses of Indian
  Institute of Management (IIM) has been expanded
  in scope.
• Hitherto, the exemption was available for two
  years full time residential post-graduate
  programme in management. Now the exemption is
  available even if such programme is
  non-residential.

Retrospective amendment in Valuation Rules
(w.e.f. date of enactment of the Finance Bill,
2017)

• Rule 2A of the Service Tax (Determination of
  Value) Rules, 2006 (Valuation Rules) is proposed
  to be amended w.e.f 01-07-2010 to make CLEAR the
  value of service portion in execution of works
  contract involving transfer of Goods and land or
  undivided share of land.

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• The amended valuation mechanism broadly provides
  as under
• Value of service portion in the works contract
  shall be equivalent to the Gross amount charged
  for the contract less the value of property in
  goods and land or undivided share of land
  transferred involved in the execution of the said
  contract.
• In case above method of valuation is not
  followed, an alternate method of valuation would
  be composite method where the entire value of
  works contract including land would be chargeable
  to service tax at an abated value equivalent to
  25 to 30 of the value of the contract with the
  given conditions over the period of time. The
  conditions for the abated rate and respective
  CENVAT Credit are same as have been provided
  under the Abatement Notification(s) as applicable
  over the different period of time involved.

• Note that since the Valuation Rules and the
  abatement NN. 26/2012-ST got amended/ substituted
  many times since 01-07-2010 to date, the
  respective amendments in the rules have been
  marked separately for the applicable rules and
  abatement during different periods of time.

• The above amendments would apply retrospectively
  and would prevail over the decision of any Court
  or quasi-judicial authorities.

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Background

• The value of service in case of such works
  contracts which involve the value of goods and
  land both, has been a matter of dispute under
  Service Tax Law since long time.
• In the recent past, a Delhi High Court judgment
  questioned the incidence of service tax in case
  of construction contracts involving value of
  land, in the absence of any mechanism to compute
  the value of service portion in such contracts.
• Though in the existing law an abatement has been
  prescribed for such works contracts, but in the
  absence of any corresponding rules, the High
  Court was of the view that the said abatement
  alone was not sufficient to define the value of
  taxable service including land as a component of
  value. Based on this view, the High Court held
  that service tax could not be levied on such
  works contracts. This view is stark opposite to
  the intent of the Government to charge service
  tax on such contracts.
• In order to do away with the contentions raised
  with this judgment, changes have been made in the
  Valuation Rules by the Finance Bill, 2017 vide
  Section 128 read with schedule VI thereto.

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Central Excise Service Tax
The Finance Bill, 2017 has made same changes in
the Central Excise and Service Tax Law with
respect to the institution of Advance Ruling
and Settlement Commission.
Amendments in Institution of Advance Ruling
(w.e.f. date of enactment of the Finance Bill,
2017)

• Advance Ruling Authority (ARA) under the Income
  Tax Act has been made the Central Authority for
  the Service Tax, Central Excise and Customs Law
  also (New Authority). The capacity of the New
  Authority is accordingly going to be enhanced.
• The present Advance Ruling Authority for the
  Service Tax, Central Excise and Customs Law would
  stop existing. The ongoing proceedings with the
  present ARA will get transferred to the new
  authority.
• The fee for making application for advance ruling
  has been enhanced from Rs. 2,500/- to Rs.
  10,000/-.
• The time limit for pronouncing advance ruling by
  the Authority has been extended from ninety days
  to Six months.

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Amendments in Institution of Settlement
Commission(w.e.f. date of enactment of the
Finance Bill, 2017)

• The scope of approaching to Settlement Commission
  has been enhanced.
• Now any person other than an assessee, having a
  case under adjudication which is relating to the
  case of an assessee already gone to the
  settlement commission, can also make an
  application to the Settlement Commission.
• The powers of the Settlement Commission to take
  records from specified Central Excise Officer has
  been extended to include Principal Additional
  Director General or Additional Director General
  of Central Excise Intelligence.

• The settlement Commission has been granted the
  powers to rectify an error apparent on the record
  suo-motu or on behest of any of the parties to
  the case.

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CENVAT Credit (w.e.f. 02nd February 2017)

• Specific provision for Banking Cos., FIs and
  NBFCs under Rule 6 of CCR
• Amendment has been made in the manner of
  computation of value of turnover of Banking
  Companies and Financial Institutions including
  Non-Banking Financial Companies for the purpose
  of computing the proportionate CENVAT Credit
  under sub-rule (3) and (3A) of Rule 6 of the
  CENVAT Credit Rules, 2004.
• Hitherto, for computing the value for the
  purpose of ascertaining the eligible amount of
  CENVAT Credit, the value of services by way of
  extending deposits, loans or advances was not
  included in the total value, in so far as the
  consideration was by way of interest of discount.
• The amendment has now been made to provide that
  such exclusion from the total value, for the
  purpose of computing eligible credit, would not
  be allowed for Banking Companies and Financial
  Institutions including Non-Banking Financial
  Companies, engaged in providing services by way
  of extending deposits, loans or advances.
• This is kind of rationalization of existing law
  as a major part of income of such institutions
  constitute interest or discounts and excluding
  this from the value was not leading to fair
  computation of input credit.

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• Specified time limit for allowing transfer of
  credit
• In case of the situation of transfer of CENVAT
  Credit from One factory/ manufacturer or to other
  factory/ manufacturer under Rule 10 of the CCR, a
  time limit of three months has now been
  prescribed for allowing such transfer of credit.
  This time limit of three months can be extended
  by the Commissioner of Principal Commissioner for
  a further period not exceeding six months.

No Research Development Cesson Import of
Technology(w.e.f. 01st April 2017)

• The RD Cess Act, 1986 proposed to be repealed.
  The repeal of this Act shall not affect any other
  enactment in which it has been applied,
  incorporate or referred to or the validity,
  invalidity, effect or consequences of anything
  already done or suffered, any right, title,
  obligation or liability already acquired.
• The proceeds of duties levied under this Act
  immediately before the repeal shall be collected
  and paid by the collecting agencies into the
  Reserve Bank of India.
• In service tax law, NN. 14/2012-ST exempts the
  taxable services involving import of technology
  from so much of service tax, which is equivalent
  to the amount of RD Cess payable on the said
  import of technology. This exemption would not be
  available as a consequence of the repeal of RD
  Cess Act.

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CUSTOMS LAW

• Exporter and Importer to include Beneficial Owner
• Definition(s) of Exporter and Importer have
  been expanded to include the Beneficial Owner.
• Beneficial Owner has been defined as any person
  on whose behalf, the goods are being imported or
  exported or who exercises effective control over
  the goods being imported or exported.

• Powers of Customs Officers extended for documents
  for ascertaining duty
• The Customs officer may now ask for any document
  and information to ascertain the value of duty
  leviable on the import or export of goods. This
  amendment is providing sweeping powers to the
  customs officers. In the existing provisions,
  they can ask for specified documents for
  specified purposes only.
• The Time limit for presenting the bill of entry
  after import of goods has been changed
• The amendment requires that the BOE to be
  presented before the end of the next day
  following the day (excluding holidays) on which
  the Aircraft or vessel or vehicle carrying the
  goods arrives at a customs station at which such
  goods are to be cleared. The BOE may also be
  presented within 30 days of the expected arrival
  of the vehicle carrying the goods to be imported
  in India.

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• Unjust enrichment not to apply in specified cases
• The principle of unjust enrichment would not
  apply in case of refund of duty where such duty
  had been paid in excess by the importer and this
  fact is evident from the bill of entry.
• Change in the time of Payment of Import Duty
• The time for payment of import duty has now been
  specified as the date of presentation of BOE in
  the case of self-assessment. The time is one day
  (excluding holidays) from the day on which BOE is
  returned to the importer by proper officer for
  payment of duty in the case of assessment,
  re-assessment or provisional assessment.

• Passengers and Crew information required by
  outgoing and incoming aircrafts or vessels
• An obligation to submit a passenger and crew
  manifest by an aircraft or a vessel coming from
  outside India or departing for outside India, has
  been introduced vide new sections 30A and 41A.
• Amendments regarding storage of imported goods
• The facility of storage of imported goods in
  warehouse pending clearance or removal of goods
  has been provided. In the existing provision this
  facility was available only in case of pending
  clearance of goods
• The point of notice that the option of keeping
  the goods in private warehouse under the existing
  provision is not available in the amended
  provision.

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• Amendments regarding import or export of goods by
  Post
• In case of goods imported or exported by post,
  existing section 82 providing that any label or
  declaration accompanying the goods, which
  contains the description, quantity value
  thereof, shall be deemed to be an entry for
  export and import, has been omitted.
• Simultaneously powers have been granted to the
  Board to prescribe that which document would be
  considered as entry in case of import or export
  by post.
• Amendments made to the definition of Customs
  Stations to include Foreign Post Office and
  International Courier Terminal.

• Amendments relating to Settlement Commission and
  Advance Ruling
• Amendments relating to the Advance Ruling
  Authority and Settlement Commission in the
  Customs Law have been made on similar lines as in
  the Central Excise Service Tax Law.
•  

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