TIOL-DDT 2550
03.03.2015
Tuesday

THE Budget 2015 has caused several apprehensions in the minds of the stakeholders and we have been getting several calls and mails seeking clarifications on several doubts. Some of them may appear outright silly, but because of the humungous confusion created by avalanches of statutes flowing in the form of Acts, Rules, Notifications, Circulars, Judgements etc and the constant fear of being hit by the unfailing demon of demands followed by draconian recovery action, the assessees are simply terror stricken.

Where is 12.5% Excise Duty Notification? It was announced that excise duty has been enhanced to 12.5% and it has immediate effect. People started looking for the notification for the 12.5% rate and the effective date. Some assessees told us that in 2012 there was a Notification No. 18/2012 dated 17.03.2012, making the effective rate of duty at 12%. We had a difficult time explaining to several people that the 12.5% rate has been proposed in the Finance Bill 2015. But they believed that the Finance Bill will become effective only after enactment - we had to tell them about the Provisional Collection of Taxes Act, by which an increase in Excise and Customs duties will have immediate effect. But then is it effective from 11 a.m of 28th February when the Budget was presented? In fact a Chartered Accountant even wrote an article for us that 12.5% is effective from 28th February, but the exemption to education cess by Notification No. 14/2015-CE dated 1.3.2015, was effective from 1.3.2015. So, he stated that for clearances on 28th February 2015, there was no exemption from Education Cess, but the 12.5% rate would be applicable. No, sir - immediate effect does not mean immediately after presentation of the Budget. As per the Provisional Collection of Taxes Act, it means immediately on the expiry of the day on which the Bill is introduced in the Parliament. So, the 12.5% rate as well as the Education Cess exemption is applicable only from 1.3.2015. It is reiterated that excise duty has been enhanced to 12.5% by the Finance Bill and there is no education Cess on this and this is applicable from 1.3.2015.

What is the Service Tax rate? It was announced that Service Tax rate has been enhanced to 14% and there would be no Education Cess. We are told that some people have already started collecting 14% Service Tax as they believe it would have immediate effect under the Provisional Collection of Taxes Act. They were surprised when we told them, that the enhanced rate of Service Tax will be applicable only from a date to be notified after enactment of the Finance Bill. If excise duty is applicable immediately, why not service tax? We explained that Provisional Collection of Taxes Act does not apply to Service Tax. Strange and difficult to comprehend? It must be noted that 14% Service Tax will be applicable from a date to be notified later.

SAD - Not for all: There was a general misunderstanding that the Finance Minister has exempted all goods from SAD; they all looked for the notification exempting all goods from SAD; sadly they couldn't find it. Many of them called us to tell us that there is a terrible mistake. This is what the Finance minister said in Para 112 of his Budget Speech.

Some other changes address the problem of CENVAT credit accumulation due to the levy of SAD. I propose to fully exempt all goods, except populated printed circuit boards for use in manufacture of ITA bound items from SAD and reduce the SAD on imports of certain other inputs and raw materials subject to actual user condition .

This was understood as exemption from SAD for all goods. Even a leading advocate told me that he too understood it that way only. The Annexure to Finance Minister's speech stated,

Reduction in SAD to address the problem of CENVAT credit accumulation: All goods except populated PCBs, falling under any Chapter of the Customs Tariff, for use in manufacture of ITA bound goods from 4% to Nil .

So, it is clear that all goods are not exempt from SAD. "it's a comma mistake", says another leading lawyer.

Two Rates of Duty - which one is applicable?: There was a frantic call from an importer. What is the rate of duty for iron and steel falling under Chapter 72?

Notification No. 12/2012-Cus as amended on 1.3.2015 has the following different rates and there is one rate of 10% for all goods under Chapter 72. Will they insist on payment of 10% for all goods?

The JSTRU in his D.O Letter answered this question. The JS stated,

"it is quite likely that a commodity may be covered under more than one notification attracting different rates of duties. In such cases, as per various judicial pronouncements on the subject, the benefit of lower rate of duty cannot be denied to the assessee provided he fulfils the conditions prescribed, if any, for such lower rate."

The Raga of Tax - Taxing Classical Music - Depraved?

USTAD Amjad Ali Khan, M. Balamuralikrishna, and Pandit Birju Maharaj are just three names among the gems of Indian art, culture and music - they will soon end up as Service Tax assessees.

As per Sl. No. 16 of Notification No. 25/2012-ST dated 20.06.2012, Services by a performing artist in folk or classical art forms of (i) music, or (ii) dance, or (iii) theatre, excluding services provided by such artist as a brand ambassador were exempted.

In this Budget, by Notification No. 6/2015-ST dated 1.3.2015, this has been changed to "Services by an artist by way of a performance in folk or classical art forms of (i) music, or (ii) dance, or (iii) theatre, if the consideration charged for such performance is not more than one lakh rupees":

Soon these greatest maestros may become offenders and maybe even summoned by a Superintendent of Service Tax. (I had seen a world famous engineering professor sitting on a bench outside a Superintendent's room, having been summoned there and told that the proceedings before the great authority was judicial and any disobedience will result in heavy penal action.)

If these artists, who are the pride of the Nation, charge more than a lakh of rupees for a performance, they are liable to pay Service Tax, take out a registration, file an online return and comply with all the complicated procedures. They can even be audited.

BN Gururaj, the famous advocate from Bangalore says,

In the drive of India for economic growth, India should not end up taxing its torchbearers of art and culture. India should not become so materialistic that it taxes musical and artistic performances. We would have to be a depraved society to do so.

Most artists get paid less than this sum (of one lakh rupees) and would be exempt. Only performers of high repute can hope to charge couple of lakh rupees or three lakh rupees per performance. How much Revenue does the government expect to earn by taxing a couple of dozen or few hundred performing folk and classical artists? Very often, the main artist would have to pay fellow artists out of his honorarium. Rs.1 lakh per performance is not a big fortune, which the government must tax.

This proposal is shameful to the society. The central government should drop this proposal and continue the unconditional exemption to folk and classical performing artists.

Chit Remains

BY Notification No 8/2015 ST dated 01.03.2015, the following entry in the Notification No 26/2012 ST dated 20.06.2012 is omitted:

But, they forgot to omit this part of the Notification:

2. For the purposes of this notification, unless the context otherwise requires,-

a. "chit" means a transaction whether called chit, chit fund, chitty, kuri, or by whatever name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to a prize amount..

Double Condition??

NOTIFICATION No. 12/2015-CE, dated 1.3.2015 amends Notification No. 12/2012, dated 17.3.2012.

Two conditions 52 and 53 are inserted in the parent notification. The problem is Notification No. 12/2012 already has a condition No. 52. Now where do you insert the second Condition No.52?

Will the Board clarify?

New Laboratory for Certification of Diamonds

INTERNATIONAL Institute of Diamond Grading and Research India Private Limited, Surat, is added as a new laboratory for purpose of certification/ grading of diamonds of 0.25 carats and above under paragraph 4A.2.1 of Foreign Trade Policy, 2009-2014.

DGFT Notification No.113/2009-2014, Dated: March 02, 2015

Clever FM!

I reproduce a mail I got yesterday from an industrialist.

Finance Minister by making the change in Rule 6 - i.e. 6% duty reversal on the non-excisable goods will lead the industry specially the chemical/pharma industries into additional financial burden.

Previously there is no duty on the sale of such hazardous waste and disposal. The industry used to pay the charges for such disposal.

By the new notification there is an additional burden of 6% on the invoice value, means a further loss to the industry.

Already as per the Pollution laws laid by the MoE the industries are under social responsibility moving their entire hazardous waste to the disposal sites.  The charges for the same are comparatively high and industries have no other option to pay the same to the waste management groups.

The Finance Minister has very cleverly touched an area where he can get the good piece of cake.

Until Tomorrow with more DDT

Have a nice day.

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