FEBRUARY 25, 2010

Withdraw Nil duty benefit extended to inputs for battery powered cars

By TIOL Netizens

DEAR FM, while finalizing your budget proposals, please do consider these suggestions as well:

The Central Government was kind enough to extend the exemption benefit to Battery Powered Cars and major inputs used in the manufacture of such cars vide Serial Numbers 35A and 35B by amending notification 6/2006-CE dated 1-3-2006 by Notification No 6/2008-CE dated 1-3-2008. The exemption provided to battery powered cars has resulted in an anomalous situation which may not achieve the purpose of passing on the benefit of cost reduction to the manufacturers in particular and the buyers in general.

As per the above exemption notification, battery powered cars are completely and unconditionally exempt from excise duty. It also exempts the six major inputs from excise duty when used for the manufacture of battery powered cars. But the manufacturers of six major inputs in turn require various inputs for manufacture of their final products which are Cenvatable. However, once the final products are cleared to a manufacturer of battery powered cars, the manufacturer of such goods will be ineligible to avail CENVAT credit as such availment is restricted by Rule 6 (1) and Rule 6 (2) of CENVAT Credit Rules, 2004.

Remedial measures suggested:

In order to ensure that the suppliers of the inputs do not encounter any loss of CENVAT Credit and at the same time they get an opportunity to pass on the benefit to the domestic buyer, at an affordable cost-effective price, by passing on the benefits the following amendments are proposed:

i) Withdraw the benefit of “NIL' rate of duty extended on six major inputs, used in the manufacture of Battery Operated Electric Car.

ii) Allow us to avail the CENVAT Credit and refund by cash of un-utilized CENVAT Credit on domestic sales as is being done with respect to exported goods by amending the CENVAT Credit Rules and Refund Rules suitably.

Phaniraj K S
Reva Electric Car Company Pvt Ltd

Disparity in duty rates for automobiles to be abolished

There are different duty rates applicable on small cars (@8%) when compared to big cars (@ 20%) and on luxury sedans it is 20% + 15000 per unit. There must be a level playing field and duty rates for all cars should be rationalized @ 16%. The discrimination on the basis of length or engine capacity or fuel type etc. should be abolished. Big cars are loaded with the safety and other features and command high price. Government will definitely gain because, the higher the price tag, the effective duty will be higher. However, lesser rates for diesel cars should be discouraged as they are using the subsidy of approximately Rs.15-20 per liter of diesel.

Refund of SAD is being delayed as there is no interest clause for this. All refunds/rebates must have a definite time frame like section 11B or section 11B should be made applicable to all refunds/rebates. Further, documents must be specified to be filed for refund. More discretion more trouble for the trade. Further, refund of SAD should be allowed through jurisdictional excise offices and not confine it to port of import since most of the imports are being made at Mumbai or Chennai but the importers are located in all parts of the country. For e.g. it would be difficult for an importer in Greater Noida to pursue refund claims for imports at Mumbai or Chennai.

Arbind Aggarwal,
(F & A) Honda Siel Car India Ltd.

Lacunas in Notification No.102/2007-Customs issued for refund of SAD

Notification No.102/2007 dated 14/09/2007 is issued to give exemption to the importers on goods imported into India for subsequent sale, from the whole of additional duty levied under sub-section 5 of section 3 of the Customs Tariff Act, 1975, paid by them at the time of clearance of goods. This exemption is given by way of refund; however this refund is not governed by the provisions of Section 27 of the Customs Act, 1962.

From the criteria for eligibility of exemption by way of refund stated in notification it is clear that the unsold stock of goods imported becomes ineligible for refund after a period of One Year.

The discrepancies noted in the said notification, which extend practical difficulties in availment of given exemption, are elaborated as under:

The notification entitles the importer for refund on all the sale of goods made during one year from the date of importation i.e. the date of payment of duty. At the same time it expects you to file the claim also within a period of one year. This is practically impossible.

For eg: Let us assume that an importer imports the goods and pays duty on 01/01/2009. As per the notification the importer has to sell these goods as well as submit a refund claim prior to 31/12/2009. Suppose the importer sells such goods on last day of the year i.e. 31/12/2009 it is practically not possible for him to file the refund claim of goods sold on 31/12/2009, in spite of the said goods fulfilling the condition of getting sold within one year. Therefore, the time limit for filing of the refund claim is required to be modified by giving grace period to cover all the sales for the year.

Further, producing evidence of payment of Sales Tax/ VAT against the sale of goods made during the same month is also not possible. The Sales Tax/ VAT is always paid in the subsequent month. Hence it is impossible for the importer to claim the refund on sale of goods taking place in the 12 th month from the date of importation i.e. from the date of payment of duty. The importer has to forgo the refund amount on sale of goods in the 12 th month which he is rightly entitled to. This defeats the purpose of exemption given to the importers.

Remedial measures suggested:

To overcome the lacunas in the notification, the following suggestions are made:

1. The importer should be given a grace period of 3 months for submission of the refund claim documents, after the expiry of one year from the date of payment of Special Additional Duty. This is to accommodate the cumbersome process of documentation.

2. Once the endorsement of exemption notification is made on the Bill of Entry upon payment of all the duties at the time of clearance of goods, it may be regarded as claim for benefit of exemption by the importer.

3. Both the above suggestions should be given effect from the date of notification retrospectively in order to protect the traders from being deprived of the fundamental benefits extended to them by the Government through this notification.

A Netizen

Enhance ceiling on reimbursement of medical expenses under IT Act:

Reimbursement of medical expenses is exempt as per the provisions of Income Tax Act, 1961 upto Rs 15000/- per annum. This reimbursement is extended to family inclusive of spouse, children and dependent parents. The cost of medical treatment has considerably increased and the monetary limit of  Rs 15000/- limit which was laid down a long time ago is inadequate. Further, in spite of allowing medical insurance, not all diseases are covered by the scheme and there are unreasonable limits to the claims. The Finance Minister may have to consider increasing the ceiling of medical expenses reimbursement from Rs 15000/- to Rs 50,000/- per annum.

M. Bala

Abolish Customs duty on imported stores like HSD, FO, LO on Coastal-Going Vessels:

The stores/bunkers like High Speed Diesel (HSD), Furnace and Lubricating Oil are consumables for shipping service provider and are used for operating the shipping vessels. Since these stores are meant for use on the vessel and not for sale, levy of duty on such stores is not justified. In fact, this is not a normal/regular import but it is an import by default. Hence, levy of duty on the imported stores to be consumed on board a coastal-going vessel is not justified .

In terms of Section 87 of the Customs Act, 1962, duty is not leviable on the imported stores on board a foreign-going vessel. However, Section 87 of has to be amended in order to exempt duty leviable on the imported stores/bunkers to be consumed on board a coastal-going vessel as well.

To safeguard Government Revenue, conversion charges may be imposed at the time of conversion of vessel from a foreign-going vessel to a coastal-going vessel. Customs Circular No.58/97-Cus dated 06.11.1997 may be amended on these lines which will be a great boon for shipping industry if such facility is given. More vessels will be involved in carrying coastal goods resulting in optimal utilization of sea route and thus giving a boost to shipping industry.

Samir Kumar Sinha
GM (Customs)
Atlantic Shipping Pvt Ltd, Mumbai

Statutory time limit for ST refund to be computed from date of payment of service tax and not date of export

There is difficulty in claiming refund of Service Tax for exports. The statutory time limit for filing refund claim is from the date of export. The time limit for filing of refund claim should be computed from the date of payment of service tax instead of the date of exports.

Vinod Parekh,
U M Cables Ltd
Usha Martin Group

Enhance Section 44AB limits

The limit for Compulsory Audit under 44AB to be increased to Rs. One Crore for business assessees and to Rs.25,00,000/ for professionals. The limit was not enhanced, ever since it was introduced 26 years back in 1984.

K. Balasubramanian
BHEL House
New Delhi

Some suggestions for amendments to IT and Service Tax laws

++ Exemption u/s. 10A for Corporates should not be withdrawn considering the present economic recession.

++ Option of online filing of TDS returns should be given to all assesses like Income Tax return, which creates more flexibility for the assessees.

++ Clear provision should be given for TDS assessments and refunds and if possible online TDS clarification / complaints should also be provided by CBDT.

++ Exemption to be given for compulsory PAN for Non-residents (Sec. 206AA) considering the practical administrative issues.

++ As a common demand individual tax exemption slab to be increased to reasonable level – at least upto Rs. 3.00 lakhs & peak tax rate for individuals should be restricted to 25% only.

++ Reasonable Standard Deduction for salaried class should be restored.

++ Children Education Allowances (Rs. 100 p.m.), Transport Allowances (Rs. 800 p.m.) & Medical Reimbursement (Rs. 15 K p.a.) exemptions to be increased to reasonable level considering the present standard of living.

++ Exemption / lower rate Service tax certificate provision (like in Income Tax u/s. 197) can be provided for exporters in order to reduce the ST refund claims and increase the cash flow.

++ Service tax on individuals should be liberalized / simplified.

++ Functions and benefits of Large Tax payers Unit (LTU) should be given wide publicity.

M. Ravikannan
Manager - Finance
Scope International Private Limited