KEY FEATURES OF BUDGETS: 2016-17

•  Finance Bill
• Budget_Highlights 
•  Budget Speech
• Service tax Notification 
• Custom Notification 
• Excise Notification

KEY FEATURES OF BUDGET &
KEY POINTS OF SERVICE TAX 

Changes under Service Tax Proposed in Finance Bill 2016

1)      Service tax another surcharge from 01st June 2016- “Krishi Kalyan Cess” – 0.5 % . Thus Service tax now effectively will be 14%+0.5%+0.5% = 15 %

2)      Legal Service now removed from Reverse Charge Mechanism and brought to direct Service Tax at above effective rate from 01st April 2016.

3)      The services provided by mutual fund agent/distributor to a mutual fund or asset management company, are being made taxable under forward charge (removed from Reverse Charge Mechanism)  with effect from 1st April, 2016, so as to enable the small sub-agents down the distribution chain to avail small scale exemption having threshold turnover of Rs 10 lakh per year. This will reduce burden of Mutual fund and other similar organisation.

4)      From 1st March 2016 Contract pertaining to monorail or metro construction, erection, commissioning or installation of original works will now be liable at 5.6% effective rate plus two surcharge.

5)      Service provided by ropeway, cable car or aerial tramway for transport of passenger will now be liable to service tax @ above rate from 01st April 2016.

6)      Service tax on transportation of passengers by Air-conditioned Stage carrier will be liable to tax from 01st June 2016 @ 5.6% effective rate plus two surcharge.

7)      Impose Service Tax on services provided by them by way of transportation of goods by a vessel from outside India up to the customs station in India with effect from 1st June, 2016 so as to complete the credit chain and enable Indian Shipping Lines to avail and utilize input tax credits.

8)      With effects from 01st April 2016, the following service are now exempted ---Service provided by:-a) Pension Fund Regulatory and Development Authority (PFRDA) b) Employees’ Provident Fund Organisation (EPFO) c) Insurance Regulatory and Development Authority (IRDA) d) Securities and Exchange Board of India (SEBI) e) services of general insurance business provided under ‘Niramaya’ Health Insurance scheme f) National Centre for Cold Chain Development under Department of Agriculture, Cooperation and Farmer’s Welfare, g) Biotechnology Industry Research Assistance Council (BIRAC) h) way of skill/vocational training by training partners under Deen Dayal Upadhyay Grameen Kaushalya Yojana i) Directorate General of Training, Ministry of Skill Development & Entrepreneurship j) a performing artist in folk or classical art forms of music, dance or theatre is being enhanced from Rs 1 lakh to Rs 1.5 lakh.

9)      From 1st March 2016 the construction service in respect of housing project (Urban) Mission/Pradhan Mantri Awas Yojana; low cost houses up to carpet area 60 sq.metres=(645 Square feet)  under  “Affordable housing in Partnership” ; low cost houses up to a carpet area of 60 square metres in a housing project under any housing scheme of the State Government is exempted from service tax.

10)   From 01st April 2016 Service Tax on single premium annuity (insurance) policies is being reduced from 3.5% to 1.4% of the premium.

11)   From 01st March 2016 services provided by Indian Shipping lines by way of transportation of goods by a vessel to outside India, will be entitle for Cenvat credit on inputs; input services and capital goods credit.

12)   Benefit from retrospective effect i.e. 01st April 2015 (earlier withdrawn from that date) - Exemptions on services of: a) construction provided to the Government, a local authority or a governmental authority, in respect of construction of govt. schools, hospitals etc. b) construction of ports, airports. Thus reduce service tax from 5.6 % to “zero”.

13)   Services provided by way of construction, maintenance etc. of canal, dam or other irrigation works provided to bodies set up by Government but not necessarily by an Act of Parliament or a State Legislature, during the period from the 1st July, 2012 to 29th January, 2014, are being exempted from Service Tax with consequential refunds, subject to the principle of unjust enrichment. Thus reduce service tax from 5.6 % to “zero”.

14)   Services provided by the Indian Institutes of Management (IIM) by way of 2 year full time Post Graduate Programme in Management (PGPM) (other than executive development programme), Integrated Programme in Management and Fellowship Programme in Management (FPM) are being exempted from Service Tax with effect from 1st March, 2016. Now exempted.

15)   “One Person Company” and HUF can from 01st April 2016 pay quarterly Service tax.

16)   Interest rates on delayed payment of duty/tax across all indirect taxes are being rationalized and made uniform at 15%, except in case of Service Tax collected but not deposited to the exchequer, in which case the rate of interest will be 24% from the date on which the Service Tax payment became due.---( In case of assessees, whose value of taxable services in the preceding year/years covered by the notice is less than Rs. 60 Lakh, the rate of interest on delayed payment of Service Tax will be 12%.) – with effect from Finance Bill receives the assent of the President.

17)   Cenvat credit on input service will now be available on following abatements ( From 01st April 2016)

a)       Credit of input services is being allowed on transport of passengers by rail

b)      Credit of input services is being allowed on transport of goods, other than in containers

c)       Credit of input services is being allowed on transport of goods in containers by rail at a reduced abatement rate of 60%. (In effect tax will first increase by 1.4 % and then cenvat credit available)

d)      Credit of input services is being allowed on transport of goods by vessel

18)   The abatement rate in respect of services by way of construction of residential complex, building, civil structure, or a part thereof, is being rationalized at 70% by merging the two existing rates. Thus effective rate 4.2 % plus above two surcharges. From 1st April 2016

19)   The abatement on shifting of used household goods by a Goods Transport Agency (GTA) is being rationalized at the rate of 60%, without CENVAT credit on inputs, input services and capital goods. Thus the effective tax rate is 5.6 % . From 1st April 2016.

20)   The abatement rate on services of a foreman to a chit fund is being rationalised at the rate of 30%, without CENVAT credit on inputs, input services and capital goods. Thus the effective tax rate is 9.8 % . From 1st April 2016.

21)   A condition mandating inclusion of cost of fuel in the consideration for availing abatement on the services by way of renting of motor-cab is being prescribed with effect from 1st April, 2016.

22)   Indirect tax Dispute Resolution Scheme, 2016, wherein a scheme in respect of cases pending before Commissioner (Appeals), the assessee, after paying the duty, interest and penalty equivalent to 25% of duty, can file a declaration, is being introduced. In such cases the proceedings against the assessee will be closed and he will also get immunity from prosecution.

23)   The annual return will also have to be filed by Service Tax assessees, above a certain threshold, taking total number of returns to three in a year for them. This change shall come into effect from 1st April, 2016.

24)   Section 73 of the Finance Act, 1994 is being amended so as to increase the limitation period from 18 months to 30 months for short levy/non levy/short payment/non-payment/erroneous refund of Service Tax.

25)   The power to arrest in Service Tax is being restricted only to situations where the tax payer has collected the tax but not deposited it to the exchequer, and that too above a threshold of Rs 2 crore. The monetary limit for launching prosecution is being increased from Rs. 1 crore to Rs. 2 crore of Service Tax evasion. 


KEY FEATURES OF BUDGETS: 2016-17

•  Raise the ceiling of tax rebate under section 87A from Rs. 2000 to Rs.5000 to lessen tax burden on individuals with income upto Rs. 5 laks.
•       Increase the limit of deduction of rent paid under section 80GG from Rs.24000 per annum to Rs. 60000, to provide relief to those who live in rented houses.
•      Deduction for additional interest of Rs.50,000 per annum for loans up to Rs.35 lakh sanctioned in 2016-17 for first time home buyers, where house cost does not exceed Rs. 50 lakh
•     Increase the turnover limit under Presumptive taxation scheme under section 44AD of the Income Tax Act to Rs. 2 crores to bring big relief to a large number of assessees in the MSME category
•  Extend the presumptive taxation scheme with profit deemed to be 50%, to professionals with gross receipts up to Rs.50 lakh.
•     Lower the corporate tax rate for the next financial year for relatively small enterprises i.e companies with turnover not exceeding Rs. 5 crore (in the financial year ending March 2015), to 29% plus surcharge and cess.
•  100% deduction of profits for 3 out of 5 years for startups setup during April, 2016 to March, 2019. MAT will apply in such cases.
•   Expansion in the scope of e-assessments to all assessees in 7 mega cities in the coming years.
•    Interest at the rate of 9% p.a against normal rate of 6% p.a for delay in giving effect to Appellate order beyond ninety days.
•  ‘e-Sahyog’ to be expanded to reduce compliance cost, especially for small taxpayers. 
•  Penalty rates to be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts.

Some hidden things in budget for income tax:

1. From presumptive taxation income of business as well as profession,   Sec. 44AD and Sec. 44ADA, no deduction is now available for partners salary and interest.

2. Income Rs. 5,00,000, tax 20600.(Tax rebate of Rs. 5000 available.)  Income Rs. 5,00,100, tax 25,770.(No rebate available). Earn Rs. 100 more, tax increases by Rs. 5170

3. Time limit of filing of belated return from A Y 16 17, upto the end of assessment year only. Presently it is 1 year from the end of assessment year.

4. Practically Every partnership firm under Tax Audit , also considering 5 years clause audit for others too

BUDGET - HIDDEN AMENDMENTS AFFECTING SMPs :

1) In section 50C saving provisos similar to section 43CA (3) and (4) added as follows w.e.f. A.Y. 17-18:

"Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer: 

Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer.”

2) No loss shall be allowed to set off from income chargeable u/s 115BBE (i.e. income added u/s 68-69-69A-69B-69C-69D) W.E.F. A.Y. 17-18.

3) Section 139(4) and 139(5) changed as follows:

139(4)- Any person who has not furnished a return within the time allowed to him under
sub-section (1), may furnish the return for any previous year at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.”;

It means henceforth belated return must be filed before expiry of relevant ast. year..

139(5)- “ If any person, having furnished a return under sub-section (1) or sub-section (4), discovers
any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.”;

It means, henceforth belated return can also be revised... 

4) Powers of adjustments by way of 143(1) intimation widened to large extent!!!!

5) TDS related Changes:
i) Section 194C : Threshold increased from 75000 to 100000..
ii) Section 194H: Threshold increased from  5000 to 15000...
iii) Section 194H: Rate reduced from 10% to 5%..
iv) TCS @ 1% introduced on sale of motor vehicles value above Rs. 10 Lacs..
v) Existing provision of TCS @1% on sale of bullion, jewellery extended to all goods for sale in cash above Rs. 200000/-
    (Subject to certain conditions, to be prescribed later).. 

6) Advance tax provision applicable to 44AD income, advance tax to be paid on or before 15th March in single installment.
   (Accordingly interest u/s 234C made applicable on tax on such income u/s 44AD)....

Hidden bomb shells in Budget 2016 -

Time limit of filing of belated return from A Y 16 17, upto the end of assessment year only. Presently it is 1 year from the end of assessment year.

CA NITIN PATHAK