budget taxpert professionals 2010-2011

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TAXPERT Professionals…………..Adding value with quality and commitment

UNION BUDGET 2010-2011

AN ANALYSIS ON MAJOR AMENDMENTS IN DIRECT AND

INDIRECT TAX

February 27th

, 2010

By: TAXPERT PROFESSIONALS

Mumbai-New Delhi-Chandigarh

“Budget is not a mere statement of government accounts. It has to

reflect the government’s vision and signal the polices to come in

Future” …….Pranab Mukherjee, the Finance Minister of India

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A. INDIVIDUAL TAXATION

1. Slab Rates

Income Slabs#

Proposed Tax Rates

0 – 1,60,000 * NIL

1,60,001 - 5,00,000

10.30% of income exceeding Rs. 1,60,000

5,00,001 - 8,00,000

Rs. 35,020 plus 20.60% of income exceeding Rs. 5,00,000

8,00,001 - and above

Rs. 96,820 plus 30.90% of income exceeding Rs. 8,00,000

*Minimum Tax Exemption limit for Senior Citizens and Women remains unchanged; i.e. Rs.

2,40,000 and Rs. 1,90,000 respectively.

# the tax incidence for HUFs, AOPs and BOIs will be same as that of Individuals.

Due to above structure, Tax Relief will be there for over 60% of Tax Payers

2. Investment made in long-term infrastructure Bonds

A further deduction of Rs. 20,000 [over and above Rs.1,00,000 specified under Section 80C] is

proposed in case of an Individual or a Hindu Undivided Family, in respect of the amount paid or

deposited as a subscription to long- term infrastructure bonds as may be notified by Central

Government. [Section 80CCF]

Effective date: This deduction is proposed in respect of amount paid or deposited during FY

2010-11

3. Deduction in respect of health insurance premium paid by the assessee for himself

or his family

With effect from 1 April 2011, it is proposed that deduction under Section 80D shall also be

allowed in respect of any contribution made to the Central Government Health Scheme by

Government Servants within the existing limits.

MAJOR AMENDMENTS MAJOR AMENDMENTS MAJOR AMENDMENTS MAJOR AMENDMENTS

IN DIRECT TAXESIN DIRECT TAXESIN DIRECT TAXESIN DIRECT TAXES

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Introduction of SARAL-II

The income tax department will notify SARAL-II form for individual salaried taxpayers for the

coming assessment year.

B. CORPORATE TAXATION

1. Slab Rate

Entity

Previous Rates

[ income up to

100,00,000]

Previous Rates

[income above

100,00,000

Proposed Rates

[ income up to

100,00,000]

Proposed Rates

[Income Above

100,00,000]

Foreign Company

41.20 %

42.23 %

41.20 %

42.23 %

Domestic Company

Tax Rates

30.90 %

33.99 %

30.90 %

33.22 %

Domestic Company

MAT Rates

15.45 %

16.99 %

18.54 %

19.93 %

• Current surcharge of 10 per cent on domestic companies reduced to 7.5 per cent.

• Rate of Minimum Alternate Tax (MAT) increased from the current rate of 15 per cent to

18 per cent of book profits.

2. Changes in Threshold Limits and TDS Rates:

An upward revision of the thresholds limits of withholding tax rates is made which is as follows:

The change will take effect from 1 July 2010.

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3. Section 201 – Interest rate increased from 1% to 1.5%

An amendment has been brought in section 201 pertaining to interest on failure to deposit the tax

deducted but not deposited that rate has been increased from 1% to 1.5% per month calculated

for the month or part of the month from the date on which tax was deducted to the date on which

tax is deposited

Other Important Changes:

DEFINITION OF CHARITABLE PURPOSE SECTION [SECTION 2(15)]

Existing Provision: - Section 2(15) of the IT Act, defines ‘charitable purpose’ among others,

includes ‘the advancement of any other object of general public utility’. However, ‘the

advancement of any other object of general public utility’ is not a charitable purpose, if it

involves carrying on of any activity in the nature of trade, commerce or business, or any activity

of rendering any service in relation to any trade, commerce or business, for a cess or fee or any

other consideration, irrespective of the nature of use or application, or retention, of the income

from such activity.

Section

Description

Existing threshold (Rs.)

Proposed

threshold

(Rs.)

194B

Winnings from lottery

or

crossword puzzle

5,000 10,000

194BB Winnings from horse

race

2,500 5,000

194C

Payment to contractors

(for

single transaction)

20,000 30,000

194C

Payment to contractors 50,000 75,000

194D Insurance commission 5,000 20,000

194H

Commission or

brokerage

2,500 5,000

194-I Rent 1,20,000 1,80,000

194J Fees for professional or

Technical services

20,000 30,000

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Proposed : - It is proposed that the advancement of any other object of general public utility”

to be considered as “charitable purpose” even if it involves carrying on of any activity in the

nature of trade, commerce or business provided that the receipts from such activities do not

exceed Rs.10 lakh in the year.

Effective Date: - This amendment is proposed to take effect retrospectively from 1 April 2009

and will accordingly, apply in relation to the AY 2009-10 and subsequent years.

Income deemed to accrue or arise in India

Exiting Provision: - As per section 5 of the Income Tax Act,

1961 for a non resident only that income which

(a) is received or is deemed to be received in India in such

year by or on behalf of such person; or

(b) accrues or arises or is deemed to accrue or arise to him in

India during such year.

Section 9 of the Income Tax Act, 1961 specifies the situations

where the Income is deemed to accrue or arise in India.

Clause V, VI, VII of section 9 respectively deals with

• Interest • Royalty • Fees for technical services

As per explanation to this section such income shall be included in the total income of the non-

resident, whether or not the non-resident has a residence or place of business or business

connection in India, which means that the situs of the rendering of services is not relevant. It is

the situs of the payer and the situs of the utilization of services which will determine the

taxability of such services in India. This position was a settled position till the Supreme Court

decision on the subject which stated otherwise.

Proposed: - Since the intention of legislature was that rendering of services in not relevant, it is

the utilization of services therefore to put an end to ambiguity this explanation has been

substituted by the following explanation

“Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this

section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or

clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the

nonresident, whether or not,—

(i) the non-resident has a residence or place of business or business connection in India; or

(ii) the non-resident has rendered services in India.”

Proposals on direct taxes

estimated to result in a revenue

loss of Rs. 26,000 crore for the

year.

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Procedure for registration of Trusts

It has been held in certain judicial precedents that Commissioner of Income tax does not have

power to cancel registrations of the trusts / institutions registered under Section 12A. To remove

the ambiguity raised by the Judicial precedents it is proposed to provide the Commissioner of

Income tax with the explicit power to cancel registrations of the trusts / institutions registered

under Section 12A where the activities of such trust / institution are not genuine or are not in

accordance with their objects.

Effective Date: - This amendment will take effect from 1 June 1 2010 (relevant for A.Y 2011-

12)

Section 35

To further encourage R&D across all sectors of the economy, weighted deduction on expenditure

incurred on in-house R&D enhanced from 150 per cent to 200 percent. Weighted deduction on

payments made to National Laboratories, research

associations, colleges, universities and other institutions,

for scientific research enhanced from 125 per cent to 175

per cent.

Existing section 10(21) exempts the income of scientific

research association which has been approved under

Section 35. Pursuant to the amendment in Section 35,

corresponding amendment has been made in section

10(21) to widen its scope to include social science research and statistical research within the

category of activities that can be carried out by such associations in addition to scientific

research.

Deduction in respect of specified business

Existing Provision: - Section 35AD allows a deduction for the whole of capital expenditure

incurred by certain specified businesses subject to certain conditions. Such Specified business

have been defined to include the business of setting up and operating of cold chain facilities for

storage or transportation of agricultural produce, dairy products and other related items. It would

also include the business of warehousing for storing agricultural produce and the business of

laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for

distribution, including storage facilities being an integral part of such network subject to

fulfillment of specified conditions.

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Proposed: It is proposed to include “business of building and operating a new hotel of two-star

or above category as classified by Central Government" within the specified businesses eligible

to claim deduction under this section

The eligibility condition of business of laying and operating cross-country natural gas/ crude

oil/ petroleum oil pipeline, w.r.t that it makes available one third of its pipeline capacity

available for use on common carrier basis has been replaced by the limit with such proportion

of its pipeline capacity as specified by Petroleum and Natural Gas Regulatory Authority

Effective Date: - These amendments will apply from assessment year 2011-12 and subsequent

years.

RELIEF IN THE TIME LIMIT FOR DEPOSIT OF TAX WITHHELD

Existing Provision: - As per section 40(a)(ia) of Income Tax Act, 1961, deduction of

expenditure such as interest, commission, brokerage, professional fees (other than those incurred

in the last month of the financial year) is not allowed if tax on such expenditure was not

deducted, or after deduction was not paid during the previous year

Proposed: - The proposed amendment in the section grants deduction of the expenditure

incurred during the entire year if the tax deductible is deposited on or before the due date of

filing of return of income

Effective Date: - retrospectively from assessment year 2010-11 and subsequent years.

TAX AUDIT [SECTION 44AB, SECTION 271B]

Nature

Present Threshold Limit for Audit

Proposed Threshold Limit for

Audit

Every person

carrying on

Business

Total sales, turnover or

gross receipts in business exceed Rs.

40,00,000 in the previous year

The Limit is proposed to be

increased to Rs. 60,00,000

Profession

Gross receipts in profession exceed

Rs. 10,00,000

The Limit is proposed to be increased

to Rs. 15,00,000

PRESUMPTIVE TAXATION UNDER SECTION 44AD

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The threshold limit of applicability of Section 44AD relating to business of civil construction or

supply of labour for Civil Construction has been increased from Rs. 40,00,000 to Rs. 60,00,000.

Effective Date: - These amendments will apply in relation to the assessment year 2011-12 and

subsequent years

SPECIAL PROVISION FOR COMPUTING INCOME OF NON RESIDENT [SECTION

44BB AND SECTION 44DA]

Existing provisions: - As per section 44BB of the Act which provides a presumptive method

of taxing the income of a non resident says that income of a non-resident taxpayer who is

engaged in the business of providing services or facilities in connection with, or supplying plant

and machinery on hire used, or to be used, in the prospecting for, or extraction or production of,

mineral oils is computed at 10% of the aggregate of the amounts paid. Section 44DA provides

the procedure for computation of income under the head business and profession of a non-

resident from royalty or fees for technical services or professional services performed through a

permanent establishment in India.

Proposed :- To put an end to ambiguity raised by judicial pronouncements regarding the above

two section read with Section 115A , Section 44BB has been amended so as to exclude income

which is covered under section 44DA and similarly section 44DA has also been amended

exclude the income covered under section 44BB

Effective Date:-1 April 2011

INSERTION OF CONVERSION OF CERTAIN COMPANIES INTO LLP (LIMITED

LIABILITY PARTNERSHIP) [SECTION 47 (XIIIB)]

To facilitate the conversion of small companies into Limited Liability Partnerships, section 47

(xiiib) is inserted to propose that transfer of assets as a result of such conversion not to be subject

to capital gain tax on complying with specified conditions.

Section 47 (xiiib) specifies that any transfer of a capital asset or intangible asset by a private

company or unlisted public company (hereafter in this clause referred to as the company) to a

limited liability partnership as a result of conversion of the company into a limited liability

partnership in accordance with the provisions of section 56 or section 57 of the Limited Liability

Partnership Act, 2008:

In other words, any transfer of capital asset or intangible asset by Private Company or Unlisted

Public Company pursuant to the conversion of such company into a LLP as per the provisions of

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LLP Act, 2008 will not be treated as transfer for the purpose of capital gains tax on fulfilling of

certain conditions.

Effective Date: - 1st day of April, 2011

ANOMALY IN SECTION 10AA IN CASE OF SEZ UNITS REMOVED

Anomaly in the formula under section 10AA for computing exempted profits in case of SEZ

units, whereby exempted profits were computed with respect to total turnover of the business

carried on by assessee and not of the eligible undertaking was resolved by an amendment

introduced by Finance Act, 2009 under which 'assessee' was replaced with 'undertaking' with

effect from 1 April 2010.

Effective Date: Provisions of this sub-section shall have effect for the assessment year beginning

on the 1st day of April, 2006 [first year for claim of exemption by SEZ units under Section

10AA] and subsequent assessment years.

SECTION 282 B

Section 282B was inserted by section 78 of the Finance (No. 2) Act, 2009], with effect from the

1st day of October, 2010. It was proposed that the income-tax authorities will allot a computer

generated Document Identification Number in respect of every notice, order, letter or any

correspondence issued or accepted by an income-tax authority.

Proposed: Due to lack of system in Place the date for the introduction of the above requirement

on a pan-India basis has been deferred to 1 July 2011.

***** *****

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SERVICE TAX

Rate of Service Tax:

For Indian service sector, the rate of service tax has been kept intact in

order to pave the way forward for Goods and Services Tax Act which is

proposed to come into effect from 1st April, 2011. Service Tax will be

levied at the present rate i.e. 10% (plus Education Cess and Higher &

Secondary Education Cess). The effective service tax rate is 10.30 % of

the gross value of the services.

New Services Introduced:

Following the practice of previous years, the Finance Bill, 2010 proposed to broaden the service

tax net through the introduction of eight new services. These services are:-

�� Services of promoting, marketing or organizing of games of chance, including lottery.

�� Health services undertaken by hospitals or medical establishments for the employees of

business organizations and health services provided under health insurance schemes

offered by the insurance companies.

�� Service provided for maintenance of medical records of employees of a business entity.

�� Services for permitting commercial use or exploitation of any event organized by a

person or an organisation.

�� Service provided by the Electricity Exchangers in relation to assisting, regulating,

controlling the business of trading, processing and settlement pertaining to sale or

purchase of electricity.

�� Services relating to copyrights of recording of cinematographic films and sound

recording

�� Special services provided by the builder etc to the prospective buyer such as providing

preferential location or external or internal development of complexes on extra charges.

�� Service for promoting of brand of goods, services, events business entity

Consolidation of Existing Taxable Services:

Port Services, Other Port Services and Airport Services are proposed to consolidate into one

service. All services provided entirely within the port/airport premises would fall under this

category. Further, specific authorization from the port /airport authorities would not be the pre-

condition for the levy under this category.

MAJOMAJOMAJOMAJOR AMENDMENTS:R AMENDMENTS:R AMENDMENTS:R AMENDMENTS:

INDIRECT TAXINDIRECT TAXINDIRECT TAXINDIRECT TAX

Service TaxService TaxService TaxService Tax

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Amendment in Existing Services

Following amendments are proposed in following existing taxable

services:-

• Auctioneer’s Services: Section 65 (105) (zzzr) of the Finance

Act, 1994 provides that taxable service means any service

provided or to be provided to any person, by any other person, in

relation to auction of property, movable or immovable, tangible

or intangible, in any manner, but does not include auction of

property under the directions or orders of a court of law or

auction by the Government;

It is clarified that the phrase ‘auction by government” appearing in the taxable service means an

auction where government property is being auctioned and not when the government acts as an

auctioneer for the private goods.

• Unit Linked Insurance Plans: Section 65 (105) (zzzzf) defines the taxable service

provided or to be provided to policy holder, by an insurer carrying on life insurance

business, in relation to management of investment, under unit linked insurance business,

commonly known as Unit Linked Insurance Plan (ULIP) scheme.

The taxable value for the purpose of this service is the difference between:-

Premium paid by the policy holder for the Unit Linked Insurance Plan policy; and

Sum of premium paid for or attributable to risk cover, whether for life, health or other

specified purposes AND the amount segregated for actual investment. In other words the

differential amount was considered as the charges for asset management.

The Finance Bill, 2011 propose to change the value of taxable service and provides that value of

the taxable service for any year of the operation of policy shall be the actual amount charged by

the insurer for management of funds under ULIP or the maximum amount of fund management

charges fixed by IRDA, whichever is higher.

• Expansion of the scope of Information technology Services: The levy of service tax

was limited to cases where IT software was to be used in the course of furtherance of

business or commerce. The definition of taxable services is being amended to extend the

levy to cover all the cases whether or not used in the course or furtherance of business or

commerce.

• Commercial Training and Coaching Services: The meaning of term commercial has

been clarified The word ‘commercial’ means any training or coaching that is provided

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for a consideration irrespective of the presence or absence of any profit motive. This is a

retrospective amendment from July 2003.

• Sponsorship Service: The exclusion available for sponsorship pertaining to sports is

being removed.

• Renting of Immovable Property: The Hon’ble High Court of Delhi in its order in the

case of Home Solutions Retail India Limited & Others verses Union of India has struck

down the levy of service tax on the activity of renting of immovable property and

observed that renting of immovable property for use in the course of furtherance of

business or commerce does not involve any value addition and therefore cannot be

regarded as service. In order to clarify the legislative intent, it is that the activity of

renting of immovable property per se would also constitute a taxable service. This

amendment is being given retrospective effect from June 01, 2007. Further, it is also

provided that service tax would be charged on rent of vacant land if there is an agreement

or contract between the lessor and lessee that a construction on such land is to be

undertaken for furtherance of business or commerce during the tenure of the lease.

• Construction Services: An explanation is being

introduced to provide that unless the entire payment for

the property is paid by the prospective buyer or on his

behalf after the completion of construction (including

its certification by the local authorities), the activity of

construction would be deemed to be a taxable service

provided by the builder/promoter/developer to the

prospective buyer and the service tax would be charged

accordingly. This would only expand the scope of the

existing service, which otherwise remain unchanged.

Other Amendments:-

Refund of Input/ Input Services:

To bring more clarity and allow refund at faster pace, Notification No. 5/2006 – CE (NT) dated

March 14, 2006, the words “in relation to “and “in” has been added to ensure that the provisions

of the refund notification and the CENVAT Credit Rules are aligned and refund is granted on all

goods or services on which CENVAT credit can be claimed by the exporter of goods or services.

Proposals relating to

Service Tax are estimated

to result in a net revenue

gain of Rs. 3000 crore for

the year.

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Export of Services: Amendments in Export of Service Rules, 2005 are tabulated below:-

S. No. Taxable

Services

Applicable Rule of Export

of Service Rules

Amended Rule of Export of Service

Rules

1. Mandap Keeper

Section 65 (105)

(m) of the

Finance Act.

Rule 3 (1) (ii) i.e.

Performance Related

Services

Rule 3 (1) (i) i.e. Immovable

Property Related Services

2. Chartered

Accountants

Services,

Section 65 (105)

(s) of the

Finance Act.


Performance Related

Services

Rule 3 (1) (iii) i.e. Residual

Category of Services

3. Company

Secretary

Services,

Section 65 (105)

(u) of the

Finance Act.


Performance Related

Services



4. Cost

Accountant’s

Services,

Section 65 (105)

(t) of the

Finance Act.


Performance Related

Services



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CENTRAL EXCISE

Change in Excise Duty Rates

The standard rate of excise duty for non petroleum goods has been

increased from 8% to 10%. The increased rates are applicable from

February 27, 2010. The changes on major products industry wise are

tabulated below:

Industry/ Products

Previous

Rate

Current

Rate

Increase/Decrease

1. Cement Industry: - Excise Duty of cement has been increased. Previous rate and enhanced

rates are tabulated below. The details are available in Notification NO. 102010- CE, dated

February 21, 2010

Cement (Mini cement Plant) RSP above

Rs.190 per 50 Kg bag or Rs.3800 per metric

tonne

Rs. 250

per metric

tonne

Rs. 315

per metric

tonne

Increase

Cement (Mini cement Plant) RSP not below

Rs.190 per 50 Kg bag or Rs 3800 pmt

Rs. 145

per metric

tonne

Rs. 185

per metric

tonne

Increase

Cement (Mini cement Plant) except packing

form

Rs. 170

per metric

tonne

Rs. 215

per metric

tonne

Increase

Cement (other than mini Cement plant) RSP

not below Rs.190 per 50 Kg bag or Rs.3800

per metric tonne

Rs. 230

per metric

tonne

Rs. 290

per metric

tonne

Increase

Cement (other than mini Cement plant) RSP

above Rs.190 per 50 Kg bag or Rs.3800 pmt

8 % of

Retail

Sale Price

10 % of

Retail Sale

Price

Increase

Cement (other than mini Cement plant) other

than in packing form

8% or Rs.

290 per

metric

tonne -

whichever

is higher

10% or Rs.

230 per

metric-

whichever

is higher

Increase

Cement Clinker

Rs 300

per metric

tonne

375 per

metric

tonne

Increase

MAJOR AMENDMENTS:MAJOR AMENDMENTS:MAJOR AMENDMENTS:MAJOR AMENDMENTS:


CCCCentral Exciseentral Exciseentral Exciseentral Excise

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2. Tobacco & Related Industry: The rate of basic excise duty have been raised on all forms

of tobacco and tobacco product like branded unmanufactured tobacco refuse, branded hookah

or gudaku tobacco, chewing tobacco, preparations containing chewing tobacco, jarda scented

tobacco, snuff and its preparation, tobacco extracts and essences etc. smoking tobacco, cut

tobacco, smoking mixtures etc., other than which are already fully exempted.

Branded manufactured tobacco refuse

42% 50% Increase

Chewing tobacco, Zarda, Scented tobacco,

snuff tobacco

50% 60% Increase

Other Branded chewing tobacco

34% 40% Increase

Smoking Mixture of pipe and cigarettes

300% 360% Increase

3. Petroleum Products: The rates of excise rate on petrol and diesel have been increased by

Rs. 1 per litre. The increase is applicable to both branded and un branded products.

Motor Sprit (Petrol)

Without Brand Name

Rs

13.35/Ltr

Rs

14.35/Ltr

Increase

Motor Sprit (Petrol)

With Brand

Rs

14.50/ltr

Rs

15.50/Ltr

Increase

High Speed Diesel

Without Brand

Rs

3.60/Ltr

Rs 4.60/Ltr

Increase

4. Automobile

Electronically operated vehicle, cars, electric

motor assisted rickshaw

Nil 4% Increase

Large motor cars/ SUVs

20% + Rs

15000

22% + Rs

15000

Increase

5. Jewellery

Plain Gold Jewellery Rs. 500

Per 10 g

Rs.750 per

10 g

Increase

Plain Silver Jewellery Rs. 1000

per Kg

Rs 1500

Per KG

Increase

Gold Bar other than tola bar bringing

manufactures engraved serial number

Nil Rs. 280

per10 gm

Increase

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Clean Energy Cess

A clean energy cess is being imposed on coal, lignite and peat produced in India. This cess

would be levied and collected as a duty of excise from coal mines. The rate of cess, the date from

which it will be effective and the rules and procedure for its collection shall be notified after the

enactment of the Finance Bill, 2010.

Small Scale Industry:

Following two significant procedural relaxation / concessions are introduced. These amendments

come into effect on the April 01, 2010:

� Full CENVAT Credit on capital goods in one installment in the year of receipt of such

capital goods in the factory premise

� Payment of the duty on quarterly rather than monthly basis.

Other Procedural Simplification Measures:

� Pre-authentication of invoices has been dispensed with

� Benefits of allowing CENVAT Credit to be reversed on

proportionate basis (in case common inputs are used

for the manufacture of dutiable and exempt products) is

being extended retrospectively for pending cases

� Accelerated depreciation of the credit amount has been allowed for reversing credit taken

on computers and computer peripherals when they are cleared after use in the factory

� Movements of moulds, dies, jigs and fixtures by the main manufacturer to vendors (other

than Job worker) without loss of CENVAT Credit have been facilitated.

� In case of voluntary payment of duty under section 11A (2B) of the Central Excise Act,

no penalty shall be imposed.

� Settlement of cases through the Settlement Commission has been liberalized by removing

restrictions on the number of times the Commission may be approached by an assessee.

“Proposals relating to

customs and central excise

are estimated to result in a

net revenue gain of Rs.

43,500 crore for the year”

17


CUSTOMS DUTY

Exemption from Additional Duty of Customs under Section 3 (5) of

the Customs Tariff Act:

Outright exemption from additional duty of customs (presently 4%)

leviable under sub- section (5) of diction 3 of the Customs Tariff Act, 1975

is being provided to goods imported in a pre- packed form and intended for

retail sale.

Project Imports:

� Following new projects are being notified under chapter 98 of the

Customs Tariff Act (Basic Customs Duty Rate is 5%):Cold

Storage, cold room (including farm pre- coolers) or industrial project for preservation,

storage or processing of agriculture, apiary, horticultural, dairy, poultry, aquatic and

marine products.

� Mono Rail Projects for urban public transport

� Setting up Digital Head Ends

� Project for installation of mechanized handling system & pallet racking systems in

mandis or warehousing for food grains and sugar

Import of Sample:

The current limit of Rs. One lac per annum for duty free import of sample in terms of

Notification No. 154/94- Customs, dated July 13, 1994 is being enhanced to Rs. Three lacs per

annum.

Transmission of Electrical Energy:

Presently, electrical energy is fully exempt from customs duty. Electrical energy supplied from a

Special Economic Zone to the Domestic Tariff Area and non processing area of SEZ would now

attract duty at the rate of 16% ad valorem. This amendment would have retrospectively

applicability with effect from June 26, 2009. It is relevant to note in this regard that exemption

on supplies or imports of electrical energy, other than supply from SEZ to DTA or Non

processing area, would continue.

Customs Duty Rates:

MAJOR AMENDMENTS:MAJOR AMENDMENTS:MAJOR AMENDMENTS:MAJOR AMENDMENTS:


CustomsCustomsCustomsCustoms

18


The change in Customs duty of major products is tabulated below

Industry Products Previous Rates Current Rates Increase/

Decrease

PE

TR

OL

EU

M

Motor Sprit commonly

known as Petrol

2.5% 7.5% Increase

High Speed Diesel 2.5% 7.5% Increase

Other petroleum

products (excepts

Naphtha, LPG, LNG

5% 10% Increase

JEW

EL

LE

RY

Gold in any other form

(including ornaments

imported as personal

baggage)

Rs. 500/ 10gram Rs. 750/10gram Increase

Specified Gold Bars Rs. 200/ 10gram Rs. 300/ 10gram Increase

Silver in any form

(including ornaments

imported as personal

baggage excluding

ornaments studded with

stones or pearls)

Rs. 1000/

Kilogram

Rs. 1500/

Kilogram

Increase

Platinum Rs. 200/ 10gram Rs. 300/ 10gram Increase

ME

DIC

AL

Specified medical

equipment, accessories

and parts thereof

5% 7.5% Increase

Compostable polymer

or bio-plastic used in

the manufacturing of

biodegradable agro

mulching films,

nursery plantations

10% NIL Decrease

19


pots and flower pots

M

AC

HIN

ER

Y

Tunnel Boring Machine 7.5% NIL Decrease

Agriculture Machinery 7.5% 5% Decrease

Truck Refrigeration

Unit

7.5% NIL Decrease

Machinery including

prime movers and other

equipments for initial

setting up of a

solar power generation

project/facility

7.5% 5% Decrease

CO

NS

UM

ER

GO

OD

S

Exemption from

Special CVD for goods

imported in pre-

packaged form for

retail sale including-

apparel & clothing but

not the parts

Telephone sets, Wrist

watches

4% CVD NIL Decrease

Parts, components of

battery chargers, and

handsfree headphones

of mobile handsets

including cellular

phones

7.5% NIL Decrease

Pepper long 70% 30% Decrease

Asafoetida 30% 20% Decrease

20


Goods & Service Tax:

Studies commissioned by the 13th

Finance Commission indicated the roll out of Goods and

Service Tax could increase gross domestic product by almost Rs. One trillion by ironing out

inefficiencies and lowering tax collection and administration cost.

The GST implementation date has been shifted to April 2011. The Finance Minister has

reiterated the need to build consensus with the states and seems to be in favour of the 13th

Finance Commission’s recommendation on a flawless GST.

In a nutshell The Budget 2010-11 is an attempt to consolidation and correction of the fiscal

deficit, tradeoff between inflation and growth with partial roll back of fiscal stimulus. This

budget provides more purchasing power to common man and a levy of additional duty on

manufacture activity is a good try to balance the growth and industry expectations.

In the words of Mr. Pranab Mukerhjee “This Budget belongs to AAM Aadmi. It belongs to

the farmer, the agriculturist, the entrepreneur and the investor. The opportunity is great, the

time is right”

EN

TE

RT

A-

INM

EN

T

Motion pictures, music,

gaming software for

use on gaming console

7.5% NIL Decrease

ME

DIC

AL

Goods required for

medical, surgical,

dental or veternity use

including parts and

accessories

7.5% 5% Decrease

Hospital equipment,

apparatus and parts

thereof for use in

specified hospitals

5% 4% Decrease

Life saving medical

equipment, accessories

and spare parts or both

of such equipment for

personal use

5% 4% Decrease

21


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Our range of services are designed to effectively deal with complex business

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budget taxpert professionals 2010-2011

Technology

deduction of rs

income tax act

rates income

proposed tax rates0

tax incidence

tax relief

tax payers2

iithe income tax department