pre-budget memorandum

The Associated Chambers of Commerce and Industry of IndiaASSOCHAM Corporate Office:

5, Sardar Patel Marg, Chanakyapuri, New Delhi-110 021Tel: 011-46550555 (Hunting Line) • Fax: 011-23017008, 23017009

Email: [email protected] • Website: www.assocham.org

PrE-budgEt MEMoranduM

2017-18

indirECt taXEs

INDEX

Executive Summary .......................................................5

Custom Duty ....................................................................7

Central Excise ............................................................... 35

Service Tax ..................................................................... 53

Cenvat Credit ................................................................ 72

CESS ................................................................................. 79

Central Sales Tax ......................................................... 83

Other Indirect Tax Issues .........................................87

Economic Issues ..........................................................90

Annexure ........................................................................ 94

PrE-budgEt MEMoranduM

2017-18

indirECt taXEs

ASSOCHAM Pre-Budget MeMOrAnduM – 2017-18 (indireCt tAxeS)5

EXECUTIVE SUMMARY

The Union Budget 2017-18 is anticipated by Indian public with lot of hopes and expectation after Government shown its determination to replace the current multiple and multi-layered

tax structure by uniform Goods and Service Tax. On behalf of trade and industry, ASSOCHAM compliments the Government for making no stone unturned to meet the target date of 1st April 2017 to implement GST. ASSCOCHAM fully support this reform initiative. ASSOCHAM has already made its recommendations on the draft model GST Bill.

In the unlikely event of GST not getting implemented from 1st April 2017 due to delay in completing the legal process, the existing indirect laws will continue for some time. Therefore this Memorandum contains recommendations on the existing indirect lexes levied by Central Government for Union Budget 2017-18.

CustoMs dutY:

The economic slowdown in global market has forced many countries to export goods to India at significantly lower prices as short term measure which is adversely affecting Indigenous manufacturers. The Government in this global scenario should review the customs duty rates of certain products like iron & steel, aluminium copper, petrochemicals and synthetic fibres and appropriately increase till global market improves. This memorandum contains suggestions received from specific sectors for your consideration.

EXCisE dutY:

The inverted duty structure in the case of pharmaceutical industry need to be corrected as the duty on some formulations is lower (6%) compared to raw materials and API (12.5%). The duty structure for textile sector also need to be rationalised for its long term growth. The excise duty on defence production also need to be critically examined and duty exemptions rationalised as this sector has now been open for private sector investment in this sector. This memorandum contains specific suggestions on these sectors apartment from other suggestions.

sErViCE taX:

Major issue faced by several tax payers is double taxation of the same transaction for total value under VAT as well as service tax due to deeming fiction being applied by both central and state tax authorities such as in the case of lease of machinery/ equipment or aircraft or licensing of an IPR. A rational view need to be taken with clear operating guidelines, so that cascading effect of such unintended double taxation is avoided. There are several irritants and ambiguities which lead to avoidable litigation. There is urgent need for issue of clarification by CBEC taking a fair and pragmatic approach on such matters highlighted in this memorandum.


CEnVat CrEdit:

CENVAT credit allowed up to March 2011 was drastically reduced from April 2011 by restricting credit for several legitimate inputs/ input services or capital goods used in the business. States like Maharashtra and other States as well followed more pragmatic approach to allow legitimate credit to reduce cascading effect of tax from cost of manufacture or output service. It is recommended that CENVAT credit should be restored to pre-April 2011 level when GST is likely to be introduced in due course. There are also suggestions on other aspects of CENVAT credit.

The details of the above suggestions and on several other aspects of indirect taxes like CST, vari-ous CESS and economic issues are contained in this memorandum for your kind consideration for 2017-18 Budget.


CUSTOMS DUTY

s. no. Issue Recommendation Justification

CustoMs dutY on aLLuMiniuM 1. Increased im-

ports of Alumin-ium

Increasing basic cus-tom duty on alumini-um and its products as below :1. Hs Code 7601,

7603 to 7607 – 7.5% to 15%

2. Hs Code 7608 to 7616 – 10% to 15%

• Indian Aluminium Industry has seen a huge surge in Imports in recent years from 881kT in FY11 to 1607kT in FY16 (CAGR of 11%) – primarily from China and Middle East, where Aluminium Industry is supported by government in form of concessions/ subsidies with cheaper power tariff, low cost gas allocations, tax benefits, and VAT rebates on exports bringing down the production costs.

• The basic custom duty on Aluminium products was increased by 2.5% in the Union Budget 2016-17 to check the imports. Despite this 2.5% duty increase Aluminium imports have in-creased by 12% in Q1 FY17 (436kT) over Q1 FY16 (389kT).

• The surge in cheaper aluminium imports have threatened the mar-ket share of domestic primary alu-minium producers in India which has gone down from 60% in FY11 to 49.7% in FY16

• The surge in cheaper imports have rendered low capacity utilization of primary aluminium producers to be-low 60%.

ASSOCHAM Pre-Budget MeMOrAnduM – 2017-18 (indireCt tAxeS)

S. No. Issue Recommendation Justification

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2. Rising cost of production of In-dian Aluminium Producers

Reduction in duty on critical raw materials for aluminium indus-try as below :Alumina (28182010):5% to 2.5%Coal Tar Pitch(27081090):5% to 2.5%Aluminium Fluoride (28261200):7.5% to 5%Caustic soda Lye (28151200):7.5% to 5%

Cost of production of Indian aluminium producers has increased considerably over past 3-4 years vis-à-vis cost of pro-duction in other countries. Hence, we request for reduction in duty of critical raw materials for aluminium industry.• Alumina – Constitutes 40-45% of

cost of production of aluminium. Due to scarcity of bauxite (ore for alumi-na production), Indian producers are forced to import alumina.

• Coal Tar Pitch – Aluminium indus-try uses a substantial quantity of to-tal production/imports of CT Pitch. Contribution of CT Pitch in cost of production of aluminium is 3.5-4%

• aluminium Flouride (alF3) – India is a net importer of AlF3 and alumini-um industry is importing 100% of its requirement.

• Caustic soda – India is a net import-er of caustic soda. Aluminium indus-try is one of the largest importers of caustic soda and imports about 75% of its total requirement.

3. Lower Duty drawback on alu-minium products

Increase duty draw-back on aluminium products (7601, 7603 to 7607) from 1.9% to min. 3.7%.

• Duty Drawback/DEPB on Aluminum products (Chapter 76) reduced from 4% to 1.9% in most of the products of Aluminium in last few years.

• As per Standard Input Output (SION) norms, duty drawback on aluminium should be minimum 3.7%.



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CustoMs dutY struCtrE oF tEXtiLE sECtor4. Customs duty

structure should be a cascading structure i.e the duty differential should be pro-gressive at each stage of value chain - ASFI pro-poses 5% duty differential be-tween raw ma-terial and end product

therefore, the cus-toms duty structure is proposed as fol-lows (for Polyes-ter and Nylon value chains):a) Polyester Value

Chain

ItemCustoms duty (%)

Tariff No. Present ProposalPTA

2917.365 5

MEG 2905.31 5 5Polyester chips 39076010

& 39076020

5 7.5

Polyester staple fiber

5503.20 5 10

Polyester fila-ment yarn

5402.33 5 10

Polyester high tenacity yarn

5402.20 5 10

Polyester tyre-cord fabric

5902.20 5 10

b) nylon Value Chain

ItemCustoms duty (%)

Tariff No. Present ProposalCaprolactam 2933.71 7.5 5Nylon Chips 3908.10 7.5 7.5Nylon Filament Yarn

5402.45 7.5 10

Nylon High Tenacity Yarn

5402.10 7.5 10

Nylon Tyrecord Fabric

5902.10 10 10

rEVEnuE iMPLiCa-tions :

Imports of

Import volume MT per annum

Estt Price $/MT

Pro-posed Increase +/De-crease in Customs duty

Revenue Gain +/Loss- to Govern-ment due to change in Duty Rs. Cr.

Poly-ester Chips (HS Code 3907 6010, 3907 6020)

8,194 876 +2.5% +1.2

The inverted duty structure in Customs Duty in the synthetic fibre value chain had been corrected during 2001. How-ever, the Custom Duty across different fibres is different. To encourage invest-ments across the value chain to make the industry competitive, ASFI proposes a uniform cascading structure for all fi-bres / yarn value chains.

The principle is reflected in the diagram below;



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Poly-ester Yarns (HS Code 54024600,54024700,54023300,54022090)

70,281 1693 +5.00% +39.0

Polyes-ter Fibre (HS CODE 5503 2000)

98,143 1111 +5.00% +35.7

Poly-ester Indus-trial Fabric(HS Code 5902 2000)

20,070(‘000 Sq Mt)

2.11($/Sq. Mt)

+5.00% +13.8

Capro-lactam (HS Code 2933 7100)

44,577 1335 - 2.50%

- 9.96

Nylon Yarns (HS Code 5402 1910)

17, 634

2225 +2.5% + 6.56

* Ex Rate Rs 65.5/$Total: + 86.30

Source: Import data: Department of Com-merce, Government of India website. The period of imports : 2015-16 (Caprolactam – ICIS Asia Spot Taiwan Spot Average & Nylon Yarn – Technon Asia prices 1260D)

5. Customs duty on Catalysts and Chemicals – Spin finish Oil & Ti-tanium Dioxide and VP latex used in the manufac-ture of synthetic fibres / techni-cal textile fabrics should be on par with raw materi-als

Custom duty structure for various inputs for manufacture of yarn / fabrics should be on par with raw materials (These should include Chemicals, Catalysts, VP latex etc i.e. at 5%). To differentiate from the conventional ap-plications, a separate HS code and descrip-tion as detailed below could be provided for specific materials:

Currently, the Import Duty on Spin Fin-ish Oil stands at 7.5%.For the past several years ASFI has been requesting reduction of import duty on the Spin Finish Oil and Titanium Dioxide (TIO2) to 5% i.e. on par with raw mate-rials for synthetic fibers but the Govern-ment has not been able to move in the matter since the identification of Spin Finish separately is required. Currently, it falls under the description of Prepa-ration for treatment on Textile material, leather, fur skins or other materials (HS Code 34031100 in the Chapter Heading of Lubricating preparations with Chap-ter Heading 3403).



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HS code

De-scrip-tion

Current Duty (%)

Pro-posed Duty (%)

spin finish oilPresent 3403

1100Prepa-ration for treat-ment on Textile mate-rial, leather, fur skins or other materi-als

7.5

Sug-gested

3403 1200

Spin finish used in the manu-facture of Syn-thetic staple fibers and fila-ment yarns includ-ing high tenacity yarn

5

Titanium dioxidePresent 2823

0010Tita-nium Dioxide

10

Sug-gested

2823 0030

Tita-nium DioxideANA-TASE used in the manu-facture of syn-thetic staple fibers and fila-ment yarns

5

VP LatexPresent 4002.11 VP

Latex10

Sug-gested

4002.11 VP Latex

5

The Spin Finish used by the Synthetic Fibre Industry needs to be given a sep-arate code No. of 34031200 with the description - “Spin finish used in the manufacture of Synthetic Staple Fibres and Filament Yarns”. This will enable a differential duty of 5% on this product to be possible.Titanium Dioxides are of two types :RUTILE (titanium dioxide) is used main-ly by the Paint Industry and in many other applications, but not by Synthetic and Filament Yarn Industry. ANATASE is a variety of Titanium Dioxide used by the Synthetic Staple Fibres and Fila-ment yarn industry as dulling agent.Titanium Dioxide ANATESE is not pro-duced in India as neither there are any plants producing Titanium Dioxide AN-ATASE nor is there a technology for pro-ducing Titanium Dioxide available. This product has to be imported. As there is a technology barrier for production of Titanium Dioxide ANATASE world-wide and there are very few producers who enjoy an Oligopolistic market, these owners of technology are not prepared to sell or give technology to anybody. They are therefore able to charge an exorbitant price for Titanium Dioxide ANATASE.The Import Duty on Titanium Dioxide (Anatase Grade) meant for Polyester Industry was brought down from 10% to 7.5% in the Budget 2012-13 in view of ASFI’s persistent representations for the valid reason given above. It has again been raised vide notification number D.O.F No. 334/3/2013-TRU



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Revenue Implica-tions :

Imports of

Import volume MT per annum

Estt Price $/MT

Pro-posed Increase +/ De-crease- in Cus-toms duty

Rev-enue Gain +/Loss- to Govern-ment due to change in Duty Rs. Cr.

Spin Finish

6382 7940 -2.5% - 8.48

Titanium Dioxide

16421 2580 -5% - 14.18

V.P. Latex

11454 1430 -5% - 5.48

Total: 28.14 loss

Source: Import data: Department of Commerce, Government of India website. The period of imports: 2015-16.

dated 8th May ’13 to 10% on par with Rutile grade which is manufactured do-mestically.The problem can be solved only if Ti-tanium Dioxide RUTILE is given code No. of 28230020 and Titanium Dioxide ANATASE is given a code of 28230030. Thereafter a reduced import duty of 5% on Anatase Grade can be made appli-cable.VP latexVP latex is a raw material for technical textile fabrics. Customs duty on this is currently on par with the end product at 10%, rather than raw material.

6. To save highly un-organized weav-ing industry from cheap Chinese imports, increase Customs duty on fabric falling un-der chapter 54,55 and 60 (made of manmade fibres) to 15% from the present 10%. Also the specific duty which is missing under these ITHS codes be introduced at Rs.50/- per me-ter or Rs. 600/- per kg in line with other fabrics.

Increase Customs duty on fabric falling under chapters 54,55 and 60 (made of manmade fi-bres) to 15% from the present 10% to save highly unorganized weaving industry from cheap Chinese im-ports. Also the specific duty which is miss-ing under these ITHS codes be introduced at Rs.50/- per meter or Rs. 600/- per kg in line with other fabrics.

The manmade fabric weaving indus-try is highly un-organized and spread across many small units as small as some units operating with 2-3 looms. The following table illustrates the fate of the weaving industry and capacity utilization is dropping year on year and during 2104-15 it was as low as 50%. This is largely on account of cheap Chi-nese fabric imports.The imported fabric would have con-sumed 500,000 tons of manmade fibres, filament and textured yarns at standard metreage of 10 meters per kg. India, de-spite having production capacity, lost production opportunity of 500,000 tons in volume and Rs 5,000 cr in value.



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Man Made Fabric-total imports Vs in-dian Production

SN Year Total Imports in MT

Indian Production

in MTImports in % of Production

1 2011-12 87,632 1,389,850 6.31%

2 2012-13 100,107 1,302,327 7.69%

3 2013-14 100,128 1,229,272 8.15%

4 2014-15 131,650 1,184,232 11.12%

5 2015-16 150,938 1,105,781 13.65%

Imports of fabric currently have reached the level of over around US$ 1 billion = Rs 6500.00 crores which is grossly undervalued while imported. Therefore, actual value shall be over Rs 8000 cr, which is causing high value in-jury to domestic producers. As per re-cords from the DGS&DM, Customs and Central Excise, that the value of fabric imported by actual user under advance license during 2014-15 was only Rs 103.00 cr. This shows majority of fab-rics have been imported by unscrupu-lous traders. The import of this nature, has badly affected production of weav-ing industry mainly operated by small scale industry and there on manmade fiber industry.

In view of manmade fabric weaving industry is highly unorganized and it is very difficult to go for either anti-dumping or safeguard measures against cheap imports from China. Hence this industry need protection through in-crease in Customs duty.



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EXPort dutY on bauXitE 7. Request that

export duty on Bauxite un-der H.S.Code 26060010 and 26060020. Be re-duced from 5% to 5% on FOB value.

We would like to bring the following facts for your consideration: India is fortunate to

have endowed with about 3480 mil-lion tons of Baux-ite resources and is placed 6th in the world Bauxite Re-sources Map. About 84% resources in the country are of Metallurgical grade used mainly for Alumina/Alu-minum extraction. Most of the resourc-es are concentrated in the East Coast Bauxite deposits in Orissa and Andhra Pradesh followed by other states like M.P., Gujarat, Chhat-tisgarh, Maharash-tra and Jharkhand.

In view of the huge resources avail-able in the country, there is a need to have optional con-servation of these Bauxite deposits. While big Alumi-num Smelters have been commissioned

1) As exports of bauxite (all forms) has been reduced by 90% than compared to last year’s 1st quarter due to 15% export duty which is exorbitantly higher than compared to other baux-ite exporting countries who do not levy any export duty. We therefore request that considering stiff com-petition in international market with reduced FOB value ($ 20 to 25 PMT) , please reduce duty to 5% so that we can increase our volume of exports.

2) Low quality Al2O3 in the range of 40 to 45% to be considered as Alumin-ium ores under H.S.code 26060090 and not as bauxite, as Aluminium ores are not used in manufacturing of Calcined Bauxite and not in any smelter plants in India.

3) Bauxite which is available in Gujarat is of low quality and is not suitable to local industry consumption in the state of Gujarat. Hence, export has a huge potential for usage/consump-tion in China upto 10 million mts. annually. Over and above due to ex-orbitant cost of local logistics and shipping economically it is unviable to sell in local market i.e. outside Gu-jarat. Due to recent economic tur-moil in China there is a sleek demand of Bauxite and its related products which has resulted into lowering of base price from USD 37/38 per tonne to USD 20 to 25 FOB PMT. Thus, levy-ing export duty will be badly affect-ing the overall export volume to



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for utilization of Metallurgical Grade of Bauxites, but as such there are only very limited ave-nues for Non Plant Grade Bauxite par-ticularly of Gujarat state where mainly low grade Bauxite with Alumina in the range of 38-40% and Silica >5% is produced.

Since availability of low grade Bauxite is much more than the domestic demand in the country, the same is being ex-ported particularly from Maharashtra and Gujarat coastal regions. The export of low grade Baux-ite (Non Metallurgi-cal Grade) has been earning foreign exchange for the country besides ef-fective utilization and conservation of non-plant grade Bauxite. However, subsequent to im-position of Export duty @ 15% on FOB price on Bauxite, the production and export of Bauxite has been affected.

China especially to a deficit foreign exchange country like ours. There-fore, we request to consider reducing the duty to 5%.



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In view of the above facts and also to have optimum uti-lization of our min-eral resources, it is imperative that the duty imposed on export of Baux-ite be withdrawn and as such Baux-ite should continue to be permitted for exports under OGL without any restric-tions.

2) At the present sit-uation, the min-ing companies are struggling for very much survival and it is becoming very difficult to compete with global mineral suppliers and sus-tain the business. On top of this Gov-ernment of India is putting extra load by increasing the duty and royalty rates.

On the other hand, many of the major mineral exporting countries have tak-en steps in reducing the taxes so that the sustainability of the mining companies is maintained, and



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they can be able to compete with other Country suppliers.

The overall cost of India’s mining sec-tor, including roy-alty and energy and transportation costs are also the highest compared to major mineral exporting coun-tries.

Mining projects are long term projects and also the sale plans and contract executed will also be of long term in nature. While sign-ing the long term business contract, the sale prices will be fixed or will have a steady increase linked to certain in-dexes.

In fact, incentive should be provided to Exporters for ex-porting these min-erals, which was lying unutilized till 2008. Small miners have developed the export market by taking the competi-tion with the world leader, who was there for decades.



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In this connection, we request you to highlight these mat-ters to Government of India and press them to roll back 15% export duty imposed on Bauxite export and also the royalty rates.

3) We wish to inform you that as a Trad-ing Star holder hav-ing export turnover of over more than 1500 crores are fac-ing acute shortage of funds to finance our export ship-ments which is to the tune Rs. 1200 crores on provi-sional basis due to increase in export custom duty, our competitiveness is edged out due to our rival competi-tors in the Inter-national Market which are offering lower price than us.

Ever since duty is levied on all forms of Bauxite, w.e.f. 01.03.2013, the transaction cost has increased by 25% in the international market.



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This special request comes in wake of exorbitant trans-action cost and to overcome the strife pricing competition in the international market. The export of Bauxite is merely 5million tons p.a. due to freight disad-vantage compared with Indonesia, Vietnam & Austra-lia. It is imperative to abolish duty on such tiny business.

1) Loss of valuable foreign exchange into 500 millions of USD to the exche-quers.

2) Loss of revenue by way of loss of royal-ty to the statements which is 250 crores.

3) Loss of revenue to Income Tax depart-ment direct taxa-tion as we cannot create jobs in mass-es.

4) Loss of revenue to exchequers by way of service tax to vendors and other stock holders by 75 Crores approx.



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5) Our export price is edged out to our vital competitors which is higher by 10-15% besides profit loss.

doubLE taXation oF sErViCEs rELating to iMPort oF goods8. double taxation

in respect of ser-vices received from abroad and provided free of cost to the foreign sup-pliers for use in the manufac-ture of goods. Rule 10(1)(b) of the Customs Val-uation (Determi-nation of Value of Imported Goods) Rules, 2007 pro-vides that in de-termining the transaction val-ue of imported goods, there shall be added to the price thereto the value of specified services supplied directly or indi-rectly by the buy-er free of charge or at reduced cost for use in connection with

Government should consider to tax the import of service only once either as part of value for levy of Customs duty or tax-ing under service tax. Government should consider to amend the Customs Rules so as to provide exemption from inclusion of the value of services (sup-plied free of cost to the foreign supplier) in the value of imported goods provided the importer has paid ser-vice tax under reverse charge on value of such services.

This is case of double taxation which cannot be the intention of the Govern-ment.



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the production and sale for ex-port of imported goods, to the ex-tent that such value has not been included in the price actually paid or payable. Further, Section 68(2) of the Fi-nance Act, 1994 provides for pay-ment of service tax under reverse charge in respect of services re-ceived/ imported in India.

CustoMs dutY on CoPPEr iMPort9. FTA imports

have witnessed a sharp increase (in excess of 700%) in recent years and do-mestic industry is rapidly losing its market share to such imports. The Domestic sector is oper-ating merely at 10% above their breakeven vol-umes and even that 10% get di-verted to imports

Inverted duty struc-ture needs to be ad-dressed by remov-ing Custom duty on raw Material Copper Cathode (74031100) & Copper scrap (74041200) to cre-ate a level playing field for domes-tic players against cheap Imports. The resolution of FTA related issues is very difficult and time con-suming depending on the FTA review cycles despite evident gap

removal of basic Customs duty on Copper Cathode (74031100) and Copper scrap (74041200) consider-ing the fact that imports of Finished products manufactured out of these inputs viz sheet/ strips(7409)/ Foils (7410)/ rods(7408)/ tubes(7411) are subject to nil rate of duty due to various FTA Exemptions thus mak-ing the industry vulnerable to severe threat of closure.

The Copper secondary sector is in a precarious situation amidst rapidly ris-ing imports. The sector is reeling under huge pressure from various FTA im-ports and is rapidly losing its domes-tic market share as a result of Inverted



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under FTA, this would make the domestic indus-try uneconomi-cal/ unviable and face closure.

The phenomenal rate at which FTA imports are increasing every year are threat-ening the exis-tence of domestic industry and cur-rent FTA struc-ture promotes “IMPORT IN IN-DIA” in contrast to prime Minis-ter’s policy ini-tiative “MAKE IN INDIA”. The poli-cies being pur-sued by govern-ment with regard to imports & ex-ports with rela-tion to the given issue will have to be changed if the sector has to be saved from pros-pect of heavy losses in future.

in trade balance. Con-sidering the severe impact on copper fab-ricating industry, the government has to initiate urgent steps to save industry from peril and the only vi-able solution left with the government is ad-dressing it by way of customs duty elimina-tion on raw material.

Sheets/ Strips/ Foils/ Tubes etc. covered under Chapters 7409, 7410 & 7411 should also be excluded from FTA exemptions in cases where new trea-ties are being nego-tiated. Alternatively concessions wherever extended should be on the entire manufactur-ing chain of a particu-lar sector.

Duty faced by it against duty free im-ports from countries with which India has FTA’s.

The Copper and Copper Alloy fabricat-ing industry manufacturing Sheets / Strips/ Rods/ Foils / Tubes etc. of Cop-per and Copper Alloys, covered under chapter 7409-7411, are facing inverted duty situation as their principal input viz. Copper Cathode, Copper scrap etc. are subject to levy of 5% Customs duty. Even in the course of domestic trade, the Indian primary producers of Copper Cathode sell on import parity prices i.e. factoring custom duty in their price.

In contrast, finished goods are allowed to be imported duty free or concession-al duty under FTA/PTA with ASEAN, NEPAL, KOREA etc. thereby causing in-verted duty situation for domestic man-ufacturer of these goods. It is submitted that the raw material i.e. Copper cath-ode, Copper Scrap are not entitled for any concessional duty under any FTA except smaller quantity from Japan.



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CustoMs dutY on PoLYMErs10. Import duty on

polymersDuty on polymers like PE, PP, PVC, PS, may be raised from 7.5% to 10%

India already has substantial surplus of Polypropylene and is in the process of adding massive new Polyethylene ca-pacities this year which will create huge surplus for Polyethylene as well. For Poly Vinyl Chloride, no new capacity has been added in the country for over a decade despite demand exceeding ex-isting capacity consistently and hence a facilitative tariff structure is necessary.

11. P o l y e t h y l e n e Te r e p h t h a l a t e (PET)

Import duty on PET (HS code: 39076010, 39076020, 39076090) be raised from 5% to 7.5%

India is having significant investment in its production and the country is a net exporter of this material. Raising ID on PET will bring it at par with other major commodity plastics and provide relief to the sector.

12. ABS and SAN are engineering plas-tics

Duty on ABS (HS code: 39033000) and SAN (HS code: 39032000) be increased from 7.5% to 10%

This would align the duty with other major plastic raw-materials and pro-vide relief to this sector.

13. Polyester Duty on PTA (HS code: 29173600) and MEG (HS code: 29053100) be raised from 5% to 7.5%.

Investments made in Polyester sector are under threat from surplus capacity in China for PTA and MEG. Raising ID will help rationalize the tariff structure & improve duty spread between these products and their feed stocks thereby, supporting domestic manufacturing.

Import duty on POY (HS code: 54024600), FDY (HS Code: 54024700), PTY (HS code: 54023300), IDY (HS code: 54022090), TOW (HS code: 55012000) and PSF/FF (HS code: 55032000) be raised from the existing 5% to 7.5%

To rationalize the tariff structure for the entire value chain and avoid instances of duty inversion



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14. synthetic and natural rubbers

Duty on Isobutylene Isoprene Rubber (IIR) (HS code: 40023100) and Halo Butyl Rub-ber (Halo Isobutene Isoprene Rubber-HIIR; H S code: 40023900) be raised from 5% to 7.5%

Butyl rubber or IIR has an import duty of 5% lower than other major synthetic rubbers. To bring them at par with oth-er synthetic elastomers and protect the interest of natural rubber import duty is proposed to be raised from existing 5% to 7.5%

15. Mixed Petroleum Gas

Duty on Mixed Pe-troleum Gases (HS code: 27112900) and Kerosene (HS code: 27101910) be reduced from 5% to 2.5%.

Mixed petroleum gases and Kerosene are basic inputs to the chemical and petrochemical industry. In order to en-hance the cost competitiveness of the industry duty may be reduced on Mixed Petroleum Gases & Kerosene

16. LNG Duty on LNG for cap-tive power generation (HS code: 27111100) be at least be lowered to 2.5%.

Disparity of entitlement to import LNG at nil rate of duty by power generating companies not passed to captive power plants should be removed.

CustoMs dutY on iron &stEEL sECtor17. basiC CustoMs

dutY on raW MatEriaLs

1. basic Customs du-ties on stainless steel scrap be re-stored to the origi-nal rate of “niL”.

2. basic Customs duty on on Ferro Alloys need to be reduced to niL.

The duty disparity between China and India is as given below:

Raw Material China IndiaSS scrap (720421) NIL 2.5%Ferro Nickel (720260) 1% 2.5%Ferro Moly (720270) 2% 5%Pure Nickel (750210) NIL 2.5%

• Among the above mentioned raw ma-terials, Ferro Nickel, Ferro Moly and Pure Nickel are not available in India and have to be necessarily imported.

• The increased usage of Stainless Steel Scrap as a substitute for Pure Nickel and Ferro-Nickel has helped to considerably lower the Raw Mate-rial cost of Domestic Stainless Steel producers.



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• Since the Domestic Stainless Steel Industry is heavily dependent on im-ports for meeting its raw material requirements, the very inception of cost disadvantage lies in a distorted and discriminatory duty structure on inputs.

• Despite the dependence of domes-tic industry on imported scrap, the Ministry of Finance, vide Notifica-tion No. 25/2013-Customs dated 8th May’2013, had announced increase in Basic Custom Duty on Stainless Steel Scrap (HS Code720421) from NIL to 2.5%.

18. Increase in Peak duty rates

Increase the peak duty of stainless steel flat products

• The surge in imports is not only from China but from other Asian stainless steel manufacturers like Korea, Japan and ASEAN countries. This is largely attributed to the lowering in import duties under various Free Trade Agreements.

• The Bound tariff rate is an integral component of a country’s schedule of concessions or commitments to other WTO members.

• As part of the agreement, India has bound most of its duties on indus-trial products at 40% beyond which customs duties are not raised.

CustoMs dutY on sEa Food19. To reduce custom

duty on Chilled & Frozen Sea Foodb. Classification

of the Product / Services:

Proposed level of du-ties: Basic Duty : 10%

1. There are variety of Sea food products available in the world. They become unviable to bring in India because of cost on account of high import duty on sea food.

2. Cheaper sea food and proteins shall be available to Indian Public.



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Chilled & Frozen Sea Food (ITC (HS) Code: 0301….0308)

c. Present level of duties: Basic Rate: 30%

3. The food inflation will reduce tre-mendously.

6. Local fisheries will not get affected by imports because Local Sea food availability is much lower than its demand in India.

20. Reduce custom duty on Chilled & Frozen Poultry Meat (Chicken).b. Classification

of the Prod-uct/Services: Chilled & Fro-zen Poultry Meat (Chick-en) – Cuts and offal – (ITC (HS) Code: 02071100 & 0 2 0 7 1 2 0 0 ) – Basic Duty – 100% and Chilled & Fro-zen Poultry Meat (Chick-en) – Not Cuts in pieces – (ITS (HS) Code: 02071300 & 02071400) – Basic Duty – 30%.

c. Present level of duties : Basic Rate : 100% & 30%

Proposed level of du-ties : 20% for both

1. Chicken is basic non- vegetarian food, just like wheat and pulses in veg-etarian food. Basic import duty on chicken products is as high as 100% on its parts (ITS HS Code : 02071300 & 02071400) and 30% on whole chicken (ITC HS Code : 02071100 & 02071200).

2. Due to extremely high import duty on chicken products, India is not able to import chicken, Indian prices of chicken products re much higher than rest of the world prices most of the times. Indian chicken price is based on availability of chicken prod-ucts produced by Indian produc-ers only. Basic product like chicken, which is cheapest source of protein, should have price on India based on international price of chicken and protectionism policy must be abol-ished.

3. This shall have huge impact on food inflation.



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adVanCE autHorisation21. While making

application for advance authori-zation for import of inputs without duty, the appli-cant is required to mention the HS code of the c o m m o d i t y /product which shall be exported by utilizing the inputs imported against the said advance autho-rization and the quantity of each exported item.

To allow to mention different HS codes for export items with a consolidated figure of export against the said advance authorization instead of mentioning quantity against each HS code item

Since at the time of making applica-tion for advance authotisation it is not known what quantity of orders the ex-porter will receive against which HS Code item, it makes difficult for the ex-porter to mention the quantity against each item at the time of application.

LEVEL FiELd to doMEstiC CaPitaL goods sECtor22. Level Playing

Field for Domes-tic Capital Goods Industry

To encourage domes-tic capital goods man-ufacturing, to offset a part of the cost dis-advantages faced by the domestic Capital Goods manufactur-ers due to incidence of higher local taxes & duties and also to im-plement uniform tax structure, we propose the following:• Remove all exemp-

tions of Zero and 5%, i.e. impose customs duty – CD

The Capital Goods forms the backbone of any developing economy, and results in creation of jobs and development of skills in the manufacturing sector. It is clearly recognized that the manufactur-ing sector has a high multiplier effect on the economy.The Indian Capital Goods Industry has, built expensive and sophisticated manu-facturing facilities and has also acquired “State-of-the-art” technology for sup-plying complete range of equipment’s required by Core Sectors viz. Fertilizer, Power, Oil & Gas, Gas Process, Refinery, Coal Mining, etc. The Indian industry has also fully geared up to cater to the requirements of Defence, Nuclear power, Aerospace and other strategic sectors.



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10% + CVD 12.5%. Whenever, the final product like power, crude oil, etc. is not excisable, our rec-ommendation is to impose customs duty – CD 10% + CVD NIL.

• Impose additional duty equal to CST/ VAT on all proj-ects/ goods in lieu of CST/ VAT (2% / 15%) paid by local manufacturers. The additional CVD on all dutiable goods should be made in-eligible for Cenvat credit under Rule 3 of Cenvat Credit Rules 2004.

This will help:o In maintaining Uni-

form tax system.o Domestic industry

to compete with the foreign companies in India and cre-ate reference from Indian projects, which can be used for qualifying and securing business in overseas market.

o Domestic indus-try’s presence will

Government has given preferential treatment / exemptions to certain in-dustries and has reduced the custom duty from 85% to Zero / 5%, as per de-tails given below-• Zero duty (CD - Nil + CVD – Nil) for

Oil & Gas (NELP, Petroleum Opera-tions undertaken under specified contracts, Petroleum Operations un-dertaken by ONGC and OIL under PEL or ML issued or renewed after 1.4.99 and granted by GOI or any State Government on ‘nomination basis’). Power (specified 111 Mega Power projects), Nuclear Power Proj-ects, and Specified Goods for Road Projects, etc.

• Coal Mining and Fertilizer sectors have been brought under the am-bit of Zero basic custom duty in the union budget 2012-13.

• 5% duty (CD – 5% + CVD – 12.5% or as applicable) for Refinery, Power Generation, Renovation or modern-ization of a power generation / fertil-izer plant, High Voltage Transmission Projects, LNG Re-gasification Plant, Project Imports (98.01) etc.

For the above, due to the incidence of local taxes & duties, the domestic manu-facturers face the cost disadvantages to the extent of 12% to 26%, on account of sales tax, entry tax / octroi, higher cost of finance, inadequate infrastructure, etc. (details as per Annexure II).



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increase competi-tion and ultimately reduce the cost of the project.

o In long term main-tenance of the proj-ect at economical cost.

o Generate Multiplier effect on employ-ment generation & GDP growth.

23. BCD was in-creased from Nil to 10% for plans, design, Drawings which falls under CTH 4906

Request for restora-tion of the Nil rate of BCD.

In EPC business, this increase is going to be very steep.

24. Reduction in Cus-tom Duty on ar-ticles of iron & steel falling un-der Excise chap-ter 72 and 73

Iron and steel is major input for Capital goods industry and there-fore increase in basic custom duty on input material has adversely affected the Capital goods industry which is already reeling un-der economic slow-down. It is therefore requested that the Basic custom duty on articles falling under 72 and 73 be reduced to 5%.

Currently, iron & steel items falling un-der chapter 72 and 73 attract Basic cus-tom duty of 10%. Further certain items in Chapter 72 such as hot rolled flat sheets and plates of alloy or non-alloy attract Basic custom duty of 12.50%. Whereas import of Capital goods at-tract Basic custom duty of 7.5%. This has resulted in Inverted duty structure. Increase in basic custom duty on iron and steel items has discouraged manu-facturing of capital goods in India and has encouraged import of capital goods from overseas.



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25. Revised norms for execution of Bond and Bank guarantee un-der Advance Li-cense and EPCG Schemes

BG exemption be given based on only status holder certificates and Clause (c) of serial no. 3.2 of customs circu-lar no. 58/2004, dated 21.10.2004 be deleted.

Clause (c) of serial no. 3.2 of customs circular no. 58/2004, dated 21.10.2004, stipulates that the license holder can-not be given exemption from submis-sion of bank guarantee if he is penalized under the provisions of the Customs Act, 1962, the Central Excise Act, 1944, the Foreign Exchange Management Act (FEMA), 1999 or the Foreign Trade (De-velopment and Regulation) Act, 1992 during the last three financial years. In view of this, the Customs Authorities insist upon a letter from jurisdictional Central Excise Department seeking de-tails of pending cases and penalties lev-ied. Industries normally have cases pend-ing with CESTAT, appeals and courts at various levels. Almost every industry is bound to have cases which primarily and most importantly arise due to inter-pretation of law.

26. Import of Second Hand Machinery

• Customs duty on second hand ma-chinery should be enhanced to mini-mum 25% so that new machines are not imported un-der second hand machinery. Since the value of sec-ond hand machin-ery is very low the marginal increase of customs duty should not render imports costly.

(a) As per the present policy, old machinery can be imported without any restriction of age, resulting into huge import of second hand con-struction and other machinery into India. This is affecting the domestic capital goods industry adversely.



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unutiLisEd CEnVat oF EduCation CEss27. Cenvat credit on EC

and SHEC availed on material and services received even before 1st March 2015 must be permitted for set off for payment of ex-cise duty and service tax.

In the Union Budget 2015-16, the Union Finance Minister as a step towards the introduction of GST subsumed the Ed-ucation Cess (‘EC’) and Secondary and Higher Education Cess (‘SHEC’) being charged on Excise Duty and Service Tax into the overall duty rate.However, Budget 2015-16 did not throw any light on the credit being ac-cumulated in the books on account of EC and SHEC balances. The Govern-ment while bringing in such legislative amendments remained silent on the is-sue of treatment of these accumulated balances.Two months after the release of Bud-get 2015-16, the CBEC issued Notifica-tion No. 12/2015-Central Excise (N.T.) dated- 30th April, 2015 amending Rule 3(7) of the CENVAT Credit Rules, 2004 providing some respite to the manu-facturers. As per the amendment, the manufacturers were allowed to utilize the EC and SHEC paid on inputs or capi-tal goods received in their factory on or after the 1st March, 2015. Similarly, nearly at the end of the eighth month from the release of Budget 2015-16, the CBEC issued another Notification No. 22/2015-Central Excise (N.T.) dated 29 October, 2015 on the admissibility of CENVAT credit of EC and SHEC paid on input services/inputs/capital goods received in the premises of the services provider after 31 May, 2015. While the above two notifications, al-beit delayed, provided some respite, the issue of unutilized balances of EC and SHEC continues to hover till date.



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ELECtroniCs sECtor issuE28. Duty exemption

on parts and components

Exemption should also be provided to parts and compo-nents required for after sales market in order to promote manufacturing of products in India

For certain industries (for example mobile phones), parts and compo-nents required for manufacturing of various goods can be imported or procured from domestic market without payment of duty. Further, the benefit has been extended to sub-parts for manufacture of such parts

Excise duty is levied on manufacture of parts and components for after sales services market. Duty and tax incidence on said products tend to promote grey market and discourage domestic manufacturing

Input taxes become cost for manufac-turer of components as final product is exempt

29. Customs (Im-port of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 (‘IGCR’)

The requirement of furnishing bond should be relaxed and the undertaking should suffice.

As per the IGCR, the manufacturer who intends to avail the benefit of exemp-tion has to submit a continuity bond with such surety or security undertak-ing to pay the amount equal to the cus-tom duty not paid. The value of imports is of a significant amount, and thus the importer/ manufacturer is required to continuously upgrade the bond values adding to administrative hassles.

30. Encourage do-mestic manufac-turing

Increase and Ratio-nalisation on customs duty rates on such goods to encourage domestic manufactur-ing of these goods in India by making In-dian manufactured goods competitive in local market.

The current Basic Customs Duty (BCD) on various appliance and consumer electrical goods illustrated below is 10 percent: Microwave Ovens Air Conditioners Washing Machines Refrigerators LCD/LED TVs



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Further, BCD rates of components of these goods which is pres-ently in the range of 7.5 -10% should be continued as such. This is to ensure that domestic manufactur-ing of components is also encouraged which will lead to a develop-ment of full scale sup-ply ecosystem for such goods in India.

Further, these goods enjoy concessional rate of BCD under various FTAs.The above duty structure makes the im-port of these finished goods easier and cheaper as compared to local manufac-turing of the same in India. This has further resulted in erosion of the component supply base in India, since there was not enough domestic demand to be catered to by the compo-nent manufacturers and they could not reach economies of scale.

31. Encourage high Energy Efficien-cy Rating (EER) products

It is suggested that an incentive scheme be introduced to encour-age manufacturers which produce high EER products. This could involve providing (i) BCD ex-emption on parts for manufacture of prod-ucts with high EER; (ii) Merit output rate on finished products based on their EER.This would not only stimulate consumer demands but also in-centivize customers to replace products like old inefficient room ACs by new units.This would also re-sult in significantly decreased power con-sumption.

Presently, there is no incentive from the Government in respect of high EER products.Higher Star Rating saves more energy, but also costs more – results in low con-sumer demand.



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32. Encourage non-ozone depleting substance with low global warm-ing potential (GWP) technologies

BCD exemption should be rationalized and extended to: Raw materials /

components / con-sumables for pro-duction of equip-ment / products based on non-ODS Low GWP technolo-gies

Equipment im-ported for setting up R&D / Testing and Calibration fa-cilities for develop-ment of non-ODS Low GWP products and components

It will help set-off higher production cost of products (like air-conditioners) with non- ODS technologies when compared to R-22 (HCFC) technolo-gies. Extending exemption as above will encour-age development and adoption of GWP tech-nologies in the Indian markets with favor-able environmental impact.

Presently, BCD exemption is available in respect of capital equipment required for projects for:(a) Substitution of Ozone Depleting

Substances (ODS)(b) The setting up of new capacity with

non-ODS technology


CEnTRAl EXCISE

CorrECtion oF inVErtEd dutY struCturE-PHarMa1. Correction of

Inverted Duty Structure in Pharmaceutical industry

Excise duty on APIs and raw materials used for manufacture of APIs should be re-duced to 6%. Alterna-tively, a refund mecha-nism should be put in place so as to provide for refund of such ac-cumulated Cenvat credit.

The pharma products classifiable under Chapter 30 of the Central Excise Tariff are exigible to excise duty at a conces-sional rate of 6% keeping in mind the essential nature of the medicines. The said fiscal advantage has been provided as a welfare perquisite considering the essential nature of these products.The principal raw material required for manufacturing the pharma products is API (Active Pharmaceutical Ingredi-ent) classifiable under Chapter 29 of the Tariff. However, APIs and the raw materials required for manufacture of APIs are taxed at 12.5%. This creates an ‘inverted duty structure’ where the rate of duty on the principle raw mate-rial is twice the rate of duty of the final product, resulting in huge accumulated unutilized Cenvat credit which finally culminates into higher price of pharma products.Thus, the objectives of Government to make available affordable healthcare by reducing the rate of excise duty does not achieve fruition owing to the invert-ed duty structure.

rationaLisation oF dutY on tEXtiLE industrY

2. To encourage the usage of the right fibre for every application and to meet National

it is proposed inter-mediate duty regime i.e Excise rate of 2-6% and bring textiles chain in CENVAT. The

The net cash revenue accrual to Gov-ernment of India on Excise Duty on Man Made Fibres (after modvat adjustments) is Rs. 650 cr. Although by reducing the duty to 6% there will be a revenue loss




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Textile Policy 2025 challenges, excise duty rates to be rationalized.

present duty of 12.5% be reduced to 6% on MMF and its raw ma-terials. The fiber for-ward chain which is currently Zero duty be brought under 2% ex-cise duty.

of Rs. 325 cr, this will be more than made up as there will be a minimum growth of 5% in the domestic Man Made Fibre production in the first year itself.In case GST is to be made effective, there should be no exemptions and the rate should be common across the Textile Value Chain preferably the lower rate.Indian textile sector is not able to real-ize the real potential due to tax inequal-ity between Cotton & MMF (zero excise on cotton & 12.5% Excise on MMF) and it has resulted in India remaining a cot-ton based textile economy (60% cotton and 40% MMF) and being underrepre-sented in global trade (leveraged with 70% MMF and 30% cotton).Please refer to Annexure-I which gives details as to how the demand of MMF grew when Excise Duty was lower.China, Bangladesh, Vietnam and other Asian economies do not discriminate in taxes among natural and manmade fi-bres and have been growing in double digit. Textile growth in India is hardly in single digit due to distorted taxa-tion structure introduced in July 2004. Please refer to Annexure-II.In order to achieve a textile industry size of $ 350 billion with an export target of $ 200 billion, India needs about 20 bil-lion kg of textile fiber from current level of 10 billion kg comprising 6 billion kg of Cotton & 4 billion kg of MMF.Availability of cotton in India with glob-al yield of 850 kg/ha will take Indian cotton production to ~9 Bn kg. Indian cotton is rain dependent and limited



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agricultural land which will make this target very optimistic. Even in case we assume cotton reaches 10 billion Kg, it accounts for 40% of the textile fiber de-mand against its current share of 60%. To meet the demand gap, we need to in-vest and increase MMF production from current 4 billion kg to 15 billion kg.This calls for a huge investment in MMF plant & machinery using high technol-ogy. MMF being highly technology de-pendent has a potential of attracting needed FDI. The reduction of Excise Duty to 6% and its extension across the textile value chain even at 2% will significantly in-crease the revenue. The entire textile value chain was under Central Excise prior to 2004.

rEMission oF dutY on unMarKEtabLE goods 3. Remission of

duty under Rule 21 CEr, 2002 - Measures to re-duce litigation.Rule 21 of the Central Excise Rules, 2002 pro-vides for remis-sion of duty on m a n u f a c t u r e d goods provided the goods are ei-ther unmarket-able or unfit for consumption

The claim of un-mar-ketability/ fitness made by the manu-facturer should be ac-cepted by the authori-ties if such goods are not sold.

. The manufacturer’s decision not to sell the goods results into a much bigger monetary loss to the manufacturer as compared to the duty loss in relation to such goods for excise authorities. It may kindly be appreciated that no manufac-turer will suffer a monetary loss with-out a valid justification. This measure will not only result into a substantial reduction of litigation but also save the manufacturer’s storage space within the factory for productive utilization. It is also suggested that a specific time limit be incorporated in the Central Excise Act/Rules or timely disposal of such remission application made by the Manufacturer.



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4. duty on ciga-rettes destroyed during in-house quality testing – also CbECManu-alreuire update

Amendment of clause 3.2 of CBEC’s Central Excise Manual is re-quired and clarifica-tion to be issued on the following aspects:-1. It may provide for

non-payment of duty on cigarettes taken to in-house laboratory and destroyed in the course of conduct-ing quality control tests.

2. It may further pro-vide the kind of re-cords required to be maintained by the manufacturers to avail of such duty waiver in line with the judgment of the Supreme Court in the matter of ITC Limited [2003, Pat-na (151) ELT 246 (SC).

Recently, the Board vides Circular No. 1006/13/2015-CX dated 21.09.2015 has also clarified that circulars which are contrary to the judgment of Hon’ble Supreme Court need not be followed Para 3.2 of Chapter 11 of the CBEC’s Central Excise Manual continues to provide for payment of duty on such cigarettes taken for use in the in-house quality control laboratory. This contra-diction between the Apex Court’s judg-ment and the CBEC’s manual is leading to the issuance of protective demands by the departmental authorities

aMEndMEnt to ruLE 65. Amendment in

rule 6 of the CEnVat Credit rules, 2004 to enable manu-facturer of no-tified goods to take propor-tionate credit of

Rule 6 of CCR, 2004 along with definition of “exempted goods” as appearing in Rule 2(d) of the said rules should be amended to include goods notified under Section 3A of the Cen-tral Excise Act, 1944.

To remove difficulty in availment of proportionate Cenvat Credit of common inputs & input services used in manu-facturing notified goods under Section 3A of the Central Excise Act and other dutiable goods in the same factory



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common input services used for manufac-turing notified goods as well as dutiable goods.

ruLE 11 sHouLd not bE aPPLiEd to EXPorts (dECLaration oF rsP)6. Rule 11 of the

Pan Masala Packing Ma-chine (Capacity determination and C o l l e c -tion of duty) rules, 2008 re-quires amend-ment to exclude notified goods meant for Ex-port in terms of Pan Masala RulesRule 11 of the Pan Masala Packing Machine (Capaci-ty Determination and Collection of Duty) Rules, 2008 requires a manufacturer to declare the RSP on the packages of goods fall-ing within the purview of said rules. The provi-so to Rule 11 fur-ther provide that

It is suggested that requisite amendments may be carried out in Rule 11 of the Pan Ma-sala Packing Machine (Capacity Determina-tion and Collection of Duty) Rules, 2008 to exclude from is scope, goods meant for ex-ports.

This legal position is causing undue hardship inasmuch as, a domestic man-ufacturer of Pan Masala or other simi-lar products falling under Section 3A of the Central Excise Act, 1944 is un-able to fulfill its export commitments as the foreign buyer is not willing to accept packages that carry the RSP as would be applicable to goods sold in compliance with the Indian laws for the domestic market. For the buyer of the product, such goods after being import-ed into the buyers’ country will have to comply with their local laws, rules and regulations that govern the packaging and labeling requirements of the buy-ers’ country. This situation is resulting in loss of business opportunity for the manufacturers of notified goods for ex-ports and consequent loss of foreign ex-change earnings through such export.



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where a manu-facturer fails to declare the retail sale price before removing the goods from the place of manufac-ture, then such goods shall be li-able to confisca-tion.It appears that Rule 11 applies to clearances made by a manu-facturer of Pan Masala for sale in the domestic market and not for export sales; however, there is no express pro-vision in the Pan Masala rules for not printing of RSP of Pan Ma-sala pouches manufactured for export.It is significant to note that the Pan Masala Rules, otherwise, allow export of noti-fied goods under rebate of duty in terms of Rule 14 read with



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Notification No. 3 2 / 2 0 0 8 - C . E . (N.T.), dated 28-8-2008. However, rebate of such duty is also based on the RSP print-ed on pouches meant for ex-ports.

The aforesaid le-gal position has also been given effect under cen-tral excise laws in as much as MRP based assess-ment envisaged under Section 4A of the Central Ex-cise Act has not been made ap-plicable to goods meant for export. The requirement under Section 4A of the Central Excise Act, 1944 to compulsorily print MRP on the retail packages is therefore not ap-plicable for pack-ages meant for exports.



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7. Amendment to Central Excise (Removal of Goods at Con-cessional Rate of Duty for Manu-facture of Ex-cisable Goods) Rules, 2001

Amendment to Central Excise Act Required de-leting ‘Proviso’ added requiring not to accept ‘Letter of Undertaking’ if Show Cause Notice is issued. This is needed in the considering (a) current difficult eco-nomic situation across the globe and (b) pres-ent situation prevailing in indirect tax adminis-tration where SCN are issued as a matter of routine. This will facili-tate trade and industry and promote “Make in India”/ “Ease of Doing Business in India”.

A proviso has been added under which letter of undertaking will be accepted only from a manufacturer against whom no show cause notice has been issued under sub-sections (4) or (5) of sec-tion 11A of Central Excise Act, 1944 or where no action is proposed under any notification issued in pursuance of rule 12CCC of Central Excise Rules, 2002 or rule 12AAA of CENVAT Credit Rules, 2004.Though the above sections and rules re-fer to non- payment of duty with intent to evade duty, suppression, fraud, etc. and restrictions which the authorities can raise, the problem with this proviso will be on account of the fact that the departmental field-formation routinely issues SCNs, invoking extended period alleging evasion of duty, suppression of fact, etc. which are not substantiated with any evidence and are subsequently dropped after a number of years. Such show cause notices can be found even in cases where specific intimation had been given to the department and as-sessee is in possession of acknowledg-ment of such intimation or in cases where similar SCNs had been issued for earlier period, from which it is ab-solutely clear that department was fully aware about the facts.

dEFEnCE ProJECts- dEEMEd EXPort status /EXEMPtion8. Deemed export

status for defense project

Benefit of Deemed Ex-port project should be extended to all the De-fense projects which are awarded through

At present Deemed Export Status is avail-able only to projects such as Supply against Advance Authorization, Supply of goods to EOU, supply of Capital goods against Authorization under EPCG Scheme,



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International Compet-itive Bidding. Similar benefit should be ex-tended to Indian off-set partner as well as to its sub-contractor. Further, deemed ex-port benefit should be by way of outright exemption from pay-ment of Excise duty in-stead of by way of re-fund of terminal duty as it leads to blockage of fund and results into additional cost by way of interest. It is suggested that:Sr. No. 7.02 of Chap-ter 7 of Foreign Trade Policy be amended by adding paragraph (i) as under:(i) supply of goods to Defense projects un-der Ministry of De-fense.This benefit should also be extended to In-dian offset partner of Foreign Defense Sup-plier as well as to its sub-contractors.Further paragraph (d) be added to Sr. No. 7.03 of Chapter 7 of Foreign Trade Policy as under:

Supply of goods to projects financed by Multilateral or bilateral agencies/Fund as notified by Department of Economic Affairs, MOF under International Com-petitive Bidding (ICB), Supply of goods to power projects and refineries, supply of goods to nuclear power project etc. The purpose behind this exemption is to encourage Indian Industry to manu-facture the required equipment and to help Indian manufacturer to compete with foreign supplier in terms of cost. It also saves valuable foreign exchange for the country and helps in growth of In-dian Industry and reduces dependence on foreign countries for supplies.Exemption under Deemed Export is available both to Main Contractor as well as Sub Contractor. This helps Main contractor to procure goods at low cost from subcontractor and pass on cost saving benefit to the ultimate customer.



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(d) Exemption from terminal excise duty shall also be available for supplies to De-fense projects under Ministry of Defense”. This will help suppli-er of Defense Equip-ments to avail outright exemption from pay-ment of Excise duty instead of refund of terminal duty as it leads to blockage of fund and results into additional cost by way of interest.

9. Excise Duty Ex-emption to Pri-vate Sector

It is suggested that the conditions of Sr. No. 3, 7, 8, 19, 21, 22, 23, 34 & 35 of Excise No-tification No. 64/95 be amended to include as under:“If supplied by Indian offset partners of For-eign Defence suppliers or sub-contractors to the main contractor for use in the manu-facture of the goods required for the said program.”This will enable Private Sector Licensed Manu-facturers or sub-con-tractors of Private Sec-tor Defence Licensed

As per Excise notification 64/95 dated 16.03.1995, benefit of excise exemp-tion is available only to Government Factories, Public Sector undertakings, Main Contractors and sub-contractors of Public Sector undertakings. However, at present Ministry of Defence do not is-sue Excise Duty Exemption certificate to Indian Offset Partner of Foreign Sup-plier or sub-contractor of Indian Private Sector defence supplier.As per the offset clause of Ministry of Defence, Foreign supplier has to ex-ecute minimum of 30% of the work through Indian defence industries, i.e., through Defence Public Sector Under-takings, the Ordnance Factory Board, and any private Defence industry. In-dian offset partner of Foreign Defence supplier is adversely affected as Minis-try of Defence do not issue Excise Duty



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Manufacturers to obtain Excise Duty Exemption certifi-cate from Ministry of Defence and supply goods without excise duty.

Exemption certificate to Private Sector Indian Offset partner and hence Excise duty is applicable. This makes Private Indian offset partner who supplies goods to foreign supplier in India for further supply to MOD uncompetitive in comparison with Main Foreign contrac-tor. Whereas, foreign supplier export-ing Defence equipment directly from foreign country supplies the equipment under CDEC with NIL Duty

10. Exemption from Excise Duty to Job worker who carries out Job work for Private Defence manu-facturer and used for specified pur-poses

It is suggested that the Table to the Ex-cise Notification No. 63/95 Dt. 16.03.1995 should be amended by adding Sr. No. (IX) & (X) as under:(IX) Indian Offset Part-ner of Foreign Defence Supplier(X) Private sector In-dian Defence Supplier.This will provide level playing field to private sector licensed manu-facturers of Defence equipment in com-parison with Defence Public Sector Under-takings (DPSU).The will also help pri-vate sector licensed manufacturers to get job work done in line with the exemption provided to Defence Public Section under-taking.

As per Excise Notification 70/92 Dated 17.06.1992, goods manufactured in a factory as a job work and used by the following undertakings in or in relation to the manufacture of final products for supply to the Ministry of Defence for official purposes are exempt from pay-ment of Excise duty.(i) Hindustan Aeronautics Limited.(ii) Bharat Electronics Limited(iii) Bharat Dynamics Limited(iv) National Instrument Limited(v) National Aerospace Laboratories(vi) Mishra Dhatu Nigam.(vii) Bharat Earth Movers Limited(viii) Indian Ordnance Factories belong-

ing to the Central Govt.This provides them a cost advantage by savings in Excise duty on their inputs in comparison with private sector licensed manufacturer who has to pay excise duty on work done by job-worker. This adversely affects the licensed private manufacturer of defence equipment.



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11. Reimbursement of Taxes for sup-plies under Offset Clause of Defence Procurement Pol-icy (DPP):

Since the Govt. bears the T&D (specifically the Customs duty) in case of import from Foreign OEM, in order to facilitate Indigenous System Integration capability building, Government should reimburse the taxes & duties borne by Indian Offset Partner during discharge of offsets.

As per the present Tax and Duty regime, an Indian Offset partner delivering di-rectly to MoD on behalf of the foreign OEM, without the items getting physi-cally exported, is required to pay taxes on the work done within the country. There is no mechanism for these taxes to be reimbursed and consequently off-set orders on Indian companies remain limited to low end sub-systems only.

12. Excise Duty Ex-emption to all I n t e r m e d i a t e M a n u fa c t u r i n g Activities Carried Out by Sub-con-tractors at SBC Vizag in relation to defence pro-duction

Sub-contractor who is manufacturing inter-mediate goods within SBC Vizag premises should also be exempt from payment of Ex-cise duty. This will help to reduce overall project cost and pass on the benefit of cost saving to ultimate cus-tomer.

It is suggested that the conditions of Sr.No. 19 of Excise Notifica-tion No. 64/95 dated 16.04.1995 be amend-ed as under:

“If supplied by sub-contractors to the main contractor for use in the manufacture of the goods required for the said program.”

At present Warships are classified un-der Excise Tariff No. 89061000 and are chargeable to NIL Excise Duty. Whereas parts of ships are classified under Excise Tariff 73269080 and are chargeable to Excise Duty at 12.5% ad valorem. Most of the activities of manufacturing are carried out by main contractor through subcontractors. Though the manufac-turing activities carried out by Main Contractor are exempt from Excise duty (as Final goods carries NIL rate of Excise duty), manufacturing activities carried out by Subcontractor are chargeable to Excise Duty (as intermediate goods are chargeable to Excise duty as per Tariff rate). As per Excise notification 64/95 dated 16.03.1995, benefit of excise exemp-tion is available only to Government Factories, Public Sector undertakings, Main Contractors and sub-contractors of Public Sector undertakings. However, at present Ministry of Defense do not is-sue Excise Duty Exemption certificate to sub-contractor of Indian Private Sector



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This will enable main contractor to obtain intermediate goods from Sub-contractor without excise duty.

Defense supplier. Therefore sub-con-tractors are liable to pay Excise duty on items supplied to Main contractor for the defense projects.Further as per Rule 6 of Cenvat Credit Rules, 2004 Cenvat credit is not allowed on inputs used in or in relation to man-ufacture of exempted goods. As Cenvat credit on input is not available to the manufacturer of exempted goods, this result into increase in the overall cost of manufacturing of final product. This additional cost is passed on to the ulti-mate customer.

WatEr suPPLY ProECts13. Excise Duty Ex-

emption for goods used in water supply project

The available excise duty exemption may please be extended to the goods required for construction work including for other stages of water supply projects viz.1. Water Pumping Sta-

tion at the source of water.

2. Water storage facil-ity.

Excise duty exemption presently avail-able only for goods required for water treatment plant of Water supply proj-ect. Similar excise duty exemptions are not extended to other stages of water supply project and Pipelines for deliv-ery of water.

nuCLEar PoWEr ProJECts 14. Excise Duty ex-

emption- Nuclear Power Projects

Suggested to provide exemption from pay-ment of ED for the goods supplied to the Nuclear power proj-ect similar to one ac-corded to Mega Power project vide Notifica-tion No. 12/2012 dat-ed 17.3.2012.

Setting up nuclear power project is given high priority by the Government due to environment concern from tradi-tional coal based power generation. In order to encourage investment in such projects, fiscal incentive is essential.



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CEnVat CrEdit- goods suPPLiEd undEr notiFiCation 10/97 & 64/9515. Cenvat Credit on

Inputs used in Manufacture of exempted goods supplied under Excise Notifica-tion 10/97 & 64/95

At present supplies to power project, Solar Power Projects, SEZ, EOU, Exports etc. are exempted from Ex-cise duty. However, in all these cases Cen-vat credit on Inputs and Input services are allowed even if fi-nal product is exempt from payment of ex-cise duty. The excep-tion for non-reversal of Cenvat credit is pro-vided in Rule 6(6) of Cenvat Credit Rules, 2004. We suggest that the Rule 6(6) be amended by adding sub clause (x) and (xi) as under:“(x) Supplies of goods to Research institutes under administrative control of Government of India under Excise Notification 10/97.(xi) Supplies made to Ministry of Defence / Ministry of Space un-der Excise Notification 64/95.”

At present items supplied to Research institutions under the administrative control of Government of India are ex-empt from payment of excise duty un-der Excise Notification No. 10/97 Dt. 01.03.97 and items supplied to Defence Department are exempt from payment of excise duty under Excise Notification No. 64/95 Dt. 16.03.95. As per Rule 6 of the Cenvat Credit Rules, 2004 Cenvat Credit of goods used for manufacture of final product which is exempted from payment of excise duty is not allowed. This results into additional cost to the Indian manufacturer whereas foreign supplier by availing Custom Duty Ex-emption Certificate supplies equipment to MOD with NIL Custom Duty. This makes Import cheaper and local sup-plies costlier and do not provide level playing field to Indian supplier.



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sEWagE ProECts16. Exemption of

Excise Duty & Swachh Bharat Cess: for goods used in Sewerage project

It is suggested that the goods required for setting up of Sewerage Projects, need to be ex-empted from payment of excise duty and Swachh Bharat Cess (to eliminate its cas-cading impact since it is not Cenvatable) by way of a notification to reduce the cost of setting up of sewerage project.

“Swachh Bharat” being major govt. ini-tiative and sewerage and Sewerage Projects are important aspect in Public Health and Sanitation. There is no specific notification provid-ing exemption to goods used for setting up of Sewerage Projects as is available for water supply projects.

CritEria For banK For guarantEE bE rELaXEd17. Revised norms

for execution of Bond and Bank guarantee un-der Advance Li-cense and EPCG Schemes

BG exemption be given based on only status holder certificates and Clause (c) of serial no. 3.2 of customs circu-lar no. 58/2004, dated 21.10.2004 be deleted.

Clause (c) of serial no. 3.2 of customs circular no. 58/2004, dated 21.10.2004, stipulates that the license holder can-not be given exemption from submis-sion of bank guarantee if he is penalized under the provisions of the Customs Act, 1962, the Central Excise Act, 1944, the Foreign Exchange Management Act (FEMA), 1999 or the Foreign Trade (De-velopment and Regulation) Act, 1992 during the last three financial years. In view of this, the Customs Authorities insist upon a letter from jurisdictional Central Excise Department seeking de-tails of pending cases and penalties lev-ied. Industries normally have cases pend-ing with CESTAT, appeals and courts at various levels. Almost every industry is bound to have cases which primarily and most importantly arise due to inter-pretation of law.



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rEbatE CLaiMs For EXPorts18. Use of EDI Sys-

tem for Clearance of Rebate Claim on Exports

Excise Department should view the Ship-ping Bills online and clear the rebate claims without insisting on receipt of a physical signed copy of Ship-ping Bills and ARE 1. This will considerably reduce the transac-tion cost and shall give competitive edge to the exporters in the global markets.

For claiming excise rebate, the excise de-partment asks for signed copy of Ship-ping Bills and ARE1 endorsed by the Customs Department. These documents are not promptly released by customs; as a result, the exporter’s rebate claim is not filed immediately after sailing of vessel carrying the exported cargo.

sPECiaL audit undEr sECtion 72 oF FinanCE aCt to bE dELEtEd19. Special Audit un-

der Service Tax/Central Excise under Section 72 of the Finance Act

Section 72 prescribing special audit should be withdrawn. Mul-tiple audits currently provided need to be curtailed to maximum 2 Audits to create en-vironment of ease of doing business.

Section 72 of Finance Act provides ar-bitrary and unguided power to order for special audit at the Commissioner’s which is prone to misuse. “Reasons to believe” having been not defined is wide open for interpretation by the field for-mation. This audit is in addition to other ex-isting audits like Departmental Audit, EA-2000 Audit, Tax, Investigation by Tax-Evasion Dept. CERA Audit, and In-vestigation by DGCEI. All these Depts. would audit/investigate same records and burden the hapless assessee which will seriously affect the normal func-tioning of the assessee.

EXCisE dutY For ProduCts usEd in agriCuLturE20. C o n c e s s i o n a l

Rate of Excise Duty for Motor Starters, Agricul-tural Capacitors

The excise duty rate of following products, which are mostly used in agriculture sector, be reduced to 6%:

Motor Starters, Agricultural Capacitors and Submersible Flat Cables, up to cer-tain capacities, are mainly used in the agriculture sector and attract an excise duty of 12.5%. However, the following



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and Submersible Flat cables

1. Motor Starters for agricultural use/ handling water (used for motor power rating up to 7.5 kW / 10 HP or up to Relay range 14-23A etc.)

2. Agricultural Capac-itors up to 6 kVAr

3. Submersible Flat Cables up to 6 sq. mm. cross section areas

other products mainly used in agricul-ture sector are wholly or partially ex-empted from excise duty in the follow-ing manner:(a) Specific goods intended to be used

for the installation of cold storage, cold room or refrigerated vehicle for the preservation, storage or trans-portation of agricultural p r o d u c e Notification no. 12/2012 CE dated. 17.3.12 (Sr. No 232) – NIL excise duty.

(b) Tractors - Notification no. 12/2012-CE dated. 17.3.12 (Sr. no. 277) – NIL excise duty.

(c)Power driven pumps primarily de-signed for handling water – Notifica-tion no. 12/2012- CE dated. 17.3.12 (Sr. No 235) – 6% excise duty.

PErMit onLinE subMission oF ProoF oF EXPort tHrougH aCEs21. Submission of

proof of export and re-credit thereof

We suggest to make provision for online submission through ACES system of An-nexure-19 & proof of export documents (i.e. uploading of scan cop-ies)Automation will ease out paper work & save time. Automation will provide the past data/ documents for any fu-ture reference.It will be helpful if the customs export docu-ments like shipping bill, bill of lading are linked to this proof of export.

Proof of export is submitted to the Di-visional office through Range office in form Annexure-19 once in a month along with the original copies of A.R.E-1 duly endorsed by Customs, self-attested photocopy of Bill of Lading, Export Pro-motion Copy of Shipping Bill & mate re-ceipt for sea consignment.



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ELECtroniCs sECtor issuE22. Excise duty re-

duction to effec-tively compete with imports

• Due to show down in global economy particularly China there is large scale import of electron-ic goods and their parts which are adversely affecting Indigenous manu-facturers.

• Government should protect such unfair completion from Import by signifi-cantly reducing ex-cise duty on elec-tronic goods and their parts. Similar benefits was ex-tended to mobile phones and tablets in the past which helped Indian man-ufacturers.

• This measure shall give a boost to the manufacturing sec-tor in India and thus would be a boon for “Make In India”

• Excise duty rates on electronic goods manufactured in India compared to duty on import as was done earlier on mobile phones, tablets and their parts where duty was significantly reduced compared to imports, to promote manufacture in India.


SERVICE TAX


sErViCE taX issuEs1. double taxa-

tion of the same transaction un-der service tax and Vat

Double taxation of the same transaction un-der Service Tax and VAT need to be discon-tinuedas it leads to cas-cading effect on cost. There are instances of lease rental transac-tions for machinery or aircrafts being taxed by the service tax au-thorities as service as “supply of tangible assets”Whereas the same rental transac-tion is considered by State VAT Authorities as deemed sale and taxed under VAT. As ‘Transfer of Right to use’.This leads to long liti-gation and double tax-ation having cascading effect of tax on cost.

The respective legislative authority should endeavor in laying down con-ditions precedent involved in both the transactions i.e. that of deemed service and deemed sales more explicitly. This would avoid the incidence of double taxation on the same lease rental trans-action and also reduce unnecessary liti-gation.

2. service tax on securitization transactions: i.e income from in-terest gain

Since the Government intention is not to tax interest on loan, the gain from securiti-zation of such loan transactions should not be taxed. Suitable

Service Tax officers in some commis-sion rates have the predetermined no-tion that some elements of services may be embedded in Securitization process whereas Securitization does not involve rendition any other service except in-terest gain. Interest is not liable to ser-vice tax.



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clarification should be issued by CBEC clari-fying that no Service Tax would be levied on any financial gain arising to the Origina-tor (i.e. NBFCs) on ac-count of Securitization of any financial assets such as loan, receiv-ables.

3. Time limitation for issuance of sCn for cases not involving fraud should be reduced from 30 months to earlier time limit of 12 to 18 months

In order to reduce tax uncertainty and litiga-tion, 12 to 18 months’ period is adequate to do any verification by tax depart as was fixed in the past. It is rec-ommended that ap-propriate notification need to be issue to re-store earlier time limit of 12 to 18 months in the case of cases not involving frauds. It will ease of doing the business.

Time limit for issue of SCN was in-creased to 30 months vide the Finance Act 2016 for even non-fraud cases from 18 months. Prior to 18 months it was 12 months. This long period of uncertainty has wide and far reaching negative im-pacts for the major and diligent busi-ness houses Pursuant to the change in era of auto-mation and technology, when there is a provision for compulsory e-filing of service tax returns and mandatory e-payment of service tax, the extension of time period for issuing SCN is not prudent. Non fraud cases are mainly due to error while filling in statutory e-returns or making e-payment of ser-vice tax or purely due to difference in interpretation of statutory provisions of law. The reason for introducing e-filing of service tax returns and e-pay-ment of taxes is that, the Department can immediately scrutinize the same and seek all necessary clarifications if required from tax payers. Therefore any such scrutiny should not be post-ponedtill 30 months.



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4. service tax should be waived on funds received from Central govt. as aid or subsidy.

Many a times Private Entrepreneurs part-ner with Government Authorities TIE-UP for developing infrastruc-ture facilities across the country,especially in the Rural areas for masses to achieve the overall socio-econom-ic objectives of the Government of India by forming Public – Private Partnership (PPP Model). Service tax Exemption on Govt. aid/grant received from Government to meet Socioeconomic objectives for rural masses should be al-lowed either by inclu-sion in negative list or through exemption notification.

Service Tax Authorities have been issu-ing show-cause notices and also raising demands for Service Tax on the afore-said Government grants-in-aid. This is creating immense hindrance in carry-ing out mass socio-economic reform activities for the Below – poverty- line masses in India.

5. service tax on sale/ licensing of software and it Hardware.

Clarification towards the levy of service tax upon either Sale or li-censing of software or hardware should be released.

The service tax authorities in the field formations are charging service tax on both sale of software as well as hard-ware. It is evident in the case of supply of hardware as direct sale when owner-ship is transferred or deemed sale when right to use is transferred. This has nothing to do with provision of service. There is no essence of supply of service in the instant situation of supply of IT hardware.



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6. service tax and sales tax on same transac-tion of licensing of software and other intellec-tual properties.

Clarification towards the levy of service tax and sales tax upon sale of software licenses should be issued. Such transactions involving licensing of software or other intellectual properties like trade-marks, should either be subject to Sales tax or subject service tax. Both taxes should not be levied on the same transaction value.

At present the software development in-dustry is facing huge tax burden where States levy – VAT and Centrelevy Ser-vice tax on the same value of software licenses leading to cascading effect of tax.

7. rule 7b of ser-vice tax rule, 1994: The ser-vice tax return can be revised only once in 90 days.

We advise that this limit should be in-creased.

The timeline of 90 days and opportuni-ty of only one revision is not sufficient.

8. reverse Charge: Partial reverse charge should be discontinued as it complex and creates confu-sion, particularly when the service provider take abatement.

We advise to remove the partial reverse charge from all types of services.

Service under partial revers charge have been reduced in the past but there are still some services such as work con-tract and renting of motor vehicles that covered under partial reverse charge.Sometimeswhen service provider or service receiver are small entities, there is possibility to give correct tax treat-ment under partial reverse charge, this leads to non-compliance.

9. service category based registra-tion to be re-moved: Registra-tion provisions

It is recommended that assessees be provided with facility for self-declaration and cer-tification under ACES

Frequent amendments to the existing registration to incorporate new servic-es, increases administrative burden on the assessee and departmental officers without any value addition.



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under service tax require the as-sessee to register for various ser-vice categories which are/ will be provided. This requires assessee to amend the ser-vice tax registra-tion certificate time and again to incorporate new service category as a provider or receiver of said service.

for any addition of new service category. Automatic system of approval should be in-troduced for addition or deletion of service category.

10. R e q u i r e m e n t to submit docu-ments in hard copies for ob-taining/amend-ing service tax– There is specific list of documents which ought to be submitted. But that is not enough and it is to be checked with each offi-cial/authority if he requires ad-ditional docu-ments.

It is suggested to keep uniform practice across all officers/ au-thorities and the us-age of paper submis-sions in physical form should be minimized by allowing the as-sessee to upload the soft copy of any sup-porting documents (if required).

The current practice not only results more usage of paper but also additional time and effort for their submission.



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11. Payment of service tax un-der service specific ac-counting codes – Circular No. 165/16/2012 ST read with No-tification No. 48/2012 pro-vides for pay-ment of service tax under ac-counting codes.

It is recommended that this Circular be withdrawn and single code for depositing service tax liability be introduced as against multiple service spe-cific codes. If requires, separate statement of information can be filed for Statical pur-pose

Administrative inconvenience at the time of filing of service tax returns.

12. Recognition of date of submis-sion of the re-turn as the date of filing – Usu-ally the return is accepted by the ACES portal after 12 to 24 hours of uploading, lead-ing to rejection of returns uploaded on the penulti-mate/last date of submission.

It is suggested that once a return is up-loaded and “submit-ted” the same should be considered to be “filed” immediately.

There are late fees implications on grounds of delay in filing of return due to non-acceptance by the system in real time, which is beyond assessee’s con-trol.

13. Filing of ER-2 re-turns by the STPI units

It is suggested that such assessees should not be mandatorily required to file such returns as it results in dual accounting and reporting.

STPI units do not manufacture any ex-cisable goods as mostly these units are service providers in IT/ITES sector. If for any reason, any additional informa-tion is required by the authorities, it can be incorporated in the other compliance forms (such as ST-2 return/ STPI filing) as applicable for these units.



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14. Requirement of Certificate from a Statutory Audi-tor for obtaining speedy refund by exporters of services un-der Circular No. 1 8 7 / 6 / 2 0 1 5 - Service Tax dat-ed 10.11.2015 vide F. No. 1 3 7 / 6 2 / 2 0 1 5 - Service Tax.

It is recommended that the condition of providing a statutory auditor’s certificate should be replaced with a certificate is-sued by any Chartered Accountant holding certificate of practice.

Such strict condition makes a beneficial circular completely redundant. Compa-nies are incurring huge costs for pro-curing the certificate from their statuto-ry auditor as the conditions provided in the certificate requires complete verifi-cation of the refund claims by statutory auditors.

15. Rebate of SBC should be aligned with service tax refund- Notifica-tion No. 39/2012-ST dated 20 June 2012 as amended vide Notification 03/2016-ST dat-ed 03 February 2016 provides for filing of SBC dec-laration to claim rebate of Swachh Bharat Cess by service exporters.

Requirement to first file a SBC declaration and then separately file for rebate claim leads to dual compli-ances. Secondly, rev-enue authorities are not familiar with the process to be followed. Therefore, the process should be aligned with service tax refunds.

Such alignment would reduce compli-ances for both,the assesses and authori-ties.

16. Service tax re-fund related is-sues:• The disburs-

al of refunds take inordi-nately long time, which

• It is suggested that strict timelines be followed for speedy disbursal of refunds

• Interest rate should be scaled up in case of delay in remitting refunds beyond the

Litigation on this front needs to be re-duced by speedy processing and grant of refunds.



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distress as-sessees and c a u s e t h e m f i n a n c i a l crunch.

• The refund-sarerejected on frivolous grounds due to which the assessee is left with no other option but to appeal tothe Tribunal.

prescribed time frame

• Tax authorities should not base their adverse re-fund order on frivo-lous grounds, due to which litigation starts getting ac-cumulated at the various appellate forums.

17. Exemption to plans, designs and drawings – Basic Custom duty (‘BCD’) ex-emption has been withdrawn from plans, de-sign and draw-ings falling under chapter heading 49 vide Finance Act 2016. Such imports now it attracts BCD @ 10% which are already taxed un-der service tax under reverse charge.

It is suggested that exemption to plans, design and drawings falling under chap-ter heading 49 be re-stored.

Presently, import of plans, designs and drawings attracts service tax under re-verse charge. Levy of custom duty on same transaction would amount to dual levy.



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18. s a f e g u a r d s against invok-ing the extend-ed time-limit of 5 years for demanding dis-puted duties and taxes - The service tax laws permit the tax officers to raise a demand for a period of past 5 yearsin case any short levy is no-ticed because of a wilfulmis-dec-laration, collu-sion or fraud on the part of the assessee. In nor-mal cases, the demand can be raised for a pe-riod of past 30 months. It is ob-served that the officers invoke mis-declaration / fraud etc. as a matter of routine and issue show cause notices de-manding duties andtaxes for the past 5 years.

It is suggested that ap-propriate safeguards be provided to pre-vent invocation of the extended period of demand in a routine manner.

Even though the law requires the ex-tended period of 5 years to be invoked only with the approval of the Commis-sioner of Service Tax, it is observed that such concurrence is grantedby the se-nior officers routinely without carefully examining the merits of the case. Relief in such cases is granted only when the matter reaches the Appellate Tribunal in appeal.



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19. Levy of service tax on damages, fines and penal-ties – As per the service tax provi-sions, “agreeing to the obligation to refrain from an act, or to tolerate an act or a situa-tion, or to do an act” is covered under declared service catego-ries and subject to service tax.Based on the above, authori-ties are demand-ing service tax on even on penal provisions and liquidated dam-ages, fines and penalties recov-ered on the com-mercial trans-actions due to various reasons listed in the com-mercial arrange-ments.

It is suggested that necessary clarifica-tion by way of circu-lar should be issued explaining the scope of such statutory and taxable event for levy of service tax un-der such category of deemed service.

These charges are not a consideration for an activity carried out by one for an-other. These are actually of compensato-ry or penal in nature for not adhering to some critical contract terms or agreed important performance conditions.

20. Abatement pro-vided for pay-ment of service tax on trans-portation of goods by vessel - Transportation of goods by vessel

Clarity is required whether abatement is also available to a car-go handling company on recovery of freight cost from importers as a reimbursement.

Generally, shipping companies have contracts with cargo handling compa-nies for transportation of goods rather than having direct contracts with the importer of goods. In such cases, ship-ping companies charge freight to cargo handling companies who in turn charge this cost from importers.



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on import is exi-gible to service tax for which an 70% abatement is allowed from gross value of service.

21. No provision to mention service category by the service provid-er – Rule 4A of the Service Tax Rules, 1994 does not mandate the mentioning of service category on the invoice is-sued by service provider.

It is recommended that rule 4A be amended to provide that the de-scription of a service in the invoice shall be the same as the ser-vice tax category un-der which service tax is paid/payable by the service provider.

The service category determined by the service recipient may be different from the service category under which ser-vice is provided or service tax is paid by the service provider. This leads to difference in interpretation by the ser-vice recipient for the purpose of paying service tax under reverse charge/ avail-ing CENVAT credit/ claim service tax refunds or exemptions and thereby un-necessary litigation.

22. Place of provi-sion of services for intermediar-ies: In the case of service provided by an ‘interme-diary’, the place of provision of service for ser-vice tax purpose is considered to the place of pro-vider of service and taxed even if service recipient is located outside India.

It is suggested that the place of provision of intermediary service should be location of service recipient by deleting such ser-vice from Rule 9 and brought under general Rule 3 of the ‘Place of Provision of Service Rules’.

To ensure that tax on services is ulti-mately levied in the taxing jurisdiction where the final consumption occur.

OECD Guidelines prescribe the destina-tion principle. Due to the existing provi-sions, numerous export of services are not treated as exports under current regime. Many other countries tax such services as a destination based tax and do not levy tax if customer is located outside their territory.



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23. Auditor’s format for refunds: Re-cent Circular dat-ed June 15, 2016 issued by Service Tax Wing of CBEC addressed the de-lays caused on ac-count of format in the auditor’s cer-tificate. Accord-ingly, some flexi-bility was granted in the language used by the au-ditors. However, this Circular re-ferred to only provisional re-fund of 80% un-der Circular no. 187/6/2015 and not for the origi-nal refund claims.

A similar Circular should be issued for original refunds filed under Notification No. 27/2012 dated 18 June 2012 since, rev-enue authorities in-sist on word by word matching of the cer-tificate with the for-mat prescribed in the notification which is not possible owing to stringent ICAI guide-lines.

This would ease the processing of claims and would reduce the time lag as well.

24. Exemption from service tax on specified works contract un-der notification 2 5 / 2 0 1 2 - S T should be ex-tended to other i n f ra s t r u c t u r e projects / sectors

Exemption from ser-vice tax should be ex-tended to other vital infrastructure sectors such as Power Sector, Water supply, Sewer-age, Housing and other projects. As construc-tion of metro/ mono rail is very important for development of urban infrastructure, the exemption may be restored uncondition-ally in public interest.

Service Tax on specified works contract such as in relation to Airports, Ports, Railways, etc. has been exempted vide notification no. 25/2012-ST but such exemption has still not been extended to other crucial infrastructure sectors such as Power Sector. Also the exemp-tion has been withdrawn for Public transport Sector (Metro & Mono Rail).



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25. Restoration of Exemption for Construction of civil structure, E d u c a t i o n a l /Clinical Estab-lishment, Ports, Airports, etc. subject to certain conditions

Extension of this ex-emption should be allowed without in-sisting on payment of stamp duty. Time extension for filing of refund should be made upto one year as against six months.Further, for the con-tract entered on or after 1st March 2015 the exemption should continue uncondition-ally.

Union Budget’2016 restored exemption from payment of service tax till 31st March 2020 for the following services, wherein contract has been entered pri-or to 1st March 2015:a) services provided to Government,

local authority or Governmental Au-thority ….use of their employees;

b) services by way of construction, erec-tion, commission, etc. pertaining to an airport or portSubject to follow-ing conditions:

1. Payment of stamp duty for the con-tract prior to 1st March 2015

2. Production of certificate from the Ministry of Civil Aviation or Ministry of Shipping, as the case may be.

26. The definition of input service w.e.f. 1.4.2011 excludes service portion in the ex-ecution of ‘Works Contract ’ and “ c o n s t r u c t i o n Service” in so far as they are used for:a. C o n s t r u c -

tion or execu-tion of works contract of a building or a civil struc-ture or a part thereof; or

Where such services are used for setting up of immovable prop-erty used for further-ance of business and where output is tax-able CENVAT or pro-vision of taxable ser-vices, should be made eligible.

This provision restrictsthe benefit of CENVAT when to the ultimate customer who uses works contract or construc-tion services for setting up of immov-able property.



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b. Laying of f o u n d a t i o n or making of structures for support of capital goods.

27. Due date for Ser-vice tax Payment

The due date for pay-ment of service tax to be extended to 10th of the following month including payment for the month of March.

The Service Tax Rules, 1994 have been amended advancing the date of pay-ment of service tax from 25th of the month following the month in which the service charges are collected to 5th of the following month or 6th if the pay-ment is made by internet. Further, in case of month of March, the service tax is required to be paid by 31st March only. The amendment creates practical difficulties in case of organizations hav-ing multiple branches / locations over the country but paying service tax on a centralized basis due to time required in collating and reconciling the neces-sary data.

28. Adjustment of ex-cess service tax paid

Condition of adjust-ment in the succeed-ing month or quar-ter be replaced by adjustment can be made upto the date of filing service tax re-turn for succeeding half year.

The Service Tax Rules provide condi-tions for adjustment of excess service tax paid in the subsequent period (Rule 6(4A) and 6(4B)) The assessee may ad-just such excess amount paid by him against his service tax liability for the succeeding month or quarter, as the case may be.

29. Export of Servic-es

Exemption should not be denied merely on the ground that the foreign inward remit-tances delayed beyond stipulated time or a

In the case of export of service, point of taxation is the date of receipt of the pay-ment. Thus service will not be treated as export of service till receipt of the payment. If the payment for export of service is not received within the



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portion of foreign in-ward remittance re-mains uncollected for commercial reasons

period specified by RBI then such ser-vice will not be treated as export and corresponding Cenvat credit will be re-quired to be reversed

30. Exemption under MEGA Notifica-tion

Exemption list of civil structure should be widened to include construction services provided to any per-son including Govern-ment or local bodies in relation to educational institutions, hospital, charitable, health, san-itation or philanthrop-ic purpose which are not for the purposes of profit and such insti-tution is registered as charitable institution under income tax law.

Under the Negative List based Service tax Regime, there is an exemption avail-able for Services provided to Govern-ment or local authority by way of erec-tion, construction, maintenance, repair, alteration, renovation or restoration of a civil structure meant predominantly for use as (i) an educational (ii) a clinical or (iii) or an art or cultural establishment.

Considering the im-portance of infrastruc-ture development and participation of private players in the construction of Dam, Canal or other irriga-tion works, service provided to any per-son including Govern-ment or Local authori-ty should be exempted from service tax.

There is an exemption available for construction of canals, dam or other ir-rigation works for Government or local authority. However, service provided to person other than Government or Local Authority would attract service tax.

Considering the im-portance of power including hydro pow-er projects, service

Services provided by way of erection, construction, maintenance, repair, al-teration, renovation or restoration of Road, bridge, tunnel, or terminal for



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provided for construc-tion of roads, bridg-es, dams as a part of Hydro Power Project be exempted from service tax. All infra-structure projects like construction of roads, bridges, dams should be exempted from ser-vice tax though they are not directly meant for the use of general public.

road transportation “for use by general public” is exempt from service tax.Construction of tunnel is an impor-tant and most complicated component of Hydro Power project. There will be connecting roads/bridges to be con-structed for the access of Hydro power Project. Now construction of tunnel, road, and bridge in Hydro Power Proj-ect would attract service tax since they might not fall strictly for use by general public.

31. Presently there is Service Tax Ex-emption for re-pairs and main-tenance of Roads only – earlier this exemption was also avail-able to all core infra sectors including Rail-ways, Ports etc. O&M contract in Metro Rail Proj-ects would at-tract Service Tax which the service provider cannot take input tax credit and this is a significant por-tion of the cost of the project.

Exemption from ser-vice tax be granted to operations and main-tenance contract re-lated to infra project including Railways, Metro Rail, Mono Rail etc.



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32. Services by Em-ployer to Em-ployee, during the course of Em-ployment arising out of employ-ment contract:

Suitable explanation be given in the defini-tion of ‘service’ under Section 65B(44) of the Finance Act, 1994 to exclude the services provided by the em-ployer to the employ-ee in the course of em-ployment.

Services by Employee to Employer are specifically excluded from definition of “Service”. However, vice versa is not done, leaving scope for multiple inter-pretation & litigation such as in the case of “Notice Pay Recovery, bond recovery, retention pay etc.

33. Service Tax Ex-emption to s u b c o n t r a c t o r providing ser-vice within Ship Building Centre (SBC) Vizag for ATVP Program

Sub-contractor who is providing pure service as well as who pro-vides works contract service to manufac-turer of final product which is exempt from Excise duty should also be exempt from payment of service tax. This will help to reduce overall cost of the project and pass on cost saving benefit to the ultimate cus-tomer.It is suggested that the conditions of Sr.No. 29 of Service Tax Notifi-cation No. 25/2012 dated 20.06.2012 be amended by adding sub-clause (i) to the above serial number as under:“(i) Subcontractor providing service to another contractor

At present services provided to the Government, a local authority or gov-ernmental authority by way of con-struction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or al-teration of a civil structure or any other original works meant predominantly for use other than for commerce, indus-try, or any other business or profession is exempt from service tax as per serial No. 12 of the Service Tax Notification No. 25/2012-S.T. dated 20-06-2012. Therefore, as per this notification, ex-emption from service tax is available only to main contractor and not the sub-contractor who provides service to main contractor.Further as per Rule 6 of Cenvat Credit Rules, 2004 Cenvat credit is not allowed on input services used in or in relation to provision of exempted services. As Cenvat credit on input service is not available to the provider of exempt service, this result into increase in the overall cost of project. This results into increase in overall project cost which is passed on to the ultimate customer.



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which is used in or in relation to the manu-facture of exempted goods within SBC Vizag” . This will enable main contractor to obtain intermediate services from Sub-contractor without payment of service tax.

Further as per serial no. 29(h) of Ser-vice Tax Notification No. 25/2012 dated 20-06-2012, services provided by sub-contractor providing services by way of works contract to another contrac-tor providing works contract services which are exempt is also exempt from service tax. Therefore as per this clause if main contractor is providing exempt works contract service, then sub-con-tractor who provides works contract service to such main contractor is also exempt from service tax. This helps main contractor to reduce its overall project cost and pass on cost saving benefit to ultimate customer. However this exemption is provided only to sub-contractor who is also providing works contract service and not to those who provides pure service such as manpow-er supply, consulting engineer, etc.Therefore the benefit of exemption is not available who provides pure ser-vices as mentioned above and also to service provider who provides works contract service to manufacturer of ex-empt product.

34. CENVAT Credit of Excise Duty / CVD paid on Cap-ital Goods:

For better cash flow management and to reduce the administra-tive process, full credit may be allowed in the first year itself for all types of assessees. This would be in line with the provisions on CENVAT credit in re-spect of inputs.

In terms of Rule 4(2) of the CENVAT Credit Rules, 2004, maximum 50% CENVAT credit is allowed in respect of capital goods in the first year and the balance there after.



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35. Refund mecha-nism for accu-mulated & unuti-lized Education Cess& SHE Cess

Automatic refund of accumulated Cesses be provided based on the balance in returns.

Post subsuming of Cesses in Excise rates & Service Tax rates in Union Bud-get 2015 (w.e.f. 01-Mar-15 for Excise & 01-Jun-2015 for Service Tax) no mecha-nism for refund of accumulated credit or utilisation of the same for payment of Excise Duty or Service Tax is prescribed.

36. Widening the scope of “Chari-table Activity” in mega exemp-tion notification 25/2012 dated 20.06.2012

The definition of “char-itable activity” should be made inclusive and must be widened to include activities done for underprivileged and deprived persons subject to checks and balance in the form of scrutiny of the institu-tion for the nature of activity at the time of approval as it is done under Section 11 of the Income Tax Act.

The word “Charitable activity” is de-fined in in Point 2 (k) of the said notifi-cation as follows:“(a) public health by way of -(I) care or counselling of (i) terminally

ill persons or persons with severe physical or mental disability, (ii) persons afflicted with HIV or AIDS, or (iii) persons addicted to a depen-dence-forming substance such as narcotics drugs or alcohol; or

(II) public awareness of preventive health, family planning or prevention of HIV infection;

(b) advancement of religion;(c) advancement of educational pro-

grammes or skill development relat-ing to,-

(I) abandoned, orphaned or homeless children;

(II) physically or mentally abused and traumatized persons;

(III) prisoners; or(IV) persons over the age of 65 years re-

siding in a rural area;(d) preservation of environment includ-

ing watershed, forests and wildlife;


CEnVAT CEDIT


CEnVat CEdit to bE rEstorEd to PrE-20111. Restoration of

CEnVat credit allowed prior to 1 April 2011in case of civil con-struction for assets used for manufacturing taxable goods or providing taxable service by removing restriction in availing CEnVat credit on ser-vices relating to civil construc-tion.

Cenvat credit of service tax and excise duty paid in relation to civil construction services should be allowedin case of civil construc-tion for assets used for manufacturing taxable goods or providing tax-able service.

The definition of ‘input service’ places restrictions on availment of Cenvat credit on certain services which inter-alia include services related to civil construction.Hence presently Cenvat is not available on laying of foundation or building up capital structures even if such asset is used for providing tax-able service or manufacturing taxable goods. Thus duty paid on steel, cement, iron, plates used for civil structure are not cenvatable. In so far as civil construction related services are concerned many a times construction of a property is essential i.e. without construction of property the manufacturer or service provider cannot undertake its activities. For in-stance, without construction of factory building, the manufacturer cannot man-ufacture the goods; without construc-tion of office complex or shopping mall; the service provider would not be able to provide renting services; without construction of a tower the telecom ser-vice provider cannot provide telecom services; and without the construction of pipeline a service provider cannot provide services of transportation of goods through pipeline.



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2. Removal of re-strictions in availment of Cen-vat credit in rela-tion to services provided to em-ployees

Cenvat credit should be allowed in relation to services provided to employees.

The current employment regime rec-ognizes the services of transportation, provision of food to the employees, health and life insurance services as necessary prerequisites which the em-ployer has to provide to its employees to leverage optimum efficiency. There have been several judgements of Tribu-nals across India recently, where it has been held that such credits should be allowed. This leads to inconsistency in understanding and interpretation of the law and should be corrected forthwith.

CrEdit to banKs and FinanCiaL sErViCEs CoMPaniEs3. CREDIT TO

BANKS AND FI-NANCIAL SER-VICES COMPA-NIES

Clarification is re-quired from Ministry of Finance (CBEC) as to whether in terms of the provision of Rule 6(3B) of the Cenvat Credit Rules, availing of 50% of the credit at the very incep-tion stage and charg-ing the balance 50% to the Profit and Loss account as expense, is correct and precise and is in compliance to Rule 6(3B) of the Cenvat Credit Rules.

At present the numerous assesses un-der Banking & Finance Sector are fol-lowing different methodology towards the compliance of Rule 6(3B) of the Cenvat Credit Rules. A circular issued clarifying the method of computing the 50% reversal in the light of the objec-tive of such provision be change made to avoid litigation and different meth-odology used by different tax payers.



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CrEdit For sErViCEs in sEtting uP nEW ProJECts4. Companies set-

ting up green-field/ brown-field projects are not permitted to avail CENVAT credit on cement, structural Iron & steel etc. either as part of civil structure or sup-porting capital goods (machines etc.). It results in increased cost of construction.

it is suggested that capital structures should be included in the definition of “inputs” in rule 2(k) of CEnVat Credit rules, 2004 for CEn-Vat purposes.

Definition of “input” specifically ex-cludes any goods used inter alia for lay-ing of foundation or making of struc-tures for support of capital goods. Definition of Input to be widened to cover all Inputs used for foundation or making of structures thereon for sup-port / installation of capital goods-re-quest to extend Cenvat Credit on all In-puts which is being restricted till date.

CEnVat For transPort oF EMPLoYEEs on dutY5. Non-availability

of Cenvat credit on transporta-tion, rent-a-cab, catering services.

Necessary amend-ments must be made in the definition of Input Service as mentioned in Credit rules by specifically allowing the credit of services such as transporta-tion of employees, rent-a-cab, catering which are availed in relation to the busi-ness activities as many companies have to work in the shift like call centers, hospital services, airlines or units in remote areas where they have to provide transport to employees, specially female employees.

allowing CEnVat credit on specified services Services such as transportation of em-ployees, rent-a-cab, catering etc. repre-sent significant business expenditure which are incurred during the course of business by companies. These are essential business cost and the same are mostly incurred in com-pliance to various statutory provi-sions. However, Cenvat credit of these services is not allowed.Many companies have to work in the shift like call centers, hospital services, airlines or units in remote areas where they have to provide transport to em-ployees, specially female employees.



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CEnVat CrEidt to ContraCtors6. Credit availment

in case of works contract – Service tax (Determina-tion of Value) Rules, 2006 pro-vides for restric-tion on availment of Cenvat credit belonging to in-puts (Explanation 2 to Rule 2A).

Such restriction is un-reasonable especially when the contractor is following the valu-ation under actual method. Even in case of abatement method, the credit should be allowed.

This would provide a fair methodology to the assessee.In comparison with VAT laws, where similar valuation methodology is fol-lowed, credit is restricted only in case of composition scheme. There is no re-striction when actual method or abate-ment method is followed. But in service tax, there is no composition scheme as on date. Therefore, the credit on inputs should also be available.

7. Payment of in-voice within three months for availment of credit – As per 3rd proviso to rule 4(7), in or-der to avail the credit of service tax, the payment for the services and service tax thereon has to be made within three months from the date of invoice.

It is suggested that the provision be relaxed to allow for credit if the payment for services and service tax has been made within six months from the date of invoice, instead of three months.

It is a very difficult position as in nor-mal trade practice the invoices for ser-vices provided are not paid within three months. This leads to excessive moni-toring and compliance.

8. Rule 16 of Excise rules (Credit of duty on goods brought to the factory)

This rule allows avail-ment of credit as per CENVAT Credit Rules, 2002 which is a ty-pographical error. It should be rectified to Cenvat Credit Rule, 2004.

Such ambiguities lead to litigation.



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Further, 1 year time limit for availing cred-it should not apply to cases covered under Rule 16.

9. Credit availment in case of works contract – Ser-vice tax (Deter-mination of Val-ue) Rules, 2006 provides for re-striction on avail-ment of Cenvat credit belonging to inputs (Expla-nation 2 to Rule 2A).

Such restriction is un-reasonable especially when the contractor is following the valu-ation under actual method. Even in case of abatement method, the credit should be allowed. In compari-son with VAT laws, where similar valua-tion methodology is followed, credit is re-stricted only in case of composition scheme. There is no restriction when actual method or abatement method is followed. But in ser-vice tax, there is no composition scheme as on date. Therefore, the credit on inputs should also be avail-able.

This would provide a fair methodology to the assesses.

ELECtroniCs sECtor issuE10. Definition of ex-

empted services for CENVAT Cred-it reversal need to be restored to pre 2016 amend-ment

With last year amend-ment, activities not constituting service and ones excluded from the definition of service under section 65B (44) of the Finance

Explanation 3 to Rule 6(1) of CCR in-serted w.e.f. 1 April 2016, provides that for the purposes of Rule 6, exempted services shall include an activity, which is not a service as defined in section 65B(44) of the Finance Act, 1944. Rule 6 is in relation to apportionment of



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Act, 1944 will also be included in the defini-tion of exempted ser-vice the purpose of Rule 6 of CCR such as:• transfer of title in

goods or immov-able property, by way of sale, gift or in any other man-ner;

• transaction in mon-ey or actionable claim;

• service by an em-ployee to the em-ployer in the course of or in relation to his employment;

• fees taken in any Court or tribunal established under any law for the time being in force;

It is also not clear if an activity without con-sideration will also be included in the above definition of exempt service for computing the reversal amount in case of ineligible com-mon CENVAT credit, the amount of reversal shall be substantially high which would re-sult into loss of credit to manufacturers /

credits between exempted and non-exempted final products/services and subsequent reversal of credits w.r.t ex-empted goods/ services. It is suggested that the proposed explanation defining exempt service should be deleted.Due to such a broad definition of ex-empted service, while



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service providers. This would be extremely cumbersome process to identity and value activities which shall not constitute a ser-vice and which are to be included in the def-inition of exempt ser-vices for the purpose of reversal.


CESS


sWaCHH bHarat CEss1. Swachh Bharat

Cess should be available for set off.The Central Gov-ernment, with the objective of financing its pilot project – ‘Swachh Bharat Abhiyaan’, announced a new cess namely ‘Swachh Bharat Cess’ (SBC), to be levied at 0.5% on the value of all taxable services w.e.f 15 Novem-ber 2015.

Swachh Bharat Cess must be permitted for set off against output Swachh Bharat Cess, Excise duty and Ser-vice Tax.

The levy of SBC is non-cenvatable. Thus, SBC cannot be utilized for payment of SBC, Excise duty or Service tax. It is ap-parent that from a manufacturer’s per-spective, the factum of SBC being not available for set off against Excise duty renders the levy of SBC as a cost which cascades into duty on cess.

2. Point of taxa-tion for Swachh Bharat Cess- Post imposition of SBC w.e.f. 15 November 2015, CBEC issued FAQ providing clari-fications on levy of SBC including point of taxation. It was clarified to be Rule 5 of the POT Rules, 2011.

The clarification is misinterpreted to in-fer that SBC would also be leviable to out-standing balances as on 15 November even if the services have been rendered and in-voice issued before 15 November.Similar issue was ad-dressed for KKC by issuing specific notifi-cation. Similar clarifi-cation should be pro-vided for SBC as well.

This would reduce the ambiguity and consequent litigation.



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CLEan EnErgY CEss3. Clean environ-

ment cess on coal is quite high and need to be re-ducedIn the Union Bud-get 2016-17 the Clean Energy Cess (renamed as Clean Envi-ronment Cess) on coal was dou-bled to rs.400/ Mt from rs200/MT.It is being levied in India as a duty of Excise under Section 83(3) of the Finance Act, 2010 on Coal, Lignite and Peat (goods speci-fied in the Tenth Schedule to the Finance Act, 2010).

Reduction in Clean Environment Cess on coal from Rs. 400/t to Rs. 200/t.

• This drastic increase in CEC has had a severely negative impact on power aluminum and steel industry which are already suffering from less de-mand and stiff competition from im-ported products.Power constitutes approx. 40% of cost of production of aluminium.

• Indian aluminium industry is already incurring high production cost due to higher coal prices, higher logistic costs and renewable power obliga-tion.

• Rising production cost is already making Indian aluminium industry uncompetitive in the international market.

• Increase in clean environment cess has further burdened the already high production costs. On the other hand, the aluminium prices are on decline and have crashed by 40% from levels of $2662/MT in April’11 to $1641/MT in August’16. This has made the operations economically unviable.

• For Steel Plants, the impact is also se-vere. The Cost of Coal component in DRI production has increased by 12% (approx) which has further escalated the Cost per Tonne of Steel when the Steel industry is already reel-ing under pressure and facing high competition with the imported steel products even after certain relief mea-sures like MIP for certain products.



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• Coking coal is one of the main inputs for steel manufacturers, which would see further rise in total raw material costs even after reduction on import duties in the past few years. The cur-rent rise in coking coal & PCI prices coupled with the extra burden of cess makes the steel making un-competi-tive.

aCCuMuLatEd CrEdit oF EduCation CEss4. A c c u m u l a t e d

balances of Edu-cation cess and Secondary higher education cess – Finance Act 2015 abolished the levy of education cess and second-ary higher educa-tion cess.No guidelines have been issued with respect to utilization of ac-cumulated bal-ances of such cesses and hence the same consti-tute a part of the credit pool.

It is suggested that ac-cumulated credit bal-ance of education cess and secondary higher education cess should be allowed to be ad-justed against the ex-cise duty and service tax liability.

The accumulated credits would become incremental costs if not allowed to be utilized.

EduCation CEss on iMPort Continuing5. Education Cess

(EC) and Sec-ondary Higher Education Cess (SHEC) lev-ied on Import duty charged on

As the Education Cess (EC) and Secondary Higher Education Cess (SHEC) on Excise duty have been abolished, whereas CENVAT Credit on the EC and



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imported materi-al should be abol-ished.

SHEC paid on Import-ed material continues to be levied and hence there is no scope for the assessee to take credit of EC and SHEC on import duty and hence the same should be abolished.

Uniform treat-ment for levy of Swachh Bharat Cess (‘SBC’) and KrishiKalyanCess (‘KKC’) – While credit of KKC is available, credit of SBC is not eli-gible and hence a cost.

It is recommended that the credit of SBC should also be avail-able as in the case of KKC. Both SBC and KKC are in the nature of cess as service tax, therefore, uniform treatment should ap-ply in both cases.

Non availability of credit leads to higher cost of services to end-customers.


CEnTRAl SAlES TAX


sEZ units1. Levy of CST on

sale from SEZ units to DTA units

Sales by SEZ units to DTA units should be exempted from levy of CST.

Clearances of goods from SEZ to DTA is equated with importation of goods by the DTA unit from Customs law per-spective and customs duty is payable on the same. The Customs law provides for exemp-tion from SAD, if CST is payable. CST is an additional cost to buyers and no credit is allowed. Whereas SAD paid on import from overseas of similar goods is cenvatable/ refundable and hence the buyers who are manufacturers or deal-ers recoup the amount paid towards SAD on such imports.

2. Conflict between the provisions of the Special Eco-nomic Zone Act, 2005 and CST Act, on supply of goods by a sub-contractor to a SEZ Developer/Unit

Issue suitable clarifi-cation under the CST Act, 1956 to specifi-cally exempt the en-tire value chain right from the first dealer (who originated the movement of goods to the SEZ area) up to the dealer affecting the last sales to the SEZ Unit or developer.

Section 26 of the SEZ Act provides ex-emption from the levy of Central Sales Tax in respect of inter-state sale of goods which are meant to be used for the authorized operations of SEZ unit or developer. Further in terms of Sec-tion 51 of SEZ Act, provisions of the SEZ Act shall have over-riding effect notwithstanding anything inconsistent contained in any other law for the time being in force.However, collective reading of Sub-sec-tion (6), Sub- section (7) and Sub-sec-tion (8) of Section 8 of the CST Act, 1956 restricts the exemption from levy of CST only to the last inter-state sale effected to the SEZ unit or developer whereas all prior inter-state sales are made sub-ject to CST. In light of above, sales tax



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authorities in many states are denying exemption from the levy of CST to the value chain even when it is not in dis-pute that ultimate consumer for the goods sold in an SEZ unit or developer.

3. Enable SEZs to issue Form I to sub-contractors

It is suggested that Form I (to be issued by the SEZ entity) be amended to reflect both the contrac-tor’s name as well as the sub-contractor’s name, so that the en-tire leg of the inter-state transaction is exempt from levy of CST and the true in-tent of the SEZ regime is achieved. A copy of the Form I issued to the contrac-tor may be used by the sub-contractor to claim CST exemption on such SEZ supplies.

Under the SEZ provisions, SEZ units/developers and also the contractors and subcontractors appointed by the SEZ units/ developers are entitled for CST exemption on interstate procurement of goods used for setting up and for au-thorized operations, on furnishing duly signed Form I. However, under the CST provisions, there is no enabling provision or rule which provides for issuance of Form I to the subcontractor appointed by the SEZ units/developer. This results in ad-ditional cost to the SEZ unit/ developer to the extent of CST charged by the sub-contractors to the contractors of SEZ unit/ developer. This defeats the very intention of providing fiscal benefits to SEZ units/developers under the SEZ Act.

oPErating LEas FroM oVErsEas LEssors- dEEMEd saLE4. Central Sales Tax

exemption - Sale in Course of Im-port and Sale in Transit – Sec 5[2] & 6[2] in case of Operating Lease transac-tion under Cen-tral Sales Tax Act

Tax Exemption Benefit under – Sec 5[2] and Sec 6 [2] should be applicable in case of Operating Lease transaction by amending CST Act.

A clarification is required as to whether exemption under section 5(2) and 6(2) of the CST Act, is equally applicable to deemed sale as per section 2(g) of the CST Act.As per the present CST provisions, the definition of ‘’Sales’’ encompasses the activity of ‘Transfer of Right to use’, however the consequent effect of this addition/expansion in the scope and ambit of SALES is not given proper ef-fect in the exemption provision u/s 5(2) and 6(2) of the CST Act.



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With the advent of the proposed Indi-rect Tax reform ie GST – such exemp-tion provision should continue in view of the existing business contracts which are presently under the purview of Sec-tion 5(2) and 6(2) of the CST Act.

suPPLY to MEga PoWEr ProECts & dEFEnCE 5. Supplies made

to Mega Power Projects

All interstate supplies should be exempted from CST. The C Form conditions should be suitably amended to grant full exemption from CST for supplies by the main contrac-tor as well as the sub-contractors and sub -sub-contractors.

Presently supplies made to Mega Power Projects are not exempted from CST for supplies made by main contractor and sub-contractors.

6. CST exemption for supplies of Defence Equip-ments

In order to provide level playing field to Indigenous manufac-turers a Notification exempting CST in case of supply of goods to Ministry of Defence be issued in line with Custom & Excise.

At present there is no exemption under CST for supplies to Ministry of Defence. Earlier MOD used to issue Form D so as to procure goods at concessional rate from Indian Suppliers. Now all the sup-plies to Ministry of Defence attract full CST. This increases the Cost of Indian Manufactured goods supplied to MOD. However Foreign Supplier with the help of Custom duty Exemption certificate supplies Defence equipment without custom duty which gives them advan-tage in Cost.

7. Sale of Goods be-yond 12 nautical miles

MOF should issue a clarification that CST shall not be levied on sale beyond 12 nauti-cal miles.

For oil and Gas exploration and exploi-tation, facilities are required to be es-tablished in the EEZ and Continental shelf area. These facilities are located much beyond territorial limits of India i.e. much beyond 12 nautical miles from the shoreline. Sales tax authorities in



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many states are trying to levy CST on sale of goods effected beyond 12 nau-tical miles treating this type of sale as ‘Inter-State Sale”, which is resulting in litigation and confusion. The legal posi-tion is that such sale cannot be exigible for CST as CST Act has not been extend-ed to EEZ and CS area.

8. The Building and Other Construc-tion Workers’ Welfare Cess Act, 1996

There is a need for a clarification that un-der this act the cess is chargeable only on the cost of Civil Con-struction and cost of all other supplies and services fall outside the ambit of this act. Such a clarification will avoid disputes and litigation.

Under the above mentioned act 1% Cess on the cost of construction is applicable on the employer.Term “Construction” is not defined under the act leading to tax dispute in some cases which do not fall under civil construction. In case of lump sum turnkey contracts for setting up of plants/ factories, Supply and Erection, Installation / Commissioning of electri-cal/ mechanical equipment and plant is involved apart from civil construction.

9. Loss of tax cost to Pharma com-panies in case of sales return of-medicines after 6 months in case of expiry date

Health of citizens is among the top pri-orities of any Govern-ment. It is therefore essential to provide medicines at afford-able prices. Accordingly, the time limit of six months should be suitably amended as an excep-tion for Pharma In-dustry to ensure date expiry medicines are returned and not sold.

As per Section 8A of the Central Sales Tax Act, 1956, the sale price of goods re-turned to the dealer by the purchaser of goods shall be deducted from the aggre-gate of the sale prices, provided inter-alia that the goods are returned within a period of six months from the date of delivery of goods. In the case of pharma industry, expired medicines are generallyreturned to the manufacturer. Most of the medi-cines have expiry date of more than six months from the date of manufacturer and hence, it is impossible to claim de-ductions towards these sales returns.


OThER InDIRECT TAX ISSUES


ProMotion oF rEsEarCH in india1. Supplies to R&D

facilities should be zero rated

Supplies of goods and services to recognized R&D facilities should be zero rated to en-courage innovation and growth.

Currently, facilities registered with the Department of Scientific and Industrial Research (‘DSIR’) enjoy exemption from payment of excise and customs duties on their procurements. However, do-mestic suppliers do not get benefit of Cenvat credit on their procurements and neither is service tax exemption available on input services procured by such R&D facilities.

EXPort ProMotion2. Primary alu-

minium is not included in inter-est equalization scheme.

Include primary alu-minium (7601) in in-terest equalization scheme as part of ex-port promotion initia-tive of the Government

• Govt. of India had introduced inter-est equalization/interest subvention scheme for exporters – rupee export credit to exporters at interest of 3% lower.

• Primary aluminium, one of the ma-jor export items is not included and should be included in interest equal-ization scheme.

rEMoVE unCErtaintY and doubLE taXation oF EXPort EXPEnsEs.3. Clarity sought in

respect of foreign bank charges

Necessary clarifica-tions should be issued to remove litigation and difference in in-terpretation by dif-ferent Commissioner-ates.

As part of trade related services, a bank in India liaises with an overseas corre-spondent bank for collection of export proceeds / remittance of import pro-ceeds on the request of its customers. During this process, the overseas bank acts on behalf of the overseas trade counterparty and may levy its charges / fees, which may be deducted from ex-port proceeds of Indian customer / ad-ditionally charged to Indian importer.



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Banks in India separately charge their customers for trade related services rendered, on which they levy and re-cover service tax from the customers. However, since banks in India are acting in their capacity as “authorized dealer” while dealing with the overseas corre-spondent banks, they have taken a posi-tion that they are not liable to service tax by way of reverse charge on charges levied by the overseas correspondent banks. This is a unanimous position ad-opted by all the banks including foreign banks, Indian private sector banks and public sector banks.Office of the Commissioner of Service Tax - I, Mumbai, had issued a Trade No-tice, contending that it is the banks in India and not their customers who ob-tain and utilize the services of overseas correspondent banks. Hence, the banks in India are liable to pay service tax by way of reverse charge. Accordingly, no-tices have been issued to all Banks to provide data for last five years.However, the service tax exposure on the customers of these banks also re-main owing to ambiguity in the legal provisions. This may result in double taxation.

MEasurE to rEduCE taX disPutE and iMProVE aCCountabiLitY4. To reduce tax dis-

putes and fixing a c c o u n t a b i l i t y for frivolous tax demand

Instead of mandatory 7.5% pre-deposit at first stage, bank guar-antee equal to 7.5% of demand should be made as the condition of appeal.

This suggestion will prevent undue hardship to the appellants facing unten-able demands that are mostly quashed in the 1st appeal stage itself.



89

The condition of cash pre-deposit may be kept from the 2nd appeal stage. All appeals are re-quired to submit a proof of payment of pre-deposit @ 7.5% or 10% as the case may be and this pre-depos-it carries interest @ 6% payable by govern-ment

rEMoVE HardsHiP to EMPLoYEEs CHanging Jobs5. Notice Pay Re-

covery: The field officer including senior officer of CBEC have issued notices to the as-sesse, treating recovery from employee on short/no-notice on resignation as taxable service and demanding service tax from assessees.

The discretionally re-covery from assessee leads to harassment of assesses.

Recovery from employees on account of short/no-notice should be treated as re-covery of penal nature such as penalty for breach of contract and not a service to employees. The govt. should clarify its stand on it.


ECOnOMIC ISSUES

1. Financing alternatives for the nuclear Power Plants – EPC:

Westinghouse Electric Company LLC, USA has proposed the Dollar denominated financ-ing from the United States (“US Financing”) at approx. 4.5% p.a. with import of 60% of the plant construction scope.

Interest rate on the fully hedged US Financing (say through Export-Import Bank of the US) is likely to be between 12% to 13% p.a. as compared to the Indian debt financing (say by is-sue of Indian Rupee Bonds guaranteed by Government of India) which is likely to be around 8.5% p.a. Thus, us financing is likely to be more expensive by around 3.5% to 4.5% p.a. This is also likely to be the case for financing from all Export Credit Agencies.

In addition to the above, US Financing would also deprive Indian manufacturing of reactors and steam generators due to the condition of minimum overseas sourcing requirement, leading to under-utilization of capacity of the indian forge shops and other compa-nies. This would not be in line with the government’s ‘Make in india’ initiative.

as an alternate if goi is keen on usd denomination project finance, EXiM india can raise the funds abroad, for indian manufactured reactors, steam generators and equipment. Deemed export status accorded to nuclear business will allow such funding. Indian industries can compensate interest differential to EXIM India, as a service charge. This will ensure that NPCIL get entire project finance (foreign as well as Indian EXIM) on same terms.

Observations

us financing cost is likely to be higher by 3.5% p.a. to 4.5% p.a. as compared to the INR Bonds guaranteed by GOI.

• If the domestic content is maximized (through Indian financing), the total project cost is likely to reduce significantly, by around 10% to 15%.

• Foreign content to the extent of 50% to 60% is not in line with goi’s “Make in india” initiative.

Conclusion:

to support “Make in india” initiative, financing through issuance of inr bonds guar-anteed by goi or usd denomination of foreign funds generated abroad (by EXiM, india) is likely to be economical to a significant extent as compared to financing thru usa, as also from the overall project cost perspective.


2. Leveraging energy imports from gulf Countries through oil-for-capital projects barter deals can boost project exports and potentially provide major boost to “Make in india”

• One of the most significant macro-economic developments during 2014-15 has been the steep decline of crude oil prices in the international market. Crude oil prices have declined by more than 50% since June 2014.The fall in oil prices, continued geopoliti-cal events and the ongoing global climate negotiations are witness to the increasingly dynamic nature of energy markets.

• Oil is a mature global industry which offers the market participants opportunities for good economic returns. The balance between returns on capital and host countries’ interests is a delicate matter. Earlier what used to be seller’s market has now turned into buyer’s market. The present scenario has turned into a welcome opportunity for oil importing nations like India. India should leverage the current low oil prices for long-term gains.One of the measures could be to enter into oil-for-capital projects bar-ter deals to boost project exports.

Comparison of oil & gas imports with respect to EPC projects awarded in 2013 by gCCTable 1 All figures 2013, US $ bn

India south Ko-rea

Middle East Coun-

tries

Oil im-ports

EPC proj-ects

Percent-age %

Oil im-ports

EPC Proj-ects

Percent-age %

saudi ara-bia 32.8 3.05 9.30% 36.13 11.8 32.66%

Kuwait 17.02 Nil Nil 18.66 3.8 20.36%

Oman 0.76 Nil Nil 4.55 2.1 46.15%

uaE 14.1 Nil Nil 17.54 3.2 18.24%

Qatar 13.47 Nil Nil 25.46 0.9 3.53%

Total 78.35 3.05 3.89% 102.81 21.8 21.20%Source: Ministry of Commerce, www.trademap.org, MEED Projects, Zwaya

2.1 Above table explains how South Korea has been able to effectively capitalize upon its Oil import with respect to expanding its Engineering, procurement and construction (EPC) based economic and long-term strategic interests in the Gulf.

2.2 India should actively follow similar strategy of leveraging oil purchase for EPC proj-ects. It may be noted that each additional billion dollar of EPC projects brings about


5000 manpower of jobs to India. Such leveraging is easier to operate because the company which is exporting oil is the same state owned company which places orders on the EPC companies. To maximize the benefits of this opportunity and present a co-ordinate approach:

a) An Inter-ministerial group to be formed under PMO comprising senior represen-tatives from Ministry of Finance, Ministry of Commerce, Ministry of Petroleum & Natural Gas and Ministry of External affairs. The convener of this group should be Ministry of External affairs (MEA), as they have permanent presence in these countries and have the relationship to further the economic interests of the coun-try. A senior MEA official in New Delhi can be the coordinator. Representatives of FICCI and CII may be co-opted as per Invitees.

b) All government owned Oil marketing companies should make it a precondition that a predetermined % of crude oil revenue should be given as EPC contracts to Indian Companies.

c) Indian companies that are technically qualified by end clients should be allowed to participate and get EPC contracts against procurement of crude oil.

d) The Indian companies should be given opportunity to match the lowest bid while awarding the contract. This practice has been previously followed by GCC coun-tries for variety of reasons.

e) Periodic review meetings may take place at-least once a month where oil compa-nies & Indian EPC companies should be invited for making presentations & dis-cussing the future prospects. As and when necessary, Indian ambassadors to GCC countries should be invited for this meeting.

If this approach is well executed, it will lead to high exports in tune of US $ 10-15 bn per year thus improving balance of payment situation and increasing our for-eign currency reserves.

3. suggest correction in the inverted duty structure (ids) on Pressure Ves-sels, reactors, Columns / towers / Chemical storage tanks

background

Inverted Duty Structure is due to exemption of custom duty (zero duty) payable on imports consequent to preferential trade agreement with Republic of Korea (1.1.2010). Products can be imported either at basic custom duty of 7.5% from other countries.


import duty structure:

CountriesHs Code :841989/ 841990 (Pressure Vessels/reactors)

Hs Code : 841950(Heat exchangers)

Hs Code : 840219(boilers)

South Korea Nil 6% 2.5%

Japan 7.5% 7.5% 7.5%

ASEAN 6.5% 13 % 6.5%

Malaysia 2.5% 6% 2.5%

a. For Indian manufacturers, supplying to domestic customers, major raw material like stain-less chromium plates & SAW wire for manufacturing of the product are imported and chargeable to custom duty and other local taxes

b. As per South Korea FTA, import duty is NIL for finished goods like Pressure Vessels/Re-actors imported from South Korea for domestic projects. However, Indian manufacturers have to pay import duty of 5 to 10 % on raw materials & components. In addition, Indian manufacturers are incurring additional taxes & duties, CST / Octroi.

suggestions

a. Increase the import duty on pressure vessels to create a level playing field for Indian man-ufacturers. Or as an alternate impose countervailing / anti-dumping custom duty which can be levied as per existing FTA .

b. Declare Infrastructure status and priority status to capital goods sector to avail loans at concessional rates at 4% maximum (Competitors from overseas are supported by their respective Exim banks).

4. Exports to nepal and bhutan

One of the condition to be treated as export of service is that payment should be received in foreign currency.

Issue: Services are required to be exported to neighboring countries like Nepal, Bhutan, etc. and these countries are not in a position to pay for the services in convertible foreign exchange.

Recommendation:Payment in convertible foreign exchange including in Indian rupees and local currency may be allowed to qualify as export when services are provided to neighboring countries.


annEXurE-i

1. dutiesPeriod basic Excise duty (bEd %)

Mar 2006- Nov 2008 8

Dec 2008-Jun 2009 4

Jul 2009-Feb 2010 8

Mar 2010-Mar 16,2012 10

Mar 17, 2012 onwards 12

2. growthExcise duty growth registered in MMF

2006 – 2007 : 08 % 05 %2008 – 2009 : 04 % 11 %2009 – 2010 : 08 % 10 %2010 – 2011 : 10 % 04 %2011 – 2012 : 12 % 04 %2012 – 2013 : 12 % 02 %2013 – 2014 : 12 % 01 %2014 – 2015 : 12.5 % - 02 %

Source: ITMF: Capacity ; TXC: Prdn

Looms are not utilized even at 50% capacity in India due to fabrics import from China.


duty structure in neighbouring countriesThese rates are sta-

ble from 2006-15Excise duty structure of other Competitors

s. no. Products China Indonesia Thailand bangladesh Vietnam

1. Naptha 17% 10% 7% 15% 10%

2. PX 17% 10% 7% 15% 10%

3. PTA 17% 10% 7% 15% 10%

4 MEG 17% 10% 7% 15% 10%

5. ACN- 17% 10% 7% 15% 10%

6. PSF (including recy-cled PSF)estimated 17% 10% 7% 15% 10%

7. VSF 17% 10% 7% 15% 10%

8. ASF 17% 10% 7% 15% 10%

9. Polyester Filament Yarn 17% 10% 7% 15% 10%

10. VSF 17% 10% 7% 15% 10%

11. PV Yarn 17% 10% 7% 15% 10%

12. PC Yarn 17% 10% 7% 15% 10%

13, 100% Non Cotton Yarn 17% 10% 7% 15% 10%

14. Cotton and Cotton Yarn 17% 10% 7% 15% 10%

in india the tax structure is distorted as only MMF has mandatory Excise duty

annEXurE-ii


annEXurE-iii

revenue benefit to the government under 2 – 6% Excise duty regime across the textile Value Chain

Excise duty rates Current Excise rate)(Excise rate @ 6% - all

Yarn included ) rs. CroreNAPTHA 14% 14%

PX 6% 6%

PTA 12% 6%

MEG 12% 6%

Caprolactam 12% 6%

ACN 12% 6%

PSF 12% 6%

VSF 12% 6%

ASF 12% 6%

Polyester Filament Yarn 12% 6%

Nylon Filament Yarn 12% 6%

Nylon Industrial Yarn 12% 6%

Polyester Industrial Yarn 12% 6%

Nylon Tyrecord Fabric 12% 6%

Polyester Tyrecord Fabric 12% 6%

VFY 12% 6%

PV Yarn 0% 2%

PC Yarn 0% 2%

100% Non Cotton Yarn 0% 6%

Cotton Yarn 0% 2%

Cotton Fabric 0% 2%

Blended Fabric 0% 2%

100% Non Cotton 0% 2%

Garment 0% 2%

Excise Collection (rs-Crs) 7745 15500


annEXurE-iV


annEXurE-V

annEXurE-Vi


annEXurE-Vii


annEXurE-Viii

Cost disadvantages to the indian companies due to costs which are not ap-plicable to Foreign Contractors for Zero duty projects.

s. no. Items Impact

1 Terminal Sales Tax / VAT varies between states (2%- 15%) 2.25 - 16.87

2 Entry-tax / Octroi 2.5% on material (2.5% to 5%) 1.3

3 Sales-tax on indigenous inputs (2% on 10%) 0.2

4 Reimbursement of Excise Duty 12.5% x 10% 1.25

5 Customs duty on consumables (29.44% on 2.5%) 0.74

6 Financing Cost (4% differential in Indian and foreign interest rates on 40% working capital) 1.6

7 Inadequate infrastructure 5.0

Total 12.34 – 26.96

ASSOCHAM REGIONAL OFFICESASSOCHAM Southern Regional OfficeNo.13, D Block, Brigade MM1st Floor, 7th Block, JayanagarK R Road, Bangalore-560070Contact Person: Mr. T. N. SudarshanPhone: 080-40943251-53Fax: 080-41256629E-mail: [email protected] [email protected]

ASSOCHAM Western Regional Office608, 6th Floor, SAKAR-IIIOpposite Old High Court, Income TaxAhmedabad-380 014 (Gujarat)Phone: +91-79-2754 1728/ 29, 2754 1867Fax: +91-79-30006352E-mail: [email protected] [email protected]

ASSOCHAM Eastern Regional Office18, Ballygunge Circular RoadKolkata-700019Contact Person: Ms. Perminder KaurPhone: 91-33-4005 3845/41Mobile : 0967431223Fax: 91-33-4000 1149E-mail: [email protected]

ASSOCHAM North Eastern Regional OfficeGlobal Express GroupHouse No. 7, Bye No. 2Chandan Nagar, Survey, BeltolaGuwahati-781028Contact Person: Mr. Munindra KumarPhone: 09957999367E-mail: [email protected]

ASSOCHAM OVERSEAS 28 OFFICES

ASSOCHAM’s REGIONAL & OVERSEAS OFFICES

ASSOCHAM Regional Tamil Nadu OfficeInternational Law Centre, 61-63Dr. Radhakrishnan SalaiMylapore, Chennai-600004Contact Person: Mr. Vinod SolomonPhone: 044-28120000 • Fax: 044-28120001Mobile: +91 9486204970E-mail: [email protected] [email protected]

ASSOCHAM Regional Chandigarh OfficeSCO: 55, 56, 57, II Floor, Sector-8Madhya Marg, Chandigarh-160008Contact Person: Mr. Dalip SharmaPhone: 0172 4800855E-mail: [email protected]

ASSOCHAM Regional Ranchi Office503/D, Mandir Marg-C, Ashok NagarRanchi-834 002Phone: 06516555601, 06516555001Mobile: 09534769548E-mail: [email protected]; [email protected]

ASSOCHAM Regional Hyderabad OfficePlot No. 1335, Road No. 45Jubiliee Hills, Hyderabad-500 033Contact Person: Mr. Srikant BadigaPhone: 040-23557777

pre-budget memorandum

Documents