Special Budget Edition – March 2013

CHARTERED TIMES
A monthly E-journal for finance professionals
(A CA CLUB initiative)

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 Editorial Board:

CA Amarjit Chopra Mr. Ravish Bhateja CA Ashish Kalra

Former President (ICAI) ‘The Motivator’ Renowned SFM Guru

CA Vikash Agarwal CA Shammi Prabhakar Singh CA Arun Aggarwal

Practising CA Founder – CA Club AVP – Religare Capital

Contents:
Highlights of tax proposal ………………………………………………. Page 4
Direct Taxes Amendments by Finance Bill, 2013…………….. Page 8
Budget Impact on Consumer Goods…………………………….…. Page12
Securitisation Trust Exempted from Income Tax…………….. Page13
Relevance of Budget for the middle class……………………….. Page14
Amendments in Service Tax Laws…………………………………… Page15
Amendments in Central Excise……………………………………….. Page18
Amendments in Customs Act…………………………………………. Page 22
Legislative Amendments………………………………………………… Page27
Relevance of Budget for foreign investors……………………… Page30
Income Tax Ready Reckoner………………………………………….. Page30

CHARTERED TIMES 2
 From the desk of Editor:

Dear professional Colleagues,

We are extremely happy with the overwhelming response we got for

our very first edition of Feb 2013. I would like to thank you all on behalf of our
entire team for your kind support and appreciations for this initiative.

As we all know it’s a budget season for finance professionals, so we have tried
to cover detailed explanations of all the updates from Budget 2013-14.

Chartered times is a knowledge sharing platform, committed to provide you

continuous updates & amendments along with articles on topics from latest
development in financial world.

As per our promise made in very first edition of chartered times, we are
committed to keep you updated on all the recent developments and
amendments of our own world.

We have invited a few respected members from other continents as well to share
the practices of their country with us, which will help us to understand the
international finance & taxation in a simplest manner.

Please keep sharing all the updates, amendments, articles & valuable
suggestions with feedbacks on our E-mail id.

CA Shammi Prabhakar Singh

E-mail: admin@charteredtimes.in

CHARTERED TIMES 3
 HIGHLIGHTS of TAX PROPOSALS

Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute
resolution and independent judiciary for greater assurance is underlying theme of tax proposals.

Tax Administration Reforms Commission to be set up.

In short term need to reclaim peak of 11.9 per cent of tax GDP ratio achieved in 2007-08.

DIRECT TAXES
Little room to give away tax revenues or raise tax rates in a constrained economy.

No case to revise either the slabs or the rates of Personal Income Tax. Even a moderate increase
in the threshold exemption will put hundreds of thousands of Tax Payers outside Tax Net.

However, relief for Tax Payers in the first bracket of `2 lakhs to ` 5 lakhs. A tax credit of ` 2000 to
every person with total income up to `5 lakhs.

Surcharge of 10 percent on persons (other than companies) whose taxable income exceed ` 1
crore to augment revenues.

Increase surcharge from 5 to 10 percent on domestic companies whose taxable income exceed `
10 crore.

In case of foreign companies who pay a higher rate of corporate tax, surcharge to increase from
2 to 5 percent, if the taxable income exceeds ` 10 crore.

In all other cases such as dividend distribution tax or tax on distributed income, current surcharge increased
from 5 to 10 percent.

Additional surcharges to be in force for only one year.

Education cess to continue at 3 percent.

Permissible premium rate increased from 10 percent to 15 percent of the sum assured by relaxing eligibility
conditions of life insurance policies for persons suffering from disability and certain ailments.

Contributions made to schemes of Central and State Governments similar to Central

Government Health Scheme, eligible for section 80D of the Income tax Act.

Donations made to National Children Fund eligible for 100 percent deduction.

Investment allowance at the rate of 15 percent to manufacturing companies that invest more
than ` 100 crore in plant and machinery during the period 1.4.2013 to 31.3.2015.

‘Eligible date’ for projects in the power sector to avail benefit under Section 80IA extended from

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 31.3.2013 to 31.3.2014.

Concessional rate of tax of 15 percent on dividend received by an Indian company from its foreign subsidiary
proposed to continue for one more year.

Securitisation Trust to be exempted from Income Tax. Tax to be levied at specified rates only at
the time of distribution of income for companies, individual or HUF etc. No further tax on
income received by investors from the Trust.

Investor Protection Fund of depositories exempt from Income-tax in some cases.

Parity in taxation between IDF-Mutual Fund and IDF- NBFC.

A Category I AIF set up as Venture capital fund allowed pass through status under Income-tax Act.

TDS at the rate of 1 percent on the value of the transfer of immovable properties where consideration exceeds `
50 lakhs. Agricultural land to be exempted.

A final withholding tax at the rate of 20 percent on profits distributed by unlisted companies to shareholders
through buyback of shares.

Proposal to increase the rate of tax on payments by way of royalty and fees for technical services to non-
residents from 10 percent to 25 percent.

Reductions made in rates of Securities Transaction Tax in respect of certain transaction.

Proposal to introduce Commodity Transaction Tax (CTT) in a limited way. Agricultural commodities will be
exempted.

Modified provisions of GAAR will come into effect from 1.4.2016.

Rules on Safe Harbour will be issued after examining the reports of the Rangachary Committee appointed to
look into tax matters relating to Development Centers & IT Sector and Safe Harbour rules for a number of
sectors.

Fifth large tax payer unit to open at Kolkata shortly.

A number of administrative measures such as extension of refund banker system to refund more than ` 50,000,
technology based processing, extension of e-payment through more banks and expansion in the scope of annual
information returns by Income-tax Department.

Indirect Taxes

No change in the normal rates of 12 percent for excise duty and service tax.

No change in the peak rate of basic customs duty of 10 percent for non-agricultural products.

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 Customs

Period of concession available for specified part of electric and hybrid vehicles extended up to 31 March 2015.

Duty on specified machinery for manufacture of leather and leather goods including footwear reduced from 7.5
to 5 percent.

Duty on pre-forms precious and semi-precious stones reduced from 10 to 2 %

Export duty on de-oiled rice bran oil cake withdrawn.

Duty of 10 percent on export of unprocessed ilmenite and 5 percent on export on ungraded ilmenite.

Concessions to air craft maintenance, repair and overhaul (MRO) industry.

Duty on Set Top Boxes increased from 5 to10 percent.

Duty on raw silk increased from 5 to 15 percent.

Duties on Steam Coal and Bituminous Coal equalised and 2 percent custom duty and 2 percent CVD levied on
both kinds coal.

Duty on imported luxury goods such as high end motor vehicles, motor cycles, yachts and similar
vessels increased.

Duty free gold limit increased to ` 50,000 in case of male passenger and `1, 00,000 in case of a
female passenger subject to conditions.

Excise duty

Relief to readymade garment industry. In case of cotton, zero excise duty at fibre stage also. In
case of spun yarn made of manmade fiber, duty of 12 percent at the fiber stage.

Handmade carpets and textile floor coverings of coir and jute totally exempted from excise duty.

To provide relief to ship building industry, ships and vessels exempted from excise duty. No CVD
on imported ships and vessels.

Specific excise duty on cigarettes increased by about 18 percent. Similar increase on cigars, cheroots and
cigarillos.
Excise duty on SUVs increased from 27 to 30 percent. Not applicable for SUVs registered as taxies.

Excise duty on marble increased from `30 per square meter to ` 60 per square meter.

Proposals to levy 4 percent excise duty on silver manufactured from smelting zinc or lead.

Duty on mobile phones priced at more than `2000 raised to 6 percent.

MRP based assessment in respect of branded medicaments of Ayurveda, Unani, Siddha,

Homeopathy and bio-chemic systems of medicine to reduce valuation disputes.

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 Service Tax

Maintain stability in tax regime.

Vocational courses offered by institutes affiliated to the State Council of Vocational Training and testing
activities in relation to agricultural produce also included in the negative list for service tax.

Exemption of Service Tax on copyright on cinematography limited to films exhibited in cinema halls.

Proposals to levy Service Tax on all air conditioned restaurant.

For homes and flats with a carpet area of 2,000 sq. ft. or more or of a value of `1 crore or more,
which are high-end constructions, where the component of services is greater, rate of
abatement reduced from 75 to 70 percent.

Out of nearly 17 lakh registered assesses under Service Tax only 7 lakhs file returns regularly. Need to motivate
them to file returns and pay tax dues. A onetime scheme called ‘Voluntary Compliance Encouragement
Scheme’ proposed to be introduced. Defaulter may avail of the scheme on condition that he files truthful
declaration of Service Tax dues since 1st October 2007.

Tax proposals on Direct Taxes side estimated to yield to `13,300 crore and on the Indirect Tax side `4,700 crore.

Good and Services Tax

A sum of ` 9,000 crore towards the first instalment of the balance of CST compensation provided in the budget.

Work on draft GST Constitutional amendment bill and GST law expected to be taken forward.

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 HIGHLIGHTS OF DIRECT TAXES AMENDMENTS BY FINANCE BILL, 2013
(By CA Vikas aggarwal)
For individuals

 The slab rates for income tax remains same with basic exemption of Rs. 2 Lakhs for men as well as women, Rs. 2.50
Lakhs for Senior Citizens above 60 years of age and Rs. 5 Lakhs for Very Senior Citizens above 80 years of age.

 Rebate of Rs. 2,000 has been provided under Section 87 from the tax payable by an assessee, being an individual
resident in India, whose total income does not exceed five lakh rupees.

 Surcharge has been introduced @ 10% for one year for individuals having a total income exceeding Rs. 1 Crores.

 An additional deduction of Rs. 1 Lakh will be allowed under the new Section 80EE in respect of interest on loan taken for
residential house property during the year 2013-14.

 This deduction shall be in addition to the deduction of Interest on Housing Loans provided under Section 24.

 For the purpose of claiming this deduction, the Loan must be obtained during the year 2013-14, the amount of loan
sanctioned for acquisition of the residential house property does not exceed twenty-five lakh rupees, the value of the
residential house property does not exceed forty lakh rupees and the assessee does not own any residential house
property on the date of sanction of the loan.

 Any sum including the sum allocated by way of bonus received under an insurance policy issued on or after 01.04.2013
for the insurance on the life of any person who suffers from any disability as referred to in Section 80U or 80DDB shall
be exempt under clause (10D) of section 10 if the premium payable for any of the years during the term of the policy
does not exceed 15% of the actual capital sum assured.

 Section 80C has been amended to provide deduction on account of premium paid in respect of a policy issued on or
after 01.04.2013 for insurance on the life of a person referred to above to the extent the premium paid does not exceed
15% of the actual capital sum assured.

 Section 80D to include other health schemes of the Central and State Governments, which are similar to the Central
Government Health Scheme (CGHS) as may be notified by the Central Government.

 Deduction under Section 80CCG extended to investment in listed units of an equity oriented fund. Deduction under this
section shall be allowed for 3 consecutive assessment years and investment must be made by retail investor whose
gross total income for the relevant assessment year does not exceed twelve lakh rupees.

 Deduction under Section 80G extended to allow 100 % deduction for donation made to National Children’s Fund.

For Domestic Companies

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  The surcharge at the rate of ten percent shall be levied for one year if the total income of the domestic company
exceeds ten crore rupees.

 The benefit under Section 115BBD for lower rate of tax on dividend received from foreign companies has been extended
for one more year. Thus the dividends received by an Indian company from a foreign company in which it has
shareholding of 26% or more, shall be taxable @ 15%.

 For the removal of cascading effect of DDT, Section 115-O has been amended to provide that DDT shall not be payable if
the Indian company distributes the said dividend to its shareholders within the same year. This amendment shall take
effect from 1st June, 2013.

 A new Section 32AC has been introduced to provide incentive for acquisition and installation of new plant or machinery
by manufacturing company. The following conditions has been prescribed for availing the deduction:

a. The company is engaged in the business of manufacture of an article or thing,

b. Investment of more than Rs. 100 Crores in new plant and machinery during the period of two years i.e. 1 st April,
2013 to 31st Mar. 2015.
c. A deduction of 15% of the aggregate amount of actual cost of new plant and machinery shall be allowed during the
Assessment year 2014-15.
d. Deduction of 15% of the aggregate amount of actual cost of new plant and machinery for two years shall be allowed
during the Assessment year 2015-16 after reducing the deduction allowed during AY 2014-15.
e. New plant and machinery shall not include office appliances, plant and machinery installed in office or residential
accommodation or any vehicle or any ship or aircraft.
f. There is a restriction on transfer of the new plant and machinery for a period of 5 years.

 Sunset under Section 80IA for power sector has been extended for a further period of one year i.e. upto 31st Mar. 2014
with a view to provide further time to the undertakings to commence the eligible activity to avail the tax incentive.

For Foreign Companies

 The surcharge at the rate of Five percent shall be levied for one year if the total income of the domestic company
exceeds ten crore rupees as against the existing Two percent.

 The tax rate in case of non-resident taxpayer, in respect of income by way of Royalty and Fees for Technical Services as
provided under section 115A, is proposed to be increased from 10% to 25% in order to make the Income Tax provisions
in sync with the Tax treaties entered with various countries.

 Section 90 and 90A has been amended to provide that the submission of Tax Residency Certificate is a necessary
condition but not a sufficient condition for claiming benefits under the agreements for the purpose of availing benefits
of the Double Taxation Avoidance Agreements entered with various countries. These amendments will take effect
retrospectively from 1st April, 2013.

OTHER AMENDMENTS

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TDS on immovable property transactions

 A new Section 194A has been introduced to provide for deduction of tax at source on the payments made for transfer of
immovable property other than agricultural land to a resident transferor at the rate of 1 % of the consideration amount.
This is being done in order to have a reporting mechanism of transactions in the real estate sector and also to collect tax
at the earliest point of time. However, if the total amount of consideration does not exceed Rs. 50 Lakhs, no deduction
of tax is required under this section. This amendment will take effect from 1st June, 2013.

Tax on distributed profits on buy back of unlisted securities

 A new Chapter XII-DA wherein additional income tax @20% on buy back of shares of unlisted companies has been
introduced. Where Consideration paid by the company for purchase of its own unlisted shares exceeds the sum received
by the company at the time of issue of shares, the company is liable to pay additional income tax @ 20%of income
distributed to the shareholder. Such a tax is on similar lines as DDT. Income arising to shareholders would be exempt
where the company is liable to pay additional income tax. These amendments will take effect from 1st June, 2013.

Reduction in STT

 Delivery based purchased of units of equity oriented funds entered into in a recognized stock exchange – from 0.1% to
NIL
 Delivery based sale of units of equity oriented funds entered into in a recognized stock exchange- from 0.1% to 0.001%
 Sale of futures in securities- from 0.017% to 0.01%
 Sale of a unit of an equity oriented fund to mutual fund- from 0.25% to 0.001%
 These amendments will take effect from 1st June, 2013.

Imposition of Commodities Transactions Tax

 A new tax called Commodity Transaction Tax is to be levied on taxable commodities transaction entered into a
recognized association.
 ‘Taxable Commodities Transaction’ has been defined to mean a transaction of sale of commodity derivative in respect of
commodities, other than agricultural commodities, traded in recognized associations.
 Tax to be levied at the rate of 0.01% on sale of commodity derivative by the seller.
 This tax to be levied from the date when the Finance Bill, 2013 comes into force.
 Section 36 has been amended to provide that an amount equal to the commodities transaction tax paid by the assessee
in respect of the taxable commodities transactions entered into in the course of his business during the previous year
shall be allowable as deduction.
 This amendment will take effect from AY 2014-15.

Amendment in General Anti-Avoidance Rule (GAAR)

 GAAR provisions currently provided in the Act have been amended to give effect to the recommendations of the Expert
Committee constituted by the Government.
 These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year
2016-17 and subsequent assessment years.

Rationalization of tax on distributed income by the Mutual Funds

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  Under the provision of the section 115R, Infrastructure Debt fund set up as Non – Banking Finance Company or as a
Mutual Fund, the income distribution by fund to a non-resident investor will be taxable at a concessional rate of 5%.
 This amendment will take effect from 1st April, 2013.

Enabling provisions for facilitating electronic filing of annexure-less return of net wealth

 New Sections 14A and 14B introduced in lines with the provisions of Sections 139C and 139D to provide for facilitating
filing of annexure-less return of income in electronic form by certain class of income-tax assesses.

Return of Income filed without payment of self- assessment tax to be treated as defective return

 Return of income shall be regarded as defective if the Self-assessment tax under Section 140A has not been paid on or
before the date of filing of the return.
 This amendment will take effect from 1st June, 2013.

Section 142 (2A) scope widened

 Special audit under Section 142(2A) can now be ordered by having regard to the nature and complexity of the accounts,
volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts or
specialized nature of business activity of the assessee, and the interests of the revenue, after obtaining the previous
approval of the Chief Commissioner or the Commissioner.

Penalty for non-filing of Annual Information Return (AIR)

 If a person who is required to furnish an Annual Information Return, as required under sub-section (1) of section 285BA,
fails to furnish such return within the time prescribed under sub-section (2) thereof, the income-tax authority may direct
that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which the failure
continues.
 Where a person fails to furnish the return within the period specified in the notice under sub-section (5) of section
285BA, he shall pay, by way of penalty, a sum of five hundred rupees for every day during which the failure continues.

(Contact Author: vikash@astaxsolutions.com)

CHARTERED TIMES 11
 Budget Impact on Consumer Goods
Consumer Items
Television set-top boxes
Mobile Phones worth > Rs 2000
Silk & silk products
Cigarettes and tobacco products
Branded Non-Allopathic medicines
Imported Jewellery
Ready-made Garments
Eating Out
Sports Utility Vehicles (except
taxis)
Environment-friendly vehicles
Imported Luxury Vehicles
Home Furnishing and Décor
Housing Construction
High-end Homes
CHARTERED TIMES
Impact Budget Measure
Negative Customs duty on imported set-top boxes increased from 5% to 10%
Negative
Increase in excise duty to 6%
Negative Increase in the customs duty on raw silk from 5% to 15%
Negative Increase in the specific excise duty on cigarettes to about 18%.
Similar increases are proposed on cigars, cheroots and cigarillos.
An abatement of 35% on the excise duty on MRP based assessment
Positive in respect of branded medicaments of Ayurveda, Unani, Siddha,
Homeopathy and bio-chemic systems of medicine
Duty-free limit on imported Jewellery raised to Rs 50,000 in the case
Positive of a male passenger and Rs 100,000 in the case of a female
passenger
Zero excise duty' for cotton and manmade sector (spun yarn) at the
Positive
yarn, fabric and garment stages
Negative
Service tax levied on all air conditioned restaurants
Negative
Excise duty on SUVs increased from 27% to 30%
The period of concession now available for specified parts of electric
Positive
and hybrid vehicles extended upto fiscal 2015
Increase in the customs duty on imported motor vehicles from 75%
Negative to 100%; on motorcycles with engine capacity of 800cc or more from
60% to 75%; and on yachts and similar vessels from 10% to 25%
Handmade carpets and textile floor coverings
Positive
of coir or jute exempted from excise duty
Negative Increase in the excise duty on marble from Rs 30 per sq. mtr to Rs
60 per sq. mtr.
Negative For buildings having homes and flats with a carpet area of 2,000
sq.ft. Or more or of a value of Rs 1 crore or more, reduction in the
rate of abatement on the service tax from 75% to 70%.
12
 Securitisation Trust EXEMPTED from income tax
P Chidambaram in his budget 2013 has decided to exempt the Securitisation Trust from Income Tax. By virtue of this the financial
institutions will securitise their assets through a special purpose vehicle.
It’s a big relief to investors, particularly mutual funds that had stopped investing in pass through certificates because
of tax implications. It will encourage high net worth individuals as well as the country's mutual funds to enter into securitisation
transactions.

Tax shall be levied only at the time of distribution of income by the Securitisation Trust. In case, the recipient is a company, tax
rate will be 30 % and in case of an individual or HUF, it will be 25 %. If it is an exempt category of investors like MFs, no tax will be
applicable. Tax calculations for investors such as companies, foreign institutional investors would be different. Investors who have
to take deduction on account of interest paid and other charges, the same will not be allowed under Section 14A of Income Tax
Act as the income received by them from Securitisation Trust is proposed to be exempt from tax.

Microfinance institutions will sell micro loans and generate liquidity. However If the securitisation trust distributes the principal, but
retains income, it may amount to creating a tax shelter. The Trust may go on paying off principal, retain interest and distribute
interest only at the end of the term. Also, in case of revolving type of transactions, the Trust may continue to revolve income as
well as principal, and may, therefore, avoid paying tax right till the end of the term of the transaction.

Presently, tax provisions regarding securitisation transactions is contained in several sections - 10 (23D), 10 (35A), and 115TA,
115TB and 115TC including a new set of provisions in Section 115TA and 115TB.

The pro-vision in Section 115TA obliges the securitisation Trustee to pay 0 % tax in case of assessee whose income is exempt
from tax (primarily MFs), 25% in case of income received by an individual, and 30% in case of in-come received by any other
assessee.

Some of the other difficulties in applying Section 115TA, industry feels, will arise if income is not distributed, or if the investor
transfers the securities

Power can become more expensive after changes in import duty

Proposed measures in the union budget for 2013-14 coupled with rise in railway freight will result in higher electricity tariff for the
end users. Country's largest power producer NTPC fears increase in the cost of power by at least 5 paise per unit while producers
banking on older power plants fear even higher burden.

Introduction of 2% customs duty and increase of CVD from 1% to 2% will have an impact on the price of imported coal and on the
cost of power generation and is expected to increase the tariff. This, along with the freight increase announced in the Railway
Budget, may increase the cost of power by over 5 paise per unit as far as NTPC is concerned," NTPC CMD Arup Roy
Choudhury said after Budget.

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 Relevance of Budget 2013 for the middle class

1. New tax-free bonds will be announced soon, as some institutions are expected to raise around Rs 25,000 crore via tax-
free bonds in 2012-13 now the finance minister has also permitted some institutions to issue tax free bonds in 2013-14 up
to Rs 50,000 crore.

2. Inflation indexed bonds and inflation indexed national security certificates are expected to be announced shortly, to beat
inflation effect on long term savings.

3. Investors having income up to Rs 12 lakh can invest in Rajiv Gandhi Equity Saving Scheme (RGESS). (Earlier this limit
was only Rs. 10 lakhs).

4. Interest payment on housing loan of less than Rs 25 lakh (loan must be taken during this year only), has an additional
tax break of Rs 1 lakh, in addition to Rs 1.5 lakh permitted currently.

5. Insurance companies can open offices in tier II cities without prior permission from Insurance Regulatory and
Development Authority. If you are living in a tier II city and find it difficult to find an insurer near your place, it’s a good
news for you.

6. STT on futures trading in equity market has come down 0.017% to 0.01 % and if you are derivative trader in commodities
market, you have to pay CTT (Commodity transaction tax) at the same rate applicable to equity futures. (There was no
CTT before this budget).

7. STT on mutual fund (MF) and exchange traded fund (ETF) redemptions at fund counters is slashed to 0.001% from
0.25%. STT on MF/ ETF purchase and sale on exchanges is reduced from 0.1% to 0.001%, only for the seller.

8. Duty-free shopping limit is hiked to Rs 50,000 for a male passenger and Rs 1 lakh for a female passenger, that’s
obviously a good news for people who travel abroad.

9. Service tax evaders can make use of the new voluntary Compliance Encouragement Scheme by filing a declaration
of service tax due since 1.10.2007 and making the payment in one or two instalments without any interest or penalty
before prescribed dates.

Eligibility cap on life insurance premiums has been raised to15% for policyholders with disabilities or specified ailments, noting
that some policies meant for such individuals exceed the existing limit of 10%. If policies do not meet the eligibility criterion, the
amount of deduction allowed will be restricted to 10% (15% in case of persons with disabilities) of the sum assured and the
maturity proceeds will be taxed.

CHARTERED TIMES 14
 Amendments in Service tax Laws
The service tax changes in Budget 2013 are largely guided by the objectives to provide a stable tax regime and improve
voluntary compliance. The important changes are as follows:

A. Legislative changes

Following changes are being made in the Finance Act, 1994:

1. There are following changes in relation to the negative list:

(i) The definition of approved vocational course in section 65B(11) is being proposed to be changed to:
a) include courses run by an industrial training institute or an industrial training Centre affiliated to State
Council for Vocational Training; and
b) Delete clause (iii) dealing with courses run by an institute affiliated to the National Skill Development
Corporation.
(ii) The definition of “process amounting to manufacture or production” in section 65B(40) is being expanded to
include processes under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955
(iii) The negative list entry in sub-clause (i) of clause (d) of section 66D is being modified by deleting the word “seed”.
This will allow the benefit to all other testings in relation to “agriculture” or “agricultural produce”.

2. The provisions of section 73 are being modified such that if the grounds for invoking extended period are not
sustained, the Central Excise officer will be able to determine the demand for the shorter period of eighteen months.

3. The penalty under section 77(a) is being restricted to Rs 10,000. A new section 78A is also being introduced to impose
penalty on directors and officials of the company for specified offences in cases of willful actions.

New provisions are being introduced to prescribe revised punishments for offences in section 89 (prosecution of specified
offences involving service tax), make certain offences cognizable and others non-cognizable and bailable. The Policy wing of the
Board will be issuing detailed instructions in due course.

These changes will come into force when the Finance Bill, 2013 is enacted.

B. Exemptions

4. The following changes are being made w.e.f April 1, 2013 in the exemption notification number 25/2012-ST dated June 20,
2012:

(i) Exemption by way of auxiliary educational services and renting of immovable property by (and not to) specified
educational institutes under S. No 9 will not be available; (S. No 9: Services provided to or by an educational
institution in respect of education exempted from service tax, by way of,- auxiliary educational services;
or ‘renting of immovable property’);

CHARTERED TIMES 15
(ii) The benefit of exemption under S. No 15 of the notification in relation to copyrights for cinematograph films will now be
available only to films exhibited in a cinema hall or theatre. This will allow service providers to pass on input tax credits
to taxable end-users;
(S. No 15: Temporary transfer or permitting the use or enjoyment of a copyright covered under clauses (a) or
(b) of sub-section (1) of section 13 of the Indian Copyright Act, 1957 (14 of 1957), relating to original literary,
dramatic, musical, artistic works or cinematograph films)

(iii) Exemption under S. No 19 will now be available only to non-air-conditioned (non-centrally air-heated) restaurants; the
dual requirement earlier that it should also have a license to serve alcohol is being done away with;
(S. No 19 : Services provided in relation to serving of food or beverages by a restaurant, eating joint or
a mess, other than those having (i) the facility of air-conditioning or central air-heating in any part of the
establishment, at any time during the year, and (ii) a license to serve alcoholic beverages)

(iv) The exemptions available to transportation of goods by railway and vessel under S. No 20 and services provided by a
goods transportation agency (GTA) under S. No.21 are being harmonized. Thus exemption to transportation of
petroleum and petroleum products, postal mails or mail bags and household effects by railways and vessels will not be
available while the benefit of transportation of agricultural produce, foodstuffs, relief materials for specified purposes,
chemical fertilizers and oilcakes, registered newspapers or magazines and defence equipments will be available to GTA;

(v) The exemptions under S. No 24 for vehicle parking to general public and S. No 25 for repair or maintenance of
government aircrafts are being withdrawn;

(S. No 24. Services by way of vehicle parking to general public excluding leasing of space to an entity for providing such parking
facility

S. No 25. Services provided to Government, a local authority or a governmental authority by way of -

(a) carrying out any activity in relation to any function ordinarily entrusted to a municipality in relation to water supply,
public health, sanitation conservancy, solid waste management or slum improvement and upgradation; or

(b) Repair or maintenance of a vessel or an aircraft)

And

(vi) The definition of “charitable activities” is being changed by deleting the portion listed in sub-clause (v) of clause (k).
Thus the benefit to charities providing services for advancement of “any other object of general public utility” up to Rs
25 Lakh will not be available. However the threshold exemption will continue to be available up to Rs 10 lakh.

CHARTERED TIMES 16
C. Abatement

5. The abatement available under S. No 12 of notification 26/2012-ST dated June 20, 2012 for construction of a complex,
building, civil structures etc. is being reduced from the existing 75% to 70% for construction other than residential properties
having a carpet area up to 2000 sq. ft. or where the amount charged is less than Rs 1 crore. This will come into effect from
March 1, 2013.

D. Voluntary Compliance Encouragement Scheme, 2013 (VCES)

6.1 A new scheme is proposed to be introduced to encourage voluntary compliance with the following main features:

(i) The scheme can be availed of by non-filers or stop-filers or persons who have not made a truthful declaration in their
return. However it will not be applicable to persons against whom any inquiry or investigation is pending by the issue of
search warrant or summon or by way of audit;
(ii) The defaulter will be required to make a truthful declaration of all his pending tax dues (from October1, 2007 to
December 31, 2012) and pay at least half of that before December 31, 2013; remaining half to be paid by:
(a) June 30, 2014 without interest; or
(b) By December 31, 2014 with interest from July 1, 2014 onwards;
(iii) On compliance with all the requirements the person will have immunity from interest (as specified), penalties and other
proceedings;

6.2 The scheme will come into force when the Finance Bill is enacted. It is clarified that the tax-payers will need to settle their
dues for the period after December 31, 2012 under the present law.

E. Advance Ruling Authority

7. The benefit of Advance Ruling Authority is being extended to resident public limited companies.

CHARTERED TIMES 17
 Amendments in CENTRAL EXCISE
Chapter 11.

11.1 Tapioca starch manufactured and consumed captively in the manufacture of tapioca sago, (Sabudana) is being exempted
from excise duty. Notification No.12/2012-CE, dated 17th March, 2012 as amended by notification No. 12/2013-CE, dated the 1st
March 2013 refers. S. No 8A contains the changes.

Chapter 15.

15.1 Sub-heading 1517 90 20 (peanut butter) is being deleted from the First Schedule to the Central Excise Tariff Act, 1985. An
amendment has been proposed in the Finance Bill, 2013 (Clause 92 read with the Sixth Schedule) to delete the current sub-
heading 1517 90 20 and entries relating thereto from the Tariff. Hereafter, peanut butter will be classified under subheading
2008 11 00. At present, sub-heading 1517 90 20 as well as sub-heading 2008 11 00 of the Central Excise Tariff carries a tariff rate
of 6%. However, the applied rate is Nil for subheading 1517 90 20. The exemption is being continued. In this connection,
notification No. 12/2012-CE, as amended by notification No.12/2013-CE, dated 1st March, 2013 refers. S. No 13A contains the
changes.

Chapter 19.

19.1 Tapioca sago (Sabudana) is being exempted from excise duty. Notification No.12/2012CE, as amended by notification No.
12/2013-CE, dated the 1st March 2013 refers. S. No 24A contains the changes.

Chapter 24.

24.1 Basic excise duty on cigarettes and other products of tariff heading 2402 is being increased. Clause 92 of the Finance Bill,
2013 read with the Sixth Schedule may be referred to for details. By virtue of the Provisional Collection of Taxes Act, 1931, the
levies will come into force with immediate effect. There is no change in NCCD and Health Cess rates. The changes in basic excise
duty rates are summarized below.

Cigarettes
TARIFF ITEM DESCRIPTION BED BED
(length in mm) Rs. per 1000 sticks Rs. per 1000 sticks
(Existing Rate) (New Rate)
24022010 Non filter not exceeding 65 509 No change

24022020 Non-filter exceeding 65 but not exceeding 1463 1772

70
24022030 Filter not exceeding 65 509 No change

24022040 Filter exceeding 65 but not exceeding 70 1034 1249

24022050 Filter exceeding 70 but not exceeding 75 1463 1772
24022060 Filter exceeding 75 but not exceeding 85 1974 2390
24022090 Other 2373 2875

CHARTERED TIMES 18
Cigar, Cheroots and Cigarillos:

TARIFF ITEM DESCRIPTION BED BED

(Existing Rate) (New Rate)
2402 10 10 Cigar and cheroots 12% or Rs.1370 whichever is 12% or Rs.1781 whichever is
higher higher
2402 10 20 Cigarillos 12% or Rs.1370 whichever is 12% or Rs.1781 whichever is
higher higher
2402 90 10 Cigarettes of Rs.1258 per thousand Rs.1511 per thousand
Tobacco Substitutes
2402 90 20 Cigarillos of 10% or Rs.1473 whichever is 12% or Rs.1738 whichever is
Tobacco Substitutes higher higher
2402 90 90 Other 10% or Rs.1473 whichever is 12% or Rs.1738 whichever is
higher higher

Chapter 25.
25.1. Basic excise duty is being increased on marble slabs and tiles from ` 30 per square meter to ` 60 per square meter.
S.No.54 of notification No.12/2012-CE, as amended by notification No.
12/2013-CE, dated the 1st March 2013 refers.

25.2 Under notification No.12/2012-CE (S.No.55), sulphur recovered as by product in refining of crude oil (sub-heading 2503 00
10) used for the manufacture of fertilisers is exempt from excise duty. "Fertilizers" include bentonite sulphur and hence, sulphur
under sub-heading 2503 00 10 used for manufacture of bentonite sulphur is exempt from excise duty. An Explanation has been
inserted below the entry against S. No.55 to place the matter beyond doubt. Notification No. 12/2013-CE dated 1st March, 2013
may be referred to for details.

Chapter 30.

30.1 Branded Ayurvedic medicaments and medicaments of Unani, Siddha, Homeopathy or Bio-chemic system are being brought
under MRP based assessment with an abatement of 35% from the MRP. Ayurvedic medicaments as well as medicaments of
Unani, Siddha, Homeopathy or Bio-chemic System (generic as well as branded) have been included in the Third Schedule to the
Central Excise Tariff Act, 1944. In this connection, clause 91 of the Finance Bill 2013 read with the Fifth Schedule and notification
No. 1/2013-C.E. (NT) dated 1st March, 2013 refer. By virtue of the Provisional Collection of Taxes Act, 1931, the changes will
come into force with immediate effect.

Chapter 33.

33.1 Henna powder or paste, not mixed with any other ingredient is being exempted from excise duty. S No 134 of notification
No 12/2012-CE, as amended by notification No 12/2013CE, dated 1st March 2013 refers.

Chapter 39.

CHARTERED TIMES 19
39.1 S. No. 146 and the entries relating thereto are being deleted from notification No. 12/2012CE, as a general exemption is
being issued. Notification No. 7/2013-CE dated 1st March 2013 may be referred to for details.

Chapter 57.

57.1 All handmade carpets and carpets & other textile floor coverings of coir and jute, whether or not handmade, falling under
Chapter 57, are being fully exempted from excise duty. In this connection, notification No. 12/2012-CE as amended by
notification No. 12/2013-C.E. dated 1st March, 2013 refers. S. No 173A contains the changes. Consequently, the entries against S.
No.

72 of notification No. 1/2011-CE, dated 1st March, 2011 and S. No. 37 of notification No. 2/2011-CE, dated 1st March, 2011 are
being omitted. Notification No. 9/2013-CE and 10/2013CE, both dated 1st March, 2013 may be referred to.

Chapter 61-63.

61.1 Zero excise duty route, as existed prior to Budget 2011-12, is being restored on readymade garments and made ups. The
zero excise duty route will now be available in addition to the CENVAT route under which manufacturers can pay excise duty on
the final product and avail of credit of duty paid on inputs. S.No.16 of notification No. 30/2004-CE dated the 9th July, 2004 as
amended by notification No.11/2013-CE dated the 1st March, 2013 and S. No.7 of notification No. 7/2012-CE dated 17th
March,2012, as amended by notification No. 8/2013- CE dated the 1st March, 2013 may be referred to for details.

Chapter 68.
68.1 Excise duty on marble slabs and tiles is being increased from ` 30 per square meter to `

60 per square meter. S. No. 54 of the notification No. 12/2012-CE, as amended by notification No.12/2013-CE dated 1st March,
2013 refers.

Chapter 71.

71.1 Excise duty of 4% is being imposed on silver produced or manufactured during the process of zinc or lead smelting starting
from the stage of zinc or lead ore or concentrate. Notification No.12/2012-CE, as amended by notification No.12/2013-CE,
dated the 1st March 2013 refers. S. No 191A contains the changes.

Chapter 72.
72.1. The compounded duty rate on stainless steel “patta- patti” is being increased from Rs 30,000 per machine per month to Rs
40,000 per machine per month. Notification No. 17/2007CE, dated 1st March, 2007 as amended by notification No. 5/2013-CE,
dated 1st March 2013 refers.

Chapter 74.

74.1 Under notification 12/2012-CE (S. No. 217), trimmed or untrimmed sheets or circles of copper, intended for use in the
manufacture of handicrafts or utensils attract excise duty of Rs 3,500 per metric ton. For the purposes of this entry, by way of an
explanation, it is clarified that copper means copper and copper alloys including brass. Notification No. 12/2012-CE, as amended
by notification No. 12/2013-CE dated 1st March, 2013 refers.

Chapter 76.
76.1. Sub-heading 7615 19 10 (pressure cookers) is being replaced by sub-heading 7615 10 11 in the Third Schedule to the
Central Excise Act, 1944. An amendment has been proposed in the Finance Bill, 2013 (Clause 91 read with the Fifth Schedule).

CHARTERED TIMES 20
This is basically a technical rectification. In this connection, notification No. 12/2012-CE, as amended by notification No.12/2013-
CE, dated 1st March, 2013 refers. S. No 212 contains the changes. Relevant changes are also being made in notification
No.49/2008(NT) dated 24th December, 2008 as amended by notification No. 1/2013-CE(NT) dated 1st March,2013.

Chapter 85.
85.1 Excise duty on mobile handsets including cellular phones having retail sale price more than Rs. 2000/- is being increased
from 1% to 6%. The duty on mobile phones priced up to and inclusive of Rs. 2000 (retail sale price) would remain unchanged.
Notification No. 12/2013-CE, dated 1st March, 2013 (S. No. 263A) provides the details. Consequently notification No. 20/2011-CE,
dated 24th March, 2011 is being rescinded. Notification No. 6/2013-CE, dated 1st March 2013 refers.

Chapter 87.

87.1 The validity period of concessional excise duty of 6% granted to specified parts of hybrid and electric vehicles is being
extended by two more years up to 31st March, 2015. Proviso to notification No.12/2012-C.E, as amended by notification No.
12/2013-CE, dated the 1st March 2013 refers.

87.2 The excise duty on chassis of diesel motor vehicles for the transport of goods (8706 00 42) is being reduced from 14% to
13%. In this connection, notification No.12/2012-C.E, as amended by notification No. 12/2013-CE, dated the 1st March 2013
refers. S. No.s 292A and 292B contain the changes.

87.3 Excise duty on SUVs (including utility vehicles falling under CTH 8703) and engine capacity >1500 cc is being increased from
27% to 30 %.( Clause 92 of the Finance Bill, 2013 read with the Sixth Schedule). The SUV has been defined in the notification No.
12/2013-CE dated 1st March, 2013. S. No. 284A contains the changes. By virtue of the Provisional Collection of Taxes Act, 1931,
the levy will come into force with immediate effect.

87.4 The taxi refund in respect of SUVs is being adjusted with a view to ensuring that the duty increase does not affect SUVs
used as taxis. Now, in respect of SUVs the refund of 28% of the excise duty paid at the time of clearance would be applicable.
Notification No.12/2012-CE, as amended by notification No. 12/2013-CE dated 1st March, 2013 may be referred to for details. Sl.
No. 284 and 284A contains the changes.

Chapter 89.

89.1 Excise duty on ships, tugs and pusher craft, dredgers and other vessels falling under CETH 8901, 8904, 8905, 8906 90 00 is
being exempted. Notification No.12/2012-CE, as amended by notification No. 12/2013-CE dated 1st March, 2013 may be referred
to for details.

Miscellaneous:
Goods manufactured and captively consumed within the factory of production in the manufacture of final products in
respect of which exemption is claimed under the Area Based Exemption Scheme under notification Nos. 49/2003-CE and
50/2003-CE, both dated 10th June 2003 (available for Uttarakhand and Himachal Pradesh) is being exempted from excise duty.
Notification No. 7/2013-CE dated the 1st March 2013 may be referred to for details.

CHARTERED TIMES 21
 Amendments in Custom Act
Chapter 8

8.1 The basic customs duty (BCD) on hazel nuts is being reduced from 30% to 10%.

Notification No.12/2012-Customs, dated 1st March, 2012 as amended by notification No. 12/2013-Customs, dated 1st March,
2013 refers. S. No. 23A contains the changes.

8.2 In notification No 12/2012-Customs, at S. No. 24 of the Table, sub-heading 0802 50 00 (Pistachios) is being replaced by sub-
headings 0802 51 00 and 0802 52 00. This is a technical rectification.

Chapter 11

11.1 The BCD on de-hulled oat grain is being reduced from 30% to 15%. Notification No.12/2012-Customs, dated 1st March, 2012
as amended by notification No. 12/2013-Customs, dated 1st March, 2013 refers. S. No. 38A contains the changes.

Chapter 15

15.1 Peanut butter is presently classified under sub-heading 1517 90 20 of the Customs Tariff whereas, under the Harmonised
System, peanut butter is classified under sub-heading 2008 11. To align our Tariff Schedule with HSN, an amendment has been
proposed in the Finance Bill, 2013 (Clause 76 read with Third Schedule) to delete the current sub-heading 1517 90 20 and entries
relating thereto from the Tariff. By virtue of this amendment, hereafter, the peanut butter will fall under sub-heading 2008 11,
which is the correct classification as per the HSN.

15.2 Presently, peanut butter attracts a concessional BCD of 7.5% under notification No. 12/2012-Customs (S. No 71 of the
Table). In view of the amendment referred to above, subheading 1517 90 20 is being deleted from S. No. 71. However, the
concessional duty is being continued under notification No. 12/2012-Customs at new S. No. 88A. In the connection, notification
No. 12/2013-Customs refers.
Chapter 17

17.1 Raw sugar, white or refined sugar (1701) has been included in the Second Schedule to the Customs Tariff Act, 1975 (Export
Schedule) vide Clause 77 read with Fourth Schedule of the

Finance Bill, 2013 with a tariff rate of 20%. Exemption is however provided under notification No 27/2011-Customs dated
1.3.2011, as amended by notification No 15/2013-Customs, dated the 1st March 2013. Thus, raw sugar, white or refined sugar
will not attract any export duty.

Chapter 23

23.1 De-oiled rice bran oil cake is being exempted from export duty. S. No. 12 of notification No. 27/2011-Customs, dated 1st
March 2011, as amended by notification No.15/2013-Customs, dated 1st March 2013 refers.

Chapter 26
26.1 Bauxite and ilmenite are being incorporated in the Second Schedule to the Customs Tariff Act, 1975 (Export Schedule) with
a tariff rate of 30%. (Clause 77 read with the Fourth Schedule to the Finance Bill, 2013). However, the effective duty is being

CHARTERED TIMES 22
prescribed at 10% on bauxite (2606 0010 and 2606 0020) and unprocessed ilmenite (2614 0010) and at 5% on upgraded ilmenite
(2614 00 20). In this connection, notification No. 27/2011-Customs dated the 1st March as amended by notification No.15/2013-
Customs, dated 1st March 2013 refers. New S. Nos. 24A, 24B, 24C and 24D contain the changes. By virtue of the Provisional
Collection of Taxes Act, 1931, the levies will come into force with immediate effect.

Chapter 27

27.1 The BCD on bituminous coal is being reduced from 5 % to 2 % and CVD from 6 % to 2 %. The BCD on steam coal is being
raised from Nil to 2% and CVD from 1% to 2%. Hereafter, both steam coal and bituminous coal will attract a uniform rate of 2%
BCD and 2% CVD. Notification No.12/2012-Cus, as amended by notification No. 12/2013-Customs refers. Changes are contained
in S. No. 122 A, 123 and 124 of the Table.

Chapter 50

50.1 The BCD on raw silk is being increased from 5% to 15%. S. No.276 of notification No.12/2012-Customs, as amended by
notification No.12 /2013-Customs, dated the 1st March 2013 refers.

Chapter 53

53.1 Presently, coir yarn (53.08) is mentioned at S. No. 43 of notification No. 27/2011Customs. In column (4), which is presently
blank, the entry Nil is being inserted. This is a technical rectification. In this connection, notification No.15 /2013-Customs, dated
the 1st March 2013 refers.

Chapter 71

71.1 Basic customs duty is being reduced on pre-forms of precious and semi-precious stones from 10% to 2%. Notification
No.12/2012-Customs, dated 1st March, 2012 as amended by notification No.12/2013-Customs, dated 1st March, 2013 refers. S.
No.312A contains the changes.

71.2. Under the Foreign Trade Policy (paragraph 4A.2.2), an exporter with annual export turnover of Rs 5 crore for each of the
last three years is allowed to export cut & polished diamonds (each of 0.25 carat or more) abroad to any of the designated
laboratories/agencies with re-import facility at zero duty within 3 months from the date of export. In this regard, a variance not
exceeding +_1mm in height and circumference and not exceeding +_1 cent in weight is allowed between exported and re-
imported cut and polished diamonds. In this connection, Explanation 1 of notification No. 9/2012-Customs, dated the 9th March,
2012 refers. This limit is being revised in respect of height and circumference from +_1 mm to +_0.01 mm. The variation in
respect of weight shall remain unchanged. Notification No. 9/2012-Customs, dated the 9th March, 2012 as amended by
notification No. 11/2013-Customs, dated the 1st March, 2013 may be referred to for details.

Chapter 72
72.1 Flat rolled products of iron or non-alloy steel, plated or coated with zinc (sub-headings 7210 30 10, 7210 30 90, 7210 41 00,
7210 49 00, 7212 20 10, 7212 20 90, 7212 30 10 and 7212 30 90) are being exempted from export duty retrospectively from 1 st
March 2011. In this connection, clauses 75 and 77 of the Finance Bill, 2013 may be referred to for details. The changes will come
into force upon enactment of the Finance Bill. In the meanwhile, export duty may not be collected on the afore-cited product.
Prior to 1st March 2011, this product was exempt from export duty under notification No. 77/2008-Customs, dated 13th June
2008.

CHARTERED TIMES 23
Chapter 73
73.1. Under notification No 12/2012-Customs (S No. 371), specified goods for manufacture of catalytic convertors and their
parts attract a concessional BCD of 5%. Stainless Steel Wire Cloth Stripe (sub-heading 7314 14 10) and Wash Coat (sub-heading
3824 90 90) are being added to the list for availing of concessional duty of 5%.

Chapter 84

84.1 The BCD on 20 specified machinery for use in the leather industry or footwear industry is being reduced from 7.5% to 5%.
Descriptions of certain leather and footwear machinery items are being modified. S No 390 (List 29) of notification No. 12/2012-
Cus, as amended by notification No. 12/2013-Customs, dated the 1st March 2013 refers.

84.2 The BCD on all textile machinery and parts thereof falling under headings 8444 to 8449 is being reduced from 7.5% to 5%.
Notification No.12/2012-Customs, dated 1st March, 2012 as amended by notification No. 12/2013-Customs, dated 1st March,
2013 refers. S. No. 406A contains the changes.

Chapter 85

85.1 The BCD on Integrated Decoder Receiver, also known as Set Top Box, is being increased from 5% to 10%. S. No411 of
notification No.12/2012-Customs, as amended by notification No. 12 /2013-Customs, dated the 1st March 2013 refers.

85.2 LCD and LED TV Panels of 19” and above are presently exempt from BCD under notification No 12/2012-Customs (S. No.
432). In this connection, a doubt has been raised whether this exemption is available for LCD and LED TV Modules or otherwise.
It is clarified that LCD and LED TV Panels and LCD and LED TV Modules are one and the same thing for the purpose of exemption
under this notification.

85.3 Presently, all goods required for the manufacture of the goods falling under heading 8541 are exempt from BCD subject to
actual user condition. Solar cells and solar modules are classified under heading 85.41. It has been brought to the notice of the
Ministry that this exemption has been denied at certain places although the imported goods are required for the manufacture of
solar cells and solar modules. It is clarified that the BCD exemption under S No 39 of notification No. 24/2005-Customs, dated
1st March, 2005 is available to all goods including chemicals and electronic parts required for the manufacture of solar cells
whether or not assembled in modules or panels.

Chapter 87
87.1 The validity period of exemption granted to identify parts of hybrid and electric vehicles is being extended by two more
years up to 31st March, 2015. Clauses (g) and (h) of Proviso to notification No.12/2012-Customs, as amended by notification No.
12/2013-Customs, dated the 1st March 2013 refers.
87.2 BCD is being exempted on lithium ion automotive battery for manufacture of lithium ion battery packs for supply to the
manufacturers of hybrid and electric vehicles. Notification No.12/2012-Customs (S. No 438), as amended by notification No.
12/2013-Customs, dated the 1st March 2013 refers.
87.3 At present, cars and other motor vehicles, new with FOB value more than US $ 40,000 and with engine capacity more than
3000 cc for petrol-run vehicles and more than 2500 cc for diesel-run vehicles attract a BCD of 75%. In this connection,
notification No 12/2012- Customs (S No 437, (2) (a) of the Table) refers. The entry is being amended to read: “...with CIF value
more than US $ 40,000 or with engine capacity more than 3000 cc for petrol-run vehicles and more than 2500 cc for diesel-run
vehicles or with both”. Further, the BCD on these cars/motor vehicles is being increased from 75% to 100%. Thus, hereafter,
these cars/ motor vehicles with CIF value more than US $ 40,000 would attract 100% BCD regardless of engine capacity.
Similarly, regardless of value, cars/motor vehicles with engine capacity more than 3000 cc for petrol-run vehicles and more than

CHARTERED TIMES 24
2500 cc for diesel-run vehicles would attract BCD at 100%. S. No 437 of notification No.12/2012-Cus, as amended by
notification No. 12/2013-Cus, dated the 1st March 2013 refers.

87.4 The BCD on import of old cars is being increased from 100% to 125%. Clause 76 of the Finance Bill 2013 refers. By virtue of
the Provisional Collection of Taxes Act, 1931, the levy will come into force with immediate effect.

87.5 The BCD on new motorcycles with engine capacity of 800cc or more is being increased from 60% to 75%. Notification
No.12/2012-Customs (S No 443), as amended by notification No. 12 /2013-Customs, dated the 1st March 2013 may be referred
to for details.

Chapter 88

88.1 Exemption from education cess and secondary & higher education cess is being withdrawn on aeroplanes, helicopters and
their parts. For this purpose, S No. 51 and 52 and entries relating thereto are being deleted from notification No 69/2004-
Customs, dated 9th July

2004. The relevant entry at S. No 1 is also being deleted. In this connection, notification No.

9/2013- Customs, dated 1st March 2013 refers.

88.2 The time period for consumption/installation of parts and testing equipment imported for maintenance, repair and
overhaul (MRO) of aircraft by units engaged in such activities is being increased from 3 months to 1 year. S. No.448 of
notification No.12/2012-Customs (Condition 73), as amended by notification No. 12/2013-Customs, dated the 1st March 2013
refers.

88.3 The customs duty exemption on parts and testing equipment for maintenance, repair and overhauling of aircraft is being
extended to parts and testing equipment for maintenance repair & overhauling of aircraft and aircraft parts. S. No.448 of
notification No.12/2012-Customs, as amended by notification No. 12/2013-Customs, dated the 1st March 2013 refers.

88.4 Private category aircrafts are being included in the list of eligible categories of aircrafts for the purpose of availing of the
exemption under notification No 12/2012- Customs. S. No.448 of notification No.12/2012-Customs, as amended by notification
No. 12/2013-Customs, dated the 1st March 2013 refers.

88.5 The terms “scheduled air transport service” and “scheduled air cargo service” are explained in condition No. 75 of
notification No. 12/2012-Cus dated 17.3.2012. In this connection, a doubt has been raised whether exemption granted to parts
and testing equipment imported for servicing, repair or maintenance of scheduled airlines includes foreign airlines or otherwise.
Under S. Nos. 448 and 454 of the notification No. 12/2012-Customs read with condition Nos. 73 and 21 respectively, exemption
has been provided for servicing, repair or maintenance of aircraft used for operating “scheduled air transport service” and
“scheduled air cargo service”. The term “scheduled air transport service”/ “scheduled air cargo service”, as defined under
condition No 75 of the afore-said notification, does not exclude foreign airlines. It is as such clarified that the aforesaid
exemption available for “scheduled air transport service” and “scheduled air cargo service” includes foreign airlines that meet
the definition of scheduled air transport and air cargo service.

88.6 Under S. No. 450 of the notification No. 12/2012-Customs read with condition 75 (ii), a foreign registered aircraft, that is
brought into India for the purpose of “a flight to or across India” and which is intended to be removed within the time period
specified for the purpose, is exempt from customs duty. In this connection, doubts have been raised whether the term “a flight
to India” means “one landing and one take off” or it entitles the aircraft to fly to different destinations within India during the
stipulated period of stay in India. The matter has been examined and it is clarified that the term “a flight to India” by a foreign
registered non-scheduled aircraft shall mean a flight which after completion of its itinerary (which may include multiple

CHARTERED TIMES 25
destinations in India) leaves India within the stipulated period of 15 days, or as extended by the competent authority in the
Ministry of Civil Aviation, not exceeding 60 days from the date of entry.

Chapter 89

89.1 By virtue of excise duty exemption on ships and vessels (89.01, 89. 04, 89.05 and 89.06

90 00), there will no CVD leviable on these ships and vessels. Notification Nos. 19/2012Customs and 20-2012-Customs, both
dated 17th March 2012 and S. No 462 of notification No. 12/2012-Customs, which have become redundant due to excise duty
exemption, are being rescinded.

89.2 Basic customs duty on yachts and other vessels (89.03) is being increased from 10% to 25%. Clause 76 of the finance Bill,
2013 refers. By virtue of the Provisional Collection of Taxes Act, 1931, the levy will come into force with immediate effect.

89.3 The time limit for consumption of imported goods for the purpose of repair of ocean going vessels by ship repair units is
being increased from 3 months to 1 year. S. Nos.459 and 460 of notification No.12/2012-Customs (Conditions 79 and 80), as
amended by notification No. 12/2013-Customs, dated the 1st March 2013 refers.

Miscellaneous:
(i) Full exemption is being provided to trophy when imported into India by National Sports Federation recognized by the
Central Government or any Sports Body registered under any law for the time being in force in connection with international
tournament to be held in India. Notification no. 146/1994-Customs, dated the 13th July, 1994 as amended by notification no.
14/2013-Customs, dated the 1st March 2013 refers.

(ii) Notification No 75/2005-Customs, dated 22nd July 2005 (India- Singapore FTA) is being amended to replace the sub-
heading 2920 90 90 with the sub-heading 2920 90 99. This is a technical rectification.

(iii) Exemption from education Cess and secondary & higher education Cess is being withdrawn on soya bean oil, olive oil
and a few other items. Accordingly, S. Nos. 5, 6, 7, 8, 13, 51& 52 and entries relating thereto are being deleted from
notification No 69/2004-Customs, dated 9th July 2004. In the said notification, at various places, references have been made to
exemptions contained in erstwhile notification No. 21/2002-Customs, dated 1st March, 2002. The entries showing notification
No. 21/2002-Customs (S. Nos. 9, 10, 12, 55) are being replaced by the relevant S. Nos. of notification No.12/2012 –Customs.
This is a technical rectification. Notification No.69/2004-Customs as amended by notification No. 9/2013 –Customs, dated 1st
March, 2013 may be referred to for details.

Baggage Rules

Presently, under Rule 6 of the Baggage Rules, 1998, an Indian passenger, who has been residing abroad for over one year, is
permitted to bring Jewellery without payment of duty up to an aggregate value of Rs 10,000/- in case of a gentleman passenger
and Rs 20,000/- in case of a lady passenger. Under Rule 8 of the Baggage Rules,1998, a person who is transferring his residence (
Transfer of Residence) to India is also allowed to bring Jewellery without payment of duty up to an aggregate value of Rs
10,000/- in case of a gentleman passenger and Rs 20,000/- in case of a lady passenger. The duty free limits are being raised to Rs
50,000/- in case of a gentleman passenger and Rs 100,000/- in case of a lady passenger.
Presently, under Rule 10 of the Baggage Rules, 1998, a crew member of the vessel/aircraft is allowed to bring duty free
items like chocolates, cheese, cosmetics etc. for their personal or family use up to a value of Rs 600. The duty free allowance is
being increased from Rs 600 to Rs 1500.

CHARTERED TIMES 26
 LEGISLATIVE Amendments

Advance Ruling
Section 28E of the Customs Act, 1962 defines “advance ruling”. “Advance ruling” means “the determination, by the
Advance Ruling Authority, of a question of law or fact specified in the application regarding the liability to pay in relation to an
activity which is proposed to be undertaken by the applicant”. “Activity” is defined to mean “import or export”. The definition
of “activity” is being expanded to include any new business of import or export so as to enable such importer or exporter to seek
advance ruling when he starts a new line of business. Similar amendment has been proposed in section 23A of the Central Excise
Act, 1944. “Activity” now includes any new business of production or manufacture by the existing producers or manufacturers.
This will enable such producers or manufacturers to seek advance ruling when starting a new line of business.

Under 23 (C) (e) of the Central Excise Act, 1944, an advance ruling can be sought, inter- alia, on the issue of
admissibility of credit of excise duty paid or deemed to have been paid on the goods used in/ in relation to the manufacturer of
excisable goods. This section is being amended so as to extend the advance ruling provisions also to the admissibility of the
credit of service tax paid on or deemed to have been paid on input services used in the manufacture of excisable goods.

Under section 28E of the Customs Act, 1962, only a select category of persons are eligible for advance ruling. This
includes joint ventures and resident public limited companies. Presently, the latter category is not eligible for advance ruling
under the Central Excise law. Notifications are being issued to make “resident public limited companies” eligible for seeking
advance ruling on central excise and service tax matters as is available on the Customs side

Arrests and Prosecutions

Section 104 of the Customs Act, 1962 contains provisions relating to arrest. This section is being amended to make
certain offences punishable under section 135 as non-bailable. The offences are:

(a) Evasion or attempted evasion of duty exceeding Rs. fifty lakh;

(b) Prohibited goods notified under section 11 which are also notified under sub-clause (C) of clause (i) of sub-section (1) of
section 135;
(c) Import or export of any goods which have not been declared in accordance with the provisions of this Act and the
market price of which exceeds Rs. one crore;

(d) Fraudulently availing of or attempt to avail of drawback or any exemption from duty provided under this Act, if the
amount of drawback or exemption from duty exceeds Rs. fifty lakh.

Barring the offences mentioned above, all other offences under the Customs Act are bailable. Similar changes have been
proposed in the Central Excise Act, 1944 and Finance Act, 1994 (relating to Service tax).

Stay Order by Appellate Tribunal and Other Matters

Section 35C (2A) of the Central Excise Act, 1944 and the corresponding provisions under section 129B (2A) of the Customs Act,
1962 are being amended to provide for a maximum ceiling of 365 days up to which the Tribunal can grant stay of recoveries. By
inserting a proviso in the abovementioned sections, it is being stipulated that after 365 days from the stay order, this stay shall
stand vacated even if the disposal of the case is pending for no fault of the assessee. By virtue of stipulation under section 86(7)
of the Finance Act, 1994, the provisions of the Central Excise Act would be applicable for dispute in Service Tax matters.

CHARTERED TIMES 27
 Section 129C is being amended to enhance the monetary limit of the Single Bench of the Tribunal to hear and dispose of
appeals from Rs.10 lakh to Rs.50 lakh. Corresponding changes have been made in Section 35D of the Central Excise Act, 1944.

Other Amendments in the Customs Act, 1962

(i) Section 11: “Designs and geographical indications” have been included along with patents, trade mark and copy rights to
enable the Central government to prohibit either absolutely or conditionally the import or export of goods to protect
these legal rights;

(ii) Section 27: Where the amount of refund claimed is less than Rs 100/-, the same shall not be refunded;

(iii) Section 28: Show Cause Notice shall not be served where the amount involved is less than Rs 100/-

(iv) Section 28BA: This section is being amended to provide for provisional attachment of property belonging to any person to
whom notice under sub-section (4) of section 28 has been served.

(v) Section 29: This section is being amended to empower Board to allow landing of vessels or aircrafts at any place other
than customs ports or customs airports.

(vi) Section 30 and Section 41: These sections are being amended to provide for electronic filing of Import General
Manifest/Export General Manifest. It is also being provided that where this is not feasible, the Commissioner may allow
the delivery of such manifest in any other manner.

(vii) Section 47: This section is being amended reduce the interest free period for payment of import duty from 5 days to 2
days;

(viii) Section 49: This section deals with storage of imported goods in a warehouse pending clearance. This section is
amended to provide a time limit of 30 days for storage of goods in the interest of accountability and early finalization of
assessments. The Commissioner may extend the period of storage for a further period not exceeding 30 days at a time.

(ix) Section 69: This section deals with export of warehoused goods. The document listed under the section is Shipping Bill or
Bill of Export. This section is being amended to allow export of warehoused goods under postal export document;
(x) Section 135: In sub-clauses (B) and (D) of clause (i) of section 135(1), the threshold limit for punishment in an offence
relating to evasion or attempted evasion of duty or fraudulently availing of or attempting to avail of drawback or any
exemption from duty in connection with export of goods, has been increased from Rs.30 lakh to Rs.50 lakh.

(xi) Section 142: A new clause (d) is being inserted in section 142 to provide (i) for recovery of money due to the Central
Government from any other person other than the defaulter after giving such other person a notice in writing, (ii) that the
person to whom such notice has been issued shall be bound to comply, and (iii) that if the person to whom the notice is
issued fails to comply, he shall be deemed to be a defaulter in respect of the amount specified in the notice.

(xii) Section 143A is being omitted.

CHARTERED TIMES 28
(xiii) Section 144: Sub-section (3) of section 144 is being amended to remove the duty liability on any sample of goods
which is consumed or destroyed during the course of testing or examination.

(xiv)Section 146 is being substituted to change the nomenclature of “customs house agents” to “customs brokers” considering
the global practice and internationally accepted nomenclature. (xv) Section 146A is being amended so as to:- (a)
substitute the phrase “customs house agent” with the phrase “customs broker”; (b) include any offence committed under
the Finance Act, 1994 as a disqualification for person to act as an authorized representative in customs matters. (xvi)
Section 147: Sub-section (3) of section 147 is being amended to expand the scope of the liability of agents of the owner,
importer or exporter of any goods. It now casts equal responsibility on agents for making correct self-assessment.

Other Amendments in the Central Excise Act

(i) Section 9 provides that an offence case involving evasion in which the duty leviable exceeds thirty lakh rupees shall be
punishable with a term of imprisonment extending to seven years with fine. This section is being amended so as to substitute
the amount of thirty lakh rupees with fifty lakh rupees.

(ii) Section 9A is being amended to make an offence cognizable and non-bailable where the duty liability exceeds Rs.50
lakh and punishable under clause (b) or clause (bbbb) of sub-section (1) of section 9.

(iii) Section 11 is being amended so as to provide for (i) recovery of money due to the Government from any person other
than from whom money is due after giving a proper notice, if that other person holds money for or on account of the first
person; (ii) the other person to whom such notice has been issued is bound to comply and (iii) if the other person to whom the
notice is served fails to comply, he shall face all the consequences under this Act.

(iv) Section 11A is being amended to insert sub-section (7A) providing that service of a statement containing details of duty
not paid, short levied or erroneously refunded shall be deemed to be a service of notice under sub-section (1) or (3) or (4) or
(5) of this section. Reference to sub-section (1) in section 11DDA is being omitted.

(v) Section 20 is being amended so as to make the provisions applicable only to offence which is non-cognizable.

(vi) Section 21 is being amended so as to make the provisions regarding release of arrested person on bail or personal bond
applicable only to offence which is non-cognizable.

(vii) Section 37C is being amended to specify additional modes of delivery of specified documents i.e. by speed post with
proof of delivery or through courier approved by the Central Board of Excise & Customs.

CHARTERED TIMES 29
 Relevance of Budget 2013 for the Foreign Investors
Budget day was a day of disappointment for foreign investors. Government failed to deliver most expected cut in withholding
tax also confused them by proposing a brand new provision targeting tax treaties.

Several measures for foreign investors were unveiled for the 2013-14 fiscal year starting in April, including simplifying a
cumbersome registration process and allowing investments in corporate bonds and government securities to be used as
collateral to meet margin requirements.
Current account deficit had hit a record high in the quarter ended in September, which can be controlled by way of boost in
foreign inflows only.
The best announcement for foreign investors was the simplification of the complicated "Know Your Customer" rules.
The biggest confusion arises with the statement saying a tax residency certificate "shall be necessary but not a sufficient
condition" to take advantage of double taxation avoidance agreements. Tax authorities had previously considered this tax
residency as enough proof to allow foreign investors registered in countries with these treaties to avoid paying taxes in India.

According to Chidambaram ‘amendment had sought to clarify that tax authorities would now look at not only the tax residency
requirement, but also enforce rules mandating these foreign investors are the beneficiaries of any investments under double
tax agreements. ‘
But the questions still remained, especially as to which investment gains would be taxed. It’s not clarified whether the issue of
beneficial ownership is there for capital gains.

Income Tax Ready Reckoner

INDIVIDUALS - MEN & WOMEN (Up to 60 years
age)
TAX PAYABLE (Including Cess)
Taxable Income TAX (SAVED) / PAYABLE (Budget Effect)
Now Post-Budget
Tax-
Amount Tax-rate Amount
rate
₹ 200,000 0 - 0 - 0.00
₹ 220,000 10.30% 2,060 0 - (2,060.00)
₹ 300,000 10.30% 10,300 10.30% 8,240 (2,060.00)
₹ 500,000 10.30% 30,900 10.30% 28,840 (2,060) - Only those with income upto Rs 5 lakh
₹ 500,001 10.30% 30,900 10.30% 30,900 0.00
₹ 1,000,000 20.60% 133,900 20.60% 133,900 0.00
₹ 10,000,000 30.90% 2,914,900 30.90% 2,914,900 0.00
₹ 10,100,000 30.90% 2,945,800 33.99% 2,948,890 3090 - Surcharge @10 %
₹ 12,000,000 30.90% 3,532,900 33.99% 3,594,700 61,800.00

CHARTERED TIMES 30
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