The tax proposals in the Union Budget 2013-14
are in tandem with the objectives as stated by
the Finance Minister in his Budget Speech,
namely, to ensure clarity in tax laws, a stable tax regime,
a non-adversarial tax administration etc. The Finance
Minister has endeavored to table the Direct Taxes Code
Bill before the end of the Budget Session. The Bill is
expected to give due weightage to the recommendations
of the Parliamentary Standing Committee on Finance
and incorporate the best global practices.
Finance Minister has reaffirmed the Government’s
commitment to usher in the Goods and Services Tax
regime by specifically allocating a sum of `9,000 crore
towards the first installment of the balance of CST
compensation. It is hoped that the consensus of the
States would be obtained and the Constitutional
Amendment Bill as well as the GST Bill would be
introduced in the Monsoon session of the Parliament.
A. Direct Tax Proposals
The major proposals on the direct taxes front are as
follows –
I Personal Taxation
(i) The existing basic exemption limit and tax
slabs to continue.
(ii) Individuals having total income of upto `5 lakh
entitled to a rebate of upto `2,000.
(iii) Surcharge@10% to be attracted if total income
exceeds `1 crore.
(iv) Additional one-time deduction of `1,00,000 in
respect of interest on housing loan not
exceeding `25 lakhs taken from any financial
institution in respect of the first house property
acquired by an individual, provided the value
of the property does not exceed `40 lakhs.
(v) The deduction under section 80D to be
extended to health schemes similar to CGHS,
as may be notified by the Central Government.
(vi) The deduction under section 80CCG to be
available to a new retail investor, being an
individual with gross total income of up to
`12 lakh, for investment in listed equity shares
or units of equity oriented fund in accordance
with a notified scheme. At present, Rajiv
Gandhi Equity Savings Scheme has been
notified under section 80CCG. The deduction
is to be allowed for three consecutive
assessment years.
(vii) The deduction under section 80G in respect
of donation to National Children’s Fund to be
increased from 50% to 100%.
(viii) The maximum percentage of premium paid
for availing exemption benefit under section
10(10D) of maturity proceeds of insurance
policy to be increased from 10% to 15%,
where the policy is taken on or after 1.4.2013
and premium is paid to insure the life of a
person with disability or severe disability as
referred to in section 80U or suffering from a
disease or ailment as specified in section
80DDB. The increased percentage would also
be the threshold for deduction under section
80C in respect of the premium paid.
(ix) Immovable property received by an individual
or HUF for inadequate consideration to be
subject to section 56(2)(vii), if the difference
between the stamp duty value and
consideration exceeds `50,000. Stamp duty
value on the date of agreement to be considered,
if the date of agreement is different from the
date of registration, and at least a part of the
consideration is paid on or before the date of
agreement by any mode other than cash.
(x) Cash donations to political parties and
electoral trusts not to qualify for deduction
under section 80GGC.
II Business Taxation
(i) Commodities Transaction Tax (CTT) to be
levied on non-agricultural commodities futures
contracts at the same rate as on equity futures.
Trading in commodities not to be considered
as a speculative transaction. CTT to be allowed
as deduction while computing business
income.
(ii) A manufacturing company to be entitled to
investment allowance@15% of the aggregate
amount of actual cost of new plant and
machinery acquired and installed during the
financial years 2013-14 & 2014-15, if the same
exceeds ` 100 crore.
(iii) The terminal date for power sector
undertakings to set up, start transmission or
distribution or undertake substantial
The key features of the Union Budget 2013-14 discussed above
reflect the position prior to passing of the Finance Bill, 2013 by the
Parliament.
April 2013 I The Chartered Accountant Student 11
BUDGET
renovation, to be extended by one year i.e.
from 31.3.2013 to 31.3.2014.
(iv) Stamp duty value to be adopted as sale
consideration even in case of transfer of
immovable property, being land or building,
held as stock-in-trade. For this purpose, the
value on the date of agreement fixing the value
of consideration to be considered, if the date
of agreement is different from the date of
registration, provided at least a part of the
consideration has been paid by any mode
other than cash, on or before the date of
agreement.
(v) Disallowance of privilege fee, license fee,
royalty etc. which a State Government levies
exclusively on its undertakings or any amount
appropriated, directly or indirectly from its
undertakings. Such amounts would be
disallowed under section 40(a)(iib), while
computing the business income of the State
Government Undertakings.
(vi) Keyman insurance policy assigned to any
person during its term, with or without
consideration, to continue to be treated as a
keyman insurance policy. Hence, maturity
proceeds would not be exempt under section
10(10D) in the hands of the person to whom
it is assigned.
(vii) The deduction for bad debts under section
36(1)(vii) to be restricted to the amount in
excess of the credit balance in the provision
for bad and doubtful debts made under section
36(1)(viia), without any distinction between
rural advances and urban advances.
III Corporate Taxation & Tax on distributed profits/
dividends
(i) Concessional rate of tax@ 15% under section
115BBD on gross dividends received by an
Indian company from a specified foreign
company (26% or more shareholding) to
further continue for one more year. Further,
in case of such Indian company, which is also
a holding company, dividends distributed by
it in the same year, to the extent of such
dividends received from its foreign subsidiary,
would be exempt from dividend distribution
tax under section 115-O.
(ii) Introduction of additional income-tax@20%
on income distributed by unlisted companies
to shareholders through buyback of shares.
Consequent income arising to shareholders to
be exempt in their hands.
(iii) Cash donations to political parties and
electoral trusts not to qualify for deduction
under section 80GGB.
(iv) Tax on distributed income to be increased from
12.5% to 25% in all cases where distribution
is made by a fund, other than equity oriented
fund, to an individual or a HUF. In effect, the
rate of tax would be 25% if income is
distributed to an individual or HUF,
irrespective of the nature of the fund.
(v) Income from activities of securitization
vehicles set up as a trust, regulated by either
SEBI or RBI, to be exempt from incometax.
However, Securitisation Trust would be
liable to pay additional income-tax on income
distributed to investors (25% on income
distributed to individual & HUF investors and
30% to others). Income received by investor
to be exempt from tax. Further, no additional
income-tax is payable by the Securitisation
Trust if income is received by a person who
is exempt from income-tax.
(vi) Corporate surcharge increased from 5% to 10%
in case of domestic companies with total
income exceeding `10 crore and from 2% to
5% in case of foreign companies with total
income exceeding `10 crore.
(vii) Dividend distribution tax to be increased by
surcharge@10%.
(viii) Deduction under section 80JJAA to be
available only to Indian companies deriving
profits from manufacture of goods in its
factory. Deduction not to be available if the
factory is hived off or transferred from another
existing entity or acquired by the assesseecompany
as a result of amalgamation with
another company.
IV Non-resident Taxation
(i) Concessional rate of tax@5% under section
115R on income distributed by a mutual fund
or NBFC under an infrastructure debt fund
scheme to a non-resident investor.
(ii) Royalty and Fees for Technical Services received
by a non-resident under an agreement entered
after 31.3.1976 which is taxable under section
115A to be subject to tax a higher rate of 25%.
V Deduction of tax at source (TDS proposals)
(i) Tax to be deducted under section 194LC at a
concessional rate of 5% on interest payable to
a non-resident in case of certain rupeedenominated
long-term infrastructure bonds
issued by an Indian company. The designated
bank should be solely for the purpose of deposit
of money in foreign currency and such money
should be used, after conversion, for
subscription to a rupee denominated long-term
infrastructure bond issue of an Indian company.
12 April 2013 I The Chartered Accountant Student
(ii) Sale consideration of immovable property
other than agricultural land, to be subject to
TDS@1%, where the consideration is `50
lakhs or more.
VI General Anti-Avoidance Rules (GAAR proposals)
(i) GAAR provisions amended and proposed to
be made effective from A.Y.2016-17 .
(ii) An arrangement, the main purpose of which
is to obtain a tax benefit, to be considered as
an impermissible avoidance agreement.
(iii) Approving Panel to consist of a Chairperson who
is or has been a Judge of a High Court, one
Member of the Indian Revenue Service not below
the rank of Chief Commissioner of Income-tax
and one Member who shall be an academic or
scholar having specialized knowledge in matters
such as direct taxes, business accounts and
international trade practices.
(iv) The directions of the Approving Panel to be
binding on the assessee as well as the incometax
authorities.
VII Other Proposals
(i) Alternate Investment Funds (AIFs) recognized
by SEBI to enjoy “pass-through” status,
subject to satisfying certain conditions i.e.
investment of atleast two-thirds of the funds
in unlisted equity/equity-linked instruments
of venture capital undertaking, non-listing of
their shares/units on a recognized stock
exchange and units and non-investment in
associate concerns.
(ii) Definition of “Capital Asset” excludes
agricultural land. The scope of the term
“Agricultural land” is proposed to be amended
in relation to the specified distance from the
local limits of municipality/cantonment board
vis-a-vis population as per the last preceding
census. Three categories proposed to be created
as regards the second part of the definition.
Further, the requirement of measuring the
distances aerially by the shortest route is
proposed to be incorporated in the definition.
(iii) “Tax due” for the purpose of section 179,
dealing with liability of directors of a private
company in liquidation, to include interest,
penalty or any sum payable under the Act.
(iv) Section 132B dealing with application of
seized assets against “existing liability” under
the Income-tax Act, 1961, Wealth-tax Act, 1957
etc. to be amended to clarify that the “existing
liability” does not include advance tax payable.
(v) Return of income to be treated as defective,
unless the self-assessment tax along with
interest, if any, under section 140A is paid on
or before the date of furnishing the return.
(vi) Direction for special audit under section
142(2A) may also be given having regard to
the volume of 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 revenue.
(vii) Penalty of `100 per day of continuing default
in case of failure to furnish AIR within the time
prescribed under section 285BA(2). Further, in
case of issue of notice under section 285BA(5),
and failure to furnish Annual Information
Return (AIR) within the time stipulated in the
notice, penalty at `500 to be levied for every
day during which the failure continues
beginning from the day immediately following
the day on which the time specified in such
notice for furnishing the return expires.
B. Indirect Tax Proposals
Compared to last year, the quantum of amendments
proposed by the Union Budget 2013-14 in the indirect
tax laws this year is very less. Rates of service tax,
customs duty and excise duty have not been tinkered
with. The major indirect tax proposals are as follows –
I. Service Tax
Amendments effective from March 1, 2013
Service tax abatement decreased from 75% to 70%
in case of commercial construction. However,
abatement of 75% would continue to be available
in case of a residential units having carpet area of
upto 2000 sq. ft. or where the amount charged is
less than 1 crore.
Resident public limited companies eligible to seek
advance ruling in case of specified matters relating
to service tax.
Amendments effective from April 1, 2013
All restaurants with air-conditioning or central air
heating (including restaurants not serving liquor
as well) in any part of the establishment at any
time during the year to be liable to service tax.
Transportation of the following items by a Goods
Transport Agency would be exempted:-
foodstuff including flours, tea, coffee, jaggery,
sugar, milk products, salt and edible oil,
excluding alcoholic beverages,
relief materials for specialized purposes,
chemical fertilizers and oil cakes,
registered newspapers or magazines and
defense equipments.
BUDGET
April 2013 I The Chartered Accountant Student 13
The exemptions available in respect of the following
services would be withdrawn:
Transportation of petroleum and petroleum
products, postal mails or mail bags and
household effects by railways and vessels.
Services provided by an educational
institution by way of renting of immovable
property or auxiliary educational service.
However, such services when provided to an
educational institution would continue to be
exempt from service tax.
Temporary transfer or permitting the use or
enjoyment of a copyright of cinematograph
films for exhibition elsewhere than in a cinema
hall or a cinema theatre.
Services by way of vehicle parking to general
public.
Services provided to Government, a local
authority or a Governmental authority, by way
of repair or maintenance of aircraft.
The exemption limit of ` 25 lakh available to
charitable organizations providing service towards
any other object of general public utility would be
withdrawn.
Amendments to be effective from the date of the
enactment of the Finance Bill, 2013
Voluntary Compliance Encouragement Scheme,
2013 (VCES) is proposed to be introduced to
encourage voluntary compliance and broaden the
tax base. In this scheme, it is proposed to provide
one time amnesty by way of (i) waiver of interest
and penalty; and (ii) immunity from prosecution,
to the stop filers, non-filers or non-registrants or
service providers (who have not disclosed true
liability in the returns filed by them during the period
from October 2007 to December 2012) who pay the
“tax dues”. The scheme would be effective from the
date of the enactment of the Finance Bill, 2013.
Courses in ‘designated trades’ offered by Industrial
Training Institute or Industrial Training Center
affiliated to State Council of Vocational Training to
be covered under the negative list.
Definition of “process amounting to manufacture or
production of goods” to include processes on which
duties of excise are leviable under the Medicinal
and Toilet Preparations (Excise Duties) Act, 1955
thereby bringing the same under the negative list.
Testing activities directly related to production of
any agricultural produce like soil testing, animal
feed testing, testing of samples from plants or
animals, for pests and disease causing microbes to
be covered under the negative list.
A show cause notice issued for fraud cases, if not
found sustainable by an appellate authority or
tribunal or Court, to be deemed to be a notice issued
for a period of eighteen months.
Maximum penalty for failure to obtain registration
to be restricted to `10,000 only as against earlier
penalty of `10,000 or `200 per day of default
whichever is higher.
Director, manager, secretary or other officer of the
company, who is in any manner knowingly
concerned with specified contraventions, to be liable
to a penalty of ` 1 lakh. The specified
contraventions would include evasion of service tax,
issuance of invoices, bill, challan without the
provision of taxable service, availment and utilization
of credit without actual receipt of taxable service or
excisable goods or failure to pay any amount
collected as service tax to the credit of the Central
Government beyond the period of 6 months from
the date on which such payment becomes due.
Appellate tribunal to admit an appeal or permit
the filing of memorandum of cross objections even
after the expiry of the period of 3 months in case
of assessee appeal also.
Any person who collects any amount as service
tax but fails to deposit the same to the Central
Government within 6 months would be punishable
with imprisonment for a term which may extend
to 7 years but not less than 6 months if such amount
exceeds ` 50 lakh.
Section 90 is proposed to be introduced to specify
and differentiate the offences provided in section
89(1) into cognizable offences and non-cognizable
and bailable offences.
Commissioner of Central Excise to be empowered
to authorize any officer of Central Excise not below
the rank of Superintendent of Central Excise to
arrest a person for offences specified under clauses
(i) & (ii) of section 89(1) i.e., where the amount
involved in the offence exceeds ` 50 lakh.
II. Central Excise Duty
Amendments to be effective from the date of the
enactment of the Finance Bill, 2013
Speed post with proof of delivery or courier
approved by the Central Board of Excise & Customs
would to be specified as additional modes of
delivery of any decision or order or any summons
or notices.
Advance ruling may also be sought on the matters
relating to credit of service tax paid or deemed to
have been paid on input services.
An offence involving evasion to be punishable with
a term of imprisonment extending to seven years
with fine in case the duty leviable exceeds ` 50
lakh instead of earlier ` 30 lakh.
BUDGET
14 April 2013 I The Chartered Accountant Student
Offences relating to excisable goods, (where the
duty liability exceeds ` 50 lakh) which are
punishable for evasion of excise duty or
contravention of any of the provisions relating to
set off of credit of excise duty to be cognizable and
non-bailable.
Service of a statement containing details of duty
not paid, short levied or erroneously refunded to
be deemed to be service of a show cause notice.
The officer-in-charge of police station/authorised
Central Excise Officer to admit the arrested person
to bail to appear before the Magistrate or in default
of bail forward him in custody to such Magistrate
only where the offence is non-cognizable. Further,
the authorised Central Excise Officer to release an
accused person on account of lack of sufficient
evidence, only in respect of non-cognizable
offences.
Amendments effective from March 1, 2013
“Resident public limited companies” to be eligible
for seeking advance ruling on central excise matters
as is available under Customs.
Recovery provisions provided under rule 14 of the
CENVAT Credit Rules, 2004 to apply in case of
failure to pay the amount on removal of inputs/
capital goods as such, removal of capital goods after
use and writing off the value of the inputs/capital
goods.
Interest on refund arising out of finalization of
provisional assessment to be paid as per the
provisions of section 11BB.
MRP based valuation prescribed with 35%
abatement for non-allopathic medicaments.
Excise duty on following goods enhanced:-
Mobile phones of retail sale price exceeding `
2,000/-.
Cigarettes
Marble tiles and slabs
Full exemption from excise duty to be granted to
ships and other vessels. Hence, there will be no
CVD on import of the same.
‘Zero excise duty route’ restored in respect of
branded readymade garments and made ups.
III. Customs Duty
Amendments to be effective from the date of the
enactment of the Finance Bill, 2013
Customs house agents to be known as customs
brokers.
It is proposed that the minimum amount of refund
of customs duty will be ` 100.
For issuance of the show cause notice, it is
proposed that the minimum amount demanded
should be ` 100.
Interest free period for payment of import duty to
be reduced from five days to two days.
Import manifest and export manifest to be filed
electronically. However, Commissioner of Customs
may, in cases where it is not feasible to
electronically present the same, allow the same to
be delivered in any other manner.
CBEC to be empowered to permit the landing of
vessels and aircrafts at any place other than customs
port or customs airport.
It is proposed to make the following specified
offences as non-bailable:-
(a) evasion of duty exceeding ` 50 lakh;
(b) import or export of prohibited goods notified
under section 11 which are also notified under
section 135;
(c) import or export of any goods not declared in
prescribed manner and the market price of
which exceeds ` 1 crore;
(d) Fraudulent availment of drawback or
exemption, if the amount of drawback or
exemption from duty exceeds ` 50 lakh.
The period of storage of imported goods, pending
clearance, in a public or private warehouse to be
reduced to thirty days. However, Commissioner
of Customs may extend the period of storage for
further period not exceeding thirty days at a time.
The threshold limit for punishment in an offence
relating to evasion of duty or fraudulent availment
of drawback or exemption from duty in connection
with export of goods, to be increased from `30
lakh to `50 lakh.
It is proposed that any warehoused goods may be
exported to a place outside India without payment
of import duty if a shipping bill or a bill of export
in prescribed form or label or declaration
accompanying the goods as referred to in section
82 has been presented in respect of such goods.
Importation or exportation of goods to be prohibited
for protection of “designs and geographical
indications” also.
Provisions relating to duty deferment to be omitted.
No duty liability on any sample of goods which is
consumed or destroyed during the course of testing
or examination.
Scope of the liability of agents of the owner,
importer or exporter of any goods to be expanded
to cast equal responsibility on them in respect of
all acts or omissions in relation to such goods.
BUDGET
April 2013 I The Chartered Accountant Student 15
Any offence committed by a person under the
service tax law (Finance Act, 1994) to be treated as
a disqualification for him to act as an authorised
representative in custom matters.
Amendments effective from March 1, 2013
Duty free allowance in respect of jewellery for an
Indian passenger who has been residing abroad for
over one year or a person who is transferring his
residence to India raised from ` 10,000 to ` 50,000
in case of a gentleman passenger and from ` 20,000
to ` 1,00,000 in case of a lady passenger.
Duty free allowance for crew member of vessel/
aircraft raised from ` 600 to ` 1,500.
Basic customs duty enhanced on the following
goods:-
Yachts and motor vehicles
Raw silk
Set top boxes
Luxury cars (duty enhanced from 75% to
100%)
Common Points between central excise duty and
customs duty
In cases where the delay in disposing of the appeal
is not attributable to the appellant, the Tribunal
may extend the period of stay by a period not
exceeding 185 days subject to the condition that if
the appeal is not disposed of within the total period
of 365 days from the date of order, the stay order
shall stand vacated.
The producer or manufacturer allowed to seek
advance ruling while starting a new line of business
of production or manufacture. Similarly, the
importer or exporter also would be allowed to seek
advance ruling while starting a new line of business
of import or export.
Monetary limit of the Single Bench of the Tribunal
to hear and dispose of appeals enhanced from `10
lakh to ` 50 lakh.
Money due to the Government may now be
recovered 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.
Provisional attachment of property may be ordered
in case of non-payment of duty on account of fraud,
suppression of facts etc. as well.
The above amendments will be effective from the
date of the enactment of the Finance Bill, 2013.
(Compiled by CA. Priya Subramanian/CA. Smita
Mishra, BoS)
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