budget update 2009- Indirect Taxes

The Finance Minister has confirmed the introduction of the Goods and Services Tax (GST) by the targeted date of 1 April 2010. It will be a dual GST comprising of a Central GST and a State GST, whereby the Centre and the respective States will legislate, levy and administer the same. Another significant proposal is the role of the Authority for Advance Rulings (AAR) constituted under the Income Tax Act, 1961 to also act as an Authority for the purposes of Customs, Central Excise and Service Tax.

SERVICE TAX

  • Legal advice, consultancy or assistance (other than appearance in courts) provided by any entity (not being an individual) to be included in the list of services chargeable to service tax.
  • Cosmetic and plastic surgery services to be included in the list of services chargeable to service tax.
  • Services provided in relation to transport of goods by rail and transport of (i) coastal goods; and (ii) goods through inland water including national waterways to be included in the list of services chargeable to service tax.
  • “Business and auxiliary service” definition to be amended to provide exemption from services provided in relation to ‘excisable goods’ under excise, thus resulting in elimination of double taxation of such services.
  • Definition of “stock broker” to be amended to exclude sub-brokers.
  • Service providers who provide services that are taxable and are exempt and do not maintain separate accounts of inputs, to be required to pay an amount equal to 6% of the value of exempted services (reduced from 8%).
  • Exemption from service tax to be provided to inter-bank purchase and sale of foreign currency between scheduled banks.
  • Two of the taxable services, namely, “Transport of goods through road” and “Commission paid to foreign agents” to be exempted from the levy of service tax, if the exporter is liable to pay service tax on reverse charge basis. Thus, an exporter will not be required to first pay the tax and later claim refund in respect of these services. However, as the present cap of 10% on commission agency charges has been retained, the exporter will have to pay service tax on the amount of commission which is in excess of 10%.

CUSTOMS/ IMPORT DUTY

  • On packaged or canned software, an exemption of Additional or Countervailing Duty of Customs (CVD) to be provided on the portion of the value which represents the consideration for transfer of the right to use such value which represents the consideration for transfer of the right to use such software, subject to specified conditions.
  • A new section, section 26(A) to be introduced to the Customs Act, 1962, to provide for refund of import duty paid, on goods which are defective or not as per agreed specifications and which are returned by the buyer.
  • Provisions to be made for a High Court to condone delays in filing an appeal and filing cross objections beyond the prescribed period.
  • Section 9 of the Customs Tariff Act, 1975, to be amended retrospectively so as to extend the machinery provisions of the Customs Act, 1962, to CVD levied under this section.

CENTRAL EXCISE DUTY

  • The excise duty rate on items currently attracting 4% duty to be increased to 8% with certain exceptions such as specified food items, drugs and pharmaceutical products, medical equipment, etc.
  • High Courts to be empowered to condone delays for filing of appeals and memorandum of cross objections.
  • A manufacturer of both dutiable and exempted goods, who does not maintain separate accounts of inputs, to pay an amount equal to 5% of the total price of exempted goods (earlier 10%).
  • Chartered Accountants are now eligible for special audit as prescribed by section 14 A & 14AA

Contributed by Ca. Vinay Bhushan Sharma