BUDGET 2006 a cruise by Swamy Associates

SERVICE TAX

(effective from the date of enactment) Education CESS remains. Service tax … Rate enhanced to 12 % (effective from the date of enactment) Education CESS remains.

(effective from a date to be notified) Service tax … New levies - 15 services (effective from a date to be notified)

Service tax … Registrar to an issue. Share transfer agent.

Service tax … ATM Outsourced activities, such as , site selection, contracting of location, acquisition, financing, installation, certification, connection, maintenance, transaction processing, cash forecasting, replenishment, reconciliation and other value added services.

Service tax … Recovery agents. Sale of advertising space / time. (Lighter vein: Will the departmental officers, who are on the recovery spree of the arrears, have to pay ST on their salaries?) Sale of advertising space / time. Print media excluded. Space on buildings, cell phones, vehicles, internet.

Sports sponsorship not covered. Tax to be paid by the sponsor. Service tax … Sponsorship Service. Sports sponsorship not covered. Tax to be paid by the sponsor.

International Air travel. Service tax … International Air travel. Other than economy class. Transit passengers excluded.

Container transportation by rail. Government Railway excluded. Service tax … Container transportation by rail. Government Railway excluded.

Business support services. Infrastructural support services. Service tax … Business support services. Telemarketing. Logistics. Infrastructural support services. Overlapping with BAS ?

Auction under orders of Court & Government are excluded. Service tax … Auctioneering services. Auction under orders of Court & Government are excluded.

Service tax … Public relation Services. Ship Management Services. Internet Telephony Service. Transport by cruise ships.

Service tax … Credit Card related Services. Services by the bank, etc. to the cardholders. Services rendered to the issuing bank. Joint promotional cards / affinity cards, etc.

Expansion of existing levies Service tax … Expansion of existing levies (To be effective from a date to be notified)

Commercial concern gives way to any person ! Service tax … Commercial concern gives way to any person ! The following services to bear the brunt! Advertising Agency. Aircraft operator. Banking Services. Courier Agency. Credit Rating Agency. Dry Cleaner. Goods Transport Agency. Mkt. Research. Man power recruitment Agency. Convention. Photography. Program Producer. Security Agency. Sound recording. Commercial Construction. OLI. Maintenance / Repair. BAS.

Banking and Financial Services. Telegraphic / mail / electronic Service tax … Banking and Financial Services. Bankers to an issue. Telegraphic / mail / electronic transfer of money.

Service tax … Business Auxiliary Service. Maintenance of computer software & computerised data processing is no longer IT Services.

Service tax … Maintenance and Repair Service. Installation Service. ( to cover management of movable properties too) Erection, Commissioning & Installation Service. (Structures / pre fabricated structures) Management Consultancy Service. Consulting Engineering Service. ( any body corporate or other firm)

Service tax … Technical Testing and Analysis Services. Clinical testing of drugs and formulations.

Service tax … Controversial Explanation gives way to Comprehensive Section 66A ! (effective from the date of enactment of the Finance Act, 2006) Draft Rules, provide sense & solace!

Service tax … Valuation undergoes major revamp. (effective from the date of enactment of the Finance Act, 2006) Consideration in kind, is also subjected to Tax. Cum duty benefit to be given. Draft Rules issued.

(effective from the date of enactment of the Finance Act, 2006) Service tax … 11 D gives way to 73 A. (effective from the date of enactment of the Finance Act, 2006) Applicable to : Any person liable to pay ST. Any person who is not required to collect any ST. Unique refund mechanism.

Service tax … Penalties If service tax and interest is paid within 30 days from the date of receipt of notice, penalty shall only be 25 % of Service Tax. What if the service tax is paid before SCN?

(effective from the date of enactment of the Finance Act, 2006) Service tax … No more a friendly levy! Sections 73 C & 73 D (effective from the date of enactment of the Finance Act, 2006) Power to attach property, even at SCN Stage. Publication of names.

Service tax … Section 76 (effective from the date of enactment of the Finance Act, 2006) Minimum penalty to be Rs.200 per day or 2 % p.m.

Section 87 - Draconian Recovery Powers. Service tax … Section 87 - Draconian Recovery Powers. (effective from the date of enactment of the Finance Act, 2006) Deductions from any refunds from the Customs / Central Excise Departments, across the country. Chase the debtors including banks, P.Os, etc ! Beware debtors, if you don’t oblige, you are a defaulter! (they will chase your debtors too!) Detention of any movable / immovables, which “belongs to” or “under the control of” the defaulter. Mundane Certificate action.

Service tax … Other major changes 67% abatement for commercial construction, residential construction and erection, commissioning & installation is subject to non availment of Cenvat Credit on input services also. Exemption to Chartered Accountants withdrawn. Exemption to call centers and medical transcription centers withdrawn. Exemption to ERP withdrawn. For leasing and hire purchase services, 90 % of interest excluded. Records to be preserved for five years.

CENTRAL EXCISE

Central Excise … No major changes in the CE Act, 1944 No changes in the CE Rules, 2002 No changes in Cenvat Credit Rules, 2004

Central Excise … Exemptions withdrawn. Blanket exemption to coir industry, cashew industry, tanning industry, oil mill and solvent extraction industry, rice milling industry (115/75). Clearances to Exhibition (215/84). Soaps manufactured w/o the aid of power . Exemption to unbranded water.

Central Excise … Manufacture – Amplified. Drawing / Redrawing of rods / bars, into bright bars. Cement / Plastic Coating of pipes having open seams. Metalisation of certain plastic goods. Parts, components of automobiles & tooth brushes to be placed under third schedule.

Central Excise … Changes in SSI. No change in slab. Pumps to be eligible for SSI, only if BIS. No exemption for pastries & cakes. Negative list transforms into positive list.

Central Excise … Important fresh levies. Asbestos Sheets- more than 25% fly ash – 8 %. Roofing Tiles – 8 %. Walking sticks – 8 %. Pressure Cookers – 8 %. Packaged / Canned software – 8 %. Labels, diaries, file covers, etc. – 8 %. Computers – 12 %. Umbrellas – 16 %.

Central Excise … Important enhancement of levies. Cigarettes – up by 5 %. Mosaic Tiles – 8 % to 16 %. LPG Gas Stoves – 8 %.

Central Excise … Important reduction of levies. Aerated water – 24 % to 16 %. Small cars – 24 % to 16 %. Man made filaments / yarns – 16 % to 8 %. Full exemption for ice cream.

Central Excise … Duty payable by 100 % EOUs, for DTA clearances. Adieu to AED (GSI) and SED ? Duty payable by 100 % EOUs, for DTA clearances. 25 % of BCD & full CVD. Addl. CVD of 4%, if VAT/ST is exempted. Cenvat Credit Rules to be amended, as the erstwhile formula prescribed under Rule 3(6) of CCR,2004 is no more relevant.

CUSTOMS

Customs … Peak rate reduced from 15 % to 12.5 % Additional CVD of 4 % on almost all goods. (Leviable on value plus almost all duties of customs. Cenvatable in full). 5% BCD on melting scrap of I & S

ADDITIONAL. CVD Calculation: Customs … ADDITIONAL. CVD Calculation: Let the Transaction Value be Rs. 100/- Basic Customs Duty @ 12.5% = Rs.12.50 Countervailing Duty @ 16.32% = Rs.18.36 (16.32% on 112.50) Education CESS @ 2% =Rs. 0.62 {2% on (12.50+18.36)} ADDITIONAL CVD @ 4% =Rs. 5.26 {4% on (100+12.50+18.36+0.62)}

THANKS swamy associates mail@swamyassociates.com swamyassociates@gmail.com