BUDGET & FINANCE BILL INDIRECT TAX PROPSALS & FEMA / PMLA PROVISIONS VIKRAM NANKANI SENIOR ADVOCATE

BIG TICKET POINTS RATE OF TAX INCREASED: ST-14% BED 12.5% NO EDUCATION & S.H.E CESS SWACH BHARAT CESS:2% on ST LIBERAL PENALTY PROVISIONS ST ON REIMBURSEMENTS OF EXPENSES & COSTS

CUSTOMS & EXCISE: REVISED PENALTY RATES Period of Demand: 1 year OR 5 years – Maximum penalty 10% and 100% – Nil OR 15% penalty if tax+ interest paid before SCN or within 30 days therefrom provided reduced penalty also paid – 25% if tax+ interest +reduced penalty paid within 30 days of the order – Section 73(4A) is being omitted. (It provides for reduced penalty, if true and complete, details of transactions were available on specified record.) – Section 80 be deleted.

PENALTY UNDER SECTION 76 AND 78 Section 76 No penalty if service tax and interest paid within 30 days of issuance of SCN Reduced penalty equal to 25% of the penalty imposed under OIO if Service Tax, Interest and reduced penalty is paid within 30 days Reduced penalty equal to 25% to be imposed when Service Tax gets reduced in any appellate proceedings subject to the condition of payment of ST, interest and reduced penalty within 30 days

Penalty Section 78 It provides penalty of 100% of service tax. Penalty reduced to 15% if service tax interest along with reduced penalty paid within 30 days of issuance of SCN Reduced penalty equal to 25% of the penalty imposed under OIO if Service Tax, Interest and reduced penalty is paid within 30 days Reduced penalty equal to 25% to be imposed when Service Tax gets reduced in any appellate proceedings subject to the condition of payment of ST, interest and reduced penalty within 30 days

TRANSITION PROVISION Section 78B is being inserted by way of transition provision. Proposed amended provisions of Section 76 and 78 shall apply where no SCN is served or SCN is served but no OIO has been passed till the date of enactment of the Finance Bill, 2015; Cases covered under Section 73(4A) where SCN is not issued or Notice is issued but OIO has not been passed before the date of enactment of the Finance Bill, 2015, Penalty shall not exceed 50% of Service Tax.

SERVICE TAX Section 67-taxable value-definition of “consideration” enlarged to include reimbursement of all expenses and costs Overrules Delhi High Court in Intercontinental Consultants Amount retained by the lottery distributor/ selling agents from gross sale amount of lottery ticket in addition to the fees or commission including discount

SERVICE TAX contd… Any service rendered by Government or local to business entity taxable Potential to levy ST on specified amusement facilities and entertainment events-carved out of betting, gambling or lottery ST on processes amounting to manufacture alcohol for human consumption Services definition amended to exclude lottery distributor and selling agent as well as foreman of Chit Fund from money transactions. Overrule the decision of Delhi Chit Fund Association Vs UOI 2013 (30) STR 347 (Del). Advance Ruling for all Resident Firms including sole proprietors, LLP and One Person Company

Exemptions/Concessions Exhibition of movie by exhibitor (theatre owner) to distributor or AOP consisting of such exhibitor as one of its members; Services by way of right to admission to exhibitions of cinematographic film circus dance or theatrical performance including drama or ballet, recognized sports events; Services by way of right to admission to concerts, pageants award functions, musical performances, sporting events other than recognized sporting events where consideration for admission is less than Rs.500/- per person

Exemption/Concession (contd) Services of effluent treatment by an operator of common effluent treatment plant; Services by way of transportation of a patient in ambulance; Pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling services of fruits and vegetable; Transport of export goods by road from the place of removal to a land customs station; Services of life insurance business provided under Varistha Pension Bima Yojana; Services by way admission to a museum, national park, wildlife sanctuary, tiger reserve zoo.

EXEMPTIONS/CONSESSIONS AMENDED TO BE WIHDRAWN Service of construction. Erection, commissioning, maintenance etc to the Government, a local authority or a government authority except historical and national importance; irrigation works; water and sewage treatment; (Sr. No. 12 amended); Construction, erection, commissioning or installation of original works related to an airport or port (Sr. No. 14 amended);; Performing artist in fork or classical art forms where consideration charged is more than Rs.1 lac; If such service provided as brand ambassadors, no exemption is available; (Sr. No. 16 amended);

EXEMPTIONS/CONSESSIONS AMENDED TO BE WIHDRAWN Transportation by rail or vessel from one place in India to another in respect of tea, coffee, jaggery, sugar, milk products and edible oil; (Sr. No. 20 (i) amended); GTA services for transportation of tea, coffee, jaggery, sugar, milk products and edible oil; (Sr. No. 21(d) amended); Services of mutual fund agent or distributor to a mutual fund/asset management company; (Sr. No. 29 amended);

ABATEMENT OF SERVICE TAX Amended Notification No.26/2012 ST dated Transportation of goods by rail, road or vessel, service tax is to be paid on 30% subject to the condition that CENVAT credit on input, capital goods and input service not availed; Air transport of passenger for classes other than economy, service tax is to be paid on 60%.

SERVICE TAX Section 73(1B) is being inserted to provide recovery of the Service Tax amount self assessed and declared in the return but not paid shall be made under Section 87, without service of notice under Section 73(1). Provision of “Revision by Central Government” under section 35EE of the Central Excise Act will be applicable to the order passed by Commissioner (Appeals) in mater involving rebate of service tax on input services or duty paid on inputs, in case of services which are exported.

CENVAT CREDIT Period to avail credit extended to 1 year Credit of partial tax paid under Reverse Charge Mechanism allowed Concept of deemed utilization of CENVAT credit has been introduced vide Rule 14 of CCR.

SERVICE TAX RULES Tax on “aggregator” – who owns and manages web based software application under a brand name Tax on recipient in case of services by mutual fund agents or lottery agents Digital signature invoices to be accepted Abatement on air transport reduced for business/first class

FEMA / PMLA Competent Authority to get powers to seize property in India equivalent in value to the foreign exchange, foreign security or immovable property outside India held in contravention of section 4 of FEMA Making false declaration or filing false documents is a scheduled offence under PMLA Special court can consider claims of legitimate interest in the confiscated property, provided claimant is innocent.

NEGATIVES CENVAT credit scheme not made comprehensive SSIs ignored SAD retained Place of Provision of Service Rules relating intermediaries unaffected No change in CST

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