Spreading Plastics Intelligence Union Budget Highlights

Budget Highlights Indirect taxes Re-confirmation of implementation of GST by April 1, 2010 in keeping with the principles of Fiscal Federalism under the Constitution; dual GST to be implemented. 3 new taxable services introduced – Legal services inter alia brought under tax net. No change in the rate structure of Customs duty, Excise duty and Service tax. No change in rate of CST. Reduction in amount payable under Rule 6(3) of Credit Rules – 5% in case of goods; 6% in case of services. One Advance Ruling Authority for Customs, Excise, Service tax and Income tax. Exemption to exporters from Service tax on GTA Services and Commission paid to foreign agents – Refund scheme being revamped to ensure speedier grant of refunds.

Effective Date of various changes ParticularsWith effective from New services and change in existing servicesFrom a date to be notified later Amendments to service tax rules, 1994 (Procedural changes) July 7, 2009 Amendments to Cenvat Credit Rules, 2004July 7, 2009 Legislative changes in Customs and ExciseDate of Presidential assent to the Finance Bill, 2009 New rates of Customs dutyJuly 7, 2009 New rates of Excise dutyJuly 7, 2009

Service Tax - Overview Source: ELP

Key Legislative Changes – Service Tax Notifications under the Act Notification No.17/2009-S.T. dt. 07th July, 2009 Exemption provided to specified taxable services received by an exporter of goods and used for export of goods pertaining to specified services. The present Notification supercedes Notification No.41/2007-S.T. dt. 6th October, 2007 Services of terminal handling added to list of services previously enumerated in Notification No.41/2007-S.T. New Provision / Amendment Analysis

Key Legislative Changes – Service Tax Notifications under the Act Notification No.18/2009-S.T. dt. 07th July, 2009 Exemption to taxable services received by an exporter of goods and used for export of goods.  Transport of goods by road from Container freight station or Inland container depot to port or airport  Commission agent Located outside India and Engaged under a contract or agreement or document To act on behalf of the exporter To cause sale of goods exported out of India  In case of services provided by the commission agent, the exemption is limited to 1% of the FOB value of the goods exported by the exporter, for which the services have been used.  Exemption will not be available on export of canalized item, project export or export financed by Government of India of EXIM Bank or export made by Indian partner in a company with equity participation in an overseas joint- venture or wholly owned subsidiary. New Provision / Amendment

Key Legislative Changes – Service Tax Notifications under the Act Notification No.18/2009-S.T. dt. 07th July, 2009 Taxable services, viz. transport of goods by road service and business auxiliary services (amounts paid to foreign commission agents) exempted in relation to export of goods from India insofar as exporter is liable to pay Service Tax under the reverse charge mechanism. Analysis Amendments to the Import Rules The definition of the expression “India” has been amended to include installations, structures and vessels in the continental shelf of India and exclusive economic zone of India as a consequence of amendment to Notification No.1/2002-S.T. by way of Notification No. 22/2009-S.T. dt. 7th July 2009

Key Legislative Changes – Customs Duty Notification No.40/2006-Cus. dt. 1st May, 2006 – Duty Free Import Authorization (DFIA) — Exemption to materials imported thereagainst – amended retrospectively The above Notification has been amended retrospectively to allow rebate of excise duty under Rule 18 & 19(2) of the Central Excise Rules or Cenvat Credit of duty, paid on materials used in the manufacture of exported goods. It further provides that duty free replenishments in respect of which rebate / Cenvat credit has been availed shall be used for the manufacture of dutiable goods in the exporters’ factory or that of his supporting manufacturer, even after discharge of the export obligation. In case, the materials imported are transferred with the permission of the Regional Authority or materials are imported against an authorization transferred by the Regional Authority, the importer shall pay the CVD on the material so imported or transferred together with Amended Section 3 of the CTA Section 3 has been amended to provide that where tariff values have been fixed for articles manufactured in India under Section 3(2) of the Central Excise Act, 1944, for the collection of central excise duty, the value of a like imported article shall be deemed to be such tariff value. Earlier, the said Section 3 only provided for excise duty on a like article at any percentage of its value.

Key Legislative Changes – Customs Duty Retrospective amendment to Section 8C of the CTA (Power of Central Government to impose Transitional Product Specific Safeguard Duty on Imports from Peoples Republic of China) : Section 8C has been amended retrospectively to extend the provisions of the Customs Act and the Rules & Regulations made there under, especially in respect of date of determination of rate of duty, assessment, non levy, short levy, refunds, interest, appeals, offences and penalties in respect of country specific safeguard duty. It seeks to validate certain actions taken under the provisions of the Customs Act and the Rules & Regulations made there under with effect from 11th May, Changes in Rate of Customs Duty Reduction in Rate From 7.5% to 2.5%  Bio-Diesels (Chapter 29 or 38)

Changes in Rate of Excise Duty Reduction in Rate From 14% + Rs. 15 / litre to 14%  Naphtha (CETH 2710) Increase/Introduction in Rate From 4% to 8% Pure Terephthalic Acid and Dimethyl Terephthalate (CETH ) Acrylonitrile (CETH ) Polyster Chips (CETH 3907) Heat Resistant Latex Rubber thread (CETH ) Heat resistant rubber tension tape (CETH )  Ethylene Vinyl Acetate (EVA) compound manufactured by a job worker is exempted from Excise duty is the same is used in the manufacture of exempted foot wear.

Changes in Rate of Excise Duty Notification No. 4/2006-CE dt. 1st March, 2006 has been amended to provide that exemption from excise duty is available to Naphtha or Natural Gasoline Liquid – For use in the manufacture of fertiliser and if such fertiliser is cleared as such from the factory of production; or For use in the manufacture of ammonia, if such ammonia is used in the manufacture of fertiliser and such fertilizer is cleared as such from the factory of production. The implication of these changes is that exemption to naphtha or NGL would not be available if they are used in the manufacture of fertiliser/ ammonia which in turn is used for manufacture of some other item

Income Tax Rates * - Inclusive of applicable surcharge and education cess of % where the total income is equal to or less than Rs.10 million. # % where the total income is equal to or less than Rs.10 million. & - No surcharge shall be levied from Financial Year (AY 2010 – 11).

 India has cut excise duty on naphtha to 14 percent from 16 percent for use in petrochemical and power generation plants while the tax on naphtha used by fertiliser firms remains zero.  Naphtha imports have fallen substantially as many fertiliser plants have switched to gas produced from a new field, operated by Reliance Industries in the country's east coast. In June India's naphtha consumption fell 28.9 percent, while imports dropped by 72.9 percent from a year earlier. Impact of tax cut on Naphtha import in India It will bring down the imports and make local naphtha competitive with international prices. Marketing Head of leading Indian oil firm

DISCLAIMER This document is prepared by Polymerupdate.com, for client service and internal use only. This document summarizes the indirect and direct tax proposals of the Union Budget Expert guidance may be sought before acting upon the proposals. The analysis/views in this document should not be treated as legal opinion. Nothing contained herein can substitute appropriate legal opinion in fact specific situations that affect you or your enterprise.

Contact Us Polymerupdate.com 344, A - Z Industrial Estate, G. K. Marg, Near Peninsula Park, Lower Parel, Mumbai Maharashtra, INDIA Communication: Tel: (91-22) Fax: (91-22) Website: