Meeting Revenue Secretary Meeting with Revenue Secretary Tuesday, 6 October 2015 INDIRECT TAXES 1

Content A. Policy Direction in Current Economic Environment B. Create Conducive Environment For Investment & Growth C. Competitiveness of Indian Industry D. Bridge Gap Between Tax Policy And Implementation E. Removal of Tax Uncertainty F. Reduction in Tax Litigation G. Service Tax Audit Need Overhauling H. Promote “Make in India” I. Introduction of GST 2

A. POLICY DIRECTION IN CURRENT ECONOMIC ENVIRONMENT  Create conducive environment for investment, and growth by removing tax uncertainty & making administration responsive  Improve competitiveness of Indian Industry and provide level playing field  Remove wide gape between tax policy and implementation  Moderate the service tax and excise duty rates to stimulate demand & bridge revenue gape by removing exemption 3

CREATE CONDUCIVE ENVIRONMENT FOR INVESTMENT & GROWTH B. CREATE CONDUCIVE ENVIRONMENT FOR INVESTMENT & GROWTH  Remove double taxation under Service Tax and VAT for several sectors  Expeditious resolution tax uncertainly for emerging businesses like E-commerce and technological changes in others like financial, IT and telecom services. Minimize ambiguity  Remove exemption of basic customs duty on inputs and make it Cen-vatable 4

C. COMPETITIVENESS OF INDIAN INDUSTRY  Restore full CENVAT credit for inputs/ input services as was permitted till March 2011  Eliminate CVD exemptions, instead allow CENVAT credit  Reduce CST rate to 1% which will reduce cascading of tax and will help in creating common market  Reduce tax cascading by excluding central & state taxes from assessable value for computing excise and service tax payable  Expedite settlement of refunds 5

D. BRIDGE GAP BETWEEN TAX POLICY AND IMPLEMENTATION  Provide non- adversarial tax administration which is not obsessed by meeting revenue targets.  Move towards real time tax certainty. Delete tax provision of raising demand after 5 years on interpretative disputes & restrict it only to cases of frauds.  Need for stability in tax system by not resorting to frequent changes through notifications and circulars  Interest rate up to 30% on delayed payment is exorbitant and need to be reduced to 12% 6

E. REMOVAL OF TAX UNCERTAINTY  Tax uncertainty is major impediment for investment Demand for tax after 5 years which cannot be collected from customers, may threaten business viability  Tax disputes should be resolved expeditiously in fair manner.  Audit/ investigation by multiple agencies for same year & same issue to be avoided by legislative provision in Section14.  Service tax return to be modified covering all the information required by tax department;  Create directorate of tax payer services. Expeditious advance rulings 7

F. REDUCTION IN TAX LITIGATION  Power to issue of Show Cause Notice & adjudication should not be with the same person to reduce bias. SCN should be adjudicated within 6 months  First appeal within the department does not serve any purpose for resolution of dispute when 99% of the orders are confirmed. Independent machinery should be established free from executive influence to impart justice;  Adjudication/ appellate orders should be issued within 30 days of personal hearing;  Lower authorities should follow orders of tribunals/ courts 8

G. SERVICE TAX AUDIT NEED OVERHAULING  Audit is conducted in routine manner and auditee is not given any confirmation even if there is no discrepancy  Even after full audit, departmental officers from preventive wings or DGCEI again start enquiry for same period and mostly same issues and ask for same records which are audited;  Audit should be made comprehensive, audit report should be issued at the end and repeat audit/ investigation for same period should be discontinued. 9

H. PROMOTE “MAKE IN INDIA”  Inverted Customs duty structure to be corrected in certain sectors.  Duty structure under the free trade agreements need review  Recommended Basic Custom Duty rates (with few exception): Inputs / intermediates materials : 3 - 5% Finished Products: 10%  Safeguard / anti dumping duties be levied carefully & not to create distortion 10

I. INTRODUCTION OF GST  Industry strongly support introduction of GST at the earliest to replace existing multiple tax structure which fragmented the market and let to tax cascading  Proposed 1% non-vatable tax should not be levied. It will have adverse impact on cost of indigenous goods by 4 to 6%  Credit for input taxes should be part of the legislation to ensure certainty and uniformity  Industry should be consulted in finalisation of Rules and procedures and given adequate time for transition. 11

INTRODUCTION OF GST (Contd…..)  “Place of Supply Rules” for certain sectors need consultation with respective sectors for smooth transition such as E-commerce, IT, Banking, telecom etc.  Definition of GST proposed in Article 366 needs amendment to ensure stability of GST. The word “any” to be deleted and the words “as per the framework approved by GST council” should be added. 12

Thank You 13 The Associated Chambers of Commerce and Industry of India ASSOCHAM Corporate Office: 5, Sardar Patel Marg, Chanakyapuri, New Delhi , INDIA Tel : (Hunting Line) ● Fax : /9 · Website: