DNS Budget Highlights 2012

Overview of Union Budget 2012
A. Preface
B. Snapshots of Sectoral Analysis
C. Direct Tax Proposals
D. Indirect Tax Proposals
E. FRBM Amendments
F. Contact Us

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A. Preface

Finance Minister Pranab Mukherjee presented the Union Budget 2012-13 in parliament on Friday in the backdrop
of challenges faced by the economy during 2011-12 due to global crisis in the form of intensification of the
sovereign debt crisis in the Euro zone, uncertainty due to political turmoil in Middle East, rise in crude oil prices,
an earthquake striking Japan. With an optimism to improve our macroeconomic environment and strengthen
domestic growth drivers to sustain high growth in the medium term, the Finance minister presented the key
objectives of Twelfth Five Year Plan aimed at ―faster, sustainable and more inclusive growth.‖

The government is faced with a major challenge of Implementation gaps, leakages from public programmes and
the quality of outcomes. Also the Impression of drift in governance and gap in public accountability is misplaced.
The government has a challenge to improve the regulatory standards and administrative practices. The union
Budget 2012-13 to serve as a transition towards a more transparent and result oriented economic management
system in India.

Economic Overview

 India‘s GDP is estimated to grow at 6.9 per cent in real terms in 2011-12 which is a significant slowdown
in comparison to the preceding two years, primarily due to deceleration in industrial growth, more
specifically in private investment.

 The headline inflation remained high for most part of the year. It was only in December 2011 that it
moderated to 8.3 per cent followed by 6.6 per cent in January 2012.

 The current account deficit as a proportion of GDP for 2011-12 is likely to be around 3.6 per cent. This,
along with reduced net capital inflows in the second and third quarters, put pressure on the exchange rate.

 India‘s GDP is expected to grow at 7.6% with an outside band of +/- 0.25% in 2012-13

 Average inflation expected lower next year and current account deficit smaller aided by improvement in
domestic financial savings

 The developments in India‘s external trade in the first half of the current year were encouraging. Exports
have grown by 23 % to reach US Dollar 243 billion, while imports have recorded a growth of 29 % at US
Dollar 391 billion during April to January 2011-12.

The implementation of the Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act) at Centre and
the corresponding Acts at State level has been the pivot in the successful consolidation of our fiscal balance.
Following the announcement in the last Budget, amendments to the FRBM Act have been introduced as part of
Finance Bill, 2012.

Implementation of Direct Taxes Code (DTC) and Goods and Service Tax (GST) regime with effect from April 1,
2012 has been extended. GSTN will be set up as a National Information Utility and is proposed to be operational
by August 2012 which will implement common PAN-based registration, returns filing and payments processing
for all States on a shared platform.

Government committed to retain at least 51 % ownership and management control of the Central Public Sector
Undertakings. Rs. 30,000 Crore to be raised through disinvestment in 2012-13.

The decision in respect of allowing FDI in multi-brand retail trade up to 51 per cent, subject to compliance with
specified conditions, has been held in abeyance.

Allocation for social sector in 2011-12 (Rs. 1, 60,887 Crore) increased by 17 % over current year. It amounts to
36.4 % of total plan allocation.

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B. Snapshots of Sectoral Analysis
Infrastructure and Industrial Development Housing Sector (Contd..)

 More focus on public private partnerships (PPP).  Enhance provisions under Rural Housing Fund
Infrastructure investment will go up to Rs.50 lakh from Rs. 3000 crore to Rs. 4000 crore;
crore with half of this expected from private sector.
 Extend the scheme of interest subvention of 1 per
 Tax free bonds for financing infrastructure projects, cent on housing loan up to Rs. 15 lakh where the
are proposed to raise to Rs.60,000 crore in 2012-13 cost of the house does not exceed Rs. 25 lakh for
against Rs. 30,000 crore in last year. another year; and

 Coal India Limited (CIL) has been advised to sign  Enhance the limit of indirect finance under priority
fuel supply agreements, with power plants that have sector from Rs. 5 lakh to Rs. 10 lakh.
entered into long term Power Purchase Agreements
with DISCOMs and would get commissioned on or
before March 31, 2015. Textile

 Proposed to allow External Commercial Borrowings  The Government has recently announced a
(ECB) to part finance Rupee debt of existing power financial package of Rs. 3,884 crore for waiver of
projects. loans of handloom weavers and their cooperative
societies
 Proposed to allow ECB for capital expenditure on
the maintenance and operations of toll systems for Micro, Small and Medium Enterprises
roads and highways so long as they are a part of the
original project.  Proposed to set up Rs. 5,000 crore ‗India
Opportunities Venture Fund‘ with SIDBI.
 To reduce the cost of Aviation Turbine Fuel (ATF),
Government has permitted direct import of ATF by  To enable these enterprises greater access to
Indian Carriers, as actual users. finance, two SME exchanges have been launched
in Mumbai recently.
 To address the immediate financing concerns of the
Civil Aviation sector, proposal to permit ECB for  Ministries and CPSEs to make a minimum of 20
working capital requirements of the airline industry per cent of their annual purchases from MSEs. Of
for a period of one year, subject to a total ceiling of this, 4 per cent will be earmarked for procurement
US Dollar 1 billion. from MSEs owned by SC/ST entrepreneurs.

 A proposal to allow foreign airlines to participate up Agriculture
to 49 per cent in the equity of an air transport
undertaking engaged in operation of scheduled and  The total plan outlay for the Department of
non-scheduled air transport services is under active Agriculture and Cooperation is being increased by
consideration of the Government. 18 per cent from Rs. 17,123 crore in 2011-12 to `
20,208 crore in 2012-13.

Housing Sector  The outlay for Rashtriya Krishi Vikas Yojana
(RKVY) is being increased from Rs. 7,860 crore in
 Proposal to allow ECB for low cost affordable 2011-12 to Rs. 9,217 crore in 2012-13
housing projects;
 Target for agricultural credit in 2012-13 to Rs.
 Set up Credit Guarantee Trust Fund to ensure 5,75,000 crore, an increase of Rs. 1,00,000 crore
better flow of institutional credit for housing loans; over the target for the current year.


B. Snapshots of Sectoral Analysis (Contd..^2)
Agriculture (Contd..) Better Governance

 The interest subvention scheme for providing short  The enrolments into the Aadhaar system have
term crop loans to farmers at 7 per cent interest per crossed 20 crore and the Aadhaar numbers
annum will be continued in 2012-13. An additional generated up to date have crossed 14 crore.
subvention of 3 per cent will be available to prompt
 It has been proposed to allocate adequate funds to
paying farmers. complete another 40 crore Aadhaar (UID)
enrolments starting from April 1, 2012.
 Allocation of Rs. 10,000 crore to NABARD for
refinancing the Regional Rural Banks (RRBs)
through RRB Credit Refinance Fund. Health

 Kisan Credit Card (KCC) scheme will be modified  No new case of polio reported in last one year.
to make it a smart card which could be used at Setting up of a new integrated vaccine unit near
ATMs. Chennai to achieve vaccine security, disease
eradication and prevention.
Rural Development  National Rural Health Mission (NRHM) is being
implemented through ‗Accredited Social Health
 Allocation under Rural Infrastructure Development
Activist‘- ‗ASHA‘. Allocation to NRHM from Rs.
Fund (RIDF) to Rs. 20,000 crore.
18,115 crore in 2011-12 to Rs. 20,822 crore in
2012-13.
Education

 The Right to Education (RTE) Act is being Budget Estimates
implemented with effect from April 1, 2010 through
 Gross Tax Receipts estimated at Rs 1,077,612
the Sarva Shiksha Abhiyan (SSA). For 2012-13, Rs.
crores for FY 2012-13
25,555 crore for RTE-SSA. This is an increase of
21.7 per cent over 2011-12.  Total expenditures budgeted at Rs 1,490,925
crores for FY 2012-13
 In the Twelfth Plan, 6,000 schools have been
proposed to be set up at block level as model
schools to benchmark excellence. Of these, 2500
will be set up under Public Private Partnership.

Defense/Security

 In the Budget for 2012-13, a provision of Rs.
1,93,407 crore has been made for Defense Services (This space is intentionally left blank)
which include Rs. 79,579 crore for capital
expenditure.


C. Direct Tax Proposals
Personal tax Corporate taxation
 Personal income-tax slabs are proposed to be revised  No change in Corporate Tax Rate, Minimum
as under: Alternate Tax, Surcharge and Education Cess
Rate % Revised Slab Existing Slab
 Turnover Limit for compulsory tax audit of
NIL Upto Rs 200,000 Upto Rs 180,000 accounts u/s 44AB as for presumptive taxation
proposed to be increased to Rs 1crore from Rs. 60
10% 200,001 to 500,000 180,001 to 500,000 Lacs

20% 500,001 to 10,00,000 500,001 to 800,000  Security Transaction Tax reduced by 20% (from
0.125% to 0.1%) on cash delivery transactions.
30% Above 10,00,000 Above 800,000
 Deeming provisions introduced to treat share
premium received in excess of fair market value as
 No separate tax slabs for women assessee. Thus, the income in the hands of closely held investee
maximum exemption limit for a resident women company
below the age of 60 years would be Rs. 2,00,000
 Limits remain unchanged for senior citizens (age of  Repatriation of dividends from foreign subsidiaries
60 years and above but less than 80 years) at Rs of Indian companies to India at a lower tax rate of
250,000 and for very senior citizen (age of 80 years 15 per cent as against the tax rate of 30 per cent
and above) at Rs 500,000. Senior citizens not having extended for one more year i.e. upto March 31,
income from business, shall be exempt from payment 2013
of advance tax.
 The cascading effect of Dividend Distribution Tax
 Unexplained money, credits, investments,
(DDT) in a multi-tier corporate structure proposed
expenditures etc. will be taxed at the highest rate of
to be removed.
30 per cent irrespective of the slab of income.
 A deduction of up to Rs. 10,000 has been proposed Tax Collection at Source
for interest from savings bank accounts to individual
taxpayers.  It is proposed to now levy tax collection at source
 Within the existing limit for deduction allowed for on purchase of bullion and jewellery in excess of Rs.
health insurance, a deduction of upto Rs. 5,000 2 Lakh in cash.
proposed for preventive health check-up.
 Tax collection at source on trading of Coal, Lignite
 It is proposed to give Income Tax deduction of 50 and iron ore.
per cent on investments of up to Rs 50,000 in savings
scheme named after Rajiv Gandhi equity scheme for Others
those who have annual income is less than 10 lacs.
The scheme will have a Lock in period of 3 year  There shall be no disallowance under Sec. 40 (a) for
non deduction of tax if due taxes are paid by the
 Premium paid on life insurance policies issued on or
payee.
after April 1, 2012 would be eligible for deduction
under Section 80C only if premium paid does not  Section 68 is proposed to be amended to provide
exceed 10% of the actual capital sum assured as that where assessee is a company (not being a widely
against 20% at present. held company), the sum found credited in its
 It has been proposed to extend the levy of Alternate financial statement, consisting of share capital,
Minimum Tax (AMT) on all persons other than security premium or any such amount, shall not be
companies, claiming profit linked deduction. It is also deemed to be unexplained if shareholder explains
proposed to provide exemption from AMT if the source of such share capital and such
adjusted total income of an Individual or HUF or explanation in the opinion of the Assessing officer
AOP or BOI does not exceed Rs. 25 lakhs. is satisfactory.


C. Direct Tax Proposals (Contd..^2)
Tax Deduction at Source  Capital gain on sale of residential property exempted
from if the sale consideration is used for subscription
 It is now proposed to deduct tax at source 1% of in equity of a manufacturing SME company for
consideration amount on transfer of immovable purchase of new plant and machinery.
property (other than agricultural land). Such
deduction is only required if consideration exceeds  Weighted deduction at the rate of 150 per cent of
Rs. 50lacs in case of property located in specified expenditure incurred on skill development in
urban area and Rs. 20lacs in case property located in manufacturing sector proposed in accordance with
any other area. specified guidelines.

 Withholding tax on interest payments on external  Deduction under Sec. 80G is proposed to be
disallowed if donation is paid in cash in excess of Rs.
commercial borrowings reduced from 20 percent to 5
10,000
percent for power, airlines, roads, bridges, affordable
houses and fertilizer sectors. Additional measures to deter use of unaccounted
money
 Threshold limit for deduction of tax from payment of
interest on debentures u/s 193 increased from Rs.  Compulsory reporting requirement in case of assets
2,500 to Rs. 5,000. held abroad
 It is now proposed to deduct tax at source under Sec.  Reopening of assessment allowed up to the period
194J from remuneration paid to a director if such
of 16years in relation to assets held abroad.
payment is not subject to deduction of tax under Sec.
192.
 Increasing the onus of proof on closely held
Deductions/ Exemptions companies for funds received from shareholders as
well as taxing share premium in excess of fair
 It has been proposed to extend the weighted market value.
deduction of 200 per cent for R&D expenditure in an
in-house facility beyond March 31, 2012 for a further Amendment to Definition of Royalty u/s 9(1)
period of five years.
 Confirming the judgment passed in the case of
 Investment linked deduction of capital expenditure Gracemac Corporation vs. ADIT and putting aside
incurred is proposed to be provided at the enhanced controversy that whether payment for use of
rate of 150 per cent, as against the current rate of 100 software or copyrighted article would be taxable as
per cent. for certain businesses which include cold royalty or not, definition of Royalty u/s 9(1) is
chain facility, warehouse for storing food grains, proposed to be amended inserting Explanation 5 to
hospital, fertilizer, new sectors eligible for investment include consideration in respect of any right,
linked deduction property or information, whether or not—
 the possession or control of such right, property
 Extension of the sunset date by one year for power or information is with the payer;
sector undertakings so that they can be set up on or  such right, property or information is used
before March 31, 2013 for claiming 100 per cent directly by the payer;
deduction of profits for 10 years. Further, additional  the location of such right, property or
depreciation of 20 per cent in the initial year is information is in India.
proposed to be extended to new assets acquired by
power generation companies.  Now, post amendment every payment for use of or
right to use of software shall be taxable as royalty.


C. Direct Tax Proposals (Contd…^3)
Overcome of Supreme Court's Ruling in Vodafone's case- Retrospective amendments to sections 2(14),
2(47) and 9 of the Income Tax Act, 1961
 The Supreme Court in the instant case {Vodafone International Holdings B.V. v. UOI [2012] 17 taxmann.com 202 (SC)}
held that transfer of shares of a foreign company which has an Indian Company as its subsidiary does not amount
to transfer of any capital asset situated in India within meaning of section 9(1)(i). The Supreme Court‘s view in this
respect was that:
o ―controlling interest‖ is not a capital asset
o the words ―directly or indirectly‖ do not qualify the transfer of the asset,
o if a foreign company has a subsidiary in India, shares of foreign company are not deemed to be situated in
India
Pursuant to this judgment, the Finance Bill, 2012 seeks to tax indirect transfer of capital assets in India by
inserting clarificatory explanations to Section 2(14), 2(47), 9(1) and 195 of the Act. The amendment is proposed to
be applicable retrospectively from 1 April, 1962.
 Section 2(14): Definition of “Capital Asset”
Explanation to section 2(14) is proposed to be added with effect from the 1st day of April 1962, so as to clarify that
“the term „property‟ includes any rights in or in relation to an Indian company, including rights of management or control or
any other rights whatsoever.”
After the amendment, transfer of shares which result in transfer of ―controlling interest of an Indian Company‖
could give rise to a taxable event in India.

 Section 2(47): Definition of “Transfer”
Explanation to section 2(47) is proposed to be added with effect from the 1st day of April 1962, so as to clarify
that “transfer includes disposing of or parting with an asset or any interest therein, or creating any interest in any asset in
any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement
(whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been
characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company incorporated
outside India.”
Thus, ‗transfer‘ would include indirect transfer of shares if rights in such shares are effected and dependent upon
transfer of shares even of a foreign company.
 Clarification of „through‟ in Section 9(1) - Explanation 4 to Section 9(1) of the Act
The Bill further proposes to clarify that the expression ‗through‘ shall mean and include and shall be deemed to
have always meant and included ‗by means of‘, ‗in consequence of‖ or ‗by reason of‘.
 Section 9(1): Definition of income deemed to accrue or arise in India
In section 9(1) of the Income Tax Act, Explanation 5 shall be inserted w.e.f. the 1st day of April 1962, so as to
clarify that “an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside
India shall be deemed to be and shall always be deemed to have been situated in India, if the share of the interest derives,
directly or indirectly, its value substantially from the assets located in India”.
Accordingly, the amendment seeks to widen the scope of income under Section 9 of the Act and bring into tax net,
the gains derived from transfer of share or interest if such share or interest derives either directly or indirectly its
value substantially from assets located in India.
 Section 195: Withholding tax on payment to non residents
A consequential amendment is proposed to be made in section 195 to extend applicability of withholding tax
provisions u/s 195 to all persons whether resident or non- resident. It is further clarified that such non- resident
may or may not have a residence or place of business or business connection or any other presence in any manner
whatsoever in India.


C. Direct Tax Proposals (Contd….^4)
TRC is mandatory to get treaty benefit, if GAAR invoked no Treaty benefit

As per existing provisions of section 90 of the Act, provisions of the DTAA entered into by India with other countries
or the provisions of the Act, whichever is more beneficial, would be applicable to the non-residents tax payers, being
residents of such other countries.

In view of such DTAAs, there are few countries, inter-alia, Mauritius, Cayman Islands, etc. wherein the right to tax
certain income (i.e. capital gains) is granted to the resident country. To ensure that the persons, availing the benefit of
such provisions in the DTAA, are actually residents of the corresponding country, the Assessing officer generally asks
for the Tax Residency Certificate (―TRC‖), to be issued by the tax authorities of such country.

Presently, there is no specific provision in the Act to obtain a TRC to claim benefits under the DTAA except in the
case of Mauritius which is provided by Circular No. 789 dated 13th April, 2000 issued by CBDT wherein it was
clarified that that wherever a Certificate of Residence is issued by the Mauritian Authorities, such Certificate will
constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the
DTAC accordingly.

Amendment to Section 90 and 90A

Finance Bill 2012 proposes to amend section 90 and 90A of the Act in order to provide that the non-residents would
be entitled to be governed by the provisions of DTAA only when TRC is obtained from the tax authorities of the
country of residence of such non-resident.

The amendment shall be applicable from 1 April 2013 to ensure that third party residents do not claim unintended
treaty benefits

Prevention of Generation and Circulation of Black Money

It is proposed to lay a white paper on black money on the Table of the House in the current session of Parliament.
Also it has been announced that there is advancement in tracking the trail of black money menace. The following have
already been done

 82 Double Taxation Avoidance Agreements (DTAA) and 17 Tax Information Exchange Agreements (TIEA) have
been finalized and information regarding bank accounts and assets held by Indians abroad has started flowing in.
In some cases prosecution will be initiated;

 Dedicated exchange of information cell for speedy exchange of tax information with treaty countries is fully
functional in CBDT;

 India became the 33rd signatory of the Multilateral Convention on Mutual Administrative Assistance in Tax
Matters; and

 Directorate of Income Tax Criminal Investigation has been established in CBDT.

The following legislative measures for strengthening anti-corruption framework are in various stages of enactment:
 Prevention of Money Laundering (Amendment) Bill, 2011
 Benami Transactions (Prohibition) Bill, 2011
 National Drugs and Psychotropic Substances (Amendment) Bill, 2011


D. Indirect Tax Proposals – Service Tax
Rate  Cascading of taxes has been significantly reduced
by permitting utilization of input tax credits in a
 Service tax rate raises from 10% to 12% effective number of services such as catering, restaurants,
from 1 April 2012. hotel accommodation, pandal and shamiana and
transport sectors.
Levy of service tax:
 As a measure of harmonization between Central
 The concept of negative list proposed to be Excise and Service Tax, the Government has
introduced, i.e. all services will now attract service made a number of alignments. From now on
tax, except those specified in the negative list. common simplified registration form and a
Exemptions common return for Central Excise and Service
Tax, to be named EST-1 shall be filed. This
 The negative list has 17 heads and includes common return will comprise only one page,
specified services provided by the government or which will be a significant reduction from the 15
local authorities, and services in the fields of pages of the two returns at present
education, renting of residential dwellings,
entertainment and amusement, public  Possibility of a common tax code for service tax
transportation, agriculture and animal husbandry. and central excise would be examined

 Film industry also gets tax exemption on  The option of deferred payment is being allowed
copyrights relating to recording of cinematographic for all service providers rather than for specific
films. services. The facility will be available only to
individuals and partnership firms (including
 In addition to the negative list, there is a list of
limited liability partnership) up to a turnover of
exemptions which include health care, services
provided by charities, religious persons,
taxable services of Rupees Fifty lakhs subject to
sportspersons, performing artists in folk and the condition that their turnover of taxable
classical arts, individual advocates providing services in previous year was below Rupees Fifty
services to non-business entities, independent lakhs.
journalists, and services by way of animal care or
car parking which shall be exempt from service tax.  Service Tax Return

 The services of business facilitators and Periodi Quarterly Return Monthly
correspondents to banks and insurance companies city of Return
included in exemption list. Return
Status Individual/ Assesses Assesses
 Construction services relating to specified Firm/LLP other than other than
infrastructure, canals, irrigation works, post-harvest assessee Individual/ Individual/
infrastructure, residential dwelling, and low-cost Firm/LLP Firm/ LLP
mass housing up to an area of 60 sq. mtr. under Limit Any amount Tax liability Tax liability
the Scheme of Affordable Housing in Partnership of tax less than 25 more than
are also included in the exemptions. liability in lakhs in 25 lakhs in
immediately immediately immediately
 It is proposed to raise the exemption for the preceding preceding preceding
monthly charges payable by a member to a housing F.Y financial financial
society from Rs. 3,000 to Rs. 5,000. year year

Regulatory measures

Revision Application Authority and Settlement
Commission are being introduced in Service Tax
to help resolve disputes with far greater ease.


D. Indirect Tax Proposals – Central Excise & Customs
CENTRAL EXCISE CENVAT Credit

Rate  Service provider to pay duty on scrap capital goods.
Duty on higher of Depreciated value or Transaction
 Rate of Excise duty raises to 12% from 10% Value.
(With CENVAT);
 Merit Rate of Excise duty raised to 6% from 5%  Restriction imposed on credit distribution by ISD.
(With CENVAT);
 Merit Rate of Excise duty raised to 2% from 1%  In case of more than one unit - distribute amongst
(Without CENVAT) with few exceptions as all relatable units proportionately on the basis of
briefed below. turnover
Increase in rate of Excise Duty Exemptions
 It is proposed to increase excise duty on demerit  It is proposed to extend concessional basic
goods such as certain cigarettes, hand rolled bidis, customs duty of 5 per cent with full exemption
pan masala, gutka, chewing tobacco, un from excise duty/ CVD to six specified life-saving
manufactured tobacco and zarda scented tobacco. drugs/ vaccines.

 It is proposed to enhance cess on crude petroleum  Branded Silver jewellery exempted from excise duty
oil produced in India to Rs. 4500/- per metric
tonne from Rs. 2500/- per metric tonne  Import of foreign-going vessels to be exempted
from CVD of 5 per cent retrospectively.
 In the case of cars that attract a mixed rate of duty
per vehicle, it has been proposed to increase the
duty and switch over to an ad valorem rate as CUSTOMS
mentioned in the table below
Increase in rate of Custom Duty
Current 10% 10% + 22% 22% +
Rate Rs. Rs.  It has been proposed to enhance basic customs
10,000 15,000 duties on completely built units of large cars/
Proposed 12% 15% 24% 27% Multi-Utility Vehicles/ Sports Utility Vehicles
Rate having engine capacity above prescribed threshold
from 60 percent to 75 per cent ad valorem.
 Excise duty rationalized for packaged cement,  Increase basic customs duty on gold and platinum
whether manufactured by mini-cement plants or bars from 2% to 4%. 5% to 10% on non-standard
others. gold;
 Levy of excise duty of 1 per cent on branded
 Impose basic customs duty of 2 per cent on cut
precious metal jewellery to be extended to include and polished, coloured gem stones at par with
unbranded jewellery.
diamonds;
 Chassis for building of commercial vehicle bodies  Increase in BCD on bicycles from 10% to 30% and
to be charged excise duty at an ad valorem rate parts of bicycles from 10% to 20%.
instead of mixed rate.
Increase basic customs duty on Digital Still
 12% excise duty imposed on branded retail Cameras from NIL to 10% not qualifying the
garments. Abatement increased from 55% to 70%. specification mentioned in Notification No.
15/2012-Cus
Reduction in rate of Excise Duty

 Excise duty on LED lamps reduced to 6 per
cent

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D. Indirect Tax Proposals – Central Excise & Customs
Reduction in rate of Custom Duty  Full exemption from import duty on specified
equipment imported for road construction by
 Duty on soya protein concentrate and isolated soya contractors of Ministry of Road Transport and
protein to 10 per cent from the present 30 per cent Highways, NHAI and State Governments is
or 15 per cent respectively being extended to contracts awarded by
Metropolitan Development Authorities
 Basic customs duty and excise duty reduced on
iodine from 6 per cent to 2.5 per cent.  Imports of equipment for initial setting-up or
substantial expansion of fertilizer projects are
 Basic customs duty on probiotics is now 5 per cent being fully exempted from basic customs duty of
reduced from 10 per cent. 5 per cent for a period of three years up to
March 31, 2015
 Basic customs duty on sugarcane planter, root or
tuber crop harvesting machine and rotary tiller and  Coating chemical used for compact fluorescent
weeder and parts has been reduced from 7.5 per lamps fully exempt from basic customs duty.
cent to 2.5 per cent
Legislative Changes
 Basic customs duty reduced from 7.5 per cent to 5
per cent on specified coffee plantation and  Section 28AAA inserted for initiating proceeding
processing machinery. against alternate person in case duty free
instrument obtained by way of collusion, willful
misrepresentation or suppression of facts.
 Basic customs reduced on some water soluble
fertilizers and liquid fertilizers, other than urea,  Computation of Education Cess and Secondary
from 7.5 per cent to 5 per cent and from 5 per & Higher Education Cess is simplified to
cent to 2.5 per cent exempt the cesses as leviable on CVD portion of
customs duty to avoid computation of such
 The duty-free baggage allowance for eligible cesses twice.
passengers of Indian origin has been increased from
Rs.25,000 to Rs. 35,000 and for children upto 10  CENVAT Credit Rules are amended to permit
years from Rs.12,000 to Rs.15,000. transfer of unutilised credit of SAD lying in
balance at the end of each quarter to other
 Concession from basic customs duty and special registered premises of same manufacturer.
CVD is being extended to certain items imported for  21/2012-Cus consolidates SAD exemptions
manufacture for hybrid or electric vehicle and under 20/2006-Cus and 29/2010-Cus. Further a
battery packs for such vehicles. condition inserted requiring the importer of the
specified goods to declare the State of
 Customs duties on imported plant & machinery for destination where the goods are intended to be
iron ore plants reduced to 2.5% sold for the first time on payment of VAT after
import along with VAT registration number.
Exemptions

 Full exemption given from basic customs duty and a
concessional CVD of 1 per cent to Steam coal for a
period of two years till March 31, 2014

 5% customs duty exempted on equipment for
fertilizer plants (This space is intentionally left blank)

 Full exemption from basic duty to Natural Gas and
Liquified Natural Gas and Uranium concentrate,
Sintered Uranium Dioxide in natural and pellet form


E. Amendments to Fiscal Responsibility and Budget Management
Act, 2003 (FRBM)

Tax Reforms Financial Sector

 Direct Tax Code Bill: Report of the  Income tax deduction of 50 per cent to new retail
Parliamentary Standing Committee submitted investors under ―Rajiv Gandhi Equity Savings
March 9, 2012 is being examined and necessary Scheme‖, who invest up to Rs. 50,000 directly in
steps for the enactment of DTC at the earliest are
equities and whose annual income is below Rs. 10
being taken.
. lacs. The scheme will have a lock-in period of 3
 Goods and Services Tax (GST): years.

Drafting of model legislation for Centre and State Capital Markets
GST in concert with States is under progress.
 Proposed to Allow Qualified Foreign Investors
The structure of GST Network (GSTN) has been (QFIs) to access Indian Corporate Bond market;
approved by the Empowered Committee of State
Finance Ministers. GSTN will be set up as a  In order to simplify the process of issuing Initial
National Information Utility and will become Public Offers (IPOs), it is proposed to make it
operational by August 2012.
mandatory for companies to issue IPOs of Rs. 10
The GSTN will implement common PAN-based crore and above in electronic form through
registration, returns filing and payments nationwide broker network of stock exchanges;
processing for all States on a shared platform.
 Providing opportunities for wider shareholder
participation in important decisions of the
Disinvestment companies through electronic voting facilities,
besides existing process for shareholder voting,
 The government propose to raise Rs. 30,000 crore which would be made mandatory initially for top
in 2012-13 through disinvestment as against a listed companies;
target of 40,000 crore last year (In actual raised
14000 crore in last year)  Permitting two-way fungibility in Indian
Depository Receipts subject to a ceiling with the
 At least 51 per cent ownership and management objective of encouraging greater foreign
control in Central Public Sector Enterprises
(CPSEs) will remain with the Government. participation in Indian capital market.

Foreign Direct Investment

 At present, FDI in single brand retail and in cash
and carry wholesale trade is permitted to the
extent of 100 per cent.

 Efforts are on to arrive at a broad based (This space is intentionally left blank)
consensus in consultation with the State
Governments to allow FDI in multi-brand retail
trade up to 51 per cent, subject to compliance
with specified conditions.
.


F. Contact Us

DNS Advisors Private Limited
W – 123, Greater Kailash Part - II
New Delhi – 110048
Tel: 011 40535910

Contact Persons

CA Neha Bansal CA Naveen Goyal
Mob: 9810904228 Mob: 9911095297
Email: neha@dnsadvisors.com Email: naveen@dnsadvisors.com

CA Deepak Gupta CA Naveen Wadhwa
Mob: 9811300590 Mob: 9891352716
Email: Deepak@dnsadvisors.com Email: naveen.wadhwa@dnsadvisors.com

Services offered:

 Business Set up Services
 Business Valuation and Financial Advisory
 Project Funding
 Taxation and Legal Advisory
 Audit / Assurance
 XBRL Conversion Services
 Conversion services to Revised Schedule VI
 Advisory on Company Law & FEMA matters
 Secretarial Compliances

Disclaimer:

This document is prepared for information purposes only. No reader should act on the basis of any statement contained herein
without seeking professional advice. The firm expressly disclaims all and any liability to any person who has read this, document or
otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance
upon the contents of this document.

Sponsored by:

WWW.COMPANIESCART.COM

YOUR GATEWAY TO BUSINESS SET UP IN INDIA


DNS Budget Highlights 2012

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