17 February 2014 | Volume 6 Issue 20
HIGHLIGHTS OF INDIRECT TAX PROPOSALS SET BY THE INTERIM BUDGET 2014-2015

The Indian Finance Minister presented the interim budget for the fiscal year 2014-2015 today (17 February 2014). With general elections coming up, an interim budget is necessary to cover expenditure and regulate revenues until the government's term ends in May 2014.

In line with the theme of the Union Budget 2013, the major focus of the Interim Budget 2014-2015 continued to be fiscal consolidation, price stability, promoting manufacturing and encouraging exports. While the peak rates of service tax, customs and excise duties remain unchanged, the budget seems focused on providing certain changes in indirect tax rates, which according to the Finance Minister are required for stimulating industrial growth in India. 

We have outlined the indirect tax proposals laid by the Interim Budget 2014-2015 which will be effective until 30 June 2014 i.e. until the regular Budget is announced. The following changes shall be effective from 17 February 2014, unless otherwise specified.


CUSTOMS DUTY

  • Basic customs duty on non-edible grade industrial oils and its fractions, palm stearin, industrial fatty acids and fatty alcohols has been reduced to 7.5%.
  • Full exemption from basic customs duty and Additional Duty of Customs granted to Liquefied Natural Gas (LNG) consumed in the authorised operations in the ONGC SEZ unit at Dahej and remnant LNG or Natural Gas (NG) cleared into the Domestic Tariff Area after completion of authorised operations carried out by ONGC SEZ unit in Dahej subject to specified conditions.
  • Exemption from Additional Duty of Customs on specified road construction machinery such as hot mix plant of specified capacity, electronic paver finisher, kerb laying machine, skid steer loaders, drilling jumbos, loaders, excavators withdrawn. However, exemption from basic customs duty to continue.
  • Basic customs duty rate on capital goods imported by Bank Note Paper Mill India Private Limited reduced to 5% plus full exemption granted from Additional Customs Duty and Special Additional Customs Duty. The exemption is valid upto 31 December 2014.
  • The human embryo has been fully exempted from customs duty.
  • Full exemption from customs duty on pulses valid until 31 March 2014 has been extended upto 30 September 2014.


EXCISE DUTY

  • The following changes in rates shall be effective upto 30 June 2014:

*Existing duty concessions, whether by way of tariff entry or notifications will continue to be available as before.

In line with the aforesaid duty reduction in commercial vehicles, the excise duty on chassis has also been appropriately reduced. Further, duty has been reduced on hybrid motor vehicles, hydrogen vehicles, dumpers, etc.

  • Excise duty structure on mobile handsets has been rationalised.

SERVICE TAX

  • Exemption granted to services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation. Such services shall typically cover collection of umbilical cord blood, processing the same for segregation of stem cells, testing and cryo-preservation of stem cells provided by cord blood banks (with effect from 17 February 2014).
  • Exemption granted to services by way of loading, unloading, packing, storage or warehousing of rice (with effect from 17 February 2014).
  • As per the clarification issued by way of Circular No. 177/3/2014 dated 17 February 2014:
    • "Food stuff" includes rice and hence service tax on transportation of rice by rail or a vessel or by a Goods Transport Agency by way of transport in a goods carriage is exempt from service tax in view of SI Nos. 20(i) and 21(d) of Notification No. 25/2012-ST.
    • Milling of paddy into rice carried out on job work basis is an intermediate production process in relation to agriculture and thereby covered by the exemption at SI No. 30 of Notification No. 25/2012-ST.


GOODS AND SERVICES TAX (GST)

  • The Finance Minister expressed disappointment for the delay in introduction of GST laws. Further, he has appealed to all political parties to resolve to pass the GST laws in 2014-15.

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ABOUT THIS TAX ALERT
This SKP Tax Alert contains general information existing at the time of its preparation only. It is intended as a news update and is not intended to be comprehensive nor to provide specific accounting, business, financial, investment, legal, tax or other professional advice or opinion or services. This tax alert is not a substitute for such professional advice or services, and it should not be acted on or relied upon or used as a basis for any decision or action that may affect you or your business. Before making any decision or taking any action that may affect you or your business, you should consult a qualified professional adviser and also refer to the source pronouncement/documents on which this tax alert is based. It is also expressly clarified that this tax alert is not a solicitation or an invitation of any sort whatsoever or a source of advertising from SKP Group or any of its entities to create any adviser-client relationship.

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