18 June 2014 | Budget 2014 | Volume 2

SKP Indirect Tax Wish List
Indirect taxes in India have been quite ambiguous, with complicated tax provisions leading to an assessee being burdened with compliances and frivolous litigation. In the upcoming budget, we hope to see appropriate steps being taken to address the existing ambiguities. A few of these provisions have been addressed below:

A. Service Tax
  • Restore the pre-July 2012 provisions wherein the Reverse Charge Mechanism was limited to a few services and not to as many as 11 services or, alternatively, a threshold may be provided for the same
  • Remove the condition for payment to vendor (wherein Reverse Charge Mechanism is applicable) within six months
  • Bring greater clarity in the Place of Provision of Services Rules, particularly in cases where goods are imported temporarily for repairs, and in the meaning of 'intermediary services'
  • Reduce the penalty for delay in filing of service tax returns (which could extend upto INR 20,000) since prior to 8 April 2011, the penalty was only INR 2,000 
B. CENVAT Credit
  • Restore the former definitions relating to inputs, input services and capital goods as prevailing before 1 April 2011 and make CENVAT credit available seamlessly
  • Remove the condition for payment to an input service vendor within three months
  • Issue a clarification to sanction refunds with minimal administrative hassles to exporters within three months of filing claims
C. Excise Duty
  • Amend excise duty valuation provisions suitably to provide that excise duty is payable on 'transaction value' (and not 'manufacturing cost' as held by the Apex Court in the case of Fiat India Ltd)
  • Reduce the rate of excise duty to provide impetus to the manufacturing sector
  • Allow credit of capital goods to be taken immediately on receipt in the factory without deferring 50% to the next financial year
  • Increase the threshold limit of the small-scale sector exemption from INR 15 million to INR 25 million
D. Customs
  • Plugging the lacuna with respect to Inverted Duty Structures wherein the rate of customs duty on imported raw material is more than the imported final product would encourage domestic value addition
  • Rationalise customs duty on import of goods required by certain capital-intensive industries to provide a level playing field to domestic capital goods industries
  • Grant customs duty exemption/concessions for import of goods for hydrocarbon infrastructure projects and for development of airports
  • Remove customs duty on import of IT accessories to rationalise with the exemptions granted to IT products such as laptops, monitors, etc.
  • Address the anomaly of double taxation on services and intangible-rights-related payments by importers of goods to the foreign entities
  • Issue appropriate procedural measures to expedite customs clearances and rationalise the Special Valuation Branch (SVB) procedures to reduce delays in issuance of orders by the SVB
  • Increase the interest-free warehousing period for the goods imported
E. Goods and Services Tax (GST) and Central Sales Tax (CST)
  • Introduce GST at the earliest
  • Provide clarity on the date of introduction of GST
  • Place the draft GST laws in the public domain for debate and discussion
  • Reduce CST by 1% to phase out at the time of GST
F. Litigation
  • Reduce the backlog of pending litigation by introducing Tribunal benches and filling vacancies in the Tribunal
  • Introduce policies to reduce frivolous litigation
  • Simplify tax laws to reduce the scope for unintended interpretations and, in turn, litigation  
G. General
  • Reduce the rate of interest on delayed payment of service tax/excise duty from the present 18% per annum to 12% per annum
  • Introduce transparent and assessee-friendly tax administration
  • Remove the provisions allowing arrest of taxpayers
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