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Hon’ble F. M.  Arun Jaitley – Budget 2018

CA Anil Kumar Jain




Once again the Finance Minister of India has gone through the ritualistic Annual Budget exercise on 1st of February, 2018. As, this is the last functional financial budget in the present tenure of this BJP Government, Economic and Financial wizards around the world were holding their breath in the expectation of some far-fetched fiscal announcements on this day.

There was also a feeling that, the budget documents will be election driven. So far, international investors and Indian industry has shown its stout confidence, conviction and admiration in the leadership of this regime. Pragmatic decisiveness on demonetarization and tax reforms also raised optimism for incredible proclamations through budget documents 2018.

Although, it will be hasty and unreasonable to judge and conclude the far reaching implications and affects of this presentation, but apparently it appears that, a lot is missing …………….. an opportunity is lost……… fiscal issues are inadequately balanced………common person is somewhat confused on his choice of …………!!!

In the juggleries of financial politics and democratic limitations, we as a nation are the worst victim of appeasement practices and policies. It is distressing to say that, “the illiterate farming community and allied classes of Indian Diaspora, which supersede in electoral numbers have restrained our finest leadership from dynamic fiscal decisions in the interest of nation as a whole”.

If India has to stand in the frontline, we have to compulsorily grow consistently  at least 12% plus rate for next three to five years. Revenue from direct and indirect taxes can by no means fulfill the necessities of the nation. Steel, Power, Transport, Industries are the backbone of growth cycle. Massive capital investment is required in Infrastructure, education and health sector. There is no answer for all this in budget documents.

On multiple occasions it is governmentally acknowledged that, abundant financial resources are held / parked by our own fellow Indians outside India.  In the interest of the Nation, the Hon’ble Finance Minster should not be shy in acknowledging this reality of the economics. The issue is, “why can’t, we find a respectable mutually acceptable solution so that, these staggering funds can voluntarily flow back to country and contribute in our economic growth”. I once again accentuate that, tax revenue can, on no account meet the resource needs of India.

Besides, it is also noteworthy that, good intent, announcements and allocations of Finance Minster are not getting to the last point. The administrative machinery is extremely enervated and inefficient. Historically, there appears to be lack of synchronisation and harmonisation amongst Ministry of Finance, Commerce, Law, Reserve bank of India, Judiciary etc. The Hon’ble Prime Minister must find a way out so that, there is conceptual  understanding of action from conceivement to execution.

In his budget documents, additional tax collection provisions through increase in direct taxes may not be purposeful. Capital gain tax may negatively impact the sentiments of capital market. In nutshell, economic sentiments can be better managed through greater dependence on indirect taxes rather than direct taxes. Some of the penal provisions introduced in Direct Taxes appear to be too harsh and impractical. Being our representative on national mission, we expect our Finance Minister to be a friend and a philosopher in his approach while drafting his budget proposals. We are sure he will have a relook at some of the penal provisions in Budget Documents. Besides, it is worth mentioning that, the present rates of individual and corporate taxes are still very high as compared to other progressive nations. Higher rates can definitely be justified only in the circumstances where social security scheme and other welfare programmes are effectively serving every citizen of the country. 

Summarised Budget documents and proposals are placed herein below.
DIRECT TAX

INDIVIDUALS

· Education Cess of 3% has been discontinued.

· A New Cess by the name of Health & Education Cess of 4% will be levied on the tax payable.

TAX RATE FOR CO-OPERATIVE SOCIETIES, FIRMS

· Education Cess of 3% has been discontinued.

· A new Cess by the name of Health & Education Cess of 4% will be levied on the tax payable

DOMESTIC COMPANY

· No change in the tax rate of 30%. However, if turnover or gross receipts in the previous year 2016 17 does not exceed Rs. 250 crore, the tax rate will be 25%

· No change in surcharge : 7%- if total income is between Rs. 1 crore and Rs. 10 crore;
12%- if total income exceeds Rs. 10 crore

· Education Cess of 3% has been discontinued.

· A new Cess by the name of Health & Education Cess of 4% will be levied

FOREIGN COMPANY

· No Change in tax rate -40%

· No change in surcharge: 2% - if total income is between Rs. 1 crore and Rs. 10 crore; 5%
- if total income exceeds Rs.10 crore

· Education Cess of 3% has been discontinued.

· A new Cess by the name of Health & Education Cess of 4% will be levied on the tax payable

LONG-TERM CAPITAL GAINS TAX

· Long-term capital gains (on gains exceeding Rs.1 lakh) from equity shares / unit of equity oriented fund / unit of a business trust, shall be chargeable to income tax @ 10% (benefit of indexation not provided).

· Grandfathering provisions put in place to insulate gains upto Jan 31, 2018.

· This concessional rate of 10 % will be applicable to such long term capital gains, if
i) in a case equity share in a company, STT has been paid on both acquisition and transfer; and

ii) in a case of a unit of an equity oriented fund or a unit of a business trust, STT has been paid on transfer

· Benefit of deduction under chapter VIA and rebate on income tax under section 87A shall not be allowed on such capital gains

· The cost of acquisition for the purposes of computing capital gains referred to in sub-section (1) in respect of the long-term capital asset acquired by the assessee before the 1st day of February, 2018, shall be deemed to be the higher of
i) the actual cost of acquisition of such asset; and

ii) the lower of—

a) the fair market value of such asset; and

b) the full value of consideration received or accruing as a result of the transfer of the capital asset.

· Sale of long term listed equity shares / equity oriented mutual funds during February 1, 2018 to March 31, 2018 will not attract long term capital gains tax.

· Tax on foreign institutional investor from securities or capital gains arising from their transfer . (Effective date: AY 2019-20) - New proviso has been inserted under which long term capital gains arising from transfer of listed equity shares or a unit of equity oriented fund or a unit of business trusts exceeding Rs. 100,000 would be taxable @ 10%.

· Tax on distributed income to unit holder (Effective date: April 1, 2018) - With a view to providing a level playing field between growth oriented funds and dividend paying funds, it is proposed to amend the said section to provide that where any income is distributed by a Mutual Fund being, an equity oriented fund, the mutual fund shall be liable to pay additional income tax @ 10% on income so distributed. For this purpose, equity oriented fund will have the same meaning assigned to it in the new section 112A of the Act.

· New proviso inserted in section 115-O(1): Taxation on deemed dividend referred to section 2(22)(e) is now proposed through the DDT route @ 30% instead of 15%. Thus onus is shifted to the company instead of recipient thus putting to an end the controversy on whose hands the amount is taxable. Deemed dividend will consequently be exempt in the hands of the recipient and no withholding under section 194 is applicable

· New proviso inserted in section 115-O(1B): The aforesaid DDT of 30% is not required to be grossed up.’

· Section 47 read with section 115AC: - Following transactions by a non resident on any recognised stock exchange located in any International Financial Service Center (IFSC), if consideration is paid/ payable in foreign currency will not be regarded as transfer: - Transactions in bond/ GDR/ rupee denominated bond of Indian company/ derivative Good measures to promote International Financial Services Centre (IFSC). Objective is to promote development of world class financial infrastructure in India ((a) “International Financial Services Centre” shall have the meaning assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005;)

· 115JC (AY 2019-20 onwards) - Alternate Minimum Tax (‘AMT’) to be charged @ 9% for units located in IFSC.

· Section 50C - No adjustments to be made in a case where variation between stamp duty value and sale consideration is not more than 5% of the sale consideration. Rationale for this provision is that there can be variation in respect of similar properties in the same area because of a variety of factors, including shape of the plot or location. Consequent change made in section 56 also It remains to be seen whether the limit of 5% is sufficient to cover the variation arising from the stated factors.

· Section 54EC (AY 2019-20 onwards)- Scope of long term asset transferred, restricted to land or building or both. Long term specified asset for making any investment under the section on or after the 1st day of April, 2018, shall mean any bond, redeemable after five years and issued on or after 1st day of April, 2018 by NHAI or by Rural Electrification Corporation Limited or any other bond notified by Central Government in this behalf.

 Intention of making amendments in section: -

a) Restrict scope of section to LTCG arising from land, buildings or both

b) Make funds available at the disposal of eligible bond issuing company for more than 3 years

SALARIED CLASS

· Under Section 16, it is proposed to provide standard deduction (No proof required, to claim this deduction) upto:

a) Rs. 40,000 or

b) Salary amount whichever is less (Applicable from FY 2018-19 onwards)
Consequently, present exemption in respect of Transport Allowance of Rs. 1,600 p.m. (except in case of differently abled persons) and reimbursement of medical expenses of Rs. 15,000 (pa) is withdrawn. Consequential amendment made in section 17 deleting the benefit of medical reimbursement of Rs. 15,000.

· Section 80D: Deduction in respect of Health Insurance (Effective date: AY 2019-20 onwards)- Deduction limit enhanced to Rs. 50,000

· Section 80DDB: Deduction in respect of Medical treatment (Effective date: AY 2019-20 onwards) - Limit enhanced to Rs. 100,000 for both senior and very senior citizens.

· Section 80TTB: deduction in respect of interest income from deposits held by senior citizens (Effective date: AY 2019-20 onwards) - Allow a deduction upto Rs. 50,000 in respect of interest income from deposits held by senior citizens.

· Section 80 JJAA: deduction in respect of emoluments paid to new employees (Effective date: AY 2019-20)- 30% additional deduction allowed in addition to normal 100% deduction for emoluments paid to eligible employees provided employees have worked for a minimum period of 150 days during a year  to footwear or leather industry. Benefit shall be allowed to a employee who is employed for less than the minimum period during the first year but continues to remain employed for the minimum period in subsequent year

· Section 80AC: No deduction allowed unless return is filed (Effective date: AY 2018-19 onwards) - Scope of section 80AC enhanced to include all sections under Chapter VIA wherein deductions will not be allowed if return of income is not filed in accordance with the provisions of section 139(1) - previously it was If assesses does not file return of income u/s 139, no deduction shall be allowed u/s 80IA,IAB,IB,IC,ID,and IE. Other sections of Chapter VIA not covered.

· Newly Inserted Provisions As per section 80PA, where the gross total income of producer company does not exceed Rs.100 crores in any previous year, includes any profits and gains derived from eligible business, a deduction equal to the 100 percent of profits and gains derived from eligible business will be allowed to the company The deduction would be allowed for 5 years from AY 2019-20 to 2024-25 only,

Eligible Business means the following activities :-

a) The marketing of agricultural produce grown by the members

b) The purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to the members; or

c) The processing of agricultural produce of the members



PRESUMPTIVE INCOME UNDER SECTION 44AE IN CASE OF GOODS CARRIAGE

· In the case of heavy goods vehicle (more than 12MT gross vehicle weight), the income would deemed to be an amount equal to Rs.1,000 per ton of gross vehicle weight or unladen weight, as the case may be, per month or part of a month for each goods vehicle or the amount claimed to be actually earned by the assessee, whichever is higher.

· The vehicles other than heavy goods vehicle will continue to be taxed as per the existing rates. Effective Date : A.Y. 2019-20

· Insertion of section 43AA -  43AA Subject to the provisions of section 43A, any gain or loss arising on account of effects of changes in foreign exchange rates in respect of monetary/non-monetary items; translation of financial statements of foreign operations; forward exchange contracts; foreign currency translation reserves, shall be treated as income or loss, which shall be computed in the manner provided in ICDS. This amendment would bring certainty in the wake of recent judicial pronouncements on the issue of applicability of ICDS and to shall regularize the compliances done by tax payers with ICDS

· Insertion of section 43CB - Profits arising from a construction contract or a contract for providing services shall be determined on the basis of percentage of completion method and that the contract revenue shall include retention money, and contract cost shall not be reduced by incidental interest, dividend and capital gains. Other methods prescribed for certain types of service contracts such as: (i) Contracts with duration of not more than ninety days - Project completion method (ii) involving indeterminate number of acts over a specific period of time - Straight line method. This amendment would bring certainty in the wake of recent judicial pronouncements on the issue of applicability of ICDS and to shall regularize the compliances done by tax payers with ICDS

· Insertion of New section 145A in place of erstwhile section 145A - For the purpose of determining the income chargeable under the head “Profits and gains of business or profession”

a) The valuation of inventory shall be made at lower of actual cost or net realizable value computed in the manner provided in ICDS.

b) The valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation.

c) Inventory being securities not listed, or listed but not quoted, on a recognised stock exchange, shall be valued at actual cost initially recognised in the manner provided in ICDS

d) Inventory being listed securities, shall be valued at lower of actual cost or net realisable value in the manner provided in ICDS and for this purpose the comparison of actual cost and net realisable value shall be done category-wise. This amendment would bring certainty in the wake of recent judicial pronouncements on the issue of applicability of ICDS and to shall regularize the compliances done by tax payers with ICDS

· Insertion of New section 145B – Interest received by an assessee on compensation or on enhanced compensation, shall be deemed to be the income of the year in which it is received.  The claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved.  Any subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by what ever name called) shall be deemed to be the income of the previous year in which it is received, if not charged to income tax for any earlier previous year. This amendment would bring certainty in the wake of recent judicial pronouncements on the issue of applicability of ICDS and to shall regularize the compliances done by tax payers with ICDS.

· Relief from liability of Minimum Alternate Tax - Amended Provisions - If a company’s application for corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 has been admitted by the Adjudicating Authority, then, the aggregate amount of unabsorbed depreciation and loss brought forward (excluding unabsorbed depreciation) shall be allowed to be reduced from the book profit. Effective Date : A.Y. 2018-19.

· Benefit of carry forward and set off of losses -  Section 79 - Amended Provisions - This section shall not apply to a company where a change in the shareholding takes place in a previous year pursuant to a resolution plan approved under the Insolvency and Bankruptcy Code, 2016, after affording a reasonable opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner. Effective Date : A.Y. 2018-19

· Section 28(ii) (Effective date: AY 2019-20) - Compensation or other payments due to or received by any person at or in connection with the termination or the modification of the terms and conditions, of any contract relating to his business shall be chargeable to tax.

· Section 115JB (Effective date: Retrospectively from AY 2001-02) - It is to provide that the provisions of section 115JB of the Act shall not be applicable and shall be deemed never to have been applicable to an assessee, being a foreign company, if its total income comprises solely of profits and gains from business referred to in section 44B or section 44BB or section 44BBA or section 44BBB and such income has been offered to tax at the rates specified in the said sections This amendment is clarificatory in nature

· Section 253: Appeals to the Appellate tribunal (Effective date: AY 2019-20) - It is proposed that an appeal would lie before the Income Tax Appellate Tribunal against the penalty order.  Previously ,  A penalty order passed under section 271J which provides that the Assessing officer/ CIT(A) may impose a penalty on an aaccountant or a merchant banker or a registered valuer of Rs.10,000 for furnishing incorrect information in reports or certificates, was not an appealable order under section 253.

· Section 271FA : Failure to furnish statement of Financial Transaction. (Effective date: AY 2018-19) - The provision has been amended to exclude the benefit non-levy of penalty to companies. Thus, companies have to mandatorily file tax returns within the due dates and cannot take a plea that tax payable is nil (on account of TDS) or less than Rs. 3,000 to escape prosecution. This could be a very draconian provision, specially for non-resident companies who have taxable income in India (on which appropriate TDS is done) but do not file their tax returns in India.

· Section 139A: Relating to Permanent Account Number (Effective date: April 1, 2018) - New clauses (v) and (vi) in sub section (1) of the section 139A inserted to widen the scope of persons requiring to apply for allotment of a permanent account number:
a) Every person, not being an individual, which enters into a financial transaction of an amount aggregating to two lakh fifty thousand rupees or more in a financial year; and
b) Managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office bearer of the person referred to above, or any person competent to act on behalf of the person referred to above

· Section 194A: TDS on interest other than interest on securities (Effective date: AY 2019-20) - In case of senior citizen, the limit of Rs. 10,000 has been increased to Rs 50,000.

· Amendment in Section 143 (Assessment) - • For reducing paper work and interface between the department and taxpayer, a new procedure of e-assessment has been rolled-out for all the assessee across the country. Effective from April 1, 2018 • No Adjustment will be made if there is difference in Form 26AS/ Form 16/ Form 16A and income returned (section 143(1)(vi) (earlier the difference is added to the income). Effective for returns filed for AY 2018-19 and onwards

· Transfer Pricing (Section 286) - Time lines for filing CbCR under section 286(2), in Form 3CEAD has been extended from Nov 30 of each year to 12 months from end of reporting accounting year. Therefore, for filing CbCR for FYE March 31, 2018, the deadline will be March 31, 2019 instead of Nov 30, 2018. No change in the existing deadline of March 31, 2018 for FYE March 31, 2017.


INDIRECT TAXES

PROPOSALS INVOLVING CHANGE IN CUSTOMS DUTY RATES:

From To
I. Incentivizing domestic value addition, ‘Make in India’
A. Reduction in Customs duty on inputs and raw materials to reduce costs
Food processing
1 0801 31 00 Cashew   nuts   in   shell                 [Raw cashew] 5% 2.5%
Capital goods and Electronics
2 8483 40 00,
8466 93 90,
8537 10 00
Ball screws, linear motion guides, CNC systems for manufacture of all types of CNC machine tools falling under headings 8456 to 8463 7.5% 2.5%
3 70 Solar tempered glass or solar tempered [anti-reflective coated] glass for manufacture of solar cells /panels/modules 5% Nil
B. Changes in Customs duty to address the problem of duty inversions in certain sectors
Medical Devices
4 Any Chapter Raw materials, parts or accessories for the manufacture of Cochlear Implants 2.5% Nil
C. Changes in Customs duty to provide adequate protection to domestic industry
Food Processing
5 2009 11 00
2009 12 00
2009 19 00
Orange fruit juice 30% 35%
6 2009 21 00
to
2009 90 00
Other fruit juices and vegetable juices 30% 50%
7 2009 81 00,
2009 90 00
Cranberry juice 10% 50%
8 2106 90 Miscellaneous                                             Food preparations (other than soya protein) 30% 50%
Perfumes         and toiletry preparations
9 3303 Perfumes and toilet waters 10% 20%
10 3304 Beauty or make-up preparations and preparations for the care of the skin (other than medicaments),     including sunscreen    or suntan preparations; manicure or pedicure preparations 10% 20%
11 3305 Preparations for use on the hair 10% 20%
12 3306 Preparations for oral or dental hygiene, including denture fixative pastes and powders; yarn used to clean between the teeth (dental floss), in individual retail packages 10% 20%
13 3307 Pre-shave, shaving or after-shave preparations,personal deodorants, bath preparations, depilatories and other perfumery, cosmetic or toilet preparations, not elsewhere specified or  included, prepared  room deodorizers, whether or not perfumed or having disinfectant properties 10% 20%
Automobile   and automobile parts
14 8407, 8408,
8409,
8483 10 91,
8483 10 92,
8511, 8708,
8714 10
Specified parts/accessories of motor vehicles, motor cars, motor cycles 7.5% /
10%
15%
15 8702, 8703,
8704, 8711
CKD imports of motor vehicle, motor cars, motor cycles 10% 15%
16 8702, 8704 CBU imports of motor vehicles 20% 25%
17 4011 20 10 Truck and Bus radial tyres 10% 15%
Textiles
18 5007 Silk Fabrics 10% 20%
Footwear
19 6401, 6402,
6403, 6404,
6405
Footwear 10% 20%
20 6406 Parts of footwear 10% 15%
Diamonds,   precious stones and jewellery
21 71 Cut     and     polished colored gemstones 2.5% 5%
22 71 Diamonds including lab grown diamonds-semi processed, half- cut or broken; non-industrial diamonds including lab-grown diamonds (other than rough diamonds), including cut and polished diamonds 2.5% 5%
23 7117 Imitation Jewellery 15% 20%
Electronics / Hardware
24 8517 12 Cellular mobile phones 15% 20%
25 3919 90 90,
3920 99 99,
3926 90 91,
3926 90 99,
4016 99 90,
7318 15 00,
7326 90 99,
8504, 8506,
8507,
8517 70 90,
8518,
8538 90 00,
8544 19,
8544 42,
8544 49
Specified parts and accessories of cellular mobile phones 7.5%/
10%
15%
26 8504 90 90/
3926 90 99
PCBA of charger/adapter and moulded           plastics                          of charger/adapter of cellular mobile phones Nil 10%
27 Any Chapter Inputs or parts for manufacture of:
a)    PCBA, or
b)    moulded plastics
of   charger/adapter  of       cellular mobile phones
Applicable rate Nil
28 8517 62 90 Smart watches/wearable devices 10% 20%
29 8529 10 99
8529 90 90
LCD/LED/OLED panels and other parts of LCD/LED/OLED TVs 7.5%/
10%
15%
30 8529/4016 12 specified parts for manufacture of LCD/LED TV panels Nil 10%
31 70 Preform of silica for use in the manufacture of
telecommunication grade optical fibres or optical fibre cables
Nil 5%
Furniture
32 9401 Seats and parts of seats [except aircraft seats and parts thereof] 10% 20%
33 9403 Other furniture and parts 10% 20%
34 9404 Mattresses supports; articles of bedding and similar furnishing 10% 20%
35 9405 Lamps and lighting fitting, illuminated signs, illuminated name plates and the like [except solar lanterns or solar lamps] 10% 20%
Watches and Clocks
36 9101, 9102 Wrist watches, pocket watches and other watches, including stop watches 10% 20%
37 9103 Clocks with watch movements 10% 20%
38 9105 Other clocks, including alarm clocks 10% 20%
Toys and Games
39 9503 Tricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls; other toys; puzzles of all kinds 10% 20%
40 9504 Video    game     consoles and machines, articles for funfair, 10% 20%
table or parlor games and automatic bowling alley equipment
41 9505 Festive,     carnival    or other entertainment articles 10% 20%
42 9506
[except 9506 91]
Articles and equipment for sports or outdoor games, swimming pools and paddling pools [other than articles and equipment for general physical exercise, gymnastics or athletics] 10% 20%
43 9507 Fishing rods, fishing-hooks and other line fishing tackle; fish landing nets, butter fly nets and similar nets; decoy birds and similar hunting or shooting requisites 10% 20%
44 9508 Roundabouts, swings, shooting galleries and other fairground amusements; travelling circuses, traveling menageries and travelling theatres 10% 20%
Miscellaneous items
45 3406 Candles, tapers and the like 10% 25%
46 4823 90 90 Kites 10% 20%
47 9004 10 Sunglasses 10% 20%
48 9611 Date,    sealing    or numbering stamps, and the like 10% 20%
49 9613 Cigarette lighters and other lighters, whether or not mechanical or electrical, and parts thereof other than  flints and wicks 10% 20%
50 9616 Scent sprays and similar toilet sprays, and mounts and heads therefor; powder-puffs and pads for the application of cosmetic or toilet preparations 10% 20%
II Rationalization measures
Edible oils of vegetable origin
1 1508, 1509,
1510,1512,
Crude edible vegetable oils like Ground nut oil, Olive oil, Cotton
seed   oil,   Safflower   seed   oil,
12.5% 30%
1513, 1515 Saffola oil, Coconut oil, Palm Kernel/Babassu oil, Linseed oil, Maize corn oil, Castor oil, Sesame oil, other fixed vegetable fats and oils.
2 1508, 1509,
1510,1512,
1513, 1515,
1516 20,
1517 10 21,
1517 90 10,
1518 00 11,
1518 00 21,
1518 00 31
Refined edible vegetable oils, like Ground nut oil, Olive oil, Cotton seed oil, Safflower seed oil, Saffola oil, Coconut oil, Palm Kernel/Babassu oil, Linseed oil, Maize corn oil, Castor oil, Sesame oil, other fixed vegetable fats and oils, edible margarine of vegetable origin, Sal fat; specified goods of heading 1518 20% 35%
Refractory Items
3 6815 91 00 Other articles of stone containing magnesite, dolomite or chromite 10% 7.5%
4 6901 Bricks, blocks, tiles and other ceramic goods of siliceous fossil meals or of similar siliceous earths 10% 7.5%
5 6902 Refractory bricks, blocks, tiles and similar refractory ceramic constructional goods, other than those of siliceous fossil meals or similar siliceous earths 5% 7.5%
6 6903 Other refractory ceramic goods 5% 7.5%
III Social Welfare Surcharge
1 Any chapter Levy of Social Welfare Surcharge on imported goods [other than those mentioned at
S. No. 3 to 6 below] to finance education, housing and social security
-- 10% of the aggregat e duties of   customs
2 Any chapter Abolition of Education Cess and Secondary and  Higher Education Cess on imported goods 3% of the aggregat e duties of    Customs
[2% + 1%]
Nil
3 2710 Exemption from Social Welfare Surcharge on motor spirit commonly known as petrol and high speed diesel oil -- 3% of the aggregat e duties of    Customs
4 7106 Silver (including silver plated with gold or platinum), unwrought or in semi- manufactured form, or in powder form -- 3% of the aggregat e duties of   Customs
5 7108 Gold (including gold plated with platinum), unwrought or in semi- manufactured form, or in powder form -- 3% of the aggregat e duties of    Customs
6 Any Chapter Specified goods hitherto exempt from Education Cess and Secondary and  Higher Education Cess on imported goods -- Nil
IV Road and Infrastructure Cess
1 2710 Levy of Road and Infrastructure Cess on imported motor spirit commonly known as petrol and high speed diesel oil -- Rs. 8
per litre
2 2710 Exemption from additional duty of customs leviable under section 3(1) of the Customs Tariff Act, 1975 in lieu of the proposed                           Road                           and Infrastructure cess on domestically produced motor spirit commonly known as petrol and high speed diesel oil -- Nil
3 2710 Abolition of Additional Duty of Customs [Road Cess] on imported motor spirit commonly known as petrol and high speed diesel oil Rs. 6
per litre
Nil
4 Additional duty of customs under sections 3(1) of the Customs Tariff Act, 1975 in lieu of basic excise duty
2710 (i)   Motor    spirit               commonly known as petrol Rs. 6.48
per litre
Rs. 4.48
per litre
2710 (ii) High speed diesel oil Rs. 8.33
per litre
Rs. 6.33
per litre

AMENDMENTS TO THE CUSTOMS TARIFF ACT, 1975 WITH NO CHANGES IN EFFECTIVE RATES OF DUTIES


S. No. Amendment
A Amendment in the Customs Tariff Act, 1975
1 Amendment to the section 3 so as to insert subsections 8A and 10A to provide for valuation of warehoused goods, which are sold to another person before clearance for home consumption or export, for the purposes of Integrated Tax and Goods and Services Tax Compensation Cess
B Import duty – First Schedule to the Customs Tariff Act, 1975
1 The tariff rate of customs duty for the specified medical devices is being increased from 7.5% to 10%. The effective rate of import duty on such medical devices will, however, remain unchanged.
2 The tariff rate of customs duty for Lithium-ion batteries is being increased from 10% to 20%. The effective rate of import duty on Lithium-ion batteries [other than Lithium-ion batteries for cellular mobile phones] will, however, remain unchanged at 10%.
C Export duty – Second Schedule to the Customs Tariff Act, 1975
1 To insert a new Note to specify Nil rate of duty in respect of all other goods which are not covered under column (2) of the Schedule.
2 Introduction of 20% Tariff rate of Export Duty on Electrodes of a kind used for furnaces. The effective rate of Export duty on such electrodes will, however, remain Nil.

MAJOR AMENDMENTS IN THE CUSTOMS ACT, 1962

S. No Amendment
A. For facilitating trade
1 Defining scope of Assessment and introducing “risk based selection” for verifying Self-Assessment [Section 2(2), 17 of Customs Act]
2 Establishing single point of reference for importers, exporters and Officers with regard to Regulatory Controls imposed by various Ministries, Departments and Agencies [Section 11 of Customs Act]
3 Facilitating imports and exports meant for Repair, Manufacture and further Processing with full or partial duty exemptions [Section 25A and Section 25B of Customs Act]
4 Appointing a new Customs Advance Ruling Authority with Appellate mechanism [Sections 28E to 28M of Customs Act]
5 Providing legal basis for clearance by Customs Automated System [Sections 45, 47, 51, 60, 68 and 69 of Customs Act]
6 Introducing an electronic Cash ledger on the lines similar to provisions in CGST Act [Section 51A of Customs Act ]
7 Introducing a new chapter for conduct of Audit [Section 99A of Customs Act ]
8 Inserting a new section to provide for simplified and different procedures as part of Trade Facilitation [Section 143AA of Customs Act]
9 Introducing a new section for exchange of information with competent authorities of other countries [Section 151B of Customs Act]
B. For reducing litigation
10 Providing for pre-notice consultation, issue of supplementary show cause notices on receipt of additional information but within present limitation period, time bound Adjudication and deemed closure of cases [Section 28 of Customs Act]
11 Providing for closure of cases without imposition of redemption fine in cases of voluntary payment of all dues [Section 125 of Customs Act]
C. For improving compliance
12 Expanding the scope of the Customs Act to any offence or contravention committed under the said Act outside India [Section 1 of Customs Act]
13 Introducing provisions for controlled delivery for certain goods to be notified [Section 109A of Customs Act]

 PROPOSALS INVOLVING CHANGE IN EXCISE DUTY RATES:


Commodity Rate of Duty
From To
I Motor spirit commonly known as petrol and high speed diesel oil
1. Levy of Road and Infrastructure Cess on motor spirit commonly known as petrol and high speed diesel oil -- Rs. 8 per litre
2. Abolition of Additional Duty of Excise [Road Cess] on motor spirit commonly known as petrol and high speed diesel oil Rs. 6 per litre Nil
3. Basic excise duty on:
(i).Unbranded Petrol Rs. 6.48
per litre
Rs. 4.48
per litre
(ii).Branded petrol Rs. 7.66
per litre
Rs. 5.66
per litre
(iii).Unbranded diesel Rs. 8.33
per litre
Rs. 6.33
per litre
(iv).Branded diesel Rs. 10.69
per litre
Rs. 8.69
per litre
4. Infrastructure Cess on
(i)     5% ethanol blended petrol,
(ii)     10% ethanol blended petrol and
(iii)     bio-diesel, up to 20% by volume,
subject to the condition that appropriate excise duties have been paid on petrol or diesel and appropriate GST has been paid on ethanol or bio-diesel used for making such blends
-- Nil
5. Infrastructure Cess on petrol and diesel manufactured in and cleared from 4 specified refineries located in the North-East -- Rs. 4 per litre

Note: “Basic Excise Duty” means the excise duty set forth in the First Schedule to the Central Excise Tariff Act, 1985.
FISCAL ISSUES

MONETARY POLICIES

· The fiscal deficit for 2017-18 at 3.5% and projected for 2018-19 at 3.3%
· GDP growth rate projected for 2018-19 at 7.0% - 7.5% and expected for 2017-18 at 6.5% - 6.75%.
· Divestment target for 2018-19 has been set at Rs 80,000 crore

FINANCIAL SECTOR

· RBI Act to be amended to accept uncollateralized deposits in liquidity operations.
· Proposed, corporate sector should raise at least one-fourth of their funding requirement through bonds, while reducing minimum investment grade for corporate bonds to ‘A’ from ‘AA’.
· The government will set up a unified authority for regulating all financial services in International Financial Service Centers (IFSC) in India.
· Gold to be developed as an asset class by formulating a comprehensive Gold Policy, establishing a consumer friendly and trade efficient system of regulated gold exchanges in the country and Gold Monetization Scheme to be revamped to enable opening a hassle free Gold Deposit Account.
· Proposed to set a target of Rs. 3 lackh crore for lending under MUDRA yojna for 2018-19.

INDUSTRY & EMPLOYMENT

· Proposed an outlay of Rs.7148 crore for the textile sector in 2018-19 as against Rs.6,000 Crore in 2016.
· The Budget has given big thrust to MSMEs, as a sum of Rs. 3794 crore has been provided for giving credit support, capital and interest subsidy and for innovations and it is proposed to set a target of Rs.3 lakh crore for lending under MUDRA for 2018-19.
· Women workers’ contribution towards EPF will be reduced to 8% for the first three years of empliyement, without employer’s contribution being reduced.
· Government will contribute 12% of the wages of the new employees in the EPF for all the sectors for next three years.
· In order to encourage creation of new employment the deduction of 30 percent Under Section 80-JJAA with a further relaxation to 150 days in the case of the apparel industry, has been proposed to be extended to the footwear and leather industry.

AGRICULTURE INITIATIVES

· Minimum support price (MSP) of Kharif crops to be fixed at least 1.5 times of the production cost.
· Institutional credit target for agriculture raised by 10% to Rs. 11 lakh crore for 2018-19.
· Companies registered as Farmer Producer Companies with an annual turnover upto Rs. 100 crores, proposed to get income tax incentive through 100% deduction of their profit derived from post-harvest agriculture activites, for a period of 5 years from financial year 2018-19.
· Removal of crop residue to be subsidized in order to curb pollution due to burning of crop residue.
· The Niti Ayog, after discussion with state governments, will establish a mechanism to ensure farmers get adequate remunertration if crop prices fall.
· Cluster-model approach to be adopted for agricultural production.

SPECIFIC FUND ALLOCATION

· Agri-Market Development Fund with a corpus of Rs 2000 crore to be set up for developing agricultural markets
· Restructured National Bamboo Mission to be launched with an allocation of Rs 1290 crore to promote bamboo sector.
· For boost of allied-sectors, govt. will set up fisheries and aqua culture infra fund and animal husbandry infra fund with an outlay of Rs. 10,000 crore.
· Rs 500 crore allocated for Operation Green to promote agriculture logistics
· Funds allocated for the National Rural Livelihood Mission under the rural development ministry to be increased to Rs 5,750 crore in 2018-19,
· Allocation of Rs 2600 crore to ensure irrigation facilities in 96 irrigation deprived districts.

RURAL DEVELOPMENT

· Free power connections to 4 crore homes under Saubhagya Yojana.
· 8 crore free gas connections, instead of previous target of 5 crore, for poor women through Ujjwala Yojana
· In 2018-19, for creation of livelihood and infrastructure in rural areas, total amount to be spent by the Ministries will be Rs.14.34 lakh crore.
· Budgetary allocation on infrastructure for 2018-19 increased to Rs.5.97 lakh crore against estimated expenditure of Rs.4.94 lakh crore in 2017-18.
· Using online monitoring system of PRAGATI alone, infrastructure projects worth 9.46 lakh crore have been facilitated and fast tracked.

DIGITAL ECONOMY

· NITI Aayog will initiate a national program to direct efforts in artificial intelligence.
· The Budget doubled the allocation on Digital India programme to Rs 3073 crore in 2018-19.
· The Finance Minister allocated Rs. 10000 crore in 2018-19 for creation and augmentation of Telecom infrastructure.
· Proposed to set up five lakh wi-fi hotspots to provide net connectivity to five crore rural citizens.

RAILWAYS

· Railways Capital Expenditure for the year 2018-19 has been pegged at Rs.1,48,528 crore.
· Redevelopment of 600 major railway station with over 25,000 footfall per day with escalators by Indian Railway Station Development Co. Ltd
· Railways would be procuring 12,000 wagons, 5,160 coaches and approximately 700 locomotives during 2018-19.
· Project Bharatmala Pariyojana had been approved for providing connectivity to backward areas and borders of the country by developing about 35,000 km.

AIRWAYS

· Proposal to expand the airport capacity more than five times to handle a billion trips a year under a new initiative - NABH Nirman.
· Under the Regional connectivity scheme of UDAN (Ude Desh ka Aam Nagrik) 56 unserved airports and 31 unserved helipads would be connected

EDUCATION, HEALTH AND SOCIAL PROTECTION

· World’s largest govt. funded health care programme titled National Protetection Scheme, providing a health insurance cover of Rs.5 lakh per family per year announced to 10 crore poor and vulnerable families.
· Allocate additional Rs.600 crore to provide nutritional support to all TB patients at the rate of Rs.500 per month for the duration of their treatment.
· The government will be setting up 24 new Government Medical Colleges and Hospitals by upgrading existing district hospitals in the country.
· Expenditure on health, education and social protection for 2018-19 is Rs.1.38 lakh crore against estimated expenditure of Rs.1.22 lakh crore in 2017-18 .


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Queries & Discussions Welcome

Note: The purpose of this note is to provide a brief overview of the key announcements pertaining to the Union Budget 2018. It does not seek to critically examine the various provisions nor is it meant to a complete elaboration of all its provisions. It is possible that some provisions of the Union Budget 2018 could be altered in some respect at the time of enactment of the final legislation. We recommend that advice be sought before taking any action on specific issues.

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This blog is Created by CA Anil Kumar Jain.