Indirect Tax Proposals

Union Budget 2012-13 – HIGHLIGHTS

Indirect Tax Proposals

Central Excise:

• The standard rate of the Central Excise Duty on Non-Petroleum Products has been increased from 10% to 12%. (effective rate will be 12.36%).
• The merit rate of Central Excise Duty on certain good like Medical Equipments has been increased from 5% to 6% (effective rate will be 6.18%).
• For 130 items such as RMC (Ready Mix Concrete) where 1% duty was introduced last year, the same has been enhanced to 2%.
• Excise duty on Portland Cement has been increased to 12% ad valorem plus Rs.120 pmt from 10% ad valorem plus Rs. 160 pmt.  The same will now be assessed on RSP (Retail Sale Price) less 30% abatement. (Consequently Cement Prices will be increased atleast by 2%)

Note: Above changes in excise duty rates will be effective from 17th March 2012.

Customs:

• There is no change in the peak rate of Basic Customs Duty (BCD).  It continues at 10%.
• Equipments imported for initial setting up and substantial expansion of fertilizer projects will be exempted from BCD. The exemption will be valid for 3 years i.e. upto 31-03-2015. Presently such equipment attracts 5-10% BCD.
• In an effort to boost the Thermal Power Projects, full exemption from BCD has been extended to “Steam Coal” while importing for power generation. However CVD on such coal has been reduced from 5% to 1%.  These exemption / concession will be valid for    2 years i.e. upto 31-03-2014. (Presently Steam Coal attracts 5% BCD)
• In another step to encourage the power sector, full exemption from BCD has been extended to Natural gas / LNG while importing for power generation. This exemption will also be valid for 2 years i.e. upto 31-03-2014.
• A concessional rate of 5% BCD has been extended to raw materials, intermediates required for the manufacture of parts of blades for rotors of wind operated generators.  
• Full exemption from BCD / CVD / SAD on specified equipments (other than earth moving equipments) has been extended to the road construction projects awarded by Metropolitan Development Authority. Currently such exemption was available only to the road projects awarded by Ministry of Surface Transport, NHAI, State PWD and PSU’s.
• An unconditional full exemption from BCD/CVD has been provided to Tunnel Boring Machines and also to the Parts / Components for assembling such Tunnel Boring Machines. Furthermore full exemption from BCD/CVD has also been extended to Tunnel Excavation & Lining Equipments consisting of Drilling Jumbos, Loaders, Tunnel Excavators, Shotcrete Machines & 3 Stage Crushers for use in highway development projects.
• BCD on Pipes and Tubes for use in manufacture of boilers has been reduced from 10%    to 7.5%.

Note : Above changes in customs duty rates will be effective from 17th March 2012.

Service Tax :

• Service Tax Rate has been increased from 10% to 12 %. (Consequently effective rate will   be 12.36%). (New tax rates will be effective from 01st April 2012).
• Composition tax rate under works contract service has been increased from 4.12% to 4.94%. This will also be effective from 01st April 2012.
• A new concept of taxing the services has been proposed by way of introducing the Negative List of Services comprising 17 Heads as against the current regime of levying tax on 115 specified taxable services.

Consequent to the proposed change all services other than those under negative list will be taxable.

• Following services will be specifically exempted from levy of service tax:

• Construction or Erection of Airports, Ports and Railways ;

• Construction, Erection, Maintenance and Repairs services in relation to Road, Bridges, Tunnels or Terminals.

However services in relation to Power Projects will continue to be taxable.

(This negative list taxation concept will be effective from the date to be notified, after the Finance Bill, 2012 receives assent of President)