Budget 2017 – No Significant Change in Indirect Tax
Peak rates of service tax, customs and excise duty remained untouched except few rates meant to boost the Make in India policy.
While the world is still grappling with Trump administration’s announcements displaying protectionism policies, India seems largely untouched by the hue and cry amidst its own epoch making reform implementation drives. Fresh out of the demonetisation effects and entering the unchartered territories of GST, the FM did not announce any significant changes for indirect tax.
To begin with, peak rates of service tax, customs and excise duty remained untouched except few rates meant to boost the Make in India policy whereby the customs duties on specific inputs and raw materials that majorly included minerals, few metals, leather, capital goods and items related to renewable energy were reduced. However, customs duties for food processing industry and electronic hardware wentup with an aim to protect the domestic industry.
To promote the digitalisation wave that emerged post the demonetisation drive, the Budget provided duty concessions for devices enabling cashless transactions.
Another change was made keeping in mind the Government’s aim to reduce the number of tribunals in the country whereby the Authority for Advance Ruling for customs, excise and service tax was merged with the one for income tax. As a result, the number of days within which the authority was to pronounce its ruling has increased from 90 days to 180 days. At this stage, it may not be a welcome step as the burden on the income tax tribunal will increase.
This year a retrospective amendment was proposed in service tax wherein it was held thatunder works contract if the contract price included land value,no service tax was to be levied on such value. It further prescribed percentage on which service tax is to be paid if the actual value of land cannot be determined. This seems to be negating the effect of Suresh Bansal (2016-TIOL-1077-HC-DEL-ST) that had clearly held that no service tax was to be levied on sale of under construction flats if contract price includes land value.
The Budget has also repealed the Research and Development Cess Act, 1986 which is a positive move as the entire service tax paid on import of technology will be available as credit as opposed to the R&D cess paid that was a cost.For EOUs, the Budget clarified that EOUs can claim the benefit of duty exemption with respect to raw materials/inputs.
It seems that such little changes would act as much needed assurances for the industry that GST is just round the corner and if so, all the more reason for everyone to gear up for the historic reform before it’s too late.