Budget 2013 - Final

COMPANIES BILL GST DIRECT TAXES CAPITAL GAINS
FISCAL DEFICIT GDP SAVINGS RATIO EXCISE DUTY SAVINGS RATIO FDI TAX
CUSTOMS DUTY CAPITAL GAINS TAX SLAB FOREIGN INVESTORS BASEL III ECONOMIC INDICATORS REFORMS FISCAL
RAL EMPLOYMENT DTC FISCAL POLICIES PROPOSALS

SURCHARGE STABILITY CREDIT TAX PROPOSALS RATE CARD APA PROVISION
EXEMPTION REFORMS INFRASTRUCTURE FINANCING GROWTH RECOVERY RURAL GROWTH RECOVERY CORPORATE
GST M&A SERVICE TAX TRANSFER FISCAL DEFICIT
PLANNED DISBURSEMENT TAX SLAB MAT WEALTH TA

FOOD SECURITY LAW WITHHOLDING TAXES GAAR
FISCAL INDIA EL ALLOWANCE BASEL III CREDIT BUDGET ATIVE REFORMS ADVANCE TAX VOLATILE 2013 FOREIGN EXCHANGE COMPANIES BILL CSR
RKET PUBLIC SECTOR UNDERTAKINGS FISCAL RESPONSIBILITY RATE CARD EMPLOYEE
XEMPTION REFORMS INFRASTRUCTURE FINANCING

SPENDING ADVANCE TAX VOLATILE CAPITAL MARKET SAVINGS
VERY APA PROVISIONS
CAPITAL MARKET PUBLIC SECTOR UNDERTAKINGS FISCAL RESPONSIBILITY PERSONAL TAX HEALTHCARE COSTS FINANCE
Table of Contents
Macro-economic Backdrop Tax Trends Budget Proposals
- Policy initiatives - Direct Taxes - Indirect Taxes
2013 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.
Macro Economic Backdrop
The Indian Economy GDP Growth
GDP Growth to come down from 6.2% in FY 12 to 5% in FY 13

17% Agriculture Industry 57% 26% Services
Sector Agriculture Industry Services
Growth % (FY 13E) 1.8% 3.1% 6.6%

3
The Indian Economy Taxes and Deficits
Indias Tax GDP Ratio declined from 11.9% in FY 08 to 9.9% in FY 12
6.0%
6.5% 4.8%
5.7%
5.2%
4.8%
Fiscal deficit at 5.2% in FY13 against previous estimates of 5.1%

FY 09
FY 10
FY 11
FY 12
FY 13 RE
FY 14 BE
4
The Indian Economy Balance of Payments and Forex

Current Account Deficit (CAD)
USD 2011-12 (1st Half) 2012-13 (1st Half) 36.4 bn 39 bn % of GDP 4.0% 4.6%
Decline in exports vis-vis inelastic imports leading to increased CAD

Forex Reserves
USD bn Dec 2012
Forex Reserves reflect a marginal increase over March 2012
Key Policy Developments

Reforms in diesel pricing periodic hike in prices initiated; hike in rail fares Direct cash transfers to be implemented pilot programme underway Revised Land Acquisition Bill cleared by Cabinet New Banking Licensing norms announced FDI allowed / liberalised in Multi-Brand Retail, Aviation and Broadcasting Fast tracking of mega projects > INR 10 bn
Key watch area: RBI Monetary Policy

Tax Trends
- Tax in the News - 2012 Budget and Beyond - Budget Predictions
Tax in the News
In Battling Tax Dodgers, Britain Gives Shame a Try

Executives of Starbucks, Amazon and Google were questioned by lawmakers
Facebook co-founder gives up US citizenship

Saverin joins a growing number of people giving up U.S. citizenship ahead of a possible increase in tax rates for top earners
Nearly 70 per cent of global transfer pricing litigation emanates from India
Shell India accused of tax evasion

Income-tax department says firm had underpriced intragroup share transfer by Rs15,000 cr and evaded taxes
The 2012 Budget

Key Changes & Concerns Government Response
Far-reaching provisions enacted: Assessments completed before - Retrospective tax - indirect transfers 1 April 2012 not to be reopened - GAAR introduced Shome Committee set up for - Domestic Transfer Pricing (TP) GAAR and Indirect transfers Concern areas: Rangachary Committee - IT/ITeS - Ambiguity sector Circular issued - Retrospective amendments APAs operational - Execution of GAAR - TP litigation
2013 Budget Musings

Import duty on gold Inflationary adjustments to tax slabs Tax incentives for infrastructure sector / SEZs Clarity on GAAR / Indirect transfers Reinstatement of estate duty Tax increases for super-rich
Need of the hour Clarity, Certainty and Stability

10
2013 Budget Proposals
The Budget Thrust

Focus on growth while managing the deficits Increase expenditure outlet and fiscal deficit management through surcharge and growth assumptions Increase allocations to rural and social programs Mobilization of funds for infrastructure Policies for meeting energy needs of the country Tax Administration Reform Commission to be set up
12
The Budget Thrust
DTC Bill to be brought before Parliament in Budget Session Safe harbor rules and circular on development centers awaited Draft Constitutional amendment bill and GST Bill on the cards Standing Council of Experts to analyse competitiveness of the Indian Financial Sector Encouragement to FII investment The tax proposals based on clarity, stability, fair dispute resolution and independent judiciary
13
Direct Tax Proposals
Personal Tax Rates
Income Slab (INR) Upto 200,000@*# 200,001 to 500,000$ 500,001 to 1,000,000 1,000,001 and above^
Tax Rate (Percent) Nil 10 20 30
@ Basic threshold limit remains unchanged * In case of Senior Citizens - INR 250,000 # In case of Very Senior Citizens INR 500,000 $ Rebate of INR 2,000 for resident individuals having total income upto INR 500 thousand ^ Surcharge @ 10 percent on total income exceeding INR 10 mn
15
Personal Tax Others

Additional deduction upto INR 1 lac for home loan interest
Loan taken between 1 April 2013 to 31 March 2014 Amount not to exceed INR 25 lacs Value of residential house does not exceed INR 40 lacs Individual does not own any other residential house If interest claim < INR 1 lac, balance interest deductible in subsequent year
Donations made to National Childrens Fund eligible for 100% deduction Cash contributions to political parties not eligible for tax deduction Time limit for obtaining approval by private provident fund trusts extended up to 31 March 2014
16
Corporate Tax
No change in corporate tax rates Surcharge increased on taxable income exceeding INR 100 mn (10% for Domestic Companies; 5% for Foreign Companies). Surcharge on DDT increased to 10%
Income Level (INR) Particulars Upto 10 mn 30.90% 41.20% 19.06% 19.06% 10 mn to 100 mn 32.45% 42.02% 20.01% 19.44% 16.99%
17
Above 100 mn 33.99% 43.26% 20.96% 20.01%
Corporate tax Domestic companies Corporate tax Foreign companies MAT Domestic companies MAT Foreign companies DDT
International Tax
Tax rate on Royalty and FTS increased from 10% to 25% (effective tax rate in case of net of tax contract 33.33%) * Tax rates under select DTAAs
Country USA United Kingdom Singapore Japan Rate of tax 15% 15% 10% 10%
Significant impact on Royalty & FTS payments where treaty benefit not available
* Excluding applicable surcharges and cess

18
GAAR
Key Shome Committee Recommendations
Implementation of GAAR to be deferred by 3 years i.e. to FY 2016-17 Arrangement with main purpose (and not one of the main purposes) of obtaining tax benefit to be covered Period of time of arrangement, payment of taxes, exit route - relevant but not sufficient for invoking GAAR Lack of commercial substance if no significant impact on business risks or net cash flows Definition of Connected Person to be restricted to associated person and associated enterprise
Proposals
GAAR deferred to FY 2015-16
Accepted
Accepted
Accepted Accepted - Definition restricted only to associated person

19
GAAR
Key Shome Committee Recommendations
Pre-GAAR investment to be grandfathered No treaty override where LOB exists under Treaty / Circular 789 applies Monetary threshold of INR 3 crores of tax benefit for invocation of GAAR No GAAR where SAAR applies -
Proposals
No legislative change proposed No legislative change proposed No legislative change proposed No legislative change proposed
Tax benefit definition expanded to include increase in loss
Guidelines awaited!
20
Tax Residency Certificate
TRC in prescribed form mandatory for claiming Treaty benefits Finance Act, 2012 Amendment to Section 90 proposed TRC necessary but not a sufficient condition for claiming treaty relief Provision to apply retrospectively from FY 2012-13
Impact on Azadi Bachao case and Circular 789

21
Buy-back of unlisted shares

Tax payable by the company Taxed on income = share buy-back price issue price of such shares
No linkage with availability of accumulated profit Deduction for issue price and not cost of seller
Buy-back taxed @ 22.66% Such tax is not creditable / tax deductible Shareholders not taxable again Treaty benefits lost Will this be creditable in foreign jurisdictions?
22
Foreign dividends
Taxation of dividends received from foreign companies at 15% - extended to 31 March 2014 No DDT on subsequent distribution of such dividends received from a foreign subsidiary provided declared in the same FY (effective from 1 June 2013) Indian companies holding between 26% and 50% in a Foreign company ineligible for the DDT relief
23
Incentives
Tax Holiday in Power sector commencement date extended to 31 March 2014 Deduction of 15% on investments made by manufacturing company in new plant & machinery exceeding INR 1 bn, between 1 April 2013 to 31 March 2015
Restriction on transfer of plant & machinery for 5 years (other than merger / demerger)
Deduction for new workmen restricted to workmen employed in a factory. Concessional withholding tax of 5% on interest paid to non-residents extended to certain rupee denominated long term infrastructure bonds (effective from 1 June 2013)
24
Financial Services
Tax pass-through status granted to venture capital funds / company (w.r.e.f. AY 2013-14) Banks required to maintain single account for all provision for bad and doubtful debts and deduction available in excess of such provisions Securities Transaction Tax reduced: Commodities Transaction Tax introduced
Income of securitization trust to be exempt from tax Tax on distribution by a mutual fund (w.e.f. June 1, 2013): - to any individual/ HUF, by any fund other than money market fund
or liquid fund, increased to 20% from 12.5%
25
Miscellaneous proposals
Withholding tax @1% on sale of Land or building exceeding INR 5 mn
Agricultural land excluded Direct purchase from builders also covered
Income from sale of land and building (being stock in trade) taxed at stamp duty value on presumptive bases Immovable property received by an individual or HUF for inadequate consideration taxed in excess of INR 50,000 Tax return to be regarded as defective if tax and interest not paid by due date (effective from 1 June 2013) Scope for special audit widened and can be ordered considering inter-alia the volume and correctness of accounts, multiplicity of transactions, etc
26
Indirect Tax Proposals
At a Glance
No change in basic excise duty, customs duty and service tax rate Higher excise and customs duty on luxury products such as motor cars, bikes, yachts Amnesty scheme under service tax for defaulters Allocation of INR 9000 crores for CST compensation to states Building consensus with State Finance Ministers on GST:
Amendment in Constitution Drafting of GST legislation
GST implementation date?

28
Excise Duty
Advance ruling facility extended:
- To resident public limited companies - To existing producers or manufacturers starting new business line - For admissibility of credit of service tax on input services used in manufacture
Stay granted by Tribunal to automatically stand vacated after 365 days, even if there is no fault of Assessee Mobile handsets (MRP exceeding INR 2000) may get costlier on account of 5 percent increase in excise duty rate Automobile industry to pay more excise duty (30 percent instead of 27 percent) on SUV
29
Excise Duty
Shipping industry to get benefitted on account of exemption from excise duty on ships, tugs and pusher craft, dredgers etc. Goods transport vehicles may get cheaper Hybrid/ Electric vehicles manufacturer to benefit from extension of exemption period by another 2 years MRP based assessment to cover branded medicaments of Ayurvedic, Unani, Homeopathy etc
30
Customs Duty
Media & Entertainment industry- boost to domestic manufacturer as import of set-top-box to become costly Luxury cars/ yachts/ motor-cycles to become expensive as customs duty increased Gems & Jewellery industry scores again- import of raw precious/ semi precious stones become cheaper Capital goods for leather/ footwear/ textile industry to become cheaper as customs duty reduced
31
Customs Duty
Benefit of Advance ruling extended to new line of business / activity of import / export Draconian changes - offences like evasion of duty exceeding INR 50 lacs or nondeclaration of import / export of goods exceeding INR 1 crore made non-bailable Increase in duty rate on steam coal brought at parity with bituminous coal (BCD 2 percent, CVD 2 percent) adverse impact for power sector as customs duty raised from 1 percent to approximately 4 percent Stay granted by Tribunal to automatically stand vacated after 365 days, even if there is no fault of Assessee Interest free period for payment of customs duty on imported goods reduced to 2 days from 5 days 30 days time limit introduced for storage of imported goods in public bonded warehouse and may be extended after every 30 days
32
Customs Duty
Proposals for airline sector / MRO operations:

Withdrawal of exemption from education cesses to aircraft, helicopters etc MRO: Benefit of exemption extended to service to parts of aircraft and private aircraft MRO: Time period for utilisation of imported goods extended to 1 year
33
Service Tax
Service tax rate unchanged amendments guided by twin objectives of stable tax regime and improving voluntary compliance Negative list coverage amended
- Testing in relation to agricultural produce covered - Processes amounting to manufacture to include processes under Medicinal & Toilet Preparations (Excise duties) Act, 1955 - Vocational courses: - Courses by institutes affiliated to State Council of Vocational Training now covered - Courses by institute affiliate to National Skill Development Corporation now excluded
Service tax on construction of residential units with carpet area of 2,000 sq.ft. or more or of value Rs. 1 crore or more increased from 3.09 percent to 3.71 percent
34
Service Tax
Amendments in Mega Exemption Notification effective 1 April 2013 Exemptions withdrawn:
- Auxiliary educational services and renting of immovable property by educational institutions - Vehicle parking for general public - Aircraft repair services provided to government, local authority or governmental authority
Film industry can now pass on tax burden to final customers - exemption from Service tax applicable only to copyrights relating to cinematographic films granted for exhibition in cinema halls / theatres All air-conditioned restaurants now under Service tax
35
Service Tax Other changes

Voluntary Compliance Encouragement Scheme introduced - Opportunity to declare and pay tax dues for October 2007 to December 2012 subject to certain conditions New section introduced to impose penalty on directors and officials for specified offences in cases of willful actions Benefit of Advance Ruling extended to resident public limited companies
36
Q&A
THANK YOU

Budget 2013 - Final

Încărcat de

Informații document

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Budget 2013 - Final

Încărcat de

Drepturi de autor:

Formate disponibile

COMPANIES BILL GST DIRECT TAXES CAPITAL GAINS

RAL EMPLOYMENT DTC FISCAL POLICIES PROPOSALS

GST M&A SERVICE TAX TRANSFER FISCAL DEFICIT

PLANNED DISBURSEMENT TAX SLAB MAT WEALTH TA

XEMPTION REFORMS INFRASTRUCTURE FINANCING

VERY APA PROVISIONS

Macro Economic Backdrop

The Indian Economy GDP Growth

GDP Growth to come down from 6.2% in FY 12 to 5% in FY 13

Sector Agriculture Industry Services

Growth % (FY 13E) 1.8% 3.1% 6.6%

The Indian Economy Taxes and Deficits

Indias Tax GDP Ratio declined from 11.9% in FY 08 to 9.9% in FY 12

Fiscal deficit at 5.2% in FY13 against previous estimates of 5.1%

The Indian Economy Balance of Payments and Forex

Decline in exports vis-vis inelastic imports leading to increased CAD

Forex Reserves reflect a marginal increase over March 2012

Key Policy Developments

Key watch area: RBI Monetary Policy

Tax in the News

In Battling Tax Dodgers, Britain Gives Shame a Try

Facebook co-founder gives up US citizenship

Shell India accused of tax evasion

The 2012 Budget

2013 Budget Musings

Need of the hour Clarity, Certainty and Stability

2013 Budget Proposals

The Budget Thrust

The Budget Thrust

Direct Tax Proposals

Personal Tax Rates

Tax Rate (Percent) Nil 10 20 30

Personal Tax Others

Above 100 mn 33.99% 43.26% 20.96% 20.01%

* Excluding applicable surcharges and cess

Accepted Accepted - Definition restricted only to associated person

Tax benefit definition expanded to include increase in loss

Tax Residency Certificate

Impact on Azadi Bachao case and Circular 789

Buy-back of unlisted shares

Agricultural land excluded Direct purchase from builders also covered

Indirect Tax Proposals

Amendment in Constitution Drafting of GST legislation

GST implementation date?

Service Tax Other changes

S-ar putea să vă placă și