Union Budget 2010-11

Flash-Highlights - Indirect Taxes provision in the Finance Bill, 2010

(Note - The Indirect Taxes Committee also prepared a detailed note containing the issues on
Indirect Taxes, which is available at http://www.icai.org/post.html?post_id=957&c_id=49 )

CUSTOMS
 Valuation of imported goods for the purpose of charging CVD in respect of goods chargeable to
excise duty on the basis of Maximum Retail Sale Price under Medicinal and Toilet Preparations
(Excise Duties) Act, 1955 to be the retail sale price declared on such imported goods less the
amount of abatement, if any.
 Settlement Commission given teeth by removing the prohibition on filing of applications for the
settlement of cases where an assessee admits short-levy in respect of goods where the assessee
has not maintained proper records and the restriction of seeking only one-time settlement.
CENTRAL EXCISE
 The standard rate of excise duty of 8% on non-petroleum products increased to 10% with few
exceptions.
 Explanation inserted in section 11A to clarify that no penalty shall be imposed where duty along
with interest has been paid before the issuance of a demand notice by the Department.
 Settlement Commission given teeth by removing the prohibition on filing of applications for the
settlement of cases where an assessee admits short-levy in respect of goods where assessee has
not maintained proper records and the restriction of seeking only one-time settlement.
 The Central Government empowered to make rules for withdrawal of facilities or imposition of
restrictions including restrictions on utilization of Cenvat credit on a manufacturer or exporter or
suspension of registration of a dealer for dealing with evasion of duty or misuse of Cenvat credit.
 Disputes in regard to common input credit used for excisable and non excisable goods to be
resolved with the help of Chartered Accountant / Cost Accountant certificate even for pending
cases by way of retrospective amendment.
 Sending of jigs, fixtures, moulds and dies for production of goods according to the specifications of
a manufacturer without reversal of credit allowed in case of another manufacturer too.
 SSI sector given relief in the form of allowing 100% CENVAT credit for capital goods in first
installment and allowing them to make the payment of duty on quarterly basis.
 Requirement of pre-authentication of the invoice dispensed with.
 CENVAT Credit Rules, 2004 amended retrospectively to provide that where a manufacturer avails
Modvat/Cenvat credit in respect of any inputs, other than fuel, to manufacture both dutiable and
exempted goods, he can opt to reverse credit or pay an amount equivalent to credit attributable to
inputs used for manufacture of exempted goods.
 Computers and computer peripherals cleared after use to have accelerated depreciation at the
same rates as applicable for similar capital goods of EOU/EHTP/STP units under Notification No.
52/2003-Customs.
 Penal provisions for incorrect availment of CENVAT credit of duty paid on inputs or capital goods
or input services harmonised.
SERVICE TAX
 The scope of following services has been expanded:
o IPR to include copyrights on cinematographic films and sound recording.
o Air passenger transport service to include domestic journeys, and international journeys in any
class.
o Service tax to be levied in all cases of Information Technology Software Service irrespective of
whether being used for furtherance of business or commerce.
o The term ‘commercial’ in commercial training or coaching service to mean any training or
coaching provided for consideration, whether or not for profit with retrospective effect.
o Sponsorship pertaining to sports excluded from the definition of ‘Sponsorship Service’.
o Definition of the ‘Renting of immovable property service’ amended retrospectively to provide
explicitly that the activity of ‘renting’ itself is a taxable service and to levy service tax on rent of
vacant land subject to certain condition.
o Consideration received on account of sale of residential unit in a residential complex or
commercial/industrial units in a commercial/industrial complex intended for sale would be
assessed as taxable services in the hands of a builder by assuming prospective buyer as a
service receiver except in the situation where the entire consideration shall be received
against completion of construction. Otherwise the builder shall also be assumed as a service
provider.
o Value of the taxable service under ‘management of Investment under ULIP service’ to be the
actual amount charged by the insurer for management of funds under ULIP or the maximum
amount of fund management charges fixed by the Insurance Regulatory and Development
Authority (IRDA), whichever is higher.
 New services to be taxable from a notified date:
o Health check up undertaken by hospitals or medical establishments for the employees of
business entities and health services provided under health insurance schemes offered by
insurance companies
o Electricity exchanges
o Brand promotion of goods, service etc.
o Lottery promotion carved out from Business Auxiliary Services
o Additional services provided by builder except parking.
o Medical record maintenance
o Commercial exploitation of private/ organizational functions
 Explanation inserted in section 73(3) to clarify that no penalty shall be imposed where service tax
along with interest has been paid before the issuance of a demand notice by the Department.
 Definition of ‘business entity’ to include an association of persons, body of individuals, company or
firm but not an individual.
 The condition of service provided from India and used outside India deleted for treating any service
as export of service.
 Construction and operation of installations, structures and vessels for the purposes of prospecting
or extraction or production of mineral oils and natural gas in the Exclusive Economic Zone and the
Continental Shelf of India and for supply of any goods connected with these activities to be
chargeable to service tax.
 Exemption in relation to service provided in relation to transport of goods by rail withdrawn with
effect from 01.04.2010.

 Exemptions
o Statutory taxes charged by the foreign governments to be excluded from taxable value for
levy of service tax under the air passenger transport service.
o Erection, Commissioning or Installation’ of Mechanized Food Grain Handling Systems etc.
exempt from service tax.
o Pre-packaged I.T. software, with the license for right to its use, exempt from service tax
subject to specified
o conditions.
o Transport of Food grains and pulses by a goods transport agency exempt from service tax.
o Services provided to Indian news agencies under ‘Online Information and Database
Retrieval Service’ exempt from service tax subject to specified conditions.
o ‘Technical Testing and Analysis Service’ and ‘Technical Inspection and certification service’
provided by Central and State seed testing laboratories and Central and State seed
certification agencies exempt from service tax.
o Transmission of electricity exempt from service tax.