India Budget Statement 2011: Mgb&co

India Budget Statement
2011
mgb&co
Chartered Accountants
www.mgbco.com
21, Shankar Vihar, Jolly Bhavan 2, 1st Floor,

Vikas Marg, 7, New Marine Lines,
New Delhi – 110092 Mumbai- 400020
India India
Tel: 91-11-42440490 Tel : 91-22-66332330
Fax: 91-11-22508300 Fax: 91-22-66351545
Email: mgbco@mgbco.com Email:mgbco@mgbco.com
This document has been prepared as a service to clients. We recommend you seek professional advice
before taking action on specific issues.
The Finance Bill as introduced in the Parliament may undergo changes before its enactment.
India Budget Statement 2011
Contents
Foreword…………………………………………………………………….………………….3
Budget proposals
Direct Tax
Income Tax…………………………………………………………………………….4
Indirect Tax
Excise Duty…………………………………………………………………………..11
Customs Duty……......………………………………………………………………17
Service Tax…………………………………………………………………………. 24
Budget Announcements…….………………………….……………………………………30
Page 2 of 39 mgb&co
Foreword
After the severe backlash over the months from the press and opposition on corruption
and inflation, everyone expected the Finance Minister to present a populist budget and
to use it as a tool to win some good for the Government. However, it was a ‘mature’
budget from a seasoned Finance Minister.
A lower than expected fiscal deficit target of 4.6% for FY12 (5.1% for the current
fiscal), a targeted decrease in subsidies and lower market borrowing by the
government, show his intentions to clean up, but there are doubts if he will be able to
stick to his targets on fiscal deficit and subsidies.
The opening up of equity mutual funds schemes to direct foreign investors may lead to
greater inflows in the stock markets. The Infrastructure Debt Fund is touted to be an
amnesty scheme for bringing back the monies stashed outside India, where the source
of income will not be looked into, and has been structured as such to avoid litigation,
the last amnesty scheme in 1997 had been through. If true, let’s wait for the fine print.
The Finance Minister remarked in his speech “Well, the number 3 happens to be my
lucky number”. However, there is no clarity on the 3 big reforms viz Direct Tax Code,
IFRS and Goods Services Tax. No clear timelines are available for IFRS after the
formal announcement of its deferment, though Direct Tax Code (replacing the existing
Income Tax Act, 1961) looks all set to meet its new date of implementation of April 1,
2012 revised last year. On GST, if he could not get a consensus on states done over
the last 12 months, can he get it done in the next 12? GST may not happen even in
2012, though the Finance Minister has taken a number of steps towards its
implementation and would not like to be so pessimistic about it. The new Companies
Bill is also announced to be introduced in the current session of the Parliament.
The AMT on LLPs has taken the charm out of LLPs wherein many promoter
companies were reorganised into LLPs to save on MAT. The introduction of MAT and
DDT on SEZ units, looks to be a step towards the rollout of DTC. The biggest change
in Service Tax has been to link the payment of tax to provision of service, raising of the
invoice or payment for service provided or to be provided, whichever is the earliest. It
is necessary to align the service tax regime with the GST regime so that transition to
GST will be smooth.
"The Indian economy is expected to grow at 9 per cent with outside band of (+/-) 0.25
per cent in 2011-12", the Finance Minister said while unveiling the Budget proposals.
Let’s hope the Indian Cricket Team and the Finance Minister meet their aspirations.
February 28, 2011 Team MGB
Page 3 of 39 mgb&co
Budget Proposals
DIRECT TAXES
Income Tax
Tax Rates
Individual Tax Rates (includes HUF, AOP, BoI)
Income (Rs) Tax Rates (%)

0 -180,000# NIL
180,001 - 500,000 10.30
500,001 - 800,000 20.60
800,001 + 30.90
# - Basic Exemption limit is Rs 190,000 for resident
Woman, Rs 250,000 for Senior Citizens (60years+)
and Rs 500,000 for Senior Citizens (80years+)
Partnership Firm Tax Rate (including LLP) – 30.90%
Tax Rates for Domestic Company
Total Income (Rs) Tax Rates (%)

<100,00,000 30.90
>100,00,000 32.45*
* - includes Surcharge of 5% and Education Cess
of 2%, Secondary and Higher Education Cess of 1%
Other Corporate Tax Rates
Tax Tax Rates (%)*

Dividend Distribution Tax 16.22
Minimum Alternative Tax 20.00
* - includes Surcharge of 5% and Education Cess
Tax Rates for Foreign Company
Total Income (Rs) Tax Rates (%)

<100,00,000 41.20
>100,00,000 42.02^
^ - includes Surcharge of 2% and Education Cess
Page 4 of 39 mgb&co
Definition
Definition of ‘charitable purpose’ provides that “the advancement of any other

object of general public utility” is not a ‘charitable purpose’, if it involves the
carrying on of any activity in the nature of trade, commerce or business, or any
activity of rendering any service in relation to any trade, commerce or business,
and the total receipts from such activity exceeds Rs 25 lacs in a year
(enhanced from Rs 10 lacs).
[Section 2(15) w.e.f. AY 2012-13]
Special Economic Zones (SEZ)
Currently, there is an exemption from Minimum Alternate Tax (MAT) in case of

a developer of a SEZ or a unit located in an SEZ and from Dividend Distribution
Tax (‘DDT’) in case of a developer of a SEZ. Such exemption of DDT is
proposed to be discontinued for dividend declared, distributed or paid by such
developer of SEZ from June 1, 2011. The exemption from the payment of MAT
for the unit located in SEZ or developer of a SEZ is proposed to be withdrawn
from AY 2012-13.
[Section 10(34), Section 115JB and Section 115O]
Infrastructure Debt Fund
It is proposed to set up dedicated infrastructure debt funds to augment long-

term, low cost funds from abroad for the infrastructure sector. The income of
such notified debt fund is proposed to be exempt from income tax. The interest
income of a non-resident investing in such notified infrastructure debt fund shall
be taxable at the rate of 5% on the gross amount of such interest income,
which shall be deducted at source in India before its remittance overseas.
[Section 10(47), Section 115A and Section 194LB w.e.f. June 1, 2011]
Weighted deduction for scientific research programme
The weighted deduction allowed for any sum paid to a National Laboratory or a
university or an Indian Institute of Technology (lIT) or a specified person for the
purpose of an approved scientific research programme is proposed to be
increased from 175 per cent to 200 per cent of the amount contributed.
[Section 35(2AA) w.e.f. AY 2012-2013]
Investment linked deduction for specified business
Currently, “specified business” eligible for investment linked incentives include

the business of setting up and operating cold chain facilities, warehousing
facilities for storage of agricultural produce, laying and operating a cross-
country natural gas or crude or petroleum oil pipeline network, building and
operating a two-star or above category hotel and building and operating a 100
bed or more hospital. It is proposed to include 2 more businesses which have
commenced operations on or after April 1, 2011 under ‘specified business’ viz
developing and building an affordable housing project under a notified scheme
framed by the Central/State Government and production of fertilizers.
Page 5 of 39 mgb&co
Under section 73A, any loss of a "specified business" is allowed set-off against
profit and gains of any other "specified business". It is proposed to remove the
word "new" from the definition of "specified business" in the case of hotels and
hospitals, leading to that, an assessee who currently operates a hospital or a
hotel would be able to set off the profits of such business against the losses, if
any, of a new hospital or new hotel which begins to operate after 1st April,
2010 and which is eligible for deduction under this Section.
[Section 35AD retrospectively w.e.f. AY 2011-12]
New Pension System (NPS)
Section 80CCD of the Income-tax Act provides, inter alia, a deduction in

respect of contributions made by an employee as well as an employer to the
New Pension System (NPS) account on behalf of the employee. It is proposed
that any sum paid by an employer by way of contribution towards a NPS, as
referred to in Section 80CCD on account of an employee to the extent it does
not exceed 10% of the salary of the employee, shall be allowed as a deduction
in computing the income. It is proposed to also amend Section 80CCE so as to
provide that the contribution made by any employer to a NPS under section
80CCD shall be excluded from the limit of one lakh rupees provided under
Section 80CCE.
[Section 36 and Section 80CCE w.e.f. AY 2012-13]
Deduction for investment in long-term infrastructure bonds
A sum of Rs. 20,000 (over and above the existing limit of Rs. 1 lakh available
under section 80CCE for tax savings) is allowed as deduction in computing the
total income of an individual or a HUF if invested in notified long-term
infrastructure bonds. It is proposed to extend this deduction for AY 2012-13.
[Section 80CCF w.e.f. AY 2012-13]
Extension of sunset clause for tax holiday for power sector
A deduction of profits and gains is allowed to an undertaking which begins to

generate power or which starts transmission or distribution by laying a network
of new transmission or distribution lines or which undertakes substantial
renovation and modernization of existing network of transmission or distribution
lines, at any time before March 31, 2011. It is proposed to extend the terminal
date for a further period of one year, i.e. upto March 31, 2012.
[Section 80IA(4) w.e.f. AY 2012-13]
Sunset of tax holiday for undertakings engaged in production of mineral oil
A seven-year profit-linked deduction is available to an undertaking, which is

located in any part of India and is engaged in commercial production of mineral
oil, if it has begun commercial production of mineral oil at any time after April 1,
1997. It is proposed that the aforesaid deduction available for commercial
production of mineral oil will not be available for blocks licensed under a
contract awarded after March 31, 2011 under the NELP or in pursuance of any
law for the time being in force or by the Central/State Government.
[Section 80IB(9) w.e.f. AY 2012-13]
Page 6 of 39 mgb&co
Transfer Pricing
The second proviso to Section 92C(2) provides that if the variation between the
actual price of the transaction and the Arms Length Price (ALP), as determined
above, does not exceed 5% of the actual price, then, no adjustment will be
made and the actual price shall be treated as the ALP. It is proposed to provide
that instead of a variation of 5% across all segments of business activity and
range of international transactions, the allowable variation will be such
percentage as may be notified by Central Government in this behalf.
[Section 92C(2) w.e.f. AY 2012-13]
Currently, the Transfer Pricing Officer (TPO) can determine the ALP in relation
to an international transaction, which has been referred to the TPO by the
Assessing Officer. It is proposed to extend the jurisdiction of the TPO in respect
of other international transactions, which are noticed by him subsequently, in
the course of proceedings before him, in addition to the international
transactions referred to the TPO by the Assessing Officer.
[Section 92C(2) w.e.f. AY 2012-13]
In order to enable the TPO to conduct on-the-spot enquiry and verification, it is

proposed to enable the TPO to also exercise the power of survey conferred
upon an income-tax authority under section 133A of the Act.
[Section 92CA(7) w.e.f. June 1, 2011]
It is proposed to extend the due date for filing of return of income by corporate
assessees who are required to file a Transfer Pricing Report in Form 3CEB to
30th November (from the current 30th September).
[Section 139 w.e.f. April 1, 2011]
Transactions with persons located in a notified jurisdictional area
It is proposed to insert a new section to specifically deal with transactions

undertaken with persons located in any country or jurisdiction which does not
effectively exchange information with India.
The proposed section provides -
• power to notify any country or territory outside India, having regard to the
lack of effective exchange of information by it with India, as a notified
jurisdictional area;
• that transfer pricing regulations shall apply to any transaction where one of
the parties to the transaction is a person located in a notified jurisdictional
area;
• that deduction in respect of any payment made to any financial institution
shall be allowed only if the assessee authorizes the income-tax authority to
seek relevant information from the said financial institution;
• that deduction in respect of any other expenditure or allowance (including
depreciation) arising from a transaction with a person located in a notified
jurisdictional area shall be allowed only if he maintains documents and
information as may be prescribed;
Page 7 of 39 mgb&co
• that the onus is on the assessee to satisfactorily explain the source of any
sum received from a person located in the notified jurisdictional area and in
case of his failure to do so, the amount shall be deemed to be the income
of the assessee;
• that any payment made to a person located in the notified jurisdictional
area shall be liable to deduction of tax at the higher of the rates specified in
the relevant provision of the Act or rate or rates in force or a rate of 30%.
[Section 94A w.e.f. June 1, 2011]
Taxation of certain foreign dividends at a reduced rate
Where total income of an Indian company includes any income by way of

dividends received from a foreign subsidiary company, then such dividends
shall be taxable at the rate of 15% (plus applicable surcharge and cess) on the
gross amount of dividends. No expenditure in respect of such dividends shall
be allowed under the Act.
[Section 115BBD w.e.f. AY 2012-13]
Limited Liability Partnerships
It is proposed that where the regular income-tax payable by a LLP is less than
18.5% on adjusted total income, the adjusted total income shall be deemed to
be the total income of such LLP and it shall be liable to pay income-tax 18.5%
on adjusted total income.
The credit for tax paid by a LLP (to the extent of the excess of the alternate
minimum tax paid over the regular income-tax) shall be allowed to be carried
forward up to the tenth assessment year immediately succeeding the
assessment year, for which such credit becomes allowable.
[Section 115JC to 115JF (Chapter XII-BA) w.e.f. AY 2012-13]
Rationalization of Tax on Income distributed to unit holders
It is proposed to provide that the Mutual Fund shall be liable to pay additional
income-tax on such distributed income at the rate of -
• 25% if the recipient is an individual or HUF in case of distribution by a

money market mutual fund or a liquid fund;
• 30% if the recipient is any other person in case of distribution by a money
market mutual fund or a liquid fund;
• 12.5% if the recipient is an individual or HUF in case of distribution by a
debt fund other than a money market mutual fund or a liquid fund;
• 30% if the recipient is any other person in case of distribution by debt fund
other than a money market mutual fund or a liquid fund.
[Section 115R(2) w.e.f. June 1, 2011]
Providing information to tax authorities outside India
Page 8 of 39 mgb&co
To facilitate prompt collection of information on requests received from tax

authorities outside India in relation to an agreement for exchange of information
under section 90 or section 90A of the Income-tax Act, it is proposed to provide
any notified income-tax authority, the powers currently conferred on income-tax
authorities referred to in section 131(1) or Section 133, notwithstanding that no
proceedings with respect to such person or class of persons are pending
before it or any other income-tax authority.
[Section 131 and Section 133 w.e.f. June 1, 2011]
Settlement Commission
It is proposed that an application can also be made, where the applicant is a

person in whose case proceedings have also been initiated as a result of
search and is related to the person in whose case proceedings have been
initiated as a result of search and who has filed an application, provided that
the additional amount of income-tax payable on the income disclosed in his
application exceeds ten lakh rupees.
[Section 245C(1) w.e.f. June 1, 2011]
It is proposed to specifically provide that the Settlement Commission may, at

any time within a period of six months from the date of its order, with a view to
rectifying any mistake apparent from the record, amend any order passed by it
provided that the Settlement Commission has given adequate notice and an
opportunity of being heard to the applicant and the Commissioner.
[Section 245D (6B) w.e.f. June 1, 2011]
Others
Under a new provision inserted, the Central Government may exempt, by

notification in the Official Gazette, any class or classes of persons from the
requirement of furnishing a return of income.
[Section 139(1C) w.e.f. June 1, 2011]
Under the existing provisions, the Central Government may notify before March
31, 2011 that any of the provisions of the Income-tax Act relating to processing
of returns shall not apply or shall apply with such exceptions, modifications and
adaptations as may be specified in that notification. It is proposed to extend the
existing time limit for issue of notification to 31st March, 2012.
[Section 143(1B) retrospectively w.e.f. April 1, 2011]
In computing the time limits for completion of assessments and reassessments,

it is proposed to exclude the time taken in obtaining information from the tax
authorities in jurisdictions situated outside India, under an agreement referred
to in section 90 or section 90A, from the statutory time limit prescribed for
completion of assessment or reassessment.
[Clause (viii) in Explanation 1 to section 153 w.e.f. June 1, 2011]
Under the existing provisions, every income-tax authority shall, on or after the
1st day of July, 2011, allot a computer-generated Document Identification
Number in respect of every notice, order, letter or any correspondence issued
Page 9 of 39 mgb&co
by him to any other income-tax authority or assessee or any other person and
such number shall be quoted thereon. It is proposed to omit the aforesaid
section.
[Section 282B retrospectively w.e.f April 1, 2011]
It is proposed to seek regular information from non-residents regarding the

activities of their liaison offices in India by mandating the filing of annual
information, within sixty days from the end of the financial year, in the
prescribed form and providing prescribed details by non-residents as regards
their liaison offices.
[Section 285 retrospectively w.e.f June 1, 2011]
Page 10 of 39 mgb&co
INDIRECT TAXES
Excise Duty
Effective Date: Changes come into effect immediately unless otherwise specified.
Changes in rates of duty whether by amendment of tariff rates or by notification:
Concessional rate of duty of 4% is increased to 5%.
Duty of 1% without Cenvat credit facility imposed on about 130 specified items,
which were hitherto either fully exempt from duty or chargeable to nil rate of
duty. General SSI exemption would be available to all products covered under
this new levy.
Mandatory duty of 10% is imposed on readymade garments and textile made

ups bearing a brand name or sold under a brand name.
Duty of 5% is imposed on automatic looms and projectile looms.
Exemption from duty available to clearances upto 3500 metric tonne of paper
manufactured from non-conventional material is withdrawn.
Full exemption from duty is withdrawn on microprocessors for computer other

than motherboards, floppy disk drive, CD-ROM drive, DVD drives/DVD writers,
flash memory and combo drives meant for fitment inside the CPU or laptop.
These goods will attract a concessional rate of duty of 5%.
Sector wise Changes
Food /Agro Processing
Full exemption from duty extended to:
Air- conditioning equipment, panels and refrigeration panels for installation of

cold chain infrastructure for the preservation, storage, transport or processing
of agricultural, horticultural, dairy, poultry, apiaries, aquatic and marine
produce.
Conveyor belt systems for use in cold storage for the preservation, storage,
transport or processing of agricultural, horticultural, dairy, poultry, apiaries,
aquatic and marine produce and in mandis and warehouses for storage of food
grains and sugar.
Health
Duty on sanitary napkins, baby & clinical diapers and adult diapers and similar
articles of textile wadding is reduced from 10% to 1%, with no Cenvat credit.
Capital Goods
Particulars Change
Goods required for expansion of existing Full exemption from duty
mega/ultra mega power project under specified
conditions at par with exemption from CVD on
imports of goods for such projects
Specified textile machinery Duty reduced from 10%
to 5%
Specified part of sewing machines Full exemption from duty
Environment Friendly and Energy Saving Goods
Particulars Change
Hydrogen vehicles based on fuel cell technology Concessional rate of
10%
Hybrid kits for conversion of fossil fuel vehicles to Duty reduced from 10%
hybrid vehicles. to 5%
Cement
Present Proposed
Particulars
Rate Rate
Mini Cement plant
1) Cleared in packaged form
(i) of retail sale price not exceeding Rs. 190
per 50 kg bag or of per ton equivalent retail Rs. 185 per 10% ad
sale price not exceeding Rs. 3800 ton valorem
(ii) of retail sale price exceeding Rs. 190 per 10% ad
50 kg bag or of per ton equivalent retail sale Rs.315 per valorem + Rs.
price exceeding Rs. 3800 ton 30 per ton
Rs. 215 per 10% ad
2) Cleared other than in packaged form
ton valorem
Other than Mini Cement plant

1)Cleared in packaged form
(i) of retail sale price not exceeding Rs. 190 10% ad
per 50 kg bag or of per ton equivalent retail Rs. 290 per valorem + Rs.
sale price not exceeding Rs. 3800 ton 80 per ton
(ii) of retail sale price exceeding Rs. 190 per 10% ad
50 kg bag or of per ton equivalent retail sale 10% of Retail valorem + Rs.
price exceeding Rs. 3800 sales price 160 per ton
10% or
Rs.290 / ton
2)Cleared other than in packaged form
whichever is 10% ad
higher valorem
10% ad
Rs. 375 per valorem + Rs.
Cement clinker ton 200 per ton
Textiles
Tariff rate of duty of 10% is prescribed for jute yarn while it is simultaneously
exempted from excise duty.
Water Supply
Full exemption from duty currently available to pipes required for delivery of
drinking water from its source to the plant and from there to the first storage
point is extended to pipe fittings such as joints, elbows, couplings etc.
Concessional rate of duty of 1% extended to water filters using presssurised

tap water but without use of electricity and their replaceable kits.
Automobile Sector
Concessional rate of duty @ 10% extended to factory built ambulances.
Scope of Tax Refund Scheme is extended to include vehicles carrying 13

persons including the driver.
Concessional duty structure for taxis is rationalized to provide refund of 20% of

duty paid on vehicles if they are registered as a taxi subsequent to removal.
Full exemption from duty is extended to parts of power tillers when cleared to
another factory of the same manufacturer for manufacturing power tillers.
Paper and Paper Board
Particulars Change
Cotton Stalk Particle Boards Fully exempt from duty
Corrugated boxes whether or not pasted Concessional rate of duty of 5%
with Duplex sheet on their outer surface.
Greaseproof paper and glassine paper Duty reduced from 10% to 5%
Precious Metals
Particulars Change
Serially numbered gold bars, other than Duty reduced from 'Rs.280 per
tola bars, made starting from the 10 grams' to 'Rs.200 per 10
ore/concentrate stage in the same factory grams'
Serially numbered gold bars manufactured Concessional duty rate of Rs.
by refining of gold dore bar 200 per 10 grams
Serially numbered gold bars, other than Duty of 'Rs.300 per 10 gram'
tola bars, manufactured during the process imposed
of copper smelting
Silver manufactured during gold refining Duty of 'Rs.1500 per Kg.'
starting from ore/concentrate stage or from imposed
gold dore bar or during the process of
copper smelting
Branded jewellery / branded articles of Duty of 1% imposed
precious metals
Miscellaneous
Particulars Change
Enzymatic preparations used in Fully exempt
leather industry
Colour, unexposed Fully exempt (including CVD on imports)
cinematographic film in jumbo
rolls of 400 feet and 1000 feet.
Legislative Changes
Section 4A is amended to substitute the reference to Standards of Weight &

Measures Act, 1976 with Legal Metrology Act, 2009 with effect from
01.03.2011.
Provisions of Section 11A, 11 AA, 11 AB and 11 AC are redrafted so as to

make them more lucid and coherent. A new category of cases is carved out in
respect of which the period of limitation would be five years but which would
attract general penalty of 50% of the duty. Waiver of show cause notice and
conclusion of proceedings would be available if the duty along with interest and
specified penalty is paid before the issue of show cause notice in such cases.
New section 11 E is inserted so as to create first charge on the property of the

defaulter for recovery of central excise dues from such defaulter subject to
provisions of section 529A of the Companies Act, the Recovery of Debt due to
Bank and Financial Institution Act, 1993 and Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002.
Section 12F is inserted to empower the Joint Commissioner or the Additional

Commissioner of the Central Excise to himself search or authorize a central
excise officer to carry out the search of any premises.
A new section 35R is inserted retrospectively with effect from 20.10.2010 so as

to empower the Board to issue instructions relating to non-filing of appeal in
certain cases in line with National Litigation Policy.
Amendments in the Schedules to Central Excise Tariff Act, 1985
Tariff rate of 5% is prescribed for specified items, which are subjected to an

effective rate of 1 % excise duty without Cenvat credit facility.
Chapter note is inserted in Chapter 22 so as to provide that in relation to

products of this chapter, labelling or relabelling of containers or packing or
repacking from bulk packs to retail packs or the adoption of any treatment to
render the product marketable to the consumer, shall amount to manufacture.

products of this chapter, the process of converting ores into concentrates shall
amount to manufacture.
Two chapter notes are inserted in Chapter 63 so as to define the expression

'brand name' and to provide that affixing a brand name on the product, labelling
or re-Iabelling of containers or packing or repacking from bulk packs to retail
packs or the adoption of any treatment to render the product marketable to the
consumer, shall amount to ‘manufacture’.
Chapter note is inserted in Chapter 71 so as to provide that the process of

refining of dore bar shall amount to manufacture.
Tariff rate of excise duty is increased from Nil to 10% on silver powder, silver
unwrought and semi-manufactured silver in specified forms.

products of this chapter, the process of galvanisation shall amount to
manufacture.
First Schedule is amended to include editorial changes in the Harmonized

System of Nomenclature (HSN) in certain chapters, effective from 01.01.2012.
Third Schedule is amended retrospectively to include certain specified goods,

which were notified under section 4A effective on enactment of the Finance Bill.
Amendments in Cenvat Credit Rules, 2004
Rule 2 is amended to substitute the definitions of inputs, input services, capital

goods, exempted goods and exempted services to bringing greater clarity.
Rule 3 and 4 are amended to disallow utilization of credit for paying duty on
concessional goods (in respect of which an exemption, other than full
exemption, is availed subject to the condition that no Cenvat credit of inputs
and input services is taken).
Rule 3 is amended retrospectively with effect from 18.04.2006 to provide that

the credit of service tax paid under section 66A of the Finance Act, 1994 shall
also be permissible effective on enactment of the Finance Bill.
Availment of Cenvat credit by ship breaking units restricted to 85% of additional

duty of customs (CVD) paid at the time of importation of ships for breaking.
Rule 4 (7) is amended to provide for reversal of Cenvat credit in case any
payment made towards an invoice of input service is received back.
Rule 6 amended to:
- reduce requirement of payment of 6% of value of exempted services to 5%;
- provide an option to maintain separate accounts for inputs alone and reverse
the amount of input services credit as per the allocation formula in rule 6 (3A).
- provide that payment made under this rule shall be treated as credit not
availed for the purpose of an applicable exemption;
- clarify the value of services in cases where the same is not clearly defined
and tax is collected on a compounding or specific principle;
Rule 6(3B) is introduced to provide that only 50% of the Cenvat credit availed
will be available for utilization towards payment of service tax under 'Banking
and other financial services' by a banking company and financial institution.
Rule 6(3C) is introduced to provide that only 80% of the Cenvat credit availed
will be available for utilization towards payment of service tax by the providers
of life insurance service and management of investment under ULIP.
A new rule 6(6A) is inserted to provide that the provisions of sub-rule (1), (2),
(3) and (4) of the said Rule shall not apply to taxable services provided to SEZ
Unit or Developer without payment of service tax.
Amendment in Medicinal and Toilet preparations (Excise Duties) Act, 1955
Explanation III of the Schedule is amended to substitute the reference to

Standards of Weight & Measures Act, 1976 with Legal Metrology Act, 2009
w.e.f. 01.03.2011.
Additional duties of Excise (Goods of Special Importance) Act, 1957
Sugar and textile items are omitted from the schedule of the Additional Duties
of Excise (Goods of Special Importance) Act, 1957.
Customs Duty
Effective Date: Changes come into effect immediately unless otherwise specified.
Standard Rate: Basic customs duty rates of 2%, 2.5% and 3% are unified at the
median rate of 2.5%.
Sector wise Changes
Food /Agro Processing / Agriculture
Particulars Change
Specified agriculture machinery viz paddy Reduced from 5% to 2.5%
transplanter, laser land leveler, cotton picker,
reaper-cum-binder, straw or fodder balers,
sugarcane harvesters and track used for
manufacture of track-type combine harvester
Parts and components required for the Reduced from 7.5% to 2.5%
manufacture of equipment mentioned above
Micro-irrigation equipment Reduced from 7.5% to 5%
Raw Pistachios Reduced from 30% to 10%
Sun-dried dark seedless raisins Reduced from 100% to 30%
Cranberry products Reduced from 30% to 10%
De – oiled rice bran oil cake Full Exemption
Exports of De – oiled rice bran oil cake Export duty of 10%
Automobiles
Full exemption from basic customs duty and SAD and concessional CVD @5%
extended to specified parts of hybrid vehicles, namely, battery pack, battery
chargers, ACIDC electric motors and motor controllers. Concession is subject
to actual user condition and will be available till 31.03.2013.
Customs duty dispensation and concessional CVD @5% at (1) above is also
made available to import of spare battery packs for the electric vehicles by
importers which are registered with the agencies notified for Central Financial
Assistance (CFA) scheme of the Ministry of Non-conventional & Renewable
Energy (MNRE).
Definition for "Completely Knocked Down (CKD) unit" of a vehicle including two
wheelers, eligible for concessional import duty, is inserted to exclude from its
purview such units containing a pre-assembled engine or gearbox or
transmission mechanism or a chassis where any of such parts or sub-
assemblies is installed.
Special Economic Zones
All clearances from SEZ into DTA are exempted from SAD provided they are
not exempt from the levy of VAT/Sales Tax.
CVD exemption currently available to Plastic materials reprocessed in India out

of the scrap or the waste of goods falling under specified chapters is extended
to domestic tariff area clearances of such plastic materials manufactured in
SEZ units also.
Ship Repairs
Exemption currently available to ship repair units on imports of spares and

consumables required for repair of ocean going vessels extended to such
spares and consumables for repairs of ocean going vessels by owners of such
vessels registered in India.
Textiles
Particulars Change
Raw silk (not thrown) of all grades Reduced from 30% to 5%
Cotton Waste Fully exempt
Poly Tetra Methylene Ether Glycol Reduced from 7.5% to 5% subject to
(PTMEG) and Diphenylmethane 4, 4- actual user condition
diisocyanate (MDl)
Acrylonitrile, Rayon grade wood pulp Reduced from 5% to 2.5%
Sodium Polyacrylate Reduced from 7.5% to 5%
Caprolactum, Nylon chips, fibre and yarn Reduced from 10% to 7.5%
Capital Goods / Infrastructure
Full customs duty exemption to water supply projects for agricultural / industrial
use is expanded to water pumping station and water reservoir of such projects.
Full exemption from basic customs duty and CVD currently available to 'Tunnel
Boring machine' and parts thereof for hydro-electric power projects is extended
to such machines for highway development projects also.
Basic customs duty reduced from 7.5% to 5% for specified gems and jewellery
machinery.
Full exemption from basic customs is provided to cash dispensers. Parts

required for the manufacturer of cash dispensers are also exempted from basic
customs duty on actual user basis.
Concessional import duty of 5% basic customs duty, 5% CVD & Nil SAD
currently applicable to high-speed printing machinery extended to mailroom
equipment compatible with such printing machinery imported by registered
newspaper establishments.
Concessional rate of 5% basic customs duty, 5% CVD & Nil SAD extended to
parts and components for manufacture of 23 specified high voltage
transmission equipments.
Full exemption from basic customs duty extended on bio-based asphalt sealer
and preservation agent, millings remover and crack filler, asphalt remover and
corrosion protectant and sprayer system for bio-based asphalt applications.
Concessions to Environment – Friendly Items
Concessional CVD @5% and full exemption from SAD is provided to LEOs
used for manufacture of LED lights and light fixtures.
Basic customs duty reduced from 10% to 5% on solar lantern or lamps.
Full exemption from duty extended to toughened glass and silver paste
imported for manufacture of solar cells or solar modules on actual user basis.
Health Sector
Endovascular stents are fully exempted from basic customs duty of 5%.
Concessional import duty regime of 5% Basic customs duty, 5% CVD & Nil
SAD is prescribed on specified raw material for the manufacture of syringes,
needles, catheters, cannulae on actual user basis.
Exemption from SAD to P&P medicines imported for retail sale.
Customs duty on four specified life saving drugs and their bulk drugs is
reduced from 10% to 5% with Nil CVD.
Basic customs duty on lactose for use in the manufacture of homoeopathic

medicines is reduced from 25% to 10%.
Electronic Hardware:
Concessional import duty structure of 5% CVD and Nil SAD is prescribed on

parts of inkjet and laser-jet printers imported for manufacture of such printers.
Full exemption from duty extended to parts/components required for the

manufacture of PC connectivity cable and sub-parts of parts & components of
battery charger, hands-free head phones and PC connectivity cable of mobile
handsets including cellular phones.
Full exemption from SAD presently available upto 31.03.2011 on parts,

components and accessories for manufacture of mobile handsets including
cellular phones extended upto 31.03.2012.
Full exemption from duty extended to additional specified capital goods and
raw materials for the manufacture of electronic hardware.
Concessional import duty structure of 5% CVD and Nil SAD is prescribed on

parts for manufacture of DVD writers, Combo drives and CD Drives subject to
actual user condition.
Aircrafts
Particulars Change
Imports of aircrafts for non-scheduled Basic duty of 2.5% is imposed
operations
Exemption from education cess and Withdrawn
secondary and higher education cess
available to aircrafts
Paper
Basic customs duty on waste paper is reduced from 5% to 2.5%.
Metals
Particulars Change
Stainless steel scrap Fully exempt
Ferro-nickel Reduced from 5% to 2.5%
Statutory rate of export duty on iron ores Increased from 20% to 30%
Effective rate of export duty on iron ore 20%
fines and lumps
Iron Ore pellets Fully exempt from export duty
Copper dross, copper residues, copper Exempt from levy of SAD
oxide mill scale, brass dross and zinc ash
Vanadium pentoxide and Vanadium Reduced from 7.5% to 2.5%
sludge
Value of gold and silver contained in the Exempt from basic customs duty
copper concentrate
Precious Metals
Import duty of Nil basic customs duty, CVD of RS.140 per 10 gram and Nil SAD
is prescribed for gold dore bars of upto 80% gold purity imported for refining
and manufacturing serially numbered gold bars in India.
Export Promotion
List of specified goods, allowed to be imported duty free for use in the
manufacture of leather goods, for export is expanded.
List of specified goods, allowed to be imported duty free for use in the
manufacture of textile and leather garments, is expanded by including anti-theft
devices like labels, tags and sensors therein.
Description of some items is changed in the list of items that are allowed to be
imported duty free for manufacture of textile or leather garments and other
leather goods for export.
Benefit of duty free import on trimmings, embellishments, components etc. for

manufacture of leather goods, footwear and textile garments is extended to
merchant exporters subject to certain conditions.
Specified tools used in the handicrafts sector are included in the list of specified
goods, allowed to be imported duty free to Handicrafts exporters.
Full exemption from basic customs duty is extended to fin fish feed.
Basic customs duty on vannamei broodstock is reduced from 30% to 10%.
Basic customs duty on bamboo used for manufacture of agarbattis is reduced

from 30% to 10%.
Miscellaneous
Basic customs duty is reduced from 5% to 2.5% on carbon black feed stock,
petroleum coke, mineral gypsum.
Crude palm stearin is fully exempted from basic customs duty for use in the
manufacture of laundry soap on actual user basis.
At present specified categories of works of art and antiquities are exempted

from customs duty. The scope of the exemption is expanded by including,-
works or arts or antiquities for exhibition or display in private art galleries or

similar premises that are open to general public;
works of art created by an Indian artist abroad, irrespective of the fact whether
such works are imported along with the artist or the sculptor on their return to
India.
Special provision imposing definitive safeguard duty retrospectively on imports

of caustic soda lye imported into India during the period 04.12.2009 to
03.03.2010
Special provision to retrospectively provide a concessional basic customs duty

of 30% to fresh garlic imported by National Consumer Cooperative Federation
and Madhya Pradesh State Cooperative Marketing Federation under import
licenses issued by the Central Government and cleared after 15.1.2003.
Certain notifications are amended retrospectively to allow exports made under

the EPCG scheme to simultaneously avail of benefits under Export Reward
Schemes such as Served From India Scheme, Focus Market Scheme etc.
Amendments in Customs Act, 1962 (Effective on enactment of Finance Bill)
Definition of 'assessment' amended to include 'self-assessment'.
Section 17 amended to replace existing system of ‘assessment’ with 'self-

assessment' of duty on imported and export goods by the importer or exporter.
Revised provisions empower customs officers to verify the self assessment and
if required, reassess duty on imported or export goods or conduct audit in
certain situations either in their own office or at the premises of the importer or
exporter.
Section 18 amended to make the provisions relating to provisional assessment

of duty applicable in case an importer or exporter is unable to make self-
assessment with the proposed scheme of 'self-assessment'.
Section 19 amended to align the provisions relating to determination of duty

where goods consist of articles liable to different rates of duty with the
proposed scheme of 'self-assessment' under section 17.
Sub-section (1) of section 27 is substituted so as to enhance the time limit for

claiming refund of duty and interest from six months to one year. This will bring
uniformity for both demanding duty and claiming refund.
Section 28 is substituted so as to make the provisions more coherent and clear

as also to harmonize the demand period in normal cases to one year.
Section 28AA and 28AB are substituted with a revised section 28AA so as to
make the provisions relating to interest more coherent and clear.
Section 46 amended to provide that an entry of imported goods shall be

presented electronically and to empower the Commissioner of Customs to
allow filing of entry in any other manner when it is infeasible to present
electronically.
Section 50 amended to provide that an entry of export goods shall be

presented electronically and to empower the Commissioner of Customs to
allow filing of entry in any other manner when it is infeasible to present
electronically.
Section 75 amended to enable the Central Government to prescribe

circumstances under which drawback would not be disallowed even though the
export remittances are not received within the period specified in the Foreign
Exchange Management Act.
Section 110A amended to empower the adjudicating authority to allow release

of seized goods.
Section 124 amended to provide for issuance of a show cause notice with prior
approval of an officer not below the rank of an Asst Commissioner of Customs.
Section 131 D inserted retrospectively with effect from 20.10.2010 to empower

the Board to issue instructions relating to non-filing of appeal in certain cases in
line with National Litigation Policy.
New section 142A inserted to create first charge on the property of the
defaulter for recovery of the customs dues from such defaulter subject to
provisions of section 529A of the Companies Act, the Recovery of Debt due to
Bank and Financial Institution Act, 1993 and Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002.
Section 150 amended to provide that the balance of sale proceeds of

unclaimed cargo sold in auction shall be paid to the Government when it
cannot be paid to the owner within six months,
Section 151A amended to empower the Board to also issue instructions to

customs authorities on any other matters under the Customs Act or any other
Act for the time in force so far as they relate to prohibition, restrictions or
procedure relating to import or export of goods.
Section 157 amended to empower the Board to prescribe regulations for

specifying the manner of conducting audit at the office of the proper officer of
customs or at the premises of the importer.
Amendments in CustomsTariff Act, 1975 (Effective on enactment of Finance Bill)
Section 3 is amended to substitute the reference to Standards of Weight &

Measures Act, 1976 with Legal Metrology Act, 2009 w.e.f. 01.03.2011.
Section 9AA amended to enable the Central Government to reduce the anti-
dumping duty imposed under the provisions of sub-section (1) of section 9A on
an article or an importer where such importer proves to the satisfaction of the
Central Government that he has paid anti-dumping duty in excess of his actual
margin of dumping.
Customs Tariff (Identification, Assessment and Collection of Anti Dumping duty

on Dumped Articles and for Determination of Injury) Rules, 1995 is amended
so as to revise provisions of rule 23 so as to align the same with Article 11 of
the WTO Agreement on anti dumping and also to insert Annexure-III containing
principles to determine the non-injurious price.
Amendments in Schedules to the Customs Tariff Act, 1975 (Effective on

enactment of Finance Bill)
First Schedule is amended to include editorial changes in the Harmonized

System of Nomenclature (HSN) in certain chapters, effective from 01.01.2012.
Description of heading 9804 in the First Schedule is amended to cover all

dutiable items intended for personal use, imported by post or air and to
prescribe a tariff rate of 35% for tariff items under the heading.
Second Schedule is amended so as to align the entries with the Harmonized.

System of Nomenclature (HSN) and introduce a new entry for de-oiled rice
bran cake. The effective rates of export duty on all items other than iron ores
lumps, fines and pellets; and de-oiled rice bran cake are maintained.
Service Tax
Effective Dates
Particulars Date from which effective

New Services/Change in Existing From a date to be notified later
Services
Amendment in Finance Act, 1994 From a date to be notified later
Exemptions With immediate effect / w.e.f. 01.04.2011
New Services liable to tax
Services provided by air-conditioned restaurants having a license to serve

alcoholic beverages in relation to serving of food and/or beverages.
Short-term accommodation provided by a hotel, inn, guesthouse, club or

campsite, or any other similar establishment for a continuous period of less
than three months.
Scope of existing services enlarged / amended
Scope of 'Life insurance service' is widened to cover all services provided to a

policyholder or any person, by an insurer, including re-insurer carrying on life
insurance business. It is also provided that tax shall be charged on the portion
of the premium other than what is allocated for investment, when the break-up
of premium is shown separately in any document given to the policy holder.
The composition rate is also increased from 1 % to 1.5%.
Scope of the 'Club or association service' is expanded to include service

provided to non-members within its ambit.
Scope of 'Authorized service station service' is expanded to:
o include services provided by any person;
o cover all motor vehicles other than those meant for goods carriage and
three-wheeler scooter auto-rickshaws; and
o services of decoration and similar services in respect of vehicles along with

the services already covered.
Definition of 'Business support services' is amended to include services

provided by way of operational or administrative assistance in any manner.
Scope of Legal consultancy services is expanded by bringing within its ambit

the:
o service provided by a business entity to individuals in relation to advice,

consultancy or assistance in any branch of law, in any manner;
o representational service provided by any person to any business entity

(representational services, provided to individuals will continue to be
exempt); and
o service of 'arbitration' provided by an arbitral tribunal to any business entity.
The definition of "Commercial training or coaching centre" is amended to bring

all unrecognized courses within the tax net, irrespective of the fact that such
courses are conducted by an institute which also conducts courses which may
lead to grant of a recognised degree or diploma.
Scope of Health services is expanded by including:
o All services, including diagnostic services, provided, by a centrally air-

conditioned (wholly or partially) clinical establishment having more than 25
beds for in-patient treatment during any part of the year;
o Diagnostic services provided by a clinical establishment with the aid of

laboratory or other medical equipment; and
o Services provided by a doctor, not being an employee of a clinical

establishment, from the premises of such establishment.
In view of the comprehensive coverage of health services as above, the

existing health services where payments are required to be made directly by
the insurance company or business entities would no longer be operational.
Exemptions
Exemption to services provided by an organizer of business exhibitions in

relation to business exhibitions held outside India.
An abatement of 25% from the taxable value is provided for the purpose of levy
of service tax under 'Transport of goods through coastal and inland shipping'.
Exemption to 'Works contract' service provided for construction or finishing of

new residential complex under 'Jawaharlal Nehru National Urban Renewal
Mission' and 'Rajiv Awaas Yojana'.
Exemption to services provided within a port or other port or an airport under

the 'Works contract' service for specified purposes.
Exemption provided to 'Rashtriya Swasthya Bima Yojana' under the 'General

insurance' service.
Value of air freight included in the assessable value of goods for charging
customs duties is excluded from taxable value for the purpose of levy of service
tax under the 'Transport of goods by air' service.
Services related to transportation of goods by road, rail or air when both the
origin and the destination are located outside India is exempted.
A modified scheme is introduced to refund service tax to SEZ units and

developers and notification No. 9/2009-ST is superceded. In the modified
scheme, 'wholly consumed' services are defined in the notification in order to
extend 'outright exemption' and to permit refund of all other services on a
proportionate basis.
Withdrawal or Amendments of Exemptions
Rates of service tax on travel by air are revised (w.e.f. 01.04.2011) as follows:
Particulars Changes
Domestic Travel (economy class) from Rs. 100 to Rs. 150
International travel (economy class) from Rs. 500 to Rs. 750
Domestic travel (other than economy 10% (standard rate)
class)
Exemption from service tax on the membership fees under 'Club or association
service' is given to the associations or chambers representing industry or
commerce for the period from 16.06.2005 to 31.03.2008. w.e.f. the date of
enactment of the Bill
Retrospective effect is given to notification NO.20/2009-ST dated 07.07.2009

exempting service tax on inter-State or intra-State transportation of passengers
in a vehicle bearing Contract carriage permit or· a tourist vehicle permit for the
period from 01.04.2000 to 06.07.2009. w.e.f. the date of enactment of the Bill
Amendments in Rules and Notifications
Monetary limit of Rs. 1,00,000/- for adjustment under Rule 6(4B)(iii) of the
Service Tax Rules, 1994 is raised to Rs. 2,00,000/- w.e.f. 01.04.2011.
Rule 6(7A) of the Service Tax Rules, 1994 is amended (w.e.f. a date to be
notified, after the enactment of Finance Bill, 2011) to provide that that an
insurer carrying on life insurance business shall have the option to pay tax,-
o on the amount of gross premium charged from a policy holder reduced by

the amount allocated for investment, where the breakup of the amount
allocated for investment is shown separately to the policy holder;
o on an amount calculated @ 1.5% of the gross amount of premium charged

from a policy holder in cases other than (i) above;
towards the discharge of his service tax liability instead of paying service tax at
the rate specified in section 66 of Finance Act, 1994.
Such option shall not be available in cases where the entire premium paid by
the policy holder is only towards risk cover in life insurance.
Clause (B) of Rule 6(7) of the Service Tax Rules, 1994 pertaining to sale and
purchase of foreign exchange is amended to reduce the composition rate from
0.25% to 0.1 % of the gross amount of currency exchanged towards discharge
of service tax liability. (w.e.f. 01.04.2011)
Rule 6(6A) is inserted in Service Tax Rules, 1994, to provide that if any amount
of service tax has been self-assessed and not paid, the same shall be
recoverable with interest under section 87 of the Act. Thus, there shall be no
need to resort to provisions of section 73. (w.e.f. 01.04.2011)
It is defined in Service Tax (Determination of Value) Rules, 2006 that the value
of the money changing service: (w.e.f. 01.04.2011)
o for a currency exchanged either from or to Indian Rupees, shall be equal to

the units of currency exchanged multiplied by the difference in the buying
rate or the selling rate, as the case may be, and the RBI reference rate for
that currency for that day;
o for a currency where the RBI reference rate is not available, shall be 1 % of
the gross amount of Indian Rupees provided or received, by the person
changing the money;
o where neither of the currencies exchanged is Indian Rupee, shall be equal

to 1 % of the lesser of the two amounts the person changing the money
would have received by converting any of the two currencies into Indian
Rupee on that day.
An explanation is added to rule 5(1) of Service Tax (Determination of Value)

Rules, 2006 to clarify that for the purpose of Telecommunication services, the
value of the taxable service shall be gross amount charged by the telegraph
authority from the service receiver. (w.e.f. 01.04.2011)
Export of Services Rules, 2005 and Taxation of Services (Provided from

Outside India and Received in India) Rules, 2006 are amended so as to move
some of the specified services from one category to another. (w.e.f.
01.04.2011)
Sub-rule (2A) is inserted in rule 3 of the Works Contract (Composition Scheme

for Payment of Service Tax) Rules, 2007 to provide that the credit of tax on
input services of 'Erection, commissioning or installation', 'Commercial or
industrial construction' and 'Construction of complex' services as available to a
person providing 'Works contract service' shall be restricted to 40% of tax paid,
when such tax has been paid on full value of the service after availment of
Cenvat credit on inputs. w.e.f. 01.03.2011.
Amendments in Act
Chapter V of Finance Act, 1994 is amended to,-
The benefit of reduction of penalty available in cases of fraud, collusion,
etc. under proviso to section 73 (1A) shall not be available. Further, a new
sub-section 4A is inserted in section 73 to provide for reduced penalty in
cases where during the course of audit, verification or investigation it is
found that the transactions not reported to the department are available in
the records or invoices. Moreover, penalty is reduced to 1 % per month of
the tax amount upto a maximum of 25%.
Reduce the penalty for delayed payment under section 76 from 2% to 1 %

per month or Rs.100 per day, whichever is higher. Maximum penalty
reduced to 50% of the tax amount.
Increase the maximum penalty under section 77 from Rs. 5,000 to Rs.
10,000.
Amend section 78 to revise the maximum penalty. Penalty will be hereafter

mandatory and equal to tax evaded. Moreover, in situations covered under
section 4A, the penalty shall be 50% of the tax amount. Further, the penalty
is reduced to 25% if the tax dues are paid within one month together with
interest and reduced penalty. For assessees having a turnover of upto
RS.60 lakh in any of the years covered in the show cause notice or in the
preceding year, the period of one month shall be revised to 90 days.
Reduce interest rate by 3% for assessees with a tumover of upto Rs. 60

lakh, both under section 73B and section 75.
Increase the maximum penalty for delay in filing of return under section 70
from Rs. 2000 to Rs. 20,000. However, the existing rate of penalty for the
first 15 days and for the subsequent 15 days as well as the daily penalty of
RS.1 00 per day thereafter under rule 7C of the Service Tax Rules, 1994
are retained without any change.
Amend the power to waive penalty under section 80. While penalties under
section 76 and 77 are retained, penalty under section 78 is waived only in
cases where the transactions are captured in the specified records.
Give power to issue search warrant under section 82 at the level of Joint
Commissioner and the execution of such warrant at the level of
Superintendent.
Make section 9A, 9AA, 9B, 9E, 34A and new section 35R of the Central
Excise Act, 1944 applicable to service tax under Section 83.
A new section 88 is inserted so as to create first charge on the property of

the defaulter for recovery of service tax dues from such defaulter subject to
provisions of section 529A of the Companies Act, the Recovery of Debt due
to Bank and Financial Institution Act, 1993 and Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002.
Reintroduce the provisions relating to prosecution under section 89 as

follows:
o The prosecution shall apply in the following situations:

- Provision of service without invoice;
- Availment and utilization of Cenvat credit without receipt of inputs or

input services;
- Submitting false information; and
- Non-payment of collected amount of service tax for a period of more

than six months.
o The sanction for the prosecution will be granted at the level of Chief
Commissioner.
Point of Taxation Rules, 2011
Point of Taxation Rules, 2011 have been framed and made effective from
01.04.2011. These rules determine the point in time when the services shall
be deemed to be provided. The general rule will be that the time of
provision of service will be the earliest of the following dates:
i. Date on which service is provided or to be provided
ii. Date of invoice
iii. Date of payment
Consequential changes have also been made in the Service Tax Rules,
1994 to alter the payment of service tax from receipt of payment to
‘provision of service’ and also to permit adjustment of tax when service is
not finally provided.
Budget Announcements
OVERVIEW OF THE ECONOMY
Fiscal deficit as a percentage of GDP is projected at 4.6% compared to 5.5% in

B.E. 2010-11.
Growth rate of GDP increased from 7.2% during 2009-10 to 8.6% in 2010-11.
Exports have grown by 29.4%, while imports have recorded growth of 17.6%
during April – January 2010-11 over the corresponding period last year.
SUSTAINING GROWTH
Fiscal consolidation
Fiscal consolidation targets at Centre and States have shown positive effect on
macro economic management of the economy.
Amendment to Centre’s FRBM Act, 2003 laying down the fiscal road map for
the next five years to be introduced in the course of the year.
Proposal to introduce the Public Debt Management Agency of India Bill in the
next financial year.
Tax Reforms
Direct Taxes Code (DTC) to be finalised for enactment during 2011-12. DTC
proposed to be effective from April 1, 2012.
Areas of divergence with States on proposed Goods and Services Tax (GST)
have been narrowed. As a step towards roll out of GST, Constitution
Amendment Bill proposed to be introduced in this session of Parliament.
Significant progress in establishing GST Network (GSTN), which will serve as

IT infrastructure for introduction of GST.
Expenditure Reforms
A Committee already set up by Planning Commission to look into the extant

classification of public expenditure between plan, non-plan, revenue and
capital.
Subsidies
Nutrient Based Subsidy (NBS) has improved the availability of fertiliser;

Government actively considering extension of the NBS regime to cover urea.
Government to move towards direct transfer of cash subsidy to people living

below poverty line in a phased manner for better delivery of kerosene, LPG and
fertilisers. Task force set up to work out the modalities for the proposed system.
People’s ownership of PSUs
Overwhelming response to public issues of Central Public Sector Undertakings

during current year.
Higher than anticipated non-tax revenue has led to reschedulement of some

disinvestment issues planned for current year.
Rs 40,000 crore to be raised through disinvestment in 2011-12.
Government committed to retain at least 51 per cent ownership and

management control of the Central Public Sector Undertakings.
INVESTMENT ENVIRONMENT
Foreign Direct Investment
Discussions underway to further liberalise the FDI policy.
Foreign Institutional Investors
SEBI registered mutual funds permitted to accept subscription from foreign

investors who meet KYC requirements for equity schemes.
To enhance flow of funds to infrastructure sector, the FII limit for investment in
corporate bonds issued in infrastructure sector being raised.
Financial Sector Legislative Initiatives
To take the process of financial sector reforms further, various legislations

proposed in 2011-12.
Amendments proposed to the Banking Regulation Act in the context of

additional banking licences to private sector players.
Public Sector Bank Capitalisation
Rs 6,000 crore to be provided during 2011-12 to enable public sector banks to

maintain a minimum of Tier I CRAR of 8 per cent.
Recapitalisation of Regional Rural Banks
Rs 500 crore to be provided to enable Regional Rural Banks to maintain a

CRAR of at least 9 per cent as on March 31, 2012.
Micro Finance Institutions
“India Microfinance Equity Fund” of 100 crore to be created with SIDBI.

Government considering putting in place appropriate regulatory framework to
protect the interest of small borrowers.
“Women’s SHG’s Development Fund” to be created with a corpus of Rs 500

crore.
Rural Infrastructure Development Fund
Corpus of RIDF XVII to be raised from Rs 16,000 crore to Rs 18,000 crore.
Micro Small and Medium Enterprises
Rs 5,000 crore to be provided to SIDBI for refinancing incremental lending by

banks to these enterprises.
Rs 3,000 crore to be provided to NABARD to provide support to handloom

weaver co-operative societies which have become financially unviable due to
non-repayment of debt by handloom weavers facing economic stress.
Public sector banks to achieve a target of 15 per cent as outstanding loans to

minority communities under priority sector lending at the earliest.
Housing Sector Finance
Existing scheme of interest subvention of 1 per cent on housing loan further

liberalised.
Existing housing loan limit enhanced to Rs 25 lakh for dwelling units under
priority sector lending.
Provision under Rural Housing Fund enhanced to Rs 3,000 crore.
To enhance credit worthiness of economically weaker sections and LIG

households, a Mortgage Risk Guarantee Fund to be created under Rajiv Awas
Yojana.
Central Electronic Registry to prevent frauds involving multiple lending on the

same immovable property to become operational by March 31, 2011.
Financial Sector Legislative Reforms Commission
Financial Sector Legislative Reforms Commission set up to rewrite and

streamline the financial sector laws, rules and regulations.
Companies Bill to be introduced in the Lok Sabha during current session.
AGRICULTURE
Removal of production and distribution bottlenecks for items like fruits and
vegetables, milk, meat, poultry and fish to be the focus of attention this year.
Allocation under Rashtriya Krishi Vikas Yojana (RKVY) increased from Rs

6,755 crore to Rs 7,860 crore.
Bringing Green Revolution to Eastern Region
To improve rice based cropping system in this region, allocation of Rs 400

crore has been made.
Integrated Development of 60,000 pulses villages in rainfed areas
Allocation of Rs 300 crore to promote 60,000 pulses villages in rainfed areas.
Promotion of Oil Palm
Allocation of Rs 300 crore to bring 60,000 hectares under oil palm plantations.
Initiative to yield about 3 lakh metric tonnes of palm oil annually in five years.
Initiative on Vegetable Clusters
Allocation of Rs 300 crore for implementation of vegetable initiative to provide

quality vegetable at competitive prices.
Nutri-cereals
Allocation of Rs 300 crore to promote higher production of Bajra, Jowar, Ragi

and other millets, which are highly nutritious and have several medicinal
properties.
National Mission for Protein Supplement
Allocation of Rs 300 crore to promote animal based protein production through

livestock development, dairy farming, piggery, goat rearing and fisheries.
Accelerated Fodder Development Programme
Allocation of Rs 300 crore for Accelerated Fodder Development Programme to

benefit farmers in 25,000 villages.
National Mission for Sustainable Agriculture
Government to promote organic farming methods, combining modern

technology with traditional farming practices.
Agriculture Credit
Credit flow for farmers raised from Rs 3,75,000 crore to Rs 4,75,000 crore in
2011-12.
Interest subvention proposed to be enhanced from 2 per cent to 3 per cent for
providing short-term crop loans to farmers who repay their crop loan on time.
In view of enhanced target for flow of agriculture credit, capital base of

NABARD to be strengthened by Rs 3,000 crore in phased manner.
Rs 10,000 crore to be contributed to NABARD’s Short-term Rural Credit fund

for 2011-12.
Mega Food Parks
Approval being given to set up 15 more Mega Food Parks during 2011-12.
Storage Capacity and Cold Chains
Augmentation of storage capacity through private entrepreneurs and

warehousing corporations has been fast tracked.
Capital investment in creation of modern storage capacity will be eligible for

viability gap funding of the Finance Ministry.
Agriculture Produce Marketing Act
In view of recent episode of inflation, need for State Governments to review

and enforce a reformed Agriculture Produce Marketing Act.
INFRASTRUCTURE AND INDUSTRY
Allocation of Rs 2,14,000 crore for infrastructure in 2011-12. This is an increase

of 23.3 per cent over 2010-11. This also amounts to 48.5 per cent of total plan
allocation.
Government to come up with a comprehensive policy for further developing

PPP projects.
IIFCL to achieve cummulative disbursement target of Rs 20,000 crore by

March 31, 2011 and Rs 25,000 crore by March 31, 2012.
Under take out financing scheme, seven projects sanctioned with debt of Rs
1,500 crore. Another Rs 5,000 crore will be sanctioned during 2011-12.
To boost infrastructure development, tax free bonds of Rs 30,000 crore

proposed to be issued by Government undertakings during 2011-12.
National Manufacturing Policy
Share of manufacturing in GDP expected to grow from about 16 per cent to 25

per cent over a period of 10 years. Government will come out with a
manufacturing policy.
Two Committees set up for greater transparency and accountability in

procurement policy; and for allocation, pricing and utilisation of natural
resources.
Issues relating to reconciliation of environmental concern from various

departmental activities including those related to infrastructure and mining to be
considered by a Group of Ministers.
National Mission for hybrid and electric vehicle to be launched.
Financial Assistance to be made available for metro projects in Delhi, Mumbai,

Bengaluru, Kolkata and Chennai.
Capital investment in fertiliser production proposed to be included as an

infrastructure sub-sector.
Exports
Of 23 suggestions made by Task Force on Transaction Cost, constituted by the

Department of Commerce, 21 suggestions already implemented. Action to be
taken on the remaining two suggestions. Transaction Cost of ` 2,100 crore will
thus be mitigated.
Self assessment to be introduced in Customs to modernize the Customs

administration.
Proposal to introduce scheme for refund of taxes paid on services used for
export of goods.
Mega Cluster Scheme to be extended for leather products. Seven mega

leather clusters to be set up during 2011-12.
Jodhpur to be included for the development of a handicraft mega cluster.
BLACK MONEY
Fivefold strategy to be put into operation to deal with the problem of generation
and circulation of black money.
Membership of various international fora engaged in anti money laundering,

Financial integrity and Economic development, Exchange of information for tax
purposes and transparency, secured.
Various Tax Information Exchange Agreements (TIEA) and Double Taxation

Avoidance Agreements (DTAA) concluded. Foreign Tax Division of CBDT has
been strengthened to effectively handle increase in tax information exchange
and transfer pricing issues.
Enforcement Directorate strengthened three fold to handle increased number

of cases registered under amended Money Laundering Legislation.
Finance Ministry has commissioned study on unaccounted income and wealth

held within and outside the country.
Comprehensive national policy to be announced in near future to strengthen

controls over prevention of trafficking on narcotic drugs.
STRENGTHENING INCLUSION
National Food Security Bill (NFSB) to be introduced in the Parliament during

the course of this year.
Allocation for social sector in 2011-12 (Rs 1,60,887 crore) increased by 17 per
cent over current year. It amounts to 36.4 per cent of total plan allocation.
Target of providing banking facilities to all 73,000 habitations having a

population of over 2,000 to be completed during 2011-2012.
Bharat Nirman
Allocation for Bharat Nirman programme proposed to be increased by Rs

10,000 crore from the current year to Rs 58,000 crore in 2011-12.
Plan to provide Rural Broadband Connectivity to all 2,50,000 Panchayats in the

country in three years.
MGNREGA
In pursuance of last years budget announcement to provide a real wage of 100

per day, the Government has decided to index the wage rates notified under
the MGNREGA to the Consumer Price Index for Agricultural Labour. The
enhanced wage rates have been notified by the Ministry of Rural Development
on January 14, 2011.
From 1st April, 2011, remuneration of Anganwadi workers increased from Rs

1,500 per month to Rs 3,000 per month and for Anganwadi helpers from Rs
750 per month to Rs 1,500 per month.
Scheduled Castes and Tribal Sub-plan
Specific allocation earmarked towards Schedule Castes Sub-plan and Tribal

Sub-plan in the Budget.
Allocation for primitive Tribal groups increased from Rs 185 crore in 2010-11 to
Rs 244 crore in 2011-12.
EDUCATION
Allocation for education increased by 24 per cent over current year.
Sarva Shiksha Abhiyan
Rs 21,000 crore allocated, which is 40 per cent higher than Budget for 2010-
11.
Pre-matric scholarship scheme to be introduced for needy SC/ST students

studying in classes IX and X.
National Knowledge Network
Connectivity to all 1,500 institutions of Higher Learning and Research through

optical fiber backbone to be provided by March, 2012.
Innovations
National Innovation Council set up to prepare road map for innovations in India.
Special grant provided to various universities and academic institutions to

recognise excellence.
Skill Development
Additional Rs 500 crore proposed to be provided for National Skill Development

Fund during the next year.
An international award with prize money of 1 crore being instituted for

promoting values of universal brotherhood as part of National celebrations of
150th Birth Anniversary of Gurudev Rabindranath Tagore.
HEALTH
Plan allocations for health stepped-up by 20 per cent.
Scope of Rashtriya Swasthya Bima Yojana to be expanded to widen the

coverage.
UNORGANISED SECTOR
Exit norms under co-contributory pension scheme “Swavalamban” to be

relaxed. Benefit of Government contribution to be extended from three to five
years for all subscribers who enroll during 2010-11 and 2011-12.
Eligibility for pension under Indira Gandhi National Old Age Pension Scheme
for BPL beneficiaries reduced from 65 years of age to 60 years. Those above
80 years of age will get pension of Rs 500 per month instead of Rs 200 at
present.
ENVIRONMENT AND CLIMATE CHANGE
Forests
Rs 200 crore proposed to be allocated for Green India Mission from National
Clean Energy Fund.
Environmental Management
Rs 200 crore proposed to be allocated for launching Environmental

Remediation Programmes from National Clean Energy Fund.
Cleaning of Rivers and Lakes
Special allocation of Rs 200 crore proposed to be provided for clean-up of

some more important lakes and rivers other than Ganga.
SOME OTHER INITIATIVES
To boost development in North Eastern Region and Special Category States,

allocation for Special Assistance doubled.
Rs 8,000 crore provided in current year for development needs of Jammu and
Kashmir.
Allocation made in 2011-12 to meet the infrastructure needs for Ladakh (Rs
100 crore) and Jammu region (Rs 150 crore).
Allocation under Backward Regions Grant Fund increased by over 35 per cent.
Funds allocated under Integrated Action Plan (IAP) for addressing problems
related to Left Wing extremism affected districts. 60 selected Tribal and
backward districts provided with 100 per cent block grant of Rs 25 crore and Rs
30 crore per district during 2010-11 and 2011-12 respectively.
A lump-sum ex-gratia compensation of 9 Rs lakh for 100 per cent disability to

be granted for personnel of Defence and Para Military forces discharged from
service on medical ground on account of disability attributable to government
service.
Provision of Rs 1,64,415 crore, including Rs 69,199 crore for capital

expenditure to be made for Defence Services in 2011-12.
To build judicial infrastructure, plan provision for Department of Justice

increased by three fold to Rs 1,000 crore.
Census 2011
To enumerate castes other than Schedule Castes and Schedule Tribes in

Census 2011, ‘caste’ to be canvassed as a separate time bound exercise.
IMPROVING GOVERNANCE
UID Mission
From 1st October, 2011 ten lakh Aadhaar numbers will be generated per day.
IT Initiatives
Various IT initiatives taken for efficient tax administration. These include e-filing
and e-payment of taxes, adoption of ‘Sevottam’ concept by CBEC and CBDT,
web based facility for tax payers to track the resolution of refunds and credit for
pre-paid taxes and augmentation of processing capacity.
Under Mission mode projects, funds released to 31 projects received from

States/UTs for computerisation of Commercial taxes. This will allow States to
align with roll out of GST.
Bill to amend the Indian Stamp Act proposed to be introduced shortly.
A new scheme with an outlay of Rs 300 crore to be launched to provide

assistance to States to modernise their stamp and registration administration
and roll out e-stamping in all the districts in the next three years.
A new simplified form ‘Sugam’ to be introduced to reduce the compliance

burden of small tax payers falling within presumptive taxation.
Three more benches of Settlement Commission to be set up to fast track the

disposal of cases.
Steps initiated to reduce litigation and focus attention on high revenue cases.
Corruption
Group of Ministers constituted to consider measures for tackling corruption.

Recommendations to be made in a time bound manner.
Performance Monitoring and Evaluation System
In pursuance of recommendations of Second Administrative Reforms

Commission, 62 departments covered under Performance Monitoring and
Evaluation System (PMES) to assess their effectiveness.
TAGUP
Recommendations of Technology Advisory Group for Unique Projects

(TAGUP) Submitted and accepted in principle.

India Budget Statement 2011: Mgb&co

Enviado por

Dados do documento

Descrição original:

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

India Budget Statement 2011: Mgb&co

Enviado por

Direitos autorais:

Formatos disponíveis

India Budget Statement

21, Shankar Vihar, Jolly Bhavan 2, 1st Floor,

February 28, 2011 Team MGB

 Individual Tax Rates (includes HUF, AOP, BoI)

Income (Rs) Tax Rates (%)

 Partnership Firm Tax Rate (including LLP) – 30.90%

 Tax Rates for Domestic Company

Total Income (Rs) Tax Rates (%)

 Other Corporate Tax Rates

Tax Tax Rates (%)*

 Tax Rates for Foreign Company

Total Income (Rs) Tax Rates (%)

 Definition of ‘charitable purpose’ provides that “the advancement of any other

Special Economic Zones (SEZ)

 Currently, there is an exemption from Minimum Alternate Tax (MAT) in case of

Infrastructure Debt Fund

 It is proposed to set up dedicated infrastructure debt funds to augment long-

Weighted deduction for scientific research programme

Investment linked deduction for specified business

 Currently, “specified business” eligible for investment linked incentives include

New Pension System (NPS)

 Section 80CCD of the Income-tax Act provides, inter alia, a deduction in

Deduction for investment in long-term infrastructure bonds

Extension of sunset clause for tax holiday for power sector

 A deduction of profits and gains is allowed to an undertaking which begins to

Sunset of tax holiday for undertakings engaged in production of mineral oil

 A seven-year profit-linked deduction is available to an undertaking, which is

 In order to enable the TPO to conduct on-the-spot enquiry and verification, it is

Transactions with persons located in a notified jurisdictional area

 It is proposed to insert a new section to specifically deal with transactions

 The proposed section provides -

[Section 94A w.e.f. June 1, 2011]

Taxation of certain foreign dividends at a reduced rate

 Where total income of an Indian company includes any income by way of

Limited Liability Partnerships

Rationalization of Tax on Income distributed to unit holders

• 25% if the recipient is an individual or HUF in case of distribution by a

[Section 115R(2) w.e.f. June 1, 2011]

Providing information to tax authorities outside India

 To facilitate prompt collection of information on requests received from tax

 It is proposed that an application can also be made, where the applicant is a

 It is proposed to specifically provide that the Settlement Commission may, at

 Under a new provision inserted, the Central Government may exempt, by

 In computing the time limits for completion of assessments and reassessments,

 It is proposed to seek regular information from non-residents regarding the

Changes in rates of duty whether by amendment of tariff rates or by notification:

 Concessional rate of duty of 4% is increased to 5%.

 Mandatory duty of 10% is imposed on readymade garments and textile made

 Duty of 5% is imposed on automatic looms and projectile looms.

 Full exemption from duty is withdrawn on microprocessors for computer other

Sector wise Changes

Food /Agro Processing

Full exemption from duty extended to:

 Air- conditioning equipment, panels and refrigeration panels for installation of

Environment Friendly and Energy Saving Goods

Other than Mini Cement plant

 Concessional rate of duty of 1% extended to water filters using presssurised

 Concessional rate of duty @ 10% extended to factory built ambulances.

 Scope of Tax Refund Scheme is extended to include vehicles carrying 13

 Concessional duty structure for taxis is rationalized to provide refund of 20% of

Paper and Paper Board

 Section 4A is amended to substitute the reference to Standards of Weight &

Individual Tax Rates (includes HUF, AOP, BoI)

Partnership Firm Tax Rate (including LLP) – 30.90%

Tax Rates for Domestic Company

Other Corporate Tax Rates

Tax Rates for Foreign Company

Definition of ‘charitable purpose’ provides that “the advancement of any other

Currently, there is an exemption from Minimum Alternate Tax (MAT) in case of

It is proposed to set up dedicated infrastructure debt funds to augment long-

Currently, “specified business” eligible for investment linked incentives include

Section 80CCD of the Income-tax Act provides, inter alia, a deduction in

A deduction of profits and gains is allowed to an undertaking which begins to

A seven-year profit-linked deduction is available to an undertaking, which is

In order to enable the TPO to conduct on-the-spot enquiry and verification, it is

It is proposed to insert a new section to specifically deal with transactions

The proposed section provides -

Where total income of an Indian company includes any income by way of

To facilitate prompt collection of information on requests received from tax

It is proposed that an application can also be made, where the applicant is a

It is proposed to specifically provide that the Settlement Commission may, at

Under a new provision inserted, the Central Government may exempt, by

In computing the time limits for completion of assessments and reassessments,

It is proposed to seek regular information from non-residents regarding the

Concessional rate of duty of 4% is increased to 5%.

Mandatory duty of 10% is imposed on readymade garments and textile made

Duty of 5% is imposed on automatic looms and projectile looms.

Full exemption from duty is withdrawn on microprocessors for computer other

Air- conditioning equipment, panels and refrigeration panels for installation of

Concessional rate of duty of 1% extended to water filters using presssurised

Concessional rate of duty @ 10% extended to factory built ambulances.

Scope of Tax Refund Scheme is extended to include vehicles carrying 13

Concessional duty structure for taxis is rationalized to provide refund of 20% of

Section 4A is amended to substitute the reference to Standards of Weight &

Provisions of Section 11A, 11 AA, 11 AB and 11 AC are redrafted so as to

New section 11 E is inserted so as to create first charge on the property of the

Section 12F is inserted to empower the Joint Commissioner or the Additional

A new section 35R is inserted retrospectively with effect from 20.10.2010 so as

Tariff rate of 5% is prescribed for specified items, which are subjected to an

Chapter note is inserted in Chapter 22 so as to provide that in relation to

Chapter note is inserted in Chapter 26 so as to provide that in relation to

Two chapter notes are inserted in Chapter 63 so as to define the expression

Chapter note is inserted in Chapter 71 so as to provide that the process of

Chapter note is inserted in Chapter 72 so as to provide that in relation to

First Schedule is amended to include editorial changes in the Harmonized

Third Schedule is amended retrospectively to include certain specified goods,

Rule 2 is amended to substitute the definitions of inputs, input services, capital

Rule 3 is amended retrospectively with effect from 18.04.2006 to provide that

Availment of Cenvat credit by ship breaking units restricted to 85% of additional

Rule 6 amended to:

Explanation III of the Schedule is amended to substitute the reference to

CVD exemption currently available to Plastic materials reprocessed in India out

Exemption currently available to ship repair units on imports of spares and

Full exemption from basic customs is provided to cash dispensers. Parts

Basic customs duty reduced from 10% to 5% on solar lantern or lamps.

Exemption from SAD to P&P medicines imported for retail sale.

Basic customs duty on lactose for use in the manufacture of homoeopathic

Concessional import duty structure of 5% CVD and Nil SAD is prescribed on

Full exemption from duty extended to parts/components required for the

Full exemption from SAD presently available upto 31.03.2011 on parts,

Concessional import duty structure of 5% CVD and Nil SAD is prescribed on

Basic customs duty on waste paper is reduced from 5% to 2.5%.

Benefit of duty free import on trimmings, embellishments, components etc. for

Basic customs duty on vannamei broodstock is reduced from 30% to 10%.

Basic customs duty on bamboo used for manufacture of agarbattis is reduced

At present specified categories of works of art and antiquities are exempted

works or arts or antiquities for exhibition or display in private art galleries or

Special provision imposing definitive safeguard duty retrospectively on imports

Special provision to retrospectively provide a concessional basic customs duty

Certain notifications are amended retrospectively to allow exports made under

Definition of 'assessment' amended to include 'self-assessment'.

Section 17 amended to replace existing system of ‘assessment’ with 'self-

Section 18 amended to make the provisions relating to provisional assessment

Section 19 amended to align the provisions relating to determination of duty

Sub-section (1) of section 27 is substituted so as to enhance the time limit for

Section 28 is substituted so as to make the provisions more coherent and clear

Section 46 amended to provide that an entry of imported goods shall be

Section 50 amended to provide that an entry of export goods shall be

Section 75 amended to enable the Central Government to prescribe

Section 110A amended to empower the adjudicating authority to allow release

Section 131 D inserted retrospectively with effect from 20.10.2010 to empower

Section 150 amended to provide that the balance of sale proceeds of