BUDGET 2015 : STEPPING STONE TO SIMPLIFICATION ?

An article by:-

CA Pradeep Jain &

CA Vaibhav Bothra

As the budget session 2015 is approaching, the nation is garnering its own expectations. The assessees falling under the indirect tax net are no different. Struggling with the high end compliances and to cope up with the difficult rules to adhere, they too are in need for some relaxation and simplification. As a part of improvement and development of this important aspect of indirect taxation, following points have emerged as the need of the hour.

1. ‘E’ Mantra to be followed:- The world has entered into the phase where every work is being done online and with a click. The indirect taxes still lives in the era of paper bundles and physical attestations. Apart from registration and returns, we have not been able to bring anything online. Even the smallest and least important intimations have to be submitted to the department physically and given the no. of ranges and divisions, we can easily imagine the sufferings of the assessee. This becomes more amusing when we see our counterpart i.e. direct taxation departments much more advanced in using the technology.  It is hoped that E-appeals and E-hearings are adopted both at the adjudication and appellate levels so that the paper work and associated costs are minimised. With minimal no. of tribunals and ever growing litigations, adopting online approach would help in enhancing the speed with which matters are resolved.

Even the ACES site shows number of features like intimations, refund etc. to be filed online but the department has implemented only the feature of registration and returns online. Still the export intimations, invoice intimations are being filed manually. Even the department has implemented “Sarvotam”. This “Sarvotam” means acknowledging the manual post at the spot. We suggest that instead of manual post the letters should be accepted through e-mail. This will reduce time and money of the assessee as well as of the department. Even the mails received through ACES system will be disposed off in a systematic manner.

1. Strategy of achieving revenue targets should be dispensed with:-  Another nightmare for assessees is the target achieving scheme of the revenue department. This strategy gains all its speed in the last quarter of the financial year and it becomes the most dreaded period for the assessees. The department resorts to raising all kind of baseless queries along with pressurising the assessees to deposit duty in cash instead of utilizing the Cenvat so that the revenue collection figure boosts up.  Thus the assessee has to face liquidity issues with the Cenvat locked up which also causes interest loss. The practise of making revenue targets should be dispensed with so that non-adversial tax environment is developed.

1. Abolition of the practise to submit revenue figures:-  Another seemingly baseless requirement of the revenue department is the submission of revenue figures which they want positively on the 1st of every month in spite of the fact that ER-1 returns are being filed monthly which consist the same figures. The practise of submitting same details again and again in different forms only creates unwarranted burden on the assessee. The practise of submitting such unnecessary details should be avoided. It is useless to give revenue figures on first of every month whereas the same are available on every tenth online in the returns. Knowing 10 days in advance will not going to make any sense. Even the figures given on first are tentative and accurate figures are normally shown in the returns. This type of practice of taking revenue figures are with Central Excise manufacturers only and not with the Service tax providers. This is unnecessary waste of time and money of department as well as manufacturers.

1. Judicial discipline should be implemented strictly:- It is commonly observed that the decisions pronounced by the Tribunals, High Courts and even Supreme Courts are ignored and distinguished on absurd reasons with the sole intention to confirm demands against assessees. The government should develop a mechanism to ensure that the departmental officers unreservedly follow the binding precedents and reduce unwarranted litigation.

1. Strict time limits for adjudicating cases/deciding appeals:- The government should also come up with statutory time limits for adjudicating show cause notice. At present, there is no time limit specified for adjudicating show cause notice and it is common phenomenon of the revenue department to keep cases pending for long durations. Moreover, the time limit for deciding appeals by Commissioner (Appeals) is optional as six months from the date of filing of appeal. Likewise, the Tribunal, if possible is recommended to decide appeal within a period of 3 years from the date on which appeal is filed. It is humble request that mandatory time limits should be specified for deciding the cases so that litigations are reduced speedily. Moreover, with the time boundaries, the government may develop efficient infrastructure for Tribunals.

1.  Single rate of tax:- The bifurcation of tax rates into basic rates, Education cess and Secondary & Higher Education cess should be dispensed with. This will help reduce the litigations regarding adjustments among different heads and will do away with the tedious job of maintaining separate balances of different types of duties. The tax rate should be unified comprising all kind of cess or surcharge and should be uniformly applied. Also the slabs of rates should be eliminated. This change is expected in the upcoming GST bill also. The Government can further allocate the funds as required by them.

1. Hike in threshold exemption limits:- Trade and industry have been expecting increase in the basic exemption limits both in excise and the service tax. The present limits have been not changed in contrast to the growth and inflation levels in the manufacturing and service sectors. Even the BJP Manifesto declared that the exemption limit will be increased but it has not been done so far.

1. Benefit of duty deposition in next month should be extended for month of March:-  The assessee should be allowed to pay tax for the month of March upto 6th of the next month as applicable for other months because payment of tax for the month of March by 31st March poses lot of problems in determining the exact liability with the result that the assessee ends up with either excess payment or short payment.

The above mentioned suggestions are just a part of what the assessees expect at large. Thus the department and the government are both expected to consider the issues of trade and industry because it is what forms the crux of the economy and its ease and comfort should be a priority concern of the budget. 

The railway budget has started to come up with the inaugral speech by the honourable Railway Minister, Mr. Suresh Prabhu. As said, it will be the budget for the common man in India, to make him feel the Modi’s Moto of Ache Din.

Here are 10 important numbers that will help you understand the Rail Budget:

• 23 million: It is the number of passengers commuting through railways every day which is equal to the entire population of the Australia. The total number of passenger trains is 12,617 every day connecting 7172 stations across the country.

• Rs. 26,000 Cr: The amount of losses railways incurs every year on subsidizing passenger fares.

• $100 billion: or Rs. 6 lac Cr is the funding railways need in next 3-4 years.

• Rs. 50,000 Cr: is what railways is likely to get from the Central government as Budgetary support.

• 200 km: The average number of kilometers added per year to rail route since independence. In the last 67 years, just 13,000 kilometers of rail route has been added for a total route of 64,460 kilometers, which is the fourth-largest in the world, but much lower than China’s over 1 lakh kilometers.

• 67 per cent: The contribution of freight in railways earnings. The share of freight carried by railways among total freight carried by all means has declined from 89 per cent in 1950-51 to 31 per cent because successive governments have cross-subsidized passenger fares with freight fares. The railways carry 2.65 million tons of freight every day.

• Rs. 1.40 lakh Cr or $23 billion: is the annual revenue of railways every year. Seems a good number, right? But no this is less than the revenue of state-run companies such as Indian Oil Corp and ONGC.

• Rs. 1.82 lakh Cr: is the amount required for completion of 359 pending projects. In the past 30 years, only 317 of the 676 sanctioned projects have been completed and others require huge funds for completion.

• 94 per cent: is the railways’ operating ratio i.e. railways save only 6 paisa on every 1 rupee it earns from operations. This leaves very little money for expansion.
• 13.1 lakh: is the number of railways employees, making it the country’s single biggest employer.

Know the live updates of Indian Railway Budget-2015. Get knowledge live on the gifts for you from the Railway Minister, Mr. Suresh Prabhu. The Railway Budget-2015 has come up centrally targetting the common man to attract the Modi’s moto of AcheDin. It has bring many gifts for the common man and as Suresh Prabhu, the Railway Minister opened his urn of gifts the people are seeking to meet their expectations.  Know the live updates of railway budget-2015

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TDS slab rate for financial year 2016-17 remains unchanged in the current union budget that was announced on Feb 29, 2016.

However, with reference to financial year 2015-16, some key changes have been made in tds in union budget 2016-17 that the Government claim to be benfitting for tax payers:

1). Section 80GG – Deduction of House Rent Paid
Deduction amount under 80GG increased from Rs 24,000 per annum to Rs 60,000 per annum. The Section 80GG of the Income Tax is only applicable for individuals who do not avail HRA. It also holds true for people who do not claim a tds deduction for their rent in any other sections of the Income Tax.

The Amendment Clause in Union Budget 2016:
Amendment of section 80GG.
In section 80GG of the Income-tax Act, for the words “two thousand rupees”, the words “five thousand rupees” shall be substituted with effect from the 1st day of April, 2017.

2). Section 87A – Income Tax Rebate
Section 87A states that an assessee, being an individual resident in India, whose total income does not exceed five hundred thousand rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under Chapter VIII of the Income-tax Act) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of two thousand rupees, whichever is less. In recent budget of 2016 the rebate amount has been raised from Rs. 2000 to Rs. 5000.

The Amendment Clause in Union Budget 2016:
In section 87A of the Income-tax Act, for the words “two thousand rupees”, the words “five thousand rupees” shall be substituted with effect from the 1st day of April, 2017.

3). Surcharge on Income above One Crore Rupees

The Amendment Clause in Union Budget 2016:
The tds surcharge on individuals having income above one crore rupees has been increased from 12% to 15%.

4). National Pension System withdrawal made tax free
National Pension System : 40% of corpus withdrawal at the time of retirement will be tax exempted. You can withdraw upto 60% of the corpus and out of this as per the new proposal 40% will be tax-free.

5). Taxing of EPF
As per the Budget 2016 proposal, at the time of retirement, 40% of the EPF (Employees Provident Fund) lump sum withdrawal is tax-exempted, 60% of the corpus is taxable as per the applicable Income Tax Slab. The levy on TDS can be avoided by way of transfer to the account of the employee under a pension scheme referred to in section 80-CCD and notified by the Central Government; the Annuity income will be Tax-free.

6). Section 80EE – First time Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments u/s 80EE.
The home loan should have been sanctioned in FY 2016-17
Loan amount should be less than Rs 35 Lakh
The value of house should not be more than Rs 50 Lakh

7). Budget 2016 proposes to levy 10% Dividend Distribution Tax (DDT) in the hands of the investor who receives dividend of Rs 10 Lakh or more in a financial year.
Cash purchases of goods & services which are worth more than Rs 2 Lakh & purchases of car worth more than Rs 10 Lakh will be subject to TCS (Tax collection at Source). Tax at source of 1% on purchase of luxury cars would be levied.

8). Budget 2016 has proposed to provide a limited period ‘Tax Compliance Window‘ for domestic taxpayers. This will be created between 1 June to 30th September to declare undisclosed income or income. To clear up their past tax transgressions, the taxpayers will have to pay tax at 30%, and surcharge at 7.5% and penalty at 7.5%. So, the total applicable tax would be at 45% of the undisclosed income. They will have to pay up the taxes within two months of declaration.

9). Levy of Infrastructure Cess on purchase of SUVs & Diesel cars.

10). Krishi Kalyan cess at 0.5% on all taxable services effective from 1st June, 2016.

11). Income tax department will expand e-sahyog project to assist small taxpayers.

If you have further questions about TDS changes in budget 2016-17, please feel free to ask us.

With the GST implementation deadline of April 2016 becoming a non-event, questions are up once again on the fate of the Goods and Services Tax. In this year’s budget speech in the Parliament, there was not much ado on the GST. This was in stark contrast to the last year’s budget session when there was a firmness to move towards GST regime within a year. Is it that the government is resigned to the fact that they do not have a majority in the Upper house and till they get it, the GST bill cannot be passed?

No, the government does not seem to be sitting idle on the GST issue. A recent statement from the finance minister that he is in agreement that the highest rate of GST Tax should not go beyond 18% had raised hopes that the bill may be passed in the budget session. However, the Congress party demand for a cap of 18% in the constitutional amendment bill was not heeded to. With the second part of the Parliament session beginning from the 25th of April there is hope once again that the government is likely to push through the tax reform.

Another noticeable action that reiterates the government’s resolve to go ahead with the GST is the focus on the administrative reforms on the tax front. The items that had been enjoying exemptions are being brought under the tax regime. This includes the jewellery items with the exception of silver jewellery and the branded apparel & clothing accessories with a retail sale price of INR 1000 and above. The reaction from the jewellers was an agitation where they said they were not willing for a 1% and 12.5% excise duty rates. The government is firm on its stand to bring this sector under taxation.

The concessional notification on the apparel and clothing accessories have been withdrawn and excise duty is proposed. It is very clear that the excise duty will be subsumed under the GST. The tax changes at this time are an indicator that irrespective of the passage of the GST bill in the parliamentary session, the government is busy with the groundwork for the reform. It is doing away with the concessions and getting more and more sectors under the tax ambit. It is now very clear to them that higher the number of concessions, more will be the Revenue Neutral Rate (RNR) of the GST.

Over the years, the Service Tax rate has also gone up. The government had upped the rate to 14.5% in the budget this year and a krishi Kalyan cess of 0.5% from June 2016 will take it up to 15%. This move is also an indicator that the government is bringing the service tax rate closer to the RNR rate of 17 to 18% in the GST. This will avoid a steep hike for the service tax rate when the Goods and Services Tax is finally implemented.

The indicators from the government are firm and clear that it is going ahead with its GST reform process. They are utilizing the time delays to set the tax administration in order. The industry, trade and dealerships would do well to iron out their tax issues and gear up their infrastructure and resources for the biggest tax reform of the times, in India.