Download: Union Budget 2016-17 — Full speech of Arun Jaitley
















Download: Union Budget 2016-17 — Full speech of Arun Jaitley
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CONTENTS
PART - A
Page No.
Introduction 1
Agriculture and Farmers' Welfare 4
Rural Sector 7
Social Sector including Health Care 9
Education, Skills and Job Creation 11
Infrastructure and Investment 13
Financial Sector Reforms 17
Governance and Ease of Doing Business 19
Fiscal Discipline 20
PART - B
TAX REFORMS
Relief to small tax payers 23
Measures to boost growth and employment
generation 24
Incentivising domestic value addition
to help Make in India 26
Measures for moving towards a
pensioned society 26
Measures for promoting affordable housing 27
Additional resource mobilization for agriculture,
rural economy and clean environment 27
Reducing litigation and providing certainty
in taxation 29
Simplification and rationalization of taxation 31
Use of Technology for creating accountability 32
Conclusion 33
Annexes
(ii)
Annexes to Part –A
Annex-I : Proposed Changes/Reforms
in FDI and Related Policies 34
Annex-II : Measures for Deepening
of Corporate Bond Market 35
Annex-III-A : Allocations of Important
Ministries, Sectors and Vulnerable
Sections 36
Annex-III-B : Allocations of Important
Schemes 37
Annex-III-C : Resources Transferred to
State and U.T. Governments 39
Annexes to Part – B
Direct Tax 40
Indirect Tax 49
Other Legislative Amendments 71
Budget 2016-2017
Speech of
Arun Jaitley
Minister of Finance
February 29, 2016
Madam Speaker,
I rise to present the Budget for the year 2016-17.
2. I am presenting this Budget when the global economy is in serious
crisis. Global growth has slowed down from 3.4% in 2014 to 3.1% in 2015.
Financial markets have been battered and global trade has contracted.
Amidst all these global headwinds, the Indian economy has held its ground
firmly. Thanks to our inherent strengths and the policies of this Government,
a lot of confidence and hope continues to be built around India.
3. The International Monetary Fund has hailed India as a ‘bright spot’
amidst a slowing global economy. The World Economic Forum has said that
India’s growth is ‘extraordinarily high’. We accomplished this despite very
unfavourable conditions and despite the fact that we inherited an economy of
low growth, high inflation and zero investor confidence in Government’s
capability to govern. We converted these difficulties and challenges into
opportunities.
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4. Let us look at our achievements compared to the last three years of
the previous Government when growth had decelerated to 6.3%. The growth
of GDP has now accelerated to 7.6%. This was possible notwithstanding the
contraction of global exports by 4.4% compared to 7.7% growth in world
exports during the last three years of the previous Government. CPI inflation
was at 9.4% during the last three years of the previous Government. Under
our Government, CPI inflation has come down to 5.4%, providing big relief
to the public. This was accomplished despite two consecutive years of
monsoon shortfall of 13%, compared to normal rainfall in the last three years
of the previous Government.
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5. Our external situation is robust. The Current Account deficit has
declined from 18.4 billion US dollars in the first half of last year to 14.4
billion this year. It is projected to be 1.4% of GDP at the end of this year.
Our foreign exchange reserves are at the highest ever level of about 350
billion US dollars.
6. Our initiatives in the last 21 months have not only placed the
economy on a faster growth trajectory but have bridged the trust deficit,
created by the previous Government. We had to work in an unsupportive
global environment, adverse weather conditions and an obstructive political
atmosphere.
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7. We believe in the principle that money with the Government belongs
to the people and we have the sacred responsibility to spend it prudently and
wisely for the welfare of our people, especially the poor and the
downtrodden. We have increased our Plan expenditure at the RE stage in
2015-16 in contrast to the usual practice of reducing it. We achieved this
despite adopting the Fourteenth Finance Commission recommendations
which increased devolution to the States by 55%.
8. We must now look ahead. The risks of further global slowdown and
turbulence are mounting. This complicates the task of economic
management for India. It has three serious implications for us. First, we
must strengthen our firewalls against these risks by ensuring macro- economic stability and prudent fiscal management. Second, since foreign
markets are weak, we must rely on domestic demand and Indian markets to
ensure that India’s growth does not slow down. And third, we must continue
with the pace of economic reforms and policy initiatives to change the lives
of our people for the better.
9. We see these challenges as opportunities. The financial years
2015-16 and 2016-17 have been and will be extremely challenging for
Government expenditure. The 14th Finance Commission has reduced the
Central share of taxes to 58% from the 68%. In the financial year 2015-16,
we managed to improve upon the budgeted expenditure due to revenue
buoyancy, notwithstanding the steep reduction in the Central share of taxes. The next financial year 2016-17 will cast an additional burden on account of
the recommendations of the 7th Central Pay Commission and the
implementation of Defence OROP. The Government, therefore, has to
prioritise its expenditure. We wish to enhance expenditure in the farm and
rural sector, the social sector, the infrastructure sector and provide for
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recapitalisation of the banks. This will address those sectors which need
immediate attention. Once the Government discharges these priority
obligations, it shall then focus on other areas which are also of utmost
priority to the Government.
10. While increasing the outlay of various social sector programmes, the
Government will undertake three major schemes to help the weaker sections
of the society. The Pradhan Mantri Fasal Bima Yojana has already been
announced to protect the farmer from the adverse consequences of nature.
The farmer will pay a nominal amount of insurance premium and get the
highest ever compensation in the event of any loss suffered. A health
insurance scheme which protects one-third of India’s population against
hospitalisation expenditure is also being announced. The Government is
also launching a new initiative to ensure that the BPL families are
provided with a cooking gas connection, supported by a Government
subsidy. This will significantly improve the health of women and those BPL
families who suffer adversely from the ill-effects of Chulha cooking.
11. The Annual Budget is also an opportunity for the Government to
outline its priorities for the year to come. The priority of our Government is
clearly to provide additional resources for vulnerable sections, rural areas
and social and physical infrastructure creation. The Government shall also
endeavour to continue with the ongoing reform programme and ensure the
passage of the Constitutional amendments to enable the implementation of
the Goods and Service Tax, the passage of Insolvency and Bankruptcy law
and other important reform measures which are pending before the
Parliament.
12. Additionally, as I will elaborate later, we will undertake significant
reforms, such as the enactment of a law to ensure that all Government
benefits are conferred upon persons who deserve it, by giving a statutory
backing to the AADHAR platform; bringing significant changes in the
legislative framework relating to the transport sector so as to free it from
constraints and restrictions; incentivising gas discovery and exploration by
providing calibrated marketing freedom; enactment of a comprehensive law
to deal with resolution of financial firms; providing legal framework for
dispute resolution in PPP projects and public utility contracts; undertaking
important banking sector reforms and public listing of general insurance
companies; and undertaking significant changes in FDI policy.
13. Our agenda for the next year is, therefore, to ‘Transform India’ in this
direction. My Budget proposals are, therefore, built on this transformative
agenda with nine distinct pillars. These include:
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(i) Agriculture and Farmers’ Welfare: with focus on doubling
farmers’ income in five years;
(ii) Rural Sector: with emphasis on rural employment and
infrastructure;
(iii) Social Sector including Healthcare: to cover all under welfare
and health services;
(iv) Education, Skills and Job Creation: to make India a
knowledge based and productive society;
(v) Infrastructure and Investment: to enhance efficiency and
quality of life;
(vi) Financial Sector Reforms: to bring transparency and stability;
(vii) Governance and Ease of Doing Business: to enable the people
to realise their full potential;
(viii) Fiscal Discipline: prudent management of Government
finances and delivery of benefits to the needy; and
(ix) Tax Reforms: to reduce compliance burden with faith in the
citizenry.
In each of these themes, I shall outline specific policy measures and
initiatives which would have a transformative impact on our economy and
the lives of our people.
I. Agriculture and Farmers' Welfare
14. Let me first take up Agriculture and Farmers’ Welfare. We are
grateful to our farmers for being the backbone of the country’s food security.
We need to think beyond ‘food security’ and give back to our farmers a
sense of ‘income security’. Government will, therefore, reorient its
interventions in the farm and non-farm sectors to double the income of the
farmers by 2022. Our total allocation for Agriculture and Farmers’ welfare
is ` 35,984 crore.
15. We need to address issues of optimal utilisation of our water
resources; create new infrastructure for irrigation; conserve soil fertility with
balanced use of fertilizer; and provide value addition and connectivity from
farm to markets.
16. Irrigation is a critical input for increasing agriculture production and
productivity. Out of 141 million hectares of net cultivated area in the
country, only 46% is covered with irrigation.
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17. The ‘Pradhan Mantri Krishi Sinchai Yojana’ has been strengthened
and will be implemented in mission mode. 28.5 lakh hectares will be brought
under irrigation under this Scheme. 18. Implementation of 89 irrigation projects under AIBP, which have
been languishing, will be fast tracked. This will help to irrigate 80.6 lakh
hectares. These projects require `17,000 crore next year and `86,500 crore
in the next five years. We will ensure that 23 of these projects are completed
before 31st March, 2017.
19. A dedicated Long Term Irrigation Fund will be created in
NABARD with an initial corpus of about `20,000 crore. To achieve all
these, a total provision of `12,517 crore has been made through
budgetary support and market borrowings in 2016-17.
20. Simultaneously a major programme for sustainable management
of ground water resources has been prepared with an estimated cost of
`6,000 crore and proposed for multilateral funding.
21. At least 5 lakh farm ponds and dug wells in rain fed areas and 10 lakh
compost pits for production of organic manure will be taken up by making
productive use of the allocations under MGNREGA.
22. The Soil Health Card Scheme is now being implemented with greater
vigour. Through this, farmers get information about nutrient level of the soil
and can make judicious use of fertilizers. The target is to cover all 14 crore
farm holdings by March 2017. `368 crore has been provided for National
Project on Soil Health and Fertility. Besides, 2,000 model retail outlets of
Fertilizer companies will be provided with soil and seed testing facilities
during the next three years. Fertilizer companies will also co-market city
compost which increases the efficacy of chemical fertilizer. A policy for
conversion of city waste into compost has also been approved by the
Government under the Swachh Bharat Abhiyan. 23. To increase crop yields in rain fed areas, which account for nearly
55% of the country’s arable land, organic farming is being promoted.
Towards this end, the Government has launched two important schemes.
First, the ‘Parmparagat Krishi Vikas Yojana’ which will bring 5 lakh acres
under organic farming over a three year period. Second, the Government has
launched a value chain based organic farming scheme called “Organic Value
Chain Development in North East Region”. The emphasis is on value
addition so that organic produce grown in these parts find domestic and
export markets. A total provision of `412 crore has been made for these
schemes.
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24. Incentives are being given for enhancement of pulses production.
`500 crores under National Food Security Mission has been assigned to
pulses. The number of districts covered has been increased to 622.
25. A national level competition will be held among 674 Krishi Vigyan
Kendras with a total prize money of `50 lakh to improve the efficiency
and performance of these Kendras. 26. Access to markets is critical for the income of farmers. The
Government is implementing the Unified Agriculture Marketing Scheme
which envisages a common e-market platform that will be deployed in
selected 585 regulated wholesale markets. Amendments to the APMC Acts
of the States are a pre-requisite to join this e-platform. I am happy to inform
that 12 States have already amended their APMC Acts and are ready to come
on board. More States are expected to join this platform in the coming year.
The Unified Agricultural Marketing E Platform will be dedicated to the
Nation on the birthday of Dr. Baba Saheb Ambedkar on 14th April this
year.
27. 97 lakh MT of storage capacity was added to the Central pool stock
during the current year.
28. We are implementing the Pradhan Mantri Gram Sadak Yojana
(PMGSY) as never before. This Scheme had suffered in the past because of
underfunding. The allocations in 2012-13 and 2013-14 were only `8,885
crore and `9,805 crore respectively. We have substantially increased the
allocation in the last two years and have now allocated `19,000 crore in
2016-17. Together with States’ share, totally about `27,000 crore will be
spent on this Yojana in 2016-17. Our goal is to advance the completion
target of the programme from 2021 to 2019 and connect the remaining
65,000 eligible habitations by constructing 2.23 lakh kms of roads.
Accordingly, the pace of construction which is currently 100 kms per day, as
compared to the average of 73.5 kms during 2011-14, will be substantially
stepped up.
29. To support farmers in the aftermath of natural calamities, Government has revised the norms of assistance under the National Disaster
Response Fund in April 2015.
30. Special focus has been given to ensure adequate and timely flow of
credit to the farmers. Against the target of `8.5 lakh crore in 2015-16, the
target for agricultural credit in 2016-17 will be an all-time high of `9 lakh
crore. To reduce the burden of loan repayment on farmers, a provision of
`15,000 crore has been made in the BE 2016-17 towards interest subvention.
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31. Government has approved the path breaking Crop Insurance Scheme,
namely, Prime Minister Fasal Bima Yojana. For effective implementation of
this Scheme, I have provided a sum of `5,500 crore in the Budget 2016-17.
32. We have to ensure that the benefit of MSP reaches farmers in all
parts of the country. Three specific initiatives will be taken up in 2016-17
for this. First, the remaining States will be encouraged to take up
decentralized procurement. Second, an online Procurement System will
be undertaken through the Food Corporation of India. This will usher
in transparency and convenience to the farmers through prior
registration and monitoring of actual procurement. Third, effective
arrangements have been made for pulses procurement.
33. Farmers also take up other allied activities to supplement their family
income. To make dairying more remunerative to the farmers, four new
projects will be taken up: first, the ‘Pashudhan Sanjivani’, an animal
wellness programme and provision of Animal Health Cards (‘Nakul
Swasthya Patra’); second, an Advanced breeding technology; third,
Creation of ‘E-Pashudhan Haat’, an e market portal for connecting
breeders and farmers; and fourth, a National Genomic Centre for
indigenous breeds. These projects will be implemented at a cost of `850
crores over the next few years.
34. There has been a visible rise in the yield of honey, from an average of
18 to 20 kg per box per annum in the year 2013-14 to 25 kg per box per
annum by 2015-16. The total production of honey in the country has
increased from 76,150 metric tonnes in 2014-15 to 86,500 metric tonnes.
90% of the domestic honey is now exported.
II. Rural Sector
35. After agriculture, I now turn to the other segments of the rural
economy.
36. A sum of `2.87 lakh crore will be given as Grant in Aid to Gram
Panchayats and Municipalities as per the recommendations of the 14th
Finance Commission. This is a quantum jump of 228% compared to the
previous five year period. The funds now allocated, translate to an average
assistance of over `80 lakh per Gram Panchayat and over `21 crore per
Urban Local Body. These enhanced allocations are capable of transforming
villages and small towns. Ministry of Panchayati Raj will work with the
States and evolve guidelines to actualise this.
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37. There is an urgent need to focus on areas of drought and rural
distress. Every block in these distress areas will be taken up as an intensive
Block under the Deen Dayal Antyodaya Mission. Formation of Self Help
Groups (SHGs) will be speeded up to promote multiple livelihoods. Cluster
Facilitation Teams (CFT) will be set up under MGNREGS to ensure water
conservation and natural resource management. These districts would also
be taken up on priority under Pradhan Mantri Krishi Sinchaii Yojna. 38. A sum of `38,500 crore has been allocated for MGNREGS in
2016-17.
39. 300 Rurban Clusters will be developed under the Shyama Prasad
Mukherjee Rurban Mission launched by the Honourable Prime Minister
recently. These Clusters will incubate growth centres in rural areas by
providing infrastructure amenities and market access for the farmers. They
will also expand employment opportunities for the youth.
40. As on 1st April, 2015, a total of 18,542 villages were not electrified.
The Honourable Prime Minister, in his address to the Nation on 15th August,
2015 announced that the remaining villages will be electrified within the
next 1000 days.
41. As on 23rd February, 2016, 5542 villages have been electrified. This
is more than the total combined achievement of previous three years. The
Government is committed to achieve 100% village electrification by
1
st May, 2018. ` 8,500 crore has been provided for Deendayal Upadhayaya
Gram Jyoti Yojna and Integrated Power Development Schemes.
42. Swachh Bharat Mission is India’s biggest drive to improve sanitation
and cleanliness, especially in rural India. This subject was very close to the
heart of the Father of the Nation. For the first time since independence, the
Parliament held a comprehensive debate on sanitation. This has become a
topic of discussion in almost every home. We have introduced ranking of
urban areas in sanitation which has resulted in constructive competition
among towns and cities. ` 9,000 crore has been provided for Swachh Bharat
Abhiyan.
43. In order to continue this momentum, priority allocation from
Centrally Sponsored Schemes will be made to reward villages that have
become free from open defecation. 44. We need to derive greater benefit from our demographic advantage.
We need to spread digital literacy in rural India. Of the 16.8 crore rural
households as many as 12 crore households do not have computers and are
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unlikely to have digitally literate persons. We have already approved two
Schemes to promote digital literacy: National Digital Literacy Mission; and
Digital Saksharta Abhiyan (DISHA). We now plan to launch a new Digital
Literacy Mission Scheme for rural India to cover around 6 crore
additional households within the next 3 years. Details of this scheme will
be spelt out separately.
45. Modernisation of land records is critical for dispute free titles. The
National Land Record Modernisation Programme has been revamped under
the Digital India Initiative and will be implemented as a Central sector
scheme with effect from 1
st April, 2016. The revamped Programme will
build an integrated land information management system. `150 crore has
been provided for this purpose.
46. Panchayat Raj Institutions need to develop governance capabilities to
deliver on the Sustainable Development Goals. It is, therefore, proposed to
launch a new restructured scheme, namely, Rashtriya Gram Swaraj
Abhiyan, for which `655 crore is being set apart in 2016-17.
47. For rural development as a whole, I have allocated ` 87,765 crore in
the Budget for 2016-17.
III. Social Sector including Health Care
48. When asked what he intends doing for regeneration of India, Swami
Vivekananda had said “no amount of politics would be of any avail until the
masses in India are well educated, well fed and well cared for”. I now
proceed to present the key elements of my proposals in the Social Sector.
49. In our country, cooking gas cylinders were considered an upper
middle class luxury. Gradually it spread to the middle class. But the poor do
not have access to cooking gas. Women of India have faced the curse of
smoke during the process of cooking. According to experts having an open
fire in the kitchen is like burning 400 cigarettes an hour. The time has come
to remedy this situation.
50. We have decided to embark upon on a massive mission to
provide LPG connection in the name of women members of poor
households. I have set aside a sum of `2,000 crore in this year’s Budget
to meet the initial cost of providing these LPG connections. This will
benefit about 1 crore 50 lakh households below the poverty line in 2016-17.
The Scheme will be continued for at least two more years to cover a total of
5 crore BPL households. This will ensure universal coverage of cooking gas
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in the country. This measure will empower women and protect their health.
It will reduce drudgery and the time spent on cooking. It will also provide
employment for rural youth in the supply chain of cooking gas.
51. I want to take this opportunity to express our gratitude and
appreciation for the 75 lakh middle class and lower middle class households
who have voluntarily given up their cooking gas subsidy, in response to the
call given by the Hon’ble Prime Minister. Their gesture is a matter of pride
for the country.
52. Catastrophic health events are the single most important cause of
unforeseen out-of-pocket expenditure which pushes lakhs of households
below the poverty line every year. Serious illness of family members cause
severe stress on the financial circumstances of poor and economically weak
families, shaking the foundation of their economic security. In order to
help such families, the Government will launch a new health protection
scheme which will provide health cover up to Rs.One lakh per family.
For senior citizens of age 60 years and above belonging to this category,
an additional top-up package up to `30,000 will be provided.
53. Making quality medicines available at affordable prices has been a
key challenge. We will reinvigorate the supply of generic drugs. 3,000
Stores under Prime Minister’s Jan Aushadhi Yojana will be opened during
2016-17.
54. About 2.2 lakh new patients of End Stage Renal Disease get added in
India every year resulting in additional demand for 3.4 crore dialysis
sessions. With approximately 4,950 dialysis centres in India, largely in the
private sector and concentrated in the major towns, the demand is only half
met. Every dialysis session costs about `2,000 – an annual expenditure of
more than `3 lakh. Besides, most families have to undertake frequent trips,
often over long distances, to access dialysis services, incurring heavy travel
costs and loss of wages.
55. To address this situation, I propose to start a ‘National Dialysis
Services Programme’. Funds will be made available through PPP mode
under the National Health Mission, to provide dialysis services in all
district hospitals. To reduce the cost, I propose to exempt certain parts
of dialysis equipment from basic customs duty, excise/CVD and SAD.
56. Scheduled Caste and Scheduled Tribe entrepreneurs are beginning to
show great promise in starting and running successful business enterprises. The Prime Minister had given a call for promoting entrepreneurship among
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SC/ST to become job providers rather than job seekers. I am happy to
inform you that the Union Cabinet has approved the “Stand Up India
Scheme” to promote entrepreneurship among SC/ST and women. ` 500
crore has been provided for this purpose. The Scheme will facilitate at least
two such projects per bank branch, one for each category of entrepreneur.
This will benefit at least 2.5 lakh entrepreneurs.
57. We are celebrating the 125th Birth Anniversary of Dr. B.R.
Ambedkar. This must become the Year of Economic Empowerment for
SC/ST entrepreneurs. We have extensively interacted with the Dalit India
Chamber of Commerce and Industry on building an entrepreneurship eco- system. It is proposed to constitute a National Scheduled Caste and
Scheduled Tribe Hub in the MSME Ministry in partnership with industry
associations. This Hub will provide professional support to Scheduled Caste
and Scheduled Tribe entrepreneurs to fulfil the obligations under the Central
Government procurement policy 2012, adopt global best practices and
leverage the Stand Up India initiative.
58. The schemes for welfare and skill development for Minorities such as
Multi-sectoral Development Programme and USTAAD shall be
implemented effectively. IV. Education, Skills and Job Creation
59. I would now like to highlight the steps proposed to be taken under
education, skill development and job creation which is the fourth pillar of my
Budget proposals.
Education
60. After universalisation of primary education throughout the country,
we want to take the next big step forward by focusing on the quality of
education. An increasing share of allocation under Sarva Shiksha Abhiyan
will be allocated for this. Further, 62 new Navodaya Vidyalayas will be
opened in the remaining uncovered districts over the next two years.
61. It is our commitment to empower Higher Educational Institutions to
help them become world class teaching and research institutions. An
enabling regulatory architecture will be provided to ten public and ten
private institutions to emerge as world-class Teaching and Research
Institutions. This will enhance affordable access to high quality education
for ordinary Indians. A detailed scheme will be formulated.
62. We have decided to set up a Higher Education Financing Agency
(HEFA) with an initial capital base of `1,000 crores. The HEFA will be a
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not-for-profit organisation that will leverage funds from the market and
supplement them with donations and CSR funds. These funds will be
used to finance improvement in infrastructure in our top institutions and will
be serviced through internal accruals.
63. To help Students, Higher Education Institutions and Employers to
access degree certificates of candidates, it is proposed to establish a Digital
Depository for School Leaving Certificates, College Degrees, Academic
Awards and Mark sheets, on the pattern of a Securities Depository. This
will help validate their authenticity, safe storage and easy retrieval.
Skill Development
64. “Skill India” mission seeks to capitalise our demographic advantage.
Since its launch, the National Skill Development Mission has created an
elaborate skilling eco-system and imparted training to 76 lakh youth. We
want to bring entrepreneurship to the doorsteps of youth through Pradhan
Mantri Kaushal Vikas Yojana (PMKVY). We have decided to set up 1500
Multi Skill Training Institutes across the country. I am setting aside an
amount of `1,700 crore for these initiatives.
65. We have decided to set up a National Board for Skill Development
Certification in partnership with the industry and academia. We propose to
further scale up Pradhan Mantri Kaushal Vikas Yojna to skill one crore
youth over the next three years.
66. Entrepreneurship Education and Training will be provided in
2200 colleges, 300 schools, 500 Government ITIs and 50 Vocational
Training Centres through Massive Open Online Courses. Aspiring
entrepreneurs, particularly those from remote parts of the country, will be
connected to mentors and credit markets.
Job Creation
67. In order to incentivize creation of new jobs in the formal sector,
Government of India will pay the Employee Pension Scheme
contribution of 8.33% for all new employees enrolling in EPFO for the
first three years of their employment. This will incentivize the employers
to recruit unemployed persons and also to bring into the books the informal
employees. In order to channelize this intervention towards the target group
of semi-skilled and unskilled workers, the scheme will be applicable to those
with salary up to `15,000 per month. I have made a budget provision of
`1,000 crore for this scheme.
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68. Further, the Finance Bill, 2016 proposes to broaden and liberalize the
scope of the employment generation incentive available under Section
80JJAA of the Income Tax Act. The deduction will be available not only to
assessees deriving income from manufacture of goods in a factory but to all
assessees who are subject to statutory audit under the Act. Thus, a deduction
of 30% of the emoluments paid to such employees can be claimed for three
years. The minimum number of days for which they should be employed
during the year is proposed to be reduced from 300 to 240 days. No
deduction will, however, be admissible in respect of employees whose
monthly emoluments exceed `25,000. Also, no deduction will be admissible
in respect of employees for whom the Government is paying the entire EPS
contribution.
69. A National Career Service was launched in July, 2015. Already 35
million jobs seekers have registered on this platform. We propose to make
100 Model Career Centres operational by the end of 2016-17. We also
propose to inter-link State Employment Exchanges with the National Career
Service platform. 70. Retail Trade is the largest service sector employer in the country.
Many more jobs can be created in this sector, provided the regulations are
simplified. If Shopping Malls are kept open all seven days of the week,
why not the small and medium shops? These shops should be given the
choice to remain open on all seven days of the week on voluntary basis.
The interest of the workers in terms of mandatory weekly holiday, number of
working hours per day, etc., of course, have to be protected. We propose to
circulate a Model Shops and Establishments Bill which can be adopted by
the State Governments on voluntary basis.
V. Infrastructure and Investment
71. The fifth support pillar of the Budget theme ‘Transform India’ is
infrastructure and investment.
72. In the road sector, there were more than 70 projects that were
languishing at the beginning of the year, due to legacy factors. Aggregate
length of these projects was about 8,300 kms involving more than `1 lakh
crore investment. With exemplary and proactive interventions, nearly 85%
of these projects have been put back on track.
73. India’s highest ever kilometres of new highways were awarded in
2015. At the same time, India’s highest ever production of motor vehicles
was achieved in 2015. This is a sign of growth in the economy; but it
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presents a challenge also. Therefore, we have speeded up the process of road
construction. I have proposed an allocation of `55,000 crore in the Budget
for Roads and Highways. This will be further topped up by additional
`15,000 crore to be raised by NHAI through bonds. Thus the total
investment in the road sector, including PMGSY allocation, would be
`97,000 crore during 2016-17.
74. Together with the capital expenditure of the Railways, the total
outlay on roads and railways will be `2,18,000 crore in 2016-17.
75. We further expect to approve nearly 10,000 kms of National
Highways in 2016-17. This will be much higher than in the two previous
years. The pace of completion of road projects will also rise to nearly 10,000
kms in 2016-17. In addition, nearly 50,000 kms of State highways will also
be taken up for up-gradation as National Highways.
76. The total outlay for infrastructure in BE 2016-17 stands at `2,21,246
crore.
77. Passenger traffic on our roads has to be made more efficient for the
benefit of the common man and the middle class. This is a totally
unreformed sector which suffers from several impediments. Abolition of
permit-raj will be our medium term goal. Government will enact necessary
amendments in the Motor Vehicles Act and open up the road transport
sector in the passenger segment. An enabling eco-system will be
provided for the States which will have the choice of adopting the new
legal framework. Entrepreneurs will be able to operate buses on various
routes, subject to certain efficiency and safety norms. The major benefits of
this game changing initiative will be provision of more efficient public
transport facilities, greater public convenience, new investment in this
moribund sector, creation of new jobs for our youth, growth of start-up
entrepreneurs and other multiplier effects. These measures will take us faster
down the road to development.
78. In 2015, India’s major ports have handled the highest ever quality of
cargo. We have also added the highest ever capacity in major ports. We
have started a series of measures for modernizing the ports and increasing
their efficiency. The Sagarmala project has already been rolled out. We are
planning to develop new greenfield ports both in the eastern and western
coasts of the country. The work on the National Waterways is also being
expedited. `800 crore has been provided for these initiatives.
79. In the civil aviation sector, the Government is drawing up an action
plan for revival of unserved and underserved airports. There are about 160
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airports and air strips with State Governments which can be revived at an
indicative cost of `50 crore to `100 crore each. We will partner with the
State Governments to develop some of these airports for regional
connectivity. Similarly, 10 of the 25 non-functional air strips with the
Airport Authority of India will also be developed.
80. India is blessed with rich natural resources including oil and gas.
However, their discovery and exploitation has been below our potential.
Imports of hydrocarbons occupy a large share of India’s total imports. There
is a situation of rising demand, near stagnation in production and consequent
rapid increase in imports. As part of our drive towards self-sufficiency, the
Government is considering to incentivise gas production from deep-water,
ultra deep-water and high pressure-high temperature areas, which are
presently not exploited on account of higher cost and higher risks. A
proposal is under consideration for new discoveries and areas which are
yet to commence production, first, to provide calibrated marketing
freedom; and second, to do so at a pre-determined ceiling price to be
discovered on the principle of landed price of alternative fuels.
81. In the other segments of the infrastructure sector, our Government
has achieved the highest coal production growth in over two decades, highest
ever capacity addition in generation, highest ever increase in transmission
lines and in distribution of LED bulbs.
82. In the power sector, we need to diversify the sources of power
generation for long term stability. Government is drawing up a
comprehensive plan, spanning next 15 to 20 years, to augment the
investment in nuclear power generation. Budgetary allocation up to `3,000
crore per annum, together with public sector investments, will be leveraged
to facilitate the required investment for this purpose.
83. To augment infrastructure spending further, Government will permit
mobilisation of additional finances to the extent of `31,300 crore by NHAI,
PFC, REC, IREDA, NABARD and Inland Water Authority through raising
of Bonds during 2016-17. 84. Our private sector plays an important role in the development of
infrastructure, many of which are implemented in the Public Private
Partnership (PPP) mode. I would like to announce three new initiatives to
reinvigorate this sector.
(i) A Public Utility (Resolution of Disputes) Bill will be
introduced during 2016-17 to streamline institutional
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arrangements for resolution of disputes in infrastructure
related construction contracts, PPP and public utility
contracts;
(ii) Guidelines for renegotiation of PPP Concession
Agreements will be issued, keeping in view the long term
nature of such contracts and potential uncertainties of the
real economy, without compromising transparency;
(iii) A new credit rating system for infrastructure projects
which gives emphasis to various in-built credit
enhancement structures will be developed, instead of
relying upon a standard perception of risk which often
result in mispriced loans.
85. I would like to announce further reforms in our FDI policy. The
changes proposed are in the areas of insurance and pension, Asset
Reconstruction Companies, Stock Exchanges, etc. Details of the changes are
given in Annex I of the Budget Speech.
86. The duty drawback scheme has been widened and deepened to
include more products and countries. The Government will continue to take
measures to support the export sector.
87. Our FDI policy has to address the requirements of farmers and food
processing industry. A lot of fruits and vegetables grown by our farmers
either do not fetch the right prices or fail to reach the markets. Food
processing industry and trade should be more efficient. 100% FDI will be
allowed through FIPB route in marketing of food products produced and
manufactured in India. This will benefit farmers, give impetus to food
processing industry and create vast employment opportunities.
88. A new policy for management of Government investment in
Public Sector Enterprises, including disinvestment and strategic sale,
has been approved. We have to leverage the assets of CPSEs for generation
of resources for investment in new projects. We will encourage CPSEs to
divest individual assets like land, manufacturing units, etc. to release
their asset value for making investment in new projects. The NITI Aayog
will identify the CPSEs for strategic sale.
89. We will adopt a comprehensive approach for efficient management
of Government investment in CPSEs by addressing issues such as capital
restructuring, dividend, bonus shares, etc. The Department of
Disinvestment is being re-named as the “Department of Investment and
Public Asset Management (DIPAM)”.
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VI. Financial Sector Reforms
90. A vibrant financial sector is of critical importance to the growth of
every economy. In my last two Budgets, I had announced several measures
in this regard. I would now like to announce the following initiatives:
(i) A systemic vacuum exists with regard to bankruptcy situations
in financial firms. A comprehensive Code on Resolution of
Financial Firms will be introduced as a Bill in the Parliament
during 2016-17. This Code will provide a specialised
resolution mechanism to deal with bankruptcy situations in
banks, insurance companies and financial sector entities. This
Code, together with the Insolvency and Bankruptcy Code 2015,
when enacted, will provide a comprehensive resolution
mechanism for our economy.
(ii) The RBI Act 1934, is being amended to provide statutory basis
for a Monetary Policy Framework and a Monetary Policy
Committee through the Finance Bill 2016. A committee-based
approach will add lot of value and transparency to monetary
policy decisions.
(iii) A Financial Data Management Centre under the aegis of the
Financial Stability Development Council (FSDC) will be set up
to facilitate integrated data aggregation and analysis in the
financial sector.
(iv) To improve greater retail participation in Government
securities, RBI will facilitate their participation in the primary
and secondary markets through stock exchanges and access to
NDS-OM trading platform.
(v) New derivative products will be developed by SEBI in the
Commodity Derivatives market.
(vi) To facilitate deepening of corporate bond market, a number
of measures will be undertaken, details of which are given in
Annex II of the Budget Speech. The enactment of Insolvency
and Bankruptcy Code would provide a major boost to the
development of the corporate bond market.
(vii) To tackle the problem of stressed assets in the banking sector,
Asset Reconstruction Companies (ARCs) have a very important
role. I therefore, propose to make necessary amendments in
the SARFAESI Act 2002 to enable the sponsor of an ARC to
hold up to 100% stake in the ARC and permit non-institutional
investors to invest in Securitization Receipts.
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(viii) In the recent past, there have been rising instances of people in
various parts of the country being defrauded by illicit deposit
taking schemes. The worst victims of these schemes are the
poor and the financially illiterate. The operation of such
schemes are often spread over many States. I, therefore,
propose to bring in comprehensive Central legislation in
2016-17 to deal with the menace of such schemes.
(ix) I also propose to amend the SEBI Act 1992 in the coming year
to provide for more members and benches of the Securities
Appellate Tribunal.
91. As the Honourable Members are well aware, the strength of the
financial sector is dependent upon a strong and well-functioning Banking
system. We already have a comprehensive ‘Plan For Revamping of Public
Sector Banks’, INDRADHANUSH, which is under implementation. We are
now confronted with the problem of stressed assets in Public Sector Banks,
which is a legacy from the past. Several steps have already been taken in
this regard. We are not interfering in lending and personnel matters of the
Banks. Structural issues have been addressed in various sectors like Power,
Coal, Highways, Sugar and Steel. The Banks are putting in special efforts to
effect recoveries, with a focus on reviving stalled projects.
92. To support the Banks in these efforts as well as to support credit
growth, I have proposed an allocation of `25,000 crore in BE 2016-17
towards recapitalisation of Public Sector Banks. If additional capital is
required by these Banks, we will find the resources for doing so. We stand
solidly behind these Banks.
93. Our Public Sector Banks will have to be strong and competitive.
The Bank Board Bureau will be operationalized during 2016-17 and a
roadmap for consolidation of Public Sector Banks will be spelt out. The
process of transformation of IDBI Bank has already started. Government will
take it forward and also consider the option of reducing its stake to below
50%.
94. For speedier resolution of stressed assets, the Debt Recovery
Tribunals will be strengthened with focus on improving the existing
infrastructure, including computerised processing of court cases, to support
reduction in the number of hearings and faster disposal of cases.
95. The Pradhan Mantri Mudra Yojana (PMMY) was launched for the
benefit of bottom of the pyramid entrepreneurs. Banks and NBFC-MFIs
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have reported that the amount sanctioned under PMMY had reached about
Rs.One lakh crore to over 2.5 crore borrowers by early February this year. I
propose to increase the target next year to `1,80,000 crore.
96. To provide better access to financial services, especially in rural
areas, we will undertake a massive nationwide rollout of ATMs and Micro
ATMs in Post Offices over the next three years.
97. Public shareholding in Government-owned companies is a means of
ensuring higher levels of transparency and accountability. To promote this
objective, the general insurance companies owned by the Government will
be listed in the stock exchanges.
VII. Governance and Ease of Doing Business
98. Our Government is giving unparalleled emphasis to good governance
with special focus on process reforms, IT-enabled Government processes,
etc. The whole idea is to remove the irritants for the public in their
interface with Government agencies.
99. A Task Force has been constituted for rationalisation of human
resources in various Ministries. A comprehensive review and rationalisation
of autonomous bodies is also underway.
100. A critical component of minimum Government and maximum
governance is to ensure targeted disbursement of Government subsidies and
financial assistance to the actual beneficiaries. Public money should reach
the poor and the deserving without any leakage. Three specific initiatives
are proposed to achieve this objective.  First, we will introduce a bill for Targeted Delivery of Financial and
Other Subsidies, Benefits and Services by using the Aadhar
framework. The bill will be introduced in the current Budget Session
of the Parliament. The Aadhar number or authentication shall not, however, confer any right of citizenship or domicile. A social
security platform will be developed using Aadhar to accurately target
beneficiaries. This will be a transformative piece of legislation which
will benefit the poor and the vulnerable.  Second, we have already introduced Direct Benefit Transfer in LPG.
Based on this successful experience, we propose to introduce DBT on
pilot basis for fertilizer in a few districts across the country, with a
view to improving the quality of service delivery to farmers.  Third, of the 5.35 lakh Fair Price Shops in the country, automation
facilities will be provided in 3 lakh Fair Price Shops by March 2017.
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101. We have to bring more transparency and efficiency in Government
procurement of goods and services. The Director General of Supplies and
Disposal (DGS&D) will establish a technology driven platform to facilitate
procurement of goods and services by various Ministries and agencies of the
Government.
102. To remove the difficulties and impediments to ease of doing
business, we will introduce a bill to amend the Companies Act, 2013 in the
current Budget Session of the Parliament. The Bill would also improve the
enabling environment for start-ups. The registration of companies will also
be done in one day.
103. Monitoring of prices of essential commodities is a key element of
good governance. A number of measures have been taken to deal with the
problem of abrupt increase in prices of pulses. Government has approved
creation of buffer stock of pulses through procurement at Minimum Support
Price and at market price through Price Stabilisation Fund. This Fund has
been provided with a corpus of `900 crore to support market interventions. 104. Madam Speaker, for good governance, we have to capitalise on the
country’s unity in diversity. To strengthen understanding of each other, it is
proposed to create a closer engagement between different States and Districts
in a structured manner. “Ek Bharat Shreshtha Bharat” programme will be
launched to link States and Districts in an annual programme that
connects people through exchanges in areas of language, trade, culture,
travel and tourism. We will do this through mutual agreement with
participating States and Districts.
105. In 2017, the country will celebrate 70th Anniversary of our
Independence. We will chalk out milestones for nation’s journey beyond the
70th Anniversary of Independence. Dr. Toynbee, the historian, had observed
that “a chapter which had a Western beginning will have to have an Indian
ending…..”. My belief is that the year 2017 will unfold the great historian’s
dream. Our scheme of “Ek Bharat Shreshtha Bharat” is part of this vision.
VIII. Fiscal Discipline
106. Let me now elaborate on the fiscal situation in the context of the
Budget for the year 2016-17.
107. While preparing this Budget, I have received conflicting suggestions
about the FRBM roadmap. Different schools of thought have argued either
in favour of fiscal consolidation and stability or for a less aggressive
21
consolidation and for boosting growth. I have weighed the policy options
and decided that prudence lies in adhering to the fiscal targets.
Consequently, the fiscal deficit in RE 2015-16 and BE 2016-17 have been
retained at 3.9% and 3.5% of GDP respectively. While doing so, I have
ensured that the development agenda has not been compromised.
108. The total expenditure in the Budget for 2016-17 has been projected
at `19.78 lakh crore, consisting of `5.50 lakh crore under Plan and `14.28
lakh crore under Non-Plan. The increase in Plan expenditure is in the order
of 15.3% over current year BE. Plan Allocations have given special
emphasis to sectors like agriculture, irrigation, social sector including health,
women and child development, welfare of Scheduled Castes and Scheduled
Tribes, minorities, infrastructure, etc. Continuing with the policy of higher
empowering States, the total resources being transferred to States are
`99,681 crore more over RE 2015-16 and `2,46,024 crore more over Actuals
of 2014-15. Details of allocations in certain vital sectors and schemes and
transfers to States are given in Annex III to the Speech.
109. This is the last year of the 12th Plan. Successive committees have
questioned the merit in having Plan and Non-Plan classification of
Government expenditure. A broad understanding over the years has been
that Plan expenditures are good and Non-Plan expenditures are bad. This
results in skewed allocations in the Budget. We need to correct this and give
greater focus to Revenue and Capital classification of Government
expenditure. We have, therefore, decided that the Plan-Non-Plan
classification will be done away with from fiscal 2017-18. The Finance
Ministry will closely work with the State Finance Departments to align
Central and State Budgets in this matter.
110. To improve the quality of Government expenditure, every new
scheme being sanctioned by Government will have a sunset date and
outcome review. A redeeming feature of this year’s Budget is that we
have improved upon the Revenue Deficit target from 2.8% to 2.5% of GDP
in RE 2015-16.
111. The FRBM Act has been under implementation for more than a
decade. Both Central and State Governments have made significant gains
from the implementation of this Act. There is now a school of thought
which believes that instead of fixed numbers as fiscal deficit targets, it may
be better to have a fiscal deficit range as the target, which would give
necessary policy space to the Government to deal with dynamic situations.
There is also a suggestion that fiscal expansion or contraction should be
aligned with credit contraction or expansion respectively, in the economy.
22
While remaining committed to fiscal prudence and consolidation, a time has
come to review the working of the FRBM Act, especially in the context of
the uncertainty and volatility which have become the new norms of global
economy. I, therefore, propose to constitute a Committee to review the
implementation of the FRBM Act and give its recommendations on the way
forward.
112. As the Honourable Members are aware, the Seventh Central Pay
Commission has submitted its Report. Following the past practice, a
Committee has been constituted to examine the Report and give its
recommendations. In the meantime, I have made necessary interim
provisions in the Budget.
113. We have rationalised and restructured more than 1500 Central Plan
Schemes into about 300 Central Sector and 30 Centrally Sponsored
Schemes. This will avoid overlapping of expenditure. I reiterate that I
remain committed to the financial requirements arising from economic
packages that have been announced by our Government and also
commitments emanating from reorganisation of States.
114. I have also allocated initial sums of `100 crore each for celebrating
the Birth Centenary of Pandit Deen Dayal Upadhyay and the 350th Birth
Anniversary of Guru Gobind Singh.
IX. Tax Reforms
115. I now turn to Tax Reforms which is elaborated in Part B of my
Budget Speech.
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PART B
Madam Speaker,
116. I shall now present my tax proposals
117. The Government acknowledges the role of taxpayers in nation
building. Each rupee of tax contributes towards the Government’s efforts to
provide better infrastructure, rural revival and social well-being. Taxation is
a major tool available to Government for removing poverty and inequality
from the society. The posterity will not forgive us if we do not use this
opportunity in this perspective.
The thrust of my tax proposals this year falls in nine categories:-
(1) Relief to small tax payers. (2) Measures to boost growth and employment generation. (3) Incentivizing domestic value addition to help Make in India.
(4) Measures for moving towards a pensioned society. (5) Measures for promoting affordable housing. (6) Additional resource mobilization for agriculture, rural economy
and clean environment. (7) Reducing litigation and providing certainty in taxation. (8) Simplification and rationalization of taxation. (9) Use of Technology for creating accountability. Relief to small tax payers
118. In order to lessen tax burden on individuals with income not
exceeding `5 lakhs, I propose to raise the ceiling of tax rebate under section
87A from `2,000 to `5,000. There are 2 crore tax payers in this category
who will get a relief of `3,000 in their tax liability.
119. The people who do not have any house of their own and also do not
get any house rent allowance from any employer today get a deduction of
`24,000 per annum from their income to compensate them for the rent they
pay. I propose to increase the limit of deduction in respect of rent paid under
section 80GG from `24,000 per annum to `60,000 per annum, which should
provide relief to those who live in rented houses.
120. Presumptive taxation scheme under section 44AD of the Income Tax
Act is available for small and medium enterprises i.e non corporate
businesses with turnover or gross receipts not exceeding one crore rupees.
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At present about 33 lakh small business people avail of this benefit, which
frees them from the burden of maintaining detailed books of account and
getting audit done. I propose to increase the turnover limit under this scheme
to Rupees two crores which will bring big relief to a large number of
assesses in the MSME category.
121. I also propose to extend the presumptive taxation scheme to
professionals with gross receipts up to `50 lakh with the presumption of
profit being 50% of the gross receipts. Measures to boost growth and employment generation
122. I had, in my last budget speech mooted the proposal to reduce the rate
of Corporate Tax from 30% to 25% over a period, accompanied by
rationalization and removal of various tax exemptions and incentives. In any
case the effective rate of tax paid by companies comes to an average of 24.67
% because of various exemptions which they are availing of. A phasing out
plan of removing these exemptions and tax incentives was placed in public
domain and we have received a large number of constructive suggestions.
The final plan of phasing out exemptions is given in Annexure. The
highlights are as follows:-
(a) The accelerated depreciation provided under IT Act will be
limited to maximum 40% from 1.4.2017. (b) The benefit of deductions for Research would be limited to
150% from 1.4.2017 and 100% from 1.4.2020. (c) The benefit of section 10AA to new SEZ units will be available
to those units which commence activity before 31.3.2020.
(d) The weighted deduction under section 35CCD for skill
development will continue up to 1.4.2020. 123. The reduction in corporate tax rate has to be calibrated with
additional revenue expected from the incentives being phased out. The
benefits from phasing out of exemptions are available to Government only
gradually. In the first phase, therefore, I propose the following two changes
in corporate income-tax rates:-
(a) The new manufacturing companies which are incorporated on
or after 1.3.2016 are proposed to be given an option to be taxed
at 25% + surcharge and cess provided they do not claim profit
linked or investment linked deductions and do not avail of
investment allowance and accelerated depreciation.
(b) I also propose to lower the corporate income tax rate for the
next financial year of relatively small enterprises i.e companies
with turnover not exceeding `5 crore (in the financial year
ending March 2015), to 29% plus surcharge and cess.
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124. Startups generate employment, bring innovation and are expected to
be key partners in Make in India programme. I propose to assist their
propagation through 100% deduction of profits for 3 out of 5 years for
startups set up during April 2016 to March 2019. MAT will apply in such
cases. Capital gains will not be taxed if invested in regulated/notified Fund
of Funds and by individuals in notified startups, in which they hold majority
shares.
125. Research is the driver of innovation and innovation provides a thrust
to economic growth. I propose a special patent regime with 10% rate of tax
on income from worldwide exploitation of patents developed and registered
in India.
126. In order to get more investment in Asset Reconstruction Companies
(ARCs) which play a very important role in resolution of bad debts, I
propose to provide complete pass through of income-tax to securitization
trusts including trusts of ARCs. The income will be taxed in the hands of the
investors instead of the trust. However, the trust will be liable to deduct tax
at source.
127. The period for getting benefit of long term capital gain regime in case
of unlisted companies is proposed to be reduced from three to two years.
128. Non-banking financial companies shall be eligible for deduction to
the extent of 5% of its income in respect of provision for bad and doubtful
debts.
129. The determination of residency of foreign company on the basis of
Place of Effective Management (POEM) is proposed to be deferred by one
year.
130. I would like to reiterate our commitment to implement General Anti
Avoidance Rules (GAAR) from 1.4.2017.
131. In order to meet with our commitment to BEPS initiative of OECD
and G-20, the Finance Bill, 2016 includes provision for requirement of
country by country reporting for companies with a consolidated revenue of
more than Euro 750 million.
132. I propose to exempt service tax on services provided under Deen
Dayal Upadhyay Grameen Kaushalya Yojana and services provided by
Assessing Bodies empanelled by Ministry of Skill Development &
Entrepreneurship.
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133. I propose to exempt service tax on general insurance services
provided under ‘Niramaya’ Health Insurance Scheme launched by National
Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental
Retardation and Multiple Disability.
134. To promote use of refrigerated containers, I propose to reduce the
basic custom and excise duty on them to 5% and 6% respectively.
135. A number of assistive devices, rehabilitation aids and other goods for
differently abled (Divyang) persons attract Nil basic customs duty. I propose
to extend this exemption to Braille paper.
Incentivising domestic value addition to help Make in India.
136. Customs and excise duty structure plays an important role in
incentivizing domestic value addition towards Make in India campaign of
our Government. In line with that, I propose to make suitable changes in
customs and excise duty rates on certain inputs, raw materials, intermediaries
and components and certain other goods and simplify procedures, so as to
reduce costs and improve competitiveness of domestic industry in sectors
like Information technology hardware, capital goods, defence production,
textiles, mineral fuels & mineral oils, chemicals & petrochemicals, paper,
paperboard & newsprint, Maintenance repair and overhauling [MRO] of
aircrafts and ship repair etc. Details of such changes are given in the
Annexure to Budget Speech.
Measures for moving towards a pensioned society
137. Pension schemes offer financial protection to senior citizens. I
believe that the tax treatment should be uniform for defined benefit and
defined contribution pension plans. I propose to make withdrawal up to 40%
of the corpus at the time of retirement tax exempt in the case of National
Pension Scheme.
138. In case of superannuation funds and recognized provident funds,
including EPF, the same norm of 40% of corpus to be tax free will apply in
respect of corpus created out of contributions made after 1.4.2016.
139. Further, the annuity fund which goes to the legal heir after the death
of pensioner will not be taxable in all three cases. Also, we are proposing a
monetary limit for contribution of employer in recognized Provident and
Superannuation Fund of `1.5 lakh per annum for taking tax benefit. 140. I propose to exempt from service tax the Annuity services provided
by the National Pension System (NPS) and Services provided by EPFO to
employees.
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141. I also propose to reduce service tax on Single premium Annuity
(Insurance) Policies from 3.5% to 1.4% of the premium paid in certain cases.
Measures for promoting affordable housing
142. Pradhan Mantri Awas Yojna embodies the assurance of the
Government to address the housing needs of all and more specifically the
poor, in a time bound manner. Construction of houses creates considerable
employment opportunities as well. In order to fuel activity in the housing
sector, I propose to give 100% deduction for profits to an undertaking from a
housing project for flats upto 30 sq. metres in four metro cities and 60 sq.
metres in other cities, approved during June 2016 to March 2019, and is
completed within three years of the approval. Minimum Alternate Tax will,
however, apply to these undertakings.
143. For the ‘first – home buyers’, I propose to give deduction for
additional interest of `50,000 per annum for loans up to `35 lakh sanctioned
during the next financial year, provided the value of the house does not
exceed `50 lakh.
144. Another proposal to stimulate housing activity is to facilitate
investments in Real Estate Investment Trusts. I propose that any distribution
made out of income of SPV to the REITs and INVITs having specified
shareholding will not be subjected to Dividend Distribution Tax.
145. It is proposed to exempt service tax on construction of affordable
houses up to 60 square metres under any scheme of the Central or State
Government including PPP Schemes.
146. I also propose to extend excise duty exemption, presently available to
Concrete Mix manufactured at site for use in construction work at such site
to Ready Mix Concrete. Additional resource mobilization for agriculture, rural economy and
clean environment
147. Dividend Distribution Tax (DDT) uniformly applies to all investors
irrespective of their income slabs. This is perceived to distort the fairness and
progressive nature of taxes. Persons with relatively higher income can bear a
higher tax cost. I, therefore, propose that in addition to DDT paid by the
companies, tax at the rate of 10% of gross amount of dividend will be
payable by the recipients, that is, individuals, HUFs and firms receiving
dividend in excess of `10 lakh per annum.
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148. I also propose to raise the surcharge from 12% to 15% on persons,
other than companies, firms and cooperative societies having income above
`1 crore.
149. I also propose to collect tax at source at the rate of 1% on purchase of
luxury cars exceeding value of Rs.ten lakh and purchase of goods and
services in cash exceeding Rs.two lakh. For compliant tax payers with
resources, this levy not only advances collection of tax when the expenditure
is incurred, but it provides data to the tax authorities to identify the persons
who incur such expenditure, but may be missing from the tax base. Farmers
and notified class of persons will have an option of giving a form by which
TCS will not be charged.
150. Rate of Securities Transaction tax in case of ‘Options’ is proposed to
be increased from .017% to .05%.
151. In order to tap tax on income accruing to foreign e-commerce
companies from India, it is proposed that a person making payment to a nonresident,
who does not have a permanent establishment, exceeding in
aggregate `1 lakh in a year, as consideration for online advertisement, will
withhold tax at 6% of gross amount paid, as Equalization levy. The levy will
only apply to B2B transactions.
152. I propose to impose a Cess, called the Krishi Kalyan Cess, @ 0.5%
on all taxable services, proceeds of which would be exclusively used for
financing initiatives relating to improvement of agriculture and welfare of
farmers. The Cess will come into force with effect from 1st June 2016. Input
Tax credit of this cess will be available for payment of this cess.
153. The pollution and traffic situation in Indian cities is a matter of
concern. I propose to levy an infrastructure cess, of 1% on small petrol,
LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other
higher engine capacity vehicles and SUVs.
154. I also propose to impose an excise duty of ‘1% without input tax
credit or 12.5% with input tax credit’ on articles of jewellery [excluding
silver jewellery, other than studded with diamonds and some other precious
stones], with a higher exemption and eligibility limits of ` 6 crores and ` 12
crores respectively. Necessary steps will also be taken to enable the new
taxpayers to comply with this levy without any difficulty.
155. I propose to change the excise duty on branded readymade garments
and made up articles of textiles with a retail sale price of `1,000 and above
from ‘Nil without input tax credit or 6%/12.5% with input tax credit’ to ‘2%
without input tax credit or 12.5% with input tax credit’.
29
156. I propose to rename the ‘Clean Energy Cess’ levied on coal, lignite
and peat as ‘Clean Environment Cess’ and simultaneously increase its rate
from `200 per tonne to `400 per tonne.
157. To discourage consumption of tobacco and tobacco products, I
propose to increase the excise duties on various tobacco products other than
beedi by about 10 to 15%.
158. I propose to amend the Finance Act, 1994 so as to declare assignment
by the Government of the right to use the radio-frequency spectrum and its
subsequent transfers a service, to make it clear that assignment of right to use
the spectrum is a service leviable to service tax and not sale of intangible
goods.
Reducing litigation and providing certainty in taxation
159. We are moving towards a lower tax regime with non-litigious
approach. Thus, while compliant taxpayers can expect a supportive interface
with the department, tax evasion will be countered strongly. Capability of
the tax department to detect tax evasion has improved because of enhanced
access to information and availability of technology driven analytical tools
to process such information. I want to give an opportunity to the earlier non- compliant to move to the category of compliant.
160. I propose a limited period Compliance Window for domestic
taxpayers to declare undisclosed income or income represented in the form
of any asset and clear up their past tax transgressions by paying tax at 30%,
and surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the
undisclosed income. There will be no scrutiny or enquiry regarding income
declared in these declarations under the Income Tax Act or the Wealth Tax
Act and the declarants will have immunity from prosecution. Immunity from
Benami Transaction (Prohibition) Act, 1988 is also proposed subject to
certain conditions. The surcharge levied at 7.5% of undisclosed income will
be called Krishi Kalyan surcharge to be used for agriculture and rural
economy. We plan to open the window under this Income Disclosure
Scheme from 1st June to 30th September, 2016 with an option to pay amount
due within two months of declaration.
161. Our Government is fully committed to remove black money from the
economy. Having given one opportunity for evaded income to be declared
once, we would then like to focus all our resources for bringing people with
black money to books.
162. Litigation is a scourge for a tax friendly regime and creates an
environment of distrust in addition to increasing the compliance cost of the
tax payers and administrative cost for the Government. There are about 3
lakh tax cases pending with the 1st Appellate Authority with disputed amount
30
being 5.5 lakh crores. In order to reduce this number, I propose a new
Dispute Resolution Scheme (DRS).
163. A taxpayer who has an appeal pending as of today before the
Commissioner (Appeals) can settle his case by paying the disputed tax and
interest up to the date of assessment. No penalty in respect of Income-tax
cases with disputed tax up to ` 10 lakh will be levied. Cases with disputed
tax exceeding ` 10 lakh will be subjected to only 25% of the minimum of the
imposable penalty for both direct and indirect taxes. Any pending appeal
against a penalty order can also be settled by paying 25% of the minimum of
the imposable penalty. Certain categories of persons including those who are
charged with criminal offences under specific Acts are proposed to be barred
from availing this scheme.
164. I had in my Budget speech of July, 2014 assured that this
Government would not retrospectively create a fresh tax liability. I had also
hoped then that the cases pending in various courts and other legal fora
relating to certain retrospective amendments undertaken to the Income-tax
Act, 1961, through the Finance Act, 2012 will soon reach their logical
conclusion. I would like to reiterate that we are committed to provide a
stable and predictable taxation regime. We will not resort to such
amendments in future. I had also announced constitution of a High Level
Committee which would oversee any fresh case where the assessing officer
proposes to assess or reassess the income in respect of indirect transfers by
applying the retrospective amendment. In order to allay any fears of tax
adventurism, this Committee will now be chaired by the Revenue Secretary
and consist of Chairman, CBDT and an expert from outside. This
Committee will effectively oversee the implementation of the assurances.
165. In order to give an opportunity to the past cases which are ongoing
under the retrospective amendment, I propose a one-time scheme of Dispute
Resolution for them, in which, subject to their agreeing to withdraw any
pending case lying in any Court or Tribunal or any proceeding for
arbitration, mediation etc. under BIPA, they can settle the case by paying
only the tax arrears in which case liability of the interest and penalty shall be
waived.
166. Levy of heavy penalty for concealment of income has over the years
resulted in large number of disputes despite a number of decisions of the
Apex court on interpretation of statutory provisions and principles guiding
imposition of penalty. At present the Income-tax Officer has discretion to
levy penalty at the rate of 100% to 300% of tax sought to be evaded. I
propose to modify the entire scheme of penalty by providing different
categories of misdemeanor with graded penalty and thereby substantially
reducing the discretionary power of the tax officers. The penalty rates will
now be 50% of tax in case of underreporting of income and 200% of tax
31
where there is misreporting of facts. Remission of penalty is also proposed
in certain circumstances where taxes are paid and appeal is not filed.
167. Another issue which has led to considerable number of disputes is
quantification of disallowance of expenditure relatable to exempt income in
terms of Section 14A of the Income Tax Act. I propose to rationalize the
formula in Rule 8D governing such quantification. The said Rule is being
amended to provide that disallowance will be limited to 1% of the average
monthly value of investments yielding exempt income, but not exceeding the
actual expenditure claimed.
168. As another tax payer friendly measure, I propose to provide a time
limit of one year for disposing petitions of the tax payers seeking waiver of
interest and penalty.
169. The Income-tax Department is also issuing instruction making it
mandatory for the assessing officer to grant stay of demand once the assesse
pays 15% of the disputed demand, while the appeal is pending before
Commissioner of Income-tax (Appeals). In case of deviation, assessing
officer has to get orders of his superiors. The tax payer also has an option to
go to superior officer in case he does not agree with conditions of stay order
passed by the subordinate officer. 170. In order to remove backlog of cases we are creating 11 new benches
of Customs, Excise and Service Tax Appellate Tribunal (CESTAT).
171. The monetary limit for deciding an appeal by a single member Bench
of ITAT is proposed to be enhanced from `15 lakhs to `50 lakhs.
172. I also propose to amend the CENVAT Credit Rules, 2004, so as to
improve credit flow, reduce the compliance burden and associated litigation,
particularly those relating to apportionment of credit between exempted and
non exempted final products/services. The amendments in these rules will
also enable manufacturers with multiple manufacturing units to maintain a
common warehouse for inputs and distribute inputs with credits to the
individual manufacturing units.
Simplification and rationalization of taxation
173. The Government has already accepted many recommendations of
Tax Administration Reform Committee and I propose to accept a number of
recommendations of Justice Easwar Committee in this Budget.
174. To reduce multiplicity of taxes, associated cascading and to reduce
cost of collection, I propose to abolish 13 cesses, levied by various Ministries
in which revenue collection is less than `50 crore in a year.
32
175. To improve the cash flow position of small tax payers who get their
funds blocked due to current TDS provision, I propose to rationalize TDS
provisions for Income Tax as per Annexure.
176. Non-residents without PAN are currently subjected to a higher rate of
TDS. It is proposed to amend the relevant provision to provide that on
furnishing of alternative documents, the higher rate will not apply.
177. The facility for revision of return, hitherto available to a service tax
assessee only, is being extended to Central Excise assessees also.
178. I propose to provide additional options to banking companies and
financial institutions, including non-banking financial companies, for
reversal of input tax credits with respect to non-taxable services provided by
them by way of extending deposits, loans and advances.
179. Our Government has taken a number of steps to reduce the cargo
release time and the transaction costs of EXIM trade. I propose to amend the
Customs Act to provide for deferred payment of customs duties for importers
and exporters with proven track record.
180. In 2014-15 Budget, I had announced the intent to implement Indian
Customs Single Window Project. We have made significant progress in this
and it would be implemented at major ports and airports starting from
beginning of next financial year.
181. The customs Baggage Rules for international passengers are being
simplified so as to increase the free baggage allowance. The filing of
baggage declaration will be required only for those passengers who carry
dutiable goods.
Use of Technology for creating accountability
182. Technology is a boon for mankind. We plan to use technology in
taxation Department in a big way to make life simpler for a law abiding
citizen, and also for data mining to track tax evaders. 183. A pilot was run in 2015-16 for e-assessment to obviate the
requirement for tax payers to visit the Income-tax offices. I propose to
expand the scope of e-assessments to all assessees in 7 mega cities in the
coming years. The cases selected for scrutiny will be scrutinized in
e-environment whereby unless the assessee himself wants to be heard, or for
special reasons to be recorded, the assessing officer wants to hear the party,
there will be no face to face contact of IT Department with assessee. 184. Income-tax Department (ITD) will fully expand the pilot initiative of
‘e-Sahyog’ with a view to reduce compliance cost, especially for small
33
taxpayers. The objective of the ‘e-Sahyog’ pilot project is to provide an
online mechanism to resolve mismatches in Income-tax returns without
requiring taxpayers to attend the Income-tax office.
185. I propose that in matters pertaining to Income-tax Act, Government
will pay interest at the rate of 9% p.a against normal rate of 6% p.a in case
there is delay in giving effect to Appellate order beyond ninety days. The
officers who delay it, will be accountable for this loss to Government.
186. I also propose to change the procedure to provide for a shift from
physical control to record based control for customs bonded warehouses,
supported by sophisticated IT systems.
187. Madam Speaker, my direct tax proposals would result in revenue loss
of ` 1,060 crore and my indirect proposals are expected to yield `20,670
crores. Thus the net impact of all tax proposals would be revenue gain of
`19,610 crores.
CONCLUSION
Madam Speaker,
188. This Budget is being presented amidst global and domestic
headwinds. There are several challenges. We see them as opportunities. I
have outlined the agenda of our Government to ‘Transform India’ for the
benefit of the farmers, the poor and the vulnerable. 189. Madam Speaker, it is said that “Champions are made from something
they have deep inside of them - a desire, a dream, a vision”. We have a
desire to provide socio-economic security to every Indian, especially the
farmers, the poor and the vulnerable; we have a dream to see a more
prosperous India; and a vision to ‘Transform India’.
190. With these words, Madam Speaker, I commend the Budget to the
House.
34
Annex No. I to Part A
PROPOSED CHANGES/REFORMS IN FDI AND
RELATED POLICIES
(i) Foreign investment will be allowed in the insurance and pension
sectors in the automatic route up to 49% subject to the extant
guidelines on Indian management and control to be verified by the
Regulators.
(ii) 100% FDI in Asset Reconstruction Companies (ARCs) will be
permitted through automatic route. Foreign Portfolio Investors (FPIs)
will be allowed up to 100% of each tranche in securities receipts issued
by ARCs subject to sectoral caps.
(iii) Investment limit for foreign entities in Indian stock exchanges will be
enhanced from 5 to 15% on par with domestic institutions. This will
enhance global competitiveness of Indian stock exchanges and
accelerate adoption of best-in-class technology and global market
practices.
(iv) The existing 24% limit for investment by FPIs in Central Public Sector
Enterprises, other than Banks, listed in stock exchanges, will be
increased to 49% to obviate the need for prior approval of Government
for increasing the FPI investment.
(v) The basket of eligible FDI instruments will be expanded to include
hybrid instruments subject to certain conditions.
(vi) FDI will be allowed beyond the 18 specified NBFC activities in the
automatic route in other activities which are regulated by financial
sector regulators.
(vii) With a view to promote Make in India and following the practices in
advanced countries, foreign investors will be accorded Residency
Status subject to certain conditions. Currently, these investors are
granted business visa only up to 5 years at a time.
(viii) In order to ensure effective implementation of Bilateral Investment
Treaties signed by India with other countries, I propose to introduce a
Centre State Investment Agreement. This will ensure fulfilment of the
obligations of the State Governments under these Treaties. States
which opt to sign these Agreements will be seen as more attractive
destinations by foreign investors.
All these decisions will facilitate ease of doing business for foreign investors
and their domestic recipients.
35
Annex No. II to Part A
MEASURES FOR DEEPENING OF CORPORATE BOND MARKET
(a) LIC of India will set up a dedicated fund to provide credit enhancement
to infrastructure projects. The fund will help in raising the credit rating
of bonds floated by infrastructure companies and facilitate investment
from long term investors.
(b) RBI will issue guidelines to encourage large borrowers to access a
certain portion of their financing needs through market mechanism
instead of the banks. (c) Investment basket of foreign portfolio
investors will be expanded to include unlisted debt securities and pass
through securities issued by securitisation SPVs.
(d) For developing an enabling eco system for the private placement
market in corporate bonds, an electronic auction platform will be
introduced by SEBI for primary debt offer.
(e) A complete information repository for corporate bonds, covering both
primary and secondary market segments will be developed jointly by
RBI and SEBI.
(f) A framework for an electronic platform for repo market in corporate
bonds will be developed by RBI.
36
Annex No. III-A to Part A
ALLOCATIONS OF IMPORTANT MINISTRIES, SECTORS and
VULNERABLE SECTIONS
Rs in crore
MINISTRY/DEPARTMENT Actual
14-15 RE 15-16 BE 16-17
Ministry Of Agriculture And Farmers Welfare 25917 22958 44485
Ministry Of Drinking Water And Sanitation 12091 10907 14010
Ministry Of Health And Family Welfare 32154 34957 39533
Ministry Of Housing And Urban Poverty
Alleviation 2728 1961 5411
Ministry Of Human Resource Development 68875 67586 72394
Ministry Of Micro Small And Medium
Enterprises 2767 3021 3465
Ministry Of Minority Affairs 3089 3736 3827
Ministry Of New And Renewable Energy 515 262 5036
Ministry Of Road Transport And Highways 33048 47107 57976
Ministry Of Rural Development 69817 79279 87765
Ministry Of Skill Development And
Entrepreneurship 0 1038 1804
Ministry Of Social Justice And Empowerment 5784 6580 7350
Ministry Of Urban Development 13254 18340 24523
Ministry Of Water Resources, River
Development And Ganga Rejuvenation 5480 7032 6201
Ministry Of Women And Child Development 18539 17352 17408
SECTOR TOTALS Actual
2014-15
RE
2015-16
BE
2016-17 IEBR Total for
2016-17
Agriculture and Irrigation 31497 25988 47912 6300 54212.33
Social Sectors including
Education and Health 136431 139619 151581 … …
Rural Development and
Drinking Water 81908 90185 101775 … …
Infrastructure & Energy 185139 180610 221246 25000 246246.39
ALLOCATION FOR WELFARE OF VULNERABLE SECTIONS ACROSS
ALL MINISTRIES
Actual 14-15 RE 2015-16 BE 2016-17
Schemes for welfare of Women … 81249 90625
Allocation for welfare of Children … 64635 65758
SC sub Plan 19921 20963 24005
ST SubPlan 30035 34675 38833
37
Annex No. III-B to Part A
ALLOCATIONS OF IMPORTANT SCHEMES
Rs. In crore
BE 2016-17
1 Mahatma Gandhi National Rural Employment
Guarantee Scheme 38500
2 National Social Assistance Programme 9500
3 Schemes under Tribal Sub-Plan- across all Ministries 24005
4 Schemes under Scheduled Castes Sub-Plan- across
all Ministries 38833
5 Allocation for North Eastern Region-across all
Ministries 33097
6 Umbrella Scheme for Development of Minorities. 1245
a
Multi-Sectoral Development Programme for
Minorities 1125
b Education Scheme for Madrasas and Minorities 120
7 Green Revolution 12980
a Krishonnati Yojna 7580
b Rashtriya Krishi Vikas Yojna 5400
8 White Revolution 1273
9 Blue Revolution 575
10 Pradhan Mantri Krishi Sinchai Yojna (PMKSY) 5717
a Har Khet ko Pani 500
b Accelerated Irrigation Benefit Programme and other
schemes under PMKSY in Water Resources Ministry 1377
c Per Drop More Crop 2340
d Integrated Watershed Management Programme 1500
11 Pradhan Mantri Gram Sadak Yojna 19000
12 National Rural Drinking Water Programme 5000
13 Swachh Bharat Abhiyan (SBA) 11300
14 National Health Mission (NHM) 20037
15 Rashtriya Swastha Suraksha Yojna (RSSY) 1500
16 National Education Mission (NEM) 28010
of
which
NEM : Sarva Shiksha Abhiyan 22500
38
17 National Programme of Mid-day Meals in Schools 9700
18 Integrated Child Development Scheme (Umbrella
ICDS) 16120
19 Pradhan Mantri Awas Yojna (PMAY) 20075
20 Urban Rejuvenation Mission (AMRUT and Mission
for Development of 100 Smart Cities) 7296
21
Make in India: Scheme for Investment Promotion
and Amended Technology Upgradation Fund
Scheme 1804
22 National Industrial Corridors 1448
23 Digital India Programme and E-learning,
E-panchayat, Land Records Modernisation 2059
24 Central Pool of Resources for North Eastern Region
and Sikkim 900
25 Schemes of North Eastern Council 795
26 National Investment and Infastructure Fund 4000
27 Equity Capital to Mudra and Credit Guarantee Fund
under Pradhan Mantri Mudra Yojana 2400
28 Start up and stand up 1100
29 Schemes for employment generation 1155
30 Scheme for LPG connection to poor households 2000
31 Deendayal Upadhyaya Gram Jyoti Yojana and
Integrated Power Development Scheme(IPDS) 8500
32 Sagarmala 450
33 Pradhan Mantri Kaushal Vikas Yojana 1771
34 Metro Projects 10000
35 Namame Gange- National Ganga Plan 2250
36 Rashtriya Yuva Sashakthikaran Karyakram 397
37 Khelo India 216
38 Recapitilization of Public Sector Banks 25000
This Annex provides total allocations (Plan and Non-Plan) under 38
important Schemes. Rationalization of Schemes was undertaken to avoid
too thin spread of resources. The allocation for BE 2016-17 only is provided
as it is not immediately feasible to draw a one-to-one correspondence
between the newly rationlised schemes with the earlier subsumed
component schemes.
Source : Expenditure Budget 2016-17 Volume1 & 2
39
Annex No. III-C to Part A
Resources Transferred to State and U.T.Governments
(In crore of Rupees)
S.No. Actual
2014-15
RE
2015-16
BE
2016-17
1 Devolution of State's share in taxes 337808 506193 570337
2 Non-Plan Grants and Loans 77198 108312 118437
Grants 77125 108233 118356
Loans 73 79 81
State Governments 76286 105353 115655
UT 912 2959 2782
3 Central Assistance to State
Plan/UT Plan
270829 216108 241900
Grants 258890 203608 229400
Loans 11939 12500 12500
State Governments 264725 208587 234366
UT 6104 7521 7534
4 Total (Grant & Loans) 348027 324420 360337
Grants 336015 311841 347756
Loans 12012 12579 12581
4 Total Assistance 685835 830613 930674
State Governments 678819 820133 920358
UT 7016 10480 10316
5 Less - Recovery of Loans &
Advances
10658 9093 9473
State Governments 10582 8649 9028
UT 76 444 445
6 Net Resources transferred to State
& UT Governments (1+4-5)
675177 821520 921201
State Governments 668237 811484 911330
UT 6940 10036 9871
Increase in RE 15-16 over
Actual 14-15 … 146343 …
Increase in BE16-17 over RE 15-16 … … 99681
Increase in BE 16-17 over
Actual 14-15 … … 246024
40
ANNEXURE TO PART-B OF THE BUDGET SPEECH
DIRECT TAX
1. Measures to boost the Financial Sector
1.1 It is proposed to provide that redemption by an individual of
Sovereign Gold Bond issued by Reserve Bank of India under
Sovereign Gold Bond Scheme, 2015 shall not be charged to capital
gains tax. It is also proposed to provide that long terms capital gains
arising to any person on transfer of Sovereign Gold Bond shall be
eligible for indexation benefits.
1.2 It is proposed to provide that any gains arising on account of
appreciation of rupee against a foreign currency at the time of
redemption of rupee denominated bond of an Indian company
subscribed by a non-resident shall be exempt from capital gains tax.
1.3 It is proposed to provide that any transfer of units in merger or
consolidation of plans of a mutual fund scheme shall be exempt from
capital gains tax.
1.4 It is proposed to provide that interest earned on Deposit Certificates
issued under Gold Monetisation Scheme, 2015 and capital gains
arising from them shall be exempt from tax.
1.5 It is proposed to modify the conditions of special taxation regime for
off shore funds under section 9A of the Income-tax Act so as to
provide that a fund registered or set up in a country notified by the
Central Government will also be eligible for the said regime. It is
also proposed to provide that the condition of not having control and
management of any business or not carrying on any business by the
fund will be applicable only to activities in India and not from India.
1.6 The determination of residency of foreign company on the basis of
Place of Effective Management is proposed to be deferred by one
year. It shall now apply with effect from1.04.2017. It is also proposed
to make necessary provision for adaptation, modification and
exception in the provisions of the Act for determination of income
and applicability of other provisions in case a foreign company
becomes resident in India for the first time.
1.7 Taking into account the recommendations of A.P. Shah Committee
and the decision of the Hon’ble Supreme Court in the case of
Castleton, it is proposed to amend the provisions of section 115JB of
the Income-tax Act so as to provide that Minimum Alternate Tax
(MAT) shall not be applicable to a foreign company, w.e.f.
01.04.2001 if the foreign company does not have as a permanent
establishment under relevant Double Taxation Avoidance Agreement
(DTAA) or a place of business in India.
41
1.8 With a view to facilitate setting up of international financial centre in
India, it is proposed to provide for the following tax benefits:-  The companies located in international financial services centre
shall not be liable to dividend distribution tax.  Minimum Alternate Tax shall be charged at the rate of nine per
cent from units located in international financial services centre.  The transaction in foreign currency of sale of equity share or
units of equity oriented funds or units of a business trust taking
place on a recognised stock exchange established in international
financial services centre shall not be liable to securities
transaction tax. It is also proposed that the gains arising from
transfer of such long term capital asset shall be exempt from tax.
 The transaction in foreign currency of sale of commodity
derivatives taking place on a recognised association established
in international financial services centre shall not be liable to
commodity transaction tax.
1.9 It is proposed to provide that the subsidy granted by the Central
Government and credited directly to the corpus of fund established
for specific purposes laid down by Government shall not be treated as
income of such fund.
1.10 Consequent upon the judgement of various Courts in the context of
the definition of ‘securities’ under Securities Contracts Regulation
Act, 1956, it is proposed to clarify that the capital gain arising from
transfer of a long term asset being share of a private limited company
shall be chargeable to tax at the rate of ten per cent.
1.11 It is proposed to provide that acquisition of shares by an individual or
HUF as a consequence of demerger or amalgamation of a company
shall not attract tax liability under section 56(2)(vii) of the Incometax
Act.
2. Measures to rationalize the Pension Sector
2.1 It is proposed to provide a uniform tax treatment to the recognised
provident fund, national pension system and superannuation fund.
Accordingly, the following are proposed:-  Exemption limit is proposed to be increased from `1 lakh to `1.5
lakh for annual contribution by an employer to a superannuation
fund.
42
 A monetary limit of `1.5 lakh is proposed to be provided for
annual contribution by an employer to a recognised provident
fund.
 Any amount received by the nominee, on the death of the
employee at the time of closure of account under National
Pension System referred to in section 80CCD of the Income-tax
Act is proposed to be exempt.
 Exemption is proposed to be provided for one-time portability
from a recognised provident fund or superannuation fund to
National Pension System.
 It is proposed that 40% of the pension wealth received by an
employee from the National Pension System Trust shall be
exempt.
 It is also proposed that the exemption under the recognised
provident fund and superannuation fund will be limited to 40%
of the accumulated amount arising out of contributions made in
such funds on or after 01.04.2016. However, this restriction shall
not be applicable to an employee participating in a recognised
provident fund and whose monthly salary does not exceed
`15,000/-. 3. Measures to promote the Housing and Real Estate Sector
3.1 It is proposed to provide that deduction of interest payable on capital
borrowed for acquisition or construction of a self-occupied house
property shall be allowed if such acquisition or construction is
completed within five years.
3.2 It is proposed to provide that standard deduction of 30% shall be
allowed against the amount received on account of unrealised rent
while computing the house property income.
3.3 It is proposed to provide that the date of agreement fixing the amount
of consideration for the transfer of immovable property and not the
date of registration shall be taken for the purposes of computing
capital gains in case of transfer of immovable property if any
payment in consequence of such agreement has been made by the
purchaser of the property through any mode other than cash.
4. Measures to Phase Out Deductions
4.1 It proposed to phase out the following deductions available in the
Income-tax Act:-
43
(i) Section 10AA of the Income-tax Act : Deduction for units
established in SEZ
It is proposed to amend section 10AA of the Income-tax Act to
provide for a sunset date of 31.03.2020 for commencement of activity
of manufacture or production of any article or thing or providing
services by a unit located in a Special Economic Zone for availing the
deduction under said section.
(ii) Depreciation.
It is proposed to amend Rule 5 of Income-tax Rules, 1962 to restrict
the highest rate of depreciation under the Income-tax Act to 40% for
all the assets (whether old or new) falling in the relevant block of
assets with effect from 01.4.2017
(iii) Section 35 of the Income-tax Act : Deduction for Expenditure on
Scientific Research.
It is proposed to amend section 35 of the Income-tax Act so as to
reduce the weighted deduction under section 35(1)(ii), 35 (2AA) and
35 (2AB) to 150% from the financial year 2017-18 to financial year
2019-20 and from the financial year 2020-21 onwards the deduction
shall be restricted to 100%. It is also proposed that deduction under
section 35(1) (iia) and (iii) of the Income-tax Act shall be reduced
from 125% to 100% with effect from 01.04.2017.
(iv) Section 35AD of the Income-tax Act : Investment linked
deduction for specified business.
It is proposed to amend section 35AD of the Income-tax Act so as to
reduce the deduction from 150% to 100% in the case of a cold chain
facility, warehousing facility for storage of agricultural produce, an
affordable housing project, production of fertilizer and building and
operating hospitals with effect from 01.04.2017. (v) Section 35AC of the Income-tax Act : Deduction for Expenditure
on social projects.
It is proposed to amend section 35AC of the Income-tax Act so as to
provide that no deduction under the said section shall be available
from financial year 2017-18 (Assessment Year 2018-19).
(vi) Section 35CCC of the Income-tax Act : Deduction for
expenditure on agricultural extensions project.
It is proposed to amend section 35CCC of the Income-tax Act to
restrict the deduction to 100% from financial year 2017-18
(Assessment Year 2018-19).
44
(vii) Section 35 CCD of the Income-tax Act : Deduction for
expenditure on skill development project.
It is proposed to amend section 35CCD of the Income-tax Act so as
to provide that the weighted deduction of 150% shall be available
upto financial year 2019-20 (assessment year 2020-21). However, the
deduction under the said section shall be restricted to 100% from
financial year 2020-21 (Assessment Year 2021-22).
(viii) Section 80-IA of the Income-tax Act : Deduction for development
of infrastructure facility.
It is proposed to amend section 80IA of the Income-tax Act so as to
provide that no deduction shall be available to enterprise which starts
development, operation and maintenance of any infrastructure facility
on or after 1st April, 2017. It is further proposed to provide that the
development, operation and maintenance of an infrastructure facility
beginning on or after 1st April, 2017 shall be eligible for investment
linked deduction under section 35AD of the Income-tax Act.
(ix) Section 80-IAB of the Income-tax Act : Deduction for
development of Special Economic Zone.
It is proposed to amend section 80IAB of the Income-tax Act so as to
provide that no deduction shall be available under this section where
the development of Special Economic Zone begins on or after 1st
April, 2017.
(x) Section 80-IB of the Income-tax Act : Deduction for production
of mineral oil and natural gas.
It is proposed to amend section 80-IB(9)(ii), (iv) & (v) of the Incometax
Act so as to provide that no deduction shall be available to an
undertaking engaged in production of mineral oil or natural gas if the
production commences on or after 1st April, 2017.
5. Measures for TDS / TCS Rationalisation
Present
Section
Heads Existing
Threshold
Limit (`)
Proposed
Threshold
Limit (`)
192A Payment of accumulated
balance due to an employee
in EPF
30,000 50,000
194BB Winnings from Horse
Race
5,000 10,000
194C Payments to Contractors Aggregate
annual limit
of 75,000
Aggregate
annual limit
of 1,00,000
45
194LA Payment of Compensation on
acquisition of certain
Immovable Property
2,00,000 2,50,000
194D Insurance commission 20,000 15,000
194G Commission on sale of lottery
tickets
1,000 15,000
194H Commission or brokerage 5,000 15,000
Present
Section
Heads Existing
Rate of
TDS (%)
Proposed
Rate of
TDS (%)
194DA Payment in respect of Life
Insurance
Policy
2% 1%
194EE Payments in respect of NSS
Deposits
20% 10%
194D Insurance commission 10% 5%
194G Commission on sale of lottery
tickets
10% 5%
194H Commission or brokerage 10% 5%
194K Income in respect of Units To be
omitted w.e.f
01.06.2016
194L Payment of Compensation on
acquisition of Capital Asset
To be
omitted w.e.f
01.06.2016
5.2 It is proposed to amend section 206AA of the Income-tax Act so as
to provide that TDS shall not be deducted at a higher rate in case of
non-residents not having PAN, subject to prescribed condition.
5.3 It is proposed to extend DTAA benefits by allowing for rate in force
being applicable for withholding tax purposes in respect of
distribution by Category-I and II Alternate Investment Funds to the
non-resident investors. It is also proposed to provide that the
investors may seek certificate of lower deduction or nil deduction of
tax.
5.4 The regime for taxation of Securitisation Trusts and their investors is
proposed to be modified. It is proposed to provide complete pass
through to securitisation trust and the income is to be taxed in the
hands of investor in same manner and to the same extent as it would
have been taxed, if the investor had made underlying investments
directly and not through trust. It is also proposed to provide that the
income of securitisation trust shall be exempt and that the
securitisation trust shall effect tax deduction at source.
46
5.5 It is also proposed to provide that upon self-certification, no tax will
be deducted on rental payments if the income of the payee does not
exceed the maximum amount not chargeable to tax.
6. Measures for promoting Economic Growth
6.1 It is proposed to provide that in case of foreign company, mere
storage of crude oil in India would not constitute Business
Connection and the income arising or accruing on storage and sale of
the crude oil, subject to fulfilment of certain conditions, shall not be
liable to tax in India.
6.2 It is proposed to provide that in case of a foreign company engaged in
business of mining of diamonds, no income shall be deemed to
accrue or arise in India to it through or from the activities which are
confined to display of uncut and unassorted diamonds in a notified
Special Zone.
6.3 It is proposed to provide that the plant & machinery acquired and
installed for transmission activity would also be eligible for
additional depreciation under section 32(1)(iia) of the Income-tax
Act.
6.4 It is proposed to amend sub-section (1A) of section 32AC of the
Income-tax Act to provide that the acquisition of the plant &
machinery of the specified value has to be made in the previous year.
However, installation may be made by 31.03.2017 in order to avail
the benefit of additional depreciation of 15%.
6.5 It is proposed to expand the scope of section 43B of the Income-tax
Act so as to provide that certain specified payments payable to
Railways shall be allowed as deduction as business income only if
the same has been paid on or before the due date of filing of return
for the relevant year.
6.6 It is proposed to provide that the non-compete fee received/
receivable in relation to not carrying out any profession will be
chargeable to tax as an income from business or profession. 6.7 It is proposed to amend the provisions of the Income-tax Act so as to
provide that the fees paid for obtaining right to use the spectrum is to
be amortized over the period for which the right to use the spectrum
has been granted.
7. Measures for prevention of abuse of Law
7.1 It is proposed to provide that where a trust or institution registered
u/s 12AA of the Income-tax Act ceases to be charitable organisation, the amount of net asset as on date of such conversion which
represents the income accreted to the trust over a period of time shall
47
be charged to additional income-tax at the maximum marginal rate.
Similarly, if on dissolution a charitable trust or institution does not
transfer all its assets within one year of dissolution to another
charitable organization, the amount of accreted income to the extent
not transferred shall be subject to this levy of additional income-tax.
7.2 For implementing the country by country (CbC) reporting and master
file submission in relation to OECD report on BEPS action plan
Action 13, which is the minimum standard to be followed by every
member/partner country, it is proposed to provide for furnishing of
documents by the specified person. It is also proposed to provide for
penal consequence in case of non-compliance by such person.
7.3 It is proposed to provide that no set off of losses shall be allowed
against deemed undisclosed income u/s 68 to 69D of the Income-tax
Act.
7.4 It is proposed to provide a tax neutral treatment to conversion of a
company into Limited Liability Partnership (LLP), if, among the
other existing conditions, the total value of the assets in the books of
account of the company in any of the three preceding years from the
year in which conversion takes place does not exceed five crore
rupees.
7.5 It is proposed to provide that the buyback of shares by a company
shall mean purchase of its own shares in accordance with relevant
provisions of the Companies Act and that the distributed income shall
mean, the consideration paid on buyback of shares as reduced by the
amount received by the company for issue of such shares to be
determined in the prescribed manner.
8. Measures for Simplification of Procedures
8.1 It is proposed to amend the provision of section 44AB of the Incometax
Act to enhance the threshold limit for audit of accounts from ` 25
lakh to ` 50 lakh for persons having income from profession.
8.2 It is proposed to amend the provisions of section 44AD of the
Income-tax Act so as to increase the threshold limit of presumptive
taxation from ` 1 crore to Rs 2 crore. It is also proposed to provide
that if the taxpayer opts for the presumptive taxation scheme, he
has to remain in that scheme for 5 years. Further, if he does not offer
the income as per the said scheme in any of the five years, he shall
not be eligible to claim the benefit under the scheme for next 5 years.
8.3 It is proposed to amend section 139 of the Income-tax Act so as to
provide that,-  a person shall be required to furnish his return of income if
this total income during the previous year without claiming
exemption under section 10(38) exceeds the maximum
amount which is not chargeable to tax.
48
 a person, who has not furnished a return for any previous year
by the due date, may furnish the same before the end of the
relevant assessment year or before the completion of the
assessment, whichever is earlier. He may also revise such
return before the expiry of one year from the end of the
relevant assessment year or before the completion of the
assessment, whichever is earlier.
 a return furnished in response to a notice issued under section
142 (1) of the Income-tax Act cannot be revised.
 a return which is otherwise valid would not be treated
defective merely because self-assessment tax and interest
payable in accordance with the provisions of section 140A,
has not been paid on or before the date of furnishing of the
return.
8.4 It is proposed to amend the provisions of section 211 of the Incometax
Act to provide that the number of instalments and due dates for
payment of advance tax in the case of individuals, HUFs, firms, etc.
shall be the same as is applicable to companies. It is also proposed
that the taxpayer eligible for presumptive taxation scheme under
section 44AD of the Income-tax Act shall pay whole amount of
advance tax in one instalment on or before the 15th March of the
financial year.
8.5 It is proposed to amend section 253 of the Income-tax Act to provide
that no appeal shall be filed by the Income-tax Department against
the direction of the Dispute Resolution Panel.
8.6 It is proposed to amend section 254 of the Income-tax Act to reduce
the time limit for rectifying an order passed by Appellate Tribunal
from 4 years to 6 months.
8.7 It is proposed to amend section 281B of the Income-tax Act to
provide for revocation of attachment of property in cases where
assessee furnishes a Bank Guarantee from a scheduled bank of an
amount not less than the fair market value of such property or of an
amount sufficient to protect the interest of revenue.
8.8 As a step forward in digitisation of processes of the Income-tax
Department, it is proposed to provide that notices and documents
may be issued by the income tax authorities in electronic form also.
8.9 It is proposed to amend section 147 of the Income-tax Act to provide
that a case may be reopened by the Assessing Officer on the basis of
information culled out from the data base by the Directorate of
Systems indicating that income has escaped assessment.
49
8.10 With a view to reduce litigation and to collect taxes at the earliest
point of time it is proposed to expand the scope of adjustment that
can be done at the time of processing of return under sub-section
143(1) of the Income-tax Act. It is also proposed that before making
an assessment u/s 143(3) of the Act, a return shall be processed u/s
143(1) of the Act.
INDIRECT TAX
The Table below summarises the changes in Customs, Central Excise
and Service Tax rate structures and law and procedure.
Sl.No. Changes Existing Proposed
I Promoting Agriculture and food processing
1. Krishi Kalyan Cess proposed to be levied
on all taxable services to finance and
promote initiatives to improve agriculture, with effect from 01.06.2016.
- 0.5%
2. Services provided by National Centre for
Cold Chain Development under
Department of Agriculture, Cooperation
and Farmer’s welfare, Government of
India, by way of knowledge
dissemination, being exempted from
service tax, with effect from 01.04.2016.
14% Nil
3. Excise duty on electric motor, shafts,
sleeve, chamber, impeller, washer
required for the manufacture of
centrifugal pump being reduced. More
than 50% of such pumps are used in
agriculture.
12.5% 6%
4. Concessional 5% Basic Customs Duty as
presently available under project imports
for cold storage, cold room (including for
farm level pre-cooling) being extended for
‘cold chain including pre-cooling unit,
pack houses, sorting and grading lines and
ripening chambers’ also.
10% 5%
5. BCD on refrigerated containers being
reduced
10% 5%
6. Excise duty on refrigerated containers
being reduced
12.5% 6%
50
7. Excise duty on micronutrients [covered
under S. No. 1(f) of Schedule 1 Part (A)
of the Fertilizer Control Order, 1985 and
manufactured by the manufacturers which
are registered under the FCO, 1985] being
reduced.
12.5% 6%
8. Excise duty on physical mixture of
fertilizers, made out of chemical fertilizers
on which duty of excise has been paid, by
Co-operative Societies, holding certificate
of manufacture for mixture of fertilizers
under the Fertilizer Control Order 1985,
for supply to the members of such Co- operative Societies, being exempted.
1%
(without
ITC or
6% (with
ITC)
Nil
II Broadening of Tax base Existing Proposed
1. Exemption on services provided by,-
(i) a senior advocate to an advocate or
partnership firm of advocates
providing legal service; and
(ii) a person represented on an arbitral
tribunal to an arbitral tribunal,
being withdrawn and service tax being
levied under forward charge, with effect
from 01.04.2016.
Nil 14%
2. Exemption to construction, erection,
commissioning or installation of original
works pertaining to monorail or metro, in
respect of contracts entered into on or
after 1st March 2016 being withdrawn, with effect from 01.03.2016.
Nil 5.6%
3. Exemption to the services of transport of
passengers, by ropeway, cable car or
aerial tramway being withdrawn, with
effect from 01.04.2016.
Nil 14%
4. Negative List entry that covers ‘service of
transportation of passengers, with or
without accompanied belongings, by a
stage carriage’ being omitted and tax
Nil 5.6%
51
proposed to be levied on service of
transportation of passengers by air
conditioned stage carriage, at the
abatement of 60% without input tax
credit, with effect from 01.06.2016.
5. Abatement on shifting of used household
goods by a Goods Transport Agency is
being rationalized at the rate of 60%,
without input tax credit, with effect from
01.04.2016.
4.2% 5.6%
III Measures to boost construction sector and promote affordable
housing
Existing Proposed
1. Service Tax on services in respect of-
(i) construction services under Housing
For All (HFA) (Urban) Mission/
Pradhan Mantri Awas Yojana
(PMAY);
(ii) construction projects under
“Affordable housing in partnership”
component of PMAY, subject to
carpet area of dwelling units of such
projects not exceeding 60 square
metres;
(iii) low cost houses up to a carpet area of
60 square metres per house in a
housing project under any housing
scheme of the State Government.
being exempted, with effect from
01.03.2016.
5.6% Nil
2. Excise duty exemption, presently
available to Concrete Mix manufactured
at site for use in construction work at such
site being extended to Ready Mix
Concrete manufactured at the site of
construction for use in construction work
at such site.
12.5% Nil
IV Promoting social security and moving towards a pensioned
society
1. Service Tax on service of life insurance
business provided by way of annuity under
the National Pension System regulated by
Pension Fund Regulatory and
3.5% Nil
52
Development Authority (PFRDA) being
exempted, with effect from 01.04.2016.
2. Service tax on services provided by
Employees’ Provident Fund Organization
(EPFO) to employees, being exempted, with effect from 01.04.2016.
14% Nil
3. Composition rate of service tax on single
premium annuity (insurance) policies
being reduced from 3.5% to 1.4% of the
premium charged, with effect from
01.04.2016.
3.5% 1.4%
4. Service Tax on the services of general
insurance business provided under
‘Niramaya’ Health Insurance scheme
launched by National Trust for the
Welfare of Persons with Autism, Cerebral
Palsy, Mental Retardation and Multiple
Disability being exempted, with effect
from 01.04.2016.
14% Nil
V Financial, Banking & Insurance Sector
Existing Proposed
1. The services provided by mutual fund
agent/distributor to a mutual fund or asset
management company being taxed under
forward charge, with effect from
01.04.2016.
14% 14%
2. Service tax on the regulatory services
provided by Securities and Exchange
Board of India and Insurance Regulatory
Development Authority being exempted, with effect from 01.04.2016.
14% NIL
3. Additional options being provided for reversal of actual input tax
credits with respect to non-taxable services provided by them by
way of extending deposits, loans, and advances to banking
companies and financial institutions, including non banking
financial companies. This will come into effect from 01.04.2016.
4. Service tax on services provided by
Insurance Regulatory and Development
Authority of India (IRDA), being
exempted, with effect from 01.04.2016.
14% Nil
53
VI Incentivizing domestic value addition, ‘Make in India’
Existing Proposed
1. Balloons
BCD on Natural latex rubber made
balloons being increased.
10% 20%
2. Jewellery
BCD on Imitation jewellery being
increased.
10% 15%
3. Metals
BCD being increased on
a) Primary aluminium 5% 7.5%
b) Other aluminium products 7.5% 10%
c) Zinc alloys 5% 7.5%
4. Renewable Energy
(i) BCD on Industrial solar water heater
being increased.
7.5% 10%
(ii) BCD exemption on solar tempered glass /
solar tempered (anti-reflective coated)
glass being withdrawn and 5%
concessional BCD being imposed, subject
to actual user conditions.
Nil 5%
(iii) Solar lamp being exempt from excise duty 12.5% Nil
5. Capital Goods
Tariff rate of BCD being increased on
goods falling under 211 specified tariff
lines in Chapter 84, 85 and 90. Out of
which:
(i) The effective rate of BCD on goods
falling under 115 specified tariff lines in
being maintained at 7.5%.
(ii) The effective rate of BCD on goods
falling under remaining 96 tariff lines is
being increased to 10%.
7.5%
7.5%
7.5%
10%
7.5%
10%
6. Mineral fuels and Mineral oils
(i) Rate of Oil Industries Development Cess,
on domestically produced crude oil
[OIDB Cess under the Oil Industry
(Development) Act, 1974], being reduced.
` 4500
PMT
20% ad
valorem
54
(ii) BCD being rationalized on:
a) Coal; briquettes, ovoids and
similar solid fuels manufactured
from coal
2.5% /
10%
2.5%
b) Lignite, whether or not
agglomerated, excluding jet
10% 2.5%
c) Peat (including peat litter),
whether or not agglomerated
10% 2.5%
d) Coke and semi-coke of coal, of
lignite or of peat, whether or not
agglomerated; retort carbon
5% /
10%
5%
e) Coal gas, water gas, producer gas
and similar gases, other than
petroleum gases and other gaseous
hydrocarbons
10% 5%
f) Tar distilled from coal, from
lignite or from peat and other
mineral tars, whether or not
dehydrated or partially distilled,
including reconstituted tars
10% 5%
g) Oils and other products of the
distillation of high temperature
coal tar similar products in which
the weight of the aromatic
constituents exceeds that of the
non-aromatic constituents
2.5% / 5
%/ 10%
2.5%
h) Pitch and pitch coke, obtained
from coal tar or from other mineral
tars
5% /
10%
5%
7. Chemicals & Petrochemicals
(i) BCD on all acyclic hydrocarbons and all
cyclic hydrocarbons [other than para- xylene which attracts Nil BCD and
styrene which attracts 2% BCD] being
rationalized.
5% /
2.5%
2.5%
(ii) BCD on denatured ethyl alcohol (Ethanol)
being reduced, subject to actual user
condition.
5% 2.5%
(iii) SAD on Orthoxylene, being reduced, for
the manufacture of phthalic anhydride
subject to actual user condition.
4% 2%
55
(iv) BCD on electrolysers, membranes and
their parts required by caustic soda/
potash unit using membrane cell
technology being exempted.
2.5% Nil
8. Paper, Paperboard and newsprint
(i) Basic customs duty on wood in chips or
particles for manufacture of paper,
paperboard and news print being reduced.
5% Nil
(ii) BCD on Plans, drawings and designs
being increased.
Nil 10%
9. Textiles
(i) Basic Customs Duty on specified fibres
and yarns being reduced.
5% 2.5%
(ii) Basic customs duty on import of specified
fabrics [for manufacture of textile
garments for export] of value equivalent
to 1% of FOB value of exports in the
preceding financial year being exempted
subject to the specified conditions.
Applicab
le rate
Nil
10. Electronics / Hardware
(i) BCD on polypropylene granules / resins
for the manufacture of capacitor grade
plastic films being reduced.
7.5% Nil
(ii) BCD on E-Readers being increased. Nil 7.5%
(iii) BCD on parts of E-readers being reduced. Applicable
rate
5%
(iv) Nil Basic Customs Duty being extended
on magnetron of capacity of 1 KW to 1.5
KW for use in manufacture of domestic
microwave ovens, subject to actual user
condition.
10% Nil
(v) Machinery, electrical equipment, instrument and parts thereof (except
populated PCBs) for semiconductor wafer
fabrication/LCD fabrication units being
exempted.
Applicable
BCD
SAD – 4%
Nil BCD
Nil SAD
(vi) Machinery, electrical equipment, instrument and parts thereof (except
populated PCBs) imported for Assembly,
Test, Marking and Packaging of
semiconductor chips (ATMP) being
exempted.
Applicable
BCD
SAD – 4%
Nil BCD
Nil SAD
56
(vii) The exemption from basic customs duty,
CV duty, SAD on charger/adapter, battery
and wired headsets/speakers for
manufacture of mobile phone being
withdrawn.
BCD – Nil
CVD – Nil
SAD - Nil
Applicable
BCD
CVD –
12.5%
SAD – 4%
(viii) Inputs, parts and components, subparts for
manufacture of charger / adapter, battery
and wired headsets /speakers, of mobile
phone, subject to actual user condition
being exempted.
Applicab
le BCD,
CVD
SAD
Nil BCD
Nil CVD
Nil SAD
(ix) Parts and components, subparts for
manufacture of Routers, broadband
Modems, Set-top boxes for gaining access
to internet, set top boxes for TV, digital
video recorder (DVR)/network video
recorder (NVR), CCTV camera/IP
camera, lithium ion battery [other than
those for mobile handsets] being
exempted.
Applicable
BCD, CVD
SAD
Nil BCD
Nil CVD
Nil SAD
(x) Basic Customs Duty exemption on
Magnetic - Heads (all types), Ceramic/
Magnetic cartridges and stylus, Antennas,
EHT cables, Level meters/level
indicators/ tuning indicators/ peak level
meters/ battery meter/VC meters/Tape
counters, Tone arms, Electron guns being
withdrawn.
Nil Applicab
le BCD
(xi) Specified telecommunication equipment
[Soft switches and Voice over Internet
Protocol (VoIP) equipment namely VoIP
phones, media gateways, gateway
Product/Switch (POTP/POTS), Optical
controllers and session border controllers,
Optical Transport equipment;
combination of one / more of Packet
Optical Transport Network(OTN)
products, and IP Radios, Carrier Ethernet
Switch, Packet Transport Node (PTN)
products, Multiprotocol Label Switching- Transport Profile (MPLS-TP) products,
Multiple Input / Multiple Output (MIMO)
and Long Term Evolution (LTE) Products
on which 10% BCD was imposed in
2014-15 Budget] being excluded from the
purview of the other exemption also.
Nil 10%
57
(xii) Basic Customs Duty exemption on
preform of silica for manufacture of
telecom grade optical fibre /cables being
withdrawn.
Nil 10%
(xiii) Basic Customs Duty on specified capital
goods and inputs for use in manufacture
of Micro fuses, Sub-miniature fuses,
Resettable fuses and Thermal fuses being
exempted.
Applicabl
e rate
Nil
(xiv) Concessional Basic Customs Duty on
Neodymium Magnet (before
Magnetization) and Magnet Resin
(Strontium Ferrite compound/before
formed, before magnetization) for
manufacture of BLDC motors, being
prescribed subject to actual user
condition.
Applicabl
e rate
2.5%
(xv) Exemption from SAD on populated PCBs
for manufacture of personal computers
(laptop or desktop) being withdrawn.
Nil 4%
(xvi) Exemption from SAD on populated PCBs
of mobile phone/tablet computer being
withdrawn. Concessional SAD on
populated PCBs for manufacture of
mobile phone/tablet computer imposed.
Nil 2%
(xvii) Excise duty structure on domestically
manufactured charger/adapter, battery and
wired headsets/speakers for supply to
mobile phone manufacturers as original
equipment manufacturer being changed.
Nil 2%
[without
ITC]
or 12.5%
[with ITC]
(xviii) Excise duty on inputs, parts and
components, subparts for manufacture of
charger/adapter, battery and wired
headsets/speakers of mobile phone, subject to actual user condition being
exempted.
12.5% /
Nil
Nil
(xix) Excise duty structure on Routers,
broadband Modems, Set-top boxes for
gaining access to internet, set top boxes
for TV, digital video recorder (DVR) /
network video recorder (NVR), CCTV
camera / IP camera, lithium ion battery
[other than those for mobile handsets]
being changed.
12.5% 4%
[without
ITC]
or 12.5%
[with ITC]
58
(xx) Excise duty on parts and components,
subparts for manufacture of Routers,
broadband Modems, Set-top boxes for
gaining access to internet, set top boxes
for TV, digital video recorder (DVR) /
network video recorder (NVR), CCTV
camera / IP camera, lithium ion battery
[other than those for mobile handsets]
being exempted.
12.5% Nil
11. Metals, glass and ceramics
(i) BCD on Silica sand being reduced. 5% 2.5%
(ii) Basic Customs Duty on brass scrap being
reduced.
5% 2.5%
(iii) Excise duty structure on disposable
containers made of aluminium foils being
changed.
2%
[without
ITC] or 6%
[with ITC]
2%
[without
ITC]
or 12.5%
[with ITC]
12. Automobiles
(i) BCD on Golf cars being increased. 10% 60%
(ii) Nil BCD and 6% excise/CVD being
extended on parts of electric vehicles and
hybrid vehicles, presently.
Available
upto
31.03.2016
Without
any time
limit
(iii) BCD on aluminium Oxide for
manufacture of Wash Coats, which are
used in the manufacture of catalytic
converters, being reduced subject to actual
user condition
7.5% 5%
(iv) Description of “Engine for HV (Atkinson
cycle)” to “Engine for xEV (hybrid
electric vehicle)” for the purposes of Nil
Basic Customs Duty and 6% CVD being
changed.
Applicabl
e BCD
and CVD
Nil BCD
6% CVD
(v) Description of “Engine for HV (Atkinson
cycle)” to “Engine for xEV(hybrid
electric vehicle)” being changed for the
purposes of concessional 6% excise duty
12.5% 6%
13. Capital Goods
(i) CVD exemption on specified machinery
required for construction of roads being
withdrawn.
Nil 12.5%
59
14. Defence Production
(i) Customs duties exemption on direct
imports of specified goods for defence
purposes by Government of India or State
Governments being withdrawn, with
effect from 01.04.2016.
BCD- Nil
CVD – Nil
SAD – Nil
BCD – 5%
to 10%
CVD –
12.5%
SAD – 4%
(ii) BCD exemption on specified goods
imported by contractors of Government of
India PSUs or sub-contractors of such
PSUs for defence purposes being
withdrawn, with effect from 01.04.2016.
Nil 7.5% to
10%
15. Maintenance, repair and overhaul [MRO] of aircrafts
(i) Tools and tool kits being exempted from
Basic Customs duty, CVD and SAD when
imported by MROs for maintenance,
repair, and overhauling [MRO] of aircraft
subject to certification by the Directorate
General of Civil Aviation.
Applicable
BCD,
CVD and
SAD
Nil BCD
Nil CVD
Nil SAD
(ii) Exemption from excise duty being
extended to tools and tool kits when
procured by MROs for maintenance,
repair, and overhauling [MRO] of aircraft
subject to a certification by the
Directorate General of Civil Aviation
Applicable
excise
duty
Nil
(iii) Procedure for availment of exemption
from customs duties on parts, testing
equipment, tools and tool-kits for
maintenance, repair and overhaul of
aircraft being simplified based on records
and subject to actual user condition.
(iv) The restriction of one year for utilization
of duty free parts for maintenance, repair
and overhaul of aircraft being removed.
(v) The existing conditions of stay [60 days]
being further relaxed, so as to provide for
stay up to 6 months of the foreign aircraft
for maintenance, repair or overhauling,
with further extension of such period by
DGCAs as deemed fit.
(vi) The procedure for availment of exemption
from excise duty on parts, testing
equipment, tools and tool-kits for
maintenance, repair and overhaul of
aircraft being simplified based on records.
60
16. Ship Repair /Units
(i) Excise duty on capital goods and spares
thereof, raw materials, parts, material
handling equipment and consumable for
repairs of ocean-going vessels by a ship
repair unit subject to actual user condition
being exempted.
Applicable
excise
duty
Nil
(ii) The procedure for availment of exemption
from Basic Customs Duty, CVD and SAD
by ship repair units being simplified based
on records and subject to actual user
condition.
17. Miscellaneous
(i) Basic customs duty on import of Medical
Use Fission Molybdenum-99 by Board of
Radiation and Isotope Technology (BRIT)
for manufacture of radio pharmaceuticals
being exempted.
7.5% Nil
(ii) Concessional BCD on Pulp of wood for
manufacture of sanitary pads, napkins &
tampons being provided.
5% 2.5%
(iii) Concessional BCD on Super Absorbent
Polymer when used for manufacture of
sanitary pads, napkins & tampons being
extended.
7.5% 5%
(iv) Excise duty on parts of railway or
tramway locomotives or rolling stock and
railway or tramway track fixtures and
fittings, railway safety or traffic control
equipment, etc. being reduced.
12.5% 6%
(v) “Foreign Satellite data” on storage media
when imported by National Remote
Sensing Centre (NRSC), Hyderabad being
exempted.
Applicable
BCD,
CVD,
SAD
Nil BCD
Nil CVD
Nil SAD
(vi) Clean Energy Cess / Clean Environment
Cess on coal, lignite or peat, produced or
extracted as per traditional and customary
rights enjoyed by local tribals without any
license or lease in the State of Nagaland
being exempted.
`200 per
tonne
Nil
(vii) Excise duty on improved cookstoves
including smokeless chulhas for burning
wood, agrowaste, cowdung, briquettes,
and coal being exempted unconditionally.
12.5% Nil
61
18. Ores, concentrates
Export duty reduced on:
a) Iron ore fines with Fe content below
58%
10% Nil
b) Iron ore lumps with Fe content below
58%
30% Nil
c) Chromium ores and concentrates, all
sorts
30% Nil
d) Bauxite 20% 15%
19. Textiles
(i) Excise duty on branded readymade
garments and made up articles of textiles
of retail sale price of `1000 or more being
changed.
Nil
(without
ITC)
or
6%/12.5%
(with ITC)
2%
(without
ITC) or
12.5%
(with
ITC)
(ii) The Tariff value for excise /CVD
purposes on readymade garments and
made up articles of textiles being
changed.
30% of
retail sale
price
60% of
retail
sale price
(iii) Excise duty on PSF / PFY, manufactured
from plastic scrap or plastic waste
including waste PET bottles, being
changed.
2%
(without
ITC)
or
6%
(with ITC)
2%
(without
ITC)
or
12.5%
(with
ITC)
20. Renewable Energy
(i) Excise duty on carbon pultrusions used
for manufacture of rotor blades, and
intermediates, parts and sub-parts of rotor
blades for wind operated electricity
generators being reduced.
12.5% 6%
(ii) Excise duty on Unsaturated Polyester
Resin (polyester based infusion resin and
hand layup resin), Hardeners/Hardener for
adhesive resin, Vinyl Easter Adhesive
(VEA) and Epoxy Resin used for
manufacture of rotor blades, and
intermediates, parts and sub-parts of rotor
blades for wind operated electricity
generators being increased.
Nil 6%
62
(iii) “Valid agreement between importer /
producer of power with urban local body
for processing of municipal solid waste
for not less than ten years from the date of
commissioning of project” being provided
as an alternative condition for availing
concessional customs/excise duty benefits
in case of power generation project based
on municipal and urban waste.
21. Jewellery
Excise duty exemption on Articles of
Jewellery [excluding silver jewellery,
other than studded with diamonds or other
precious stones namely, ruby, emerald
and sapphire] being withdrawn with a
higher threshold exemption upto `6 crore
in a year and eligibility limit of `12 crore, along with simplified compliance
procedure.
Nil 1%
(without
ITC)
or
12.5%
(ITC)
22. Footwear
(i) Excise duty on rubber sheets & resin
rubber sheets for soles and heels being
reduced.
12.5% 6%
(ii) The abatement rate from retail sale price
(RSP) for the purposes of RSP based
assessment of excise duty, for all
categories of footwear being revised.
25% 30%
23. Service tax
(i) a) Services provided by Indian Shipping
lines by way of transportation of
goods by a vessel to outside India
being zero rated with effect from 1st
March, 2016; and
b) Service tax on services provided by
them by way of transportation of
goods by a vessel from outside India
up to the customs station in India
being imposed, with effect from 1st
June, 2016.
No credit
Nil
Input tax
credit
allowed
14%
(ii) Service tax on services provided by
Biotechnology Industry Research
Assistance Council (BIRAC) approved
biotechnology incubators to incubatees
being exempted, with effect from
01.04.2016.
14% Nil
63
(iii) Service tax on the services provided by
way of skill/vocational training by training
partners under Deen Dayal Upadhyay
Grameen Kaushalya Yojana being
exempted, with effect from 01.04.2016.
14% NIL
(iv) Service tax on services of assessing bodies
empanelled centrally by Directorate
General of Training, Ministry of Skill
Development & Entrepreneurship being
exempted, with effect from 01.04.2016.
14% NIL
(v) Notification No. 41/2012-ST, was amended by notification
No.1/2016-ST so as to, inter alia, allow refund of service tax on
services used beyond the factory etc. for the export. This
amendment is being made effective from 1st July 2012. This will
come into effect from the date of enforcement of Finance Bill
2016.
(vi) Quarterly payment of service tax being extended to ‘One Person
Company’ (OPC) and HUF also, with effect from 01.04.2016.
(vii) Facility of payment of service tax being extended on receipt basis
to ‘One Person Company’ (OPC) also, with effect from
01.04.2016.
VI Ease of doing business
1. 13 cesses levied by other Ministries/Departments and
administered by the Department of Revenue, where the revenue
collection from each of them is less than `50 crore in a year being
abolished.
2. Interest rates on delayed payment of
duty/tax across all indirect taxes being
rationalized at 15%, except in case of
service tax collected but not deposited to
the exchequer, in which case the rate of
interest will be 24% from the date on
which the service tax payment became
due.
For assesses with taxable value during
preceding year/years covered by the
notice is less than ` 60 Lakh, the rate of
interest on delayed payment of service tax
will be 12%.
This will come into effect from date of
enforcement of Finance Bill, 2016.
Customs
18%
Excise
18%
Service tax
18%
24%
30%
Customs
Excise
Service tax
15%.
24%
in case of
tax
collected
but not
deposited
64
3. The exemptions from customs duties on specified goods imported
for petroleum exploration under various types of licenses or mining
leases, pre-NELP contracts, NELP contracts, Marginal Fields
Policy and the Coal Bed Methane Policy being merged into a single
exemption with a unified list of specified goods and conditions
4. Nil Basic Customs Duty and Nil CVD on imports of goods
required for exploration & production of hydrocarbon activities
being extended to such operations undertaken under Petroleum
Exploration Licenses (PEL) or Mining Leases (ML) issued or
renewed before 1st April 1999.
5. CENVAT Credit Rules, 2004 being amended, to improve credit
flow, reduce the compliance cost and litigation, particularly those
relating to apportionment of credit between exempted and non- exempted final products / services. Changes are also being made
in the provisions relating to input service distributor, including
extension of this facility to transfer input services credit to
outsourced manufacturers, under certain circumstances.
Amendments will also enable manufacturers with multiple
manufacturing units to maintain a common warehouse for inputs
and distribute inputs with credits to the individual manufacturing
units. This will come into effect from 01.04.2016.
6. Amendments being made to Central Excise and Service Tax laws
so as to provide for closure of proceedings against co-noticees,
once the proceedings against the main noticee have been closed,
with effect from date of enforcement of Finance Bill, 2016.
7. Rules prescribing procedure for import or domestic procurement
of goods at concessional rates of customs and excise duties for
certain specified purposes being simplified.
8. Number of returns for central excise assessee, above a certain
threshold, is being reduced, from 27 to 13, one annual and 12
monthly returns. The annual return will also have to be filed by
service tax assessees, above a certain threshold, taking total
number of returns to three in a year for them. This will come into
effect from 01.04.2016.
9. The facility for revision of return, hitherto available to a service
tax assessee only, being extended to manufacturers also.
10. The monetary limit for launching prosecution being increased to `
2 crore of service tax evasion and the power to arrest being
restricted only to situations where the tax payer has collected the
tax but not deposited it to the exchequer above a certain threshold
of ` 2 crore. This will come into effect from date of enforcement
of Finance Bill, 2016.
65
11. The Customs Act being amended to provide for deferred payment
of customs duties for certain class of importers and exporters. In
consultations with Ministry of Shipping, the facility of direct port
delivery is being extended to more importers.
12. In 2014-15 Budget, the intent to implement Indian Customs Single
Window Project was announced. Significant progress has been
made in that direction to implement this facility at major ports and
airports starting from next financial year.
13. The duty free import allowance for bona
fide gifts imported by post or air or by
courier service being increased.
`10,000 `20,000
14. Chief Commissioners of Central Excise are being instructed to file
application for withdrawing prosecution in cases involving duty
less than rupees five lakh and pending for more than fifteen years.
VII Clean Environment Initiatives Existing Proposed
1. The name of ‘Clean Energy Cess’ levied
on coal, lignite and peat being changed to
‘Clean Environment Cess’ and its rate
being increased.
` 200
PMT
` 400
PMT
2. Credit of input services on transport of
passengers by rail at the existing rate of
abatement of 70% being allowed, with
effect from 01.04.2016.
4.2%
Without
credit
4.2%
With
input
service
credit
3. Credit of input services on transport of
goods in containers by rail at a reduced
abatement rate of 60% being allowed, with effect from 01.04.2016.
4.2%
Without
credit
5.6%
With
input
service
credit
4. Credit of input services on transport of
goods, other than in containers by rail at
the existing rate of abatement of 70%
being allowed, with effect from
01.04.2016.
4.2%
Without
credit
4.2%
With
input
service
credit
5. Credit of input services on transport of
goods by vessel at the existing rate of
abatement of 70% being allowed, with
effect from 01.04.2016.
4.2%
Without
credit
4.2%
With
input
service
credit
66
6. The customs and excise duty concessions
on specified parts of electric vehicles /
hybrid vehicles being extended.
Upto
31.03.2016
Without
time
limit
7. Excise duty on sacks and bags of any
plastic being rationalized.
12.5% or
15%
15%
VIII Reduce litigation and providing certainty in taxation
1. An Indirect tax Dispute Resolution Scheme, 2016, being
introduced wherein in respect of cases pending before
Commissioner (Appeals), the assesse, after paying the duty,
interest and penalty equivalent to 25% of penalty imposed, can file
a declaration. The proceedings against the assessee will be closed
and he will also get immunity from prosecution. However, this
scheme will not apply in certain cases.
2. Retail Sale Price [RSP] based assessment of excise duty being
extended to all goods falling under heading 3401 and 3402 with
the abatement rate of 30%.
3. Retail Sale Price [RSP] based assessment of excise duty being
extended to:
a) aluminium foils of a thickness not exceeding 0.2 mm [with
abatement of 25%];
b) wrist wearable devices (commonly known as ‘smart watches’)
[with abatement of 35%]; and
c) accessories of motor vehicle and certain other specified goods
[with abatement of 30%]. 4. Exemptions being restored , with effect
from 01.04.2015, in relation to contracts
which had been entered into prior to
01.03.2015 for services of:
a) construction provided to the
Government, a local authority or a
governmental authority, in respect of
construction of govt. schools,
hospitals etc.
b) construction of ports, airports.
5.6% of
total
amount
Nil
5. Exemption from service tax being
extended to services provided by way of
construction, maintenance etc. of canal,
dam or other irrigation works provided to
bodies set up by Government, during the
period from the 1st July, 2012 to 29th
January, 2014.
5.6% of
total
amount
Nil
67
6. Section 67A being amended to obtain rule making powers in
respect of the Point of Taxation Rules, 2011. Point of Taxation
Rules, 2011 being amended accordingly, with effect from date of
enforcement of Finance Bill, 2016.
7. Section 93A of the Finance Act, 1994 being amended so as to
allow rebate by way of notification also, with effect from date of
enforcement of Finance Bill, 2016.
8. Explanation 2 in section 65B(44) of the Finance Act, 1994 being
amended so as to clarify that any activity carried out by a lottery
distributor or selling agent are liable to service tax, with effect
from date of enforcement of Finance Bill, 2016.
9. Being clarified that service provided by
the Indian Railways to Container Train
Operators (CTOs) of haulage of their
container train is a service of ‘Transport
of Goods by Rail’.
14% 4.2%
10. Services provided by the Indian Institutes
of Management (IIM) by way of 2 year
full time Post Graduate Programme in
Management (PGPM), Integrated
Programme in Management and
Fellowship Programme in Management
(FPM) being exempted, with effect from
01.03.2016.
14% Nil
11. Cenvat Credit Rules, 2004 being amended so as to provide for
reversal of Cenvat Credit of inputs/input services which have been
commonly used in providing taxable output service and an activity
which is not a ‘service’, with effect from 01.04.2016.
12. Notification No. 27/2012 – C.E. (N.T.) being amended so as to
provide that time limit for filing application for refund of Cenvat
Credit, in case of export of services, is 1 year from the specified
date, with effect from 01.03.2016.
13. Assignment by the Government of the
right to use the radio-frequency spectrum
and its subsequent transfers being
declared as a service so as to make it clear
that assignment of right to use the
spectrum is a service leviable to service
tax and not sale of intangible goods, with
effect from date of enforcement of
Finance Bill, 2016.
14% 14%
14. A condition mandating inclusion of cost of fuel in the
consideration for the services of renting of motor-cab services for
availing abatement from service tax, being introduced with effect
from 01.04.2016.
68
15. Service tax on the services of Information
Technology software on media bearing
RSP, being exempted, provided
appropriate Central Excise duty is paid, with effect from 01.03.2016.
Nil Nil
16. Mutual exclusiveness of levy of excise
duty and service tax on information
technology software [in respect of
Software recorded on media “NOT FOR
RETAIL SALE”] being ensured by
exempting from excise duty only that
portion of the transaction value on which
service tax is paid, with effect from
01.03.2016.
14% 14%
IX Rationalization/anti avoidance Existing Proposed
1. The abatement rate at 70% in respect of
services by way of construction of
residential complex etc. being
rationalized, with effect from 01.04.2016.
3.5%/
4.2% 4.2%
2. Concessional CVD on Gold dore bar
being increased and concessional excise
duty on refined gold bars manufactured
from such gold dore or gold
ore/concentrate, silver dore bar and copper
ore or concentrate being increased. Excise
duty exemption under the existing area
based exemptions on refined gold being
prospectively withdrawn.
Concessional CVD on silver dore bar and
excise duty on refined silver being
increased.
CVD
8%
Excise
duty 9%
CVD
7%
Excise
duty 8%
CVD
8.75%
Excise
duty
9.5%
CVD
7.75%
Excise
duty
8.5%
3. Actual user condition for the imports of Phosphoric Acid and
Anhydrous Ammonia at concessional BCD/CVD for manufacture
of Fertilizers being prescribed.
4. Actual user condition on imports of LCD/LED/OLED Panels at
Nil BCD for manufacture of LCD/LED/OLED TVs being
prescribed.
5. Excise duty payable per machine per month on chewing tobacco
without lime tube / lime pouches and jarda scented tobacco being
aligned by providing the same speed slabs for both the products.
69
6. Abatement rate being rationalized at 70%
in respect of services by a tour operator
subject to certain conditions, with effect
from 01.04.2016.
3.5%/
5.6% of
amount
charged
4.2% of
amount
charged
7. The rate of service tax on the services of a
foreman to a chit fund being rationalized
with an abatement of 30%, without input
tax credit, with effect from 01.04.2016.
14% of
amount
9.8% of
amount
8. Cenvat credit rules being amended so as to allow credit of service
tax paid on upfront charges for assignment of natural resources by
Government to a business entity, over such period of time as the
period for which the rights have been assigned. This comes into
effect from 01.04.2016.
9. Exemption limit on services provided by a
performing artist in certain folk or
classical art forms of music, dance or
theatre, being enhanced to Rs.1.5 lakh per
event, with effect from 01.04.2016.
14% Nil
X Additional Resource Mobilization Existing Proposed
1. BCD on Cashew nuts in shell being
increased.
Nil 5%
2. Excise duty on waters including mineral
waters and aerated waters, containing
added sugar or other sweetening matter or
flavored being increased.
18% 21%
3. Excise duty on Aviation Turbine Fuel
[ATF], other than for supply to Scheduled
Commuter Airlines (SCA) from the
Regional Connectivity Scheme Airports,
being increased. ATF for supply to aircraft
under the Regional Connectivity Scheme
will continue to attract 8% excise duty.
8% 14%
4. Infrastructure Cess being levied on motor
vehicles, of heading 8703, as under:
a) Petrol/LPG/CNG driven motor
vehicles of length not exceeding 4m
and engine capacity not exceeding
1200cc;
b) Diesel driven motor vehicles of length
not exceeding 4m and engine capacity
not exceeding 1500cc;
-
-
1%
2.5%
70
c) Other higher engine capacity and
SUVs and bigger sedans.
Three wheeled vehicles, Electrically
operated vehicles, Hybrid vehicles,
Hydrogen vehicles based on fuel cell
technology, Motor vehicles which after
clearance have been registered for use
solely as taxi, Cars for physically
handicapped persons and Motor vehicles
cleared as ambulances or registered for
use solely as ambulance will be exempt
from this Cess.
No credit of this cess will be allowed, and
credit of no other duty can be allowed to
pay this Cess.
- 4%
XI Miscellaneous Existing Proposed
Tobacco and Tobacco Products
1. Excise duty on Cigar and cheroots being
increased
12.5% or
`3375 per
thousand,
whichever
is higher
12.5% or
`3755 per
thousand,
whichever
is higher
2. Excise duty on Cigarillos being increased 12.5% or
`3375 per
thousand,
whichever
is higher
12.5% or
`3755 per
thousand,
whichever
is higher
3. Excise duty on Cigarettes of tobacco
substitutes being increased
`3375 per
thousand
`3755
per
thousand
4. Excise duty on Cigarillos of tobacco
substitutes being increased
12.5% or
`3375 per
thousand,
whichever
is higher
12.5% or
`3755
per
thousand,
whicheve
r is
higher
5. Excise duty on other forms of tobacco
substitutes being increased
12.5% or
`3375 per
thousand,
whichever
is higher
12.5% or
`3755 per
thousand,
whichever
is higher
71
6. Excise duty on Gutkha, chewing tobacco
(including filter khaini) and jarda scented
tobacco being increased
70% 81%
7. Excise duty on Unmanufactured tobacco
being increased 55% 64%
8. Tariff rate of excise duty on paper rolled
biris [whether handmade or machine
made] and other biris [other than
handmade biris] being increased.
The effective rates, will, however, remain
unchanged.
Tariff rate
`30 per
thousand.
Effective
rate
`21 per
thousand
Tariff rate
`80 per
thousand
Effective
rate `21
per
thousand
9. Additional Duty of Excise on cigarettes
being increased
` Per
thousand
` Per
thousand
(i) Non filter not exceeding 65 mm. 70 215
(ii) Non-filter exceeding 65 mm but not
exceeding 70 mm.
110 370
(iii) Filter not exceeding 65 mm. 70 215
(iv) Filter exceeding 65 mm but not exceeding
70 mm.
70 260
(v) Filter exceeding 70 mm but not exceeding
75 mm.
110 370
(vi) Other 180 560
10. Other products
(i) A number of assistive devices,
rehabilitation aids and other goods for
disabled persons attract Nil BCD. This
exemption being extended to Braille
paper.
BCD - 10%
BCD - Nil
(ii) Disposable sterilized dialyzer and micro
barrier of artificial kidney being exempted
from Basic Customs Duty, excise duty /
CVD and SAD
Applicable
BCD,
excise /
CVD, SAD
Nil BCD
Nil
excise/
CVD
Nil SAD
XII OTHER LEGISLATIVE AMENDMENTS
THE CUSTOMS ACT, 1962
Warehousing provisions are being simplified so as to move from
physical control to record based control in most of cases.
Several other consequential changes are also being made.
72
Section 25 of the Customs Act, 1962 being amended 80 also omit
the requirement of publishing and offering for sale on the date of
its issue, by the Directorate of Publicity and Public Relations of
CBEC, of notification issued for publication in the official gazette.
Sections 28, 47, 51 and 156 of the Customs Act, 1962 being
amended so as provide for deferred payment of customs duties to
certain class of importers and exporters and to increase the
limitation period from one year to two year in cases not involving
fraud, suppression of facts, wilful mis-statement, etc. New section 58A being inserted to provide for a new class of
warehouses which require continued physical control and will be
licensed for storing revenue sensitive goods.
New section 58B being inserted so as to regulate the process of
cancellation of licences which is a necessary concomitant of
licencing.
Section 65 being amended to delete the payment of fees to
Customs for supervision of manufacturing facilities under Bond;
and empower Principal Commissioner or Commissioner of
Customs to licence such facilities.
THE CUSTOMS TARIFF ACT, 1975
The First Schedule to the Customs Tariff Act, 1975 being
amended so as to include editorial changes in the Harmonized
System of Nomenclature (HSN) in certain chapters to be effective
from 01.01.2017.
The First Schedule to the Customs Tariff Act, 1975 being
amended so as to:
a) prescribe separate tariff lines for laboratory created or
laboratory grown or manmade or cultured or synthetic
diamonds;
b) substitute Tariff line 5801 39 10 with description “Warp pile
fabrics, uncut” in place of tariff line 5801 37 11 [with
description Warp pile fabrics ‘epingle’ uncut velvet] and 5801
37 19 [with description Warp pile fabrics ‘epingle’ uncut
other];
c) delete Tariff line 8525 50 50, relating to Wireless microphone;
d) to amend supplementary notes (e) and (f) of Chapter 27 so as
to change the reference: from IS:1460:2000 to IS:1460:2005
for high speed diesel (HSD) and from IS:1460 to IS:
15770:2008 for light diesel oil (LDO)
73
THE CENTRAL EXCISE ACT, 1944
Section 5A being amended, so as to omit the requirement of
publishing and offering for sale on the date of issue, by the
Directorate of Publicity and Public Relations of CBEC, of
notifications issued for publication in the Official Gazette.
Section 11A of the Central Excise Act, 1944 being amended so as
to increase the limitation period from one to two years in cases not
involving fraud, suppression, etc.
Section 37B of the Central Excise Act, 1944 being amended so as
to empower the Board for implementation of any other provision
of the said Act in addition to the power to issue orders,
instructions and directions.
The Third Schedule to the Central Excise Act, 1944 being
amended so as to include therein:
1) All goods falling under heading 3401 and 3402;
2) Aluminium foils of a thickness not exceeding 0.2 mm;
3) Wrist wearable devices (commonly known as ‘smart
watches’); and
4) Accessories of motor vehicle and certain other
specified goods.
THE CENTRAL EXCISE TARIFF ACT, 1985
The First and Second Schedules to the Central Excise Tariff Act,
1985 being amended so as to include editorial changes in the
Harmonized System of Nomenclature (HSN) in certain chapters to
be effective from 01.01.2017.
the First Schedule to the Central Excise Tariff Act, 1985 being
amended so as:
a) to prescribe separate tariff lines for laboratory created or
laboratory grown or manmade or cultured or synthetic
diamonds;
b) to substitute Tariff line 5801 39 10 with description “Warp
pile fabrics, uncut” in place of tariff line 5801 37 11 [with
description Warp pile fabrics ‘epingle’ uncut velvet] and
5801 37 19 [with description Warp pile fabrics ‘epingle’
uncut other];
c) to delete Tariff line 8525 50 50, relating to Wireless
microphone;
d) to amend supplementary notes (e) and (f) of Chapter 27 so
as to change the reference from IS:1460:2000 to
IS:1460:2005 for high speed diesel (HSD) and from
IS:1460 to IS: 15770:2008 for light diesel oil (LDO).
74
THE FINANCE ACT, 1994 [SERVICE TAX]
Section 73, being amended so as to increase the limitation period
from 18 months to 30 months for short levy/non levy/short
payment/non-payment/erroneous refund of service tax, with effect
from date of enforcement of Finance Bill, 2016.
THE CENTRAL SALES ACT, 1956
Section 3 of the Central Sales Tax Act, 1956 being amended so as
to insert an explanation:
Explanation.- Where the gas sold or purchased and transported
through a common carrier pipeline or any other common transport
distribution systems becomes co-mingled and fungible with other
gas in the pipeline or system and such gas is introduced into the
pipeline or system in one State and is taken out from the pipeline
in another State, such sale or purchase of gas shall be deemed to
be a movement of goods from one state to another.
THE CENTRAL ROAD FUND ACT, 2000
Section 10 of the Central Road Fund Act, 2000, being amended so
as to substitute clause (viii) of subsection (1) to provide a formula
for redistribution of the cess for different purposes. THE PREVENTION OF MONEY LAUNDERING ACT,
2002, THE SMUGGLERS AND FOREIGN EXCHANGE
MANIPULATORS (FORFEITURE OF PROPERTY ACT,
1976 and NARCOTICS DRUGS AND PSYCHOTROPIC
SUBSTANCES ACT, 1985
The three Tribunals established under these Acts being merged
and being provided that Appellate Tribunal established under the
Smugglers and Foreign Exchange Manipulators (Forfeiture of
Property) Act, 1976 shall be the appellate Tribunal for hearing the
appeals against the orders made under all these three Acts. THE FOREIGN EXCHANGE MANAGEMENT ACT, 1999
Section 14A in the Foreign Exchange Management Act [FEMA],
1999 being inserted to incorporate provisions contained under the
Second Schedule appended to the Income-tax Act, 1961, so as to
empower an officer not below the rank of Assistant Director to
recover arrears of penalty under the FEMA 1999 by exercising the
powers conferred under the Income-tax Act, 1961.
MISCELLANEOUS
Various notifications pertaining to Advance Licence and Duty
Free Import Authorization Schemes being amended to
retrospectively correct the reference to “section 8” of the Customs
Tariff Act, 1975 in such notifications to “section 8B” so as to
75
clearly provide that exemption from safeguard duty under section
8B is available under these notifications on imports under
Advance Licence and Duty Free Import Authorization Schemes.
RULES & NOTIFICATIONS UNDER THE CUSTOMS ACT,
1962
Existing Baggage Rules, 1998 being substituted with Baggage
Rules, 2016 so as to simplify and rationalize multiple slabs of duty
free allowance available to various categories of passengers.
Customs (Import of Goods at Concessional Rate of Duty for
Manufacture of Excisable Goods) Rules, 1996 being simplified.
REGULATIONS MADE UNDER THE CUSTOMS ACT,
1962
The Customs Baggage Declaration Regulations, 2013 being
amended to provide that baggage declaration will have to be filed
only by passengers who carry dutiable or prohibited goods.

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