"Significant tax proposals....disclosure of assets, mini Kar Vivad, dealing with retrospective taxation, Easwar Committee recommendations acceptance, automatic stay of demand, dual taxation of dividends, change in holding period for LTCG, whoa..,..we have our hands full!! Interesting times ahead."

"It’s a balanced budget with an overarching theme of realizing inclusive and staggered economic growth, without stepping down on the path of fiscal prudence. Amongst positives, focus on infrastructure development, fixing distressed asset concerns of financial sector, employment generation through indigenization stand out. Bankruptcy code and a framework for commercial dispute settlement under PPP framework are the two most significant regulatory reforms rolled out.

Amongst tax proposals, budget is rife with new taxes – eg, tax on super-rich, and levy of additional cess on services; doubling of clean environment cess. While reduction in corporate tax rate for MSMEs is encouraging, FM’s holding back across the board reduction in tax rate, perhaps constrained by budgetary compulsions. Exempting Project SPVs from dividends distribution tax accords nearly a complete pass through status to REITs and ARCs; this proposal ought to enhance competitiveness of REITs as the preferred pooling vehicle for investment in real estate /infrastructure sector.

A lot of other positives – eg, the Budget buries the bogey of retrospective tax, and provides one time opportunity for settlement of past disputes; implementing outcomes of BEPS in the form of equalization levy cess in B2B digital transactions of 6 percent shall help garner revenues. From indirect tax standpoint, inverted duty structure for IT industry in addition to reducing customs duty on inputs and raw materials is aimed to encourage domestic manufacturing and job creation.

The Budget rolls out a host of administrative reforms by way of fixing loopholes and measures to improve taxpayers’ experience, and that is definitively a step in the right direction to evolving taxpayers’ service focused administration. Improvised dispute resolution shall encourage settlement of languishing tax disputes and help unclog dispute resolution mechanism. One time window for voluntary disclosure by delinquent taxpayers finds its way back into legislation, and it’s encouraging to see the FM not propose a prohibitive penalty on disclosure. "

"A wide ranging, welcome Budget with a number of bold initiatives in the field of taxation including, provisions such as the Income Declaration Scheme and the Direct Tax Dispute Resolution Scheme, amendments to Provisions relating to penalties, deduction of Tax at Source, REITs, InVits, Presemptive Tax, and paperless assessments which should go a long way to make life easier for assessees, especially small assessees and to protect them from excessive enforcement of discretionary powers..."

"The 2016 Budget was presented today amidst a lot of expectations from the government. The biggest expectancy was around reduction in corporate tax rate. Interestingly, while government has laid roadmap to phase out tax incentives, the reduction in corporate tax rate has been limited only to certain companies like start-ups, new manufacturing entities and small companies. The peak depreciation rate is also proposed to be limited to 40%.

The much demanded deferment of Place of Effective Management (PoEM) rules by one year has been acceded, which will provide a welcome relief. Similarly concessions have been given to foreign companies in relation to non-furnishing of Permanent Account Number (PAN), subject to meeting prescribed conditions, clarifying the 10% tax rate on sale of privately-held companies, etc.

In relation to the Base Erosion and Profit Shifting (BEPS) project, the country-by-country reporting in relation to transfer pricing documentation, with a threshold of EUR 750mn, has been introduced as expected. The Budget proposal also contains a novel ‘equalisation levy’ of 6% on non-residents on online advertisement and other payments to be prescribed. Lastly, a special regime for taxation of IP income @ 10% of the gross amount of royalty is proposed – this is taking a cue from Action 5 of BEPS dealing with harmful tax practices.

The government has also proposed slew of proposals in relation to the ease of doing business in India, introduction of dispute resolution scheme, rationalisation of penalty proceedings, etc., which are welcome!"

"On the indirect tax front there are some clear positives for the corporate community. The thrust on measures to reduce tax litigation is welcome as it will help resolve pending disputes and also create certainty for the future. In view of the impending move to GST, certain measures have been taken including the imposition of an additional cess of 0.5% ad valorem, there has also been a rationalisation of the CENVAT credit structure and certain items like clothing and jewellery will now be subject to excise duty. If one were looking for something which ought to have been addressed and was missed, the provisions for arrest on indirect tax disputes which have been plaguing the sentiment of the Indian industry should have been definitively modified to prevent arrest for custodial investigations. Qua GST, while some subtle steps have been taken, some might have wished for a more positive affirmation of an action plan and dates. Personally, I think there will be more concrete announcements on GST in the latter half of this Budget Session of Parliament. 

On direct taxes, the beneficial taxation regime for new manufacturing units, start-ups, asset reconstruction companies and global patent incomes are all positive and supportive steps. The introduction of a fresh scheme of amnesty in direct taxes with a more benign interest and penalty as also assurances against prosecution; may well elicit a far greater participation. The adoption of the Easwar Committee Report on simplifications is also welcome. The settlement scheme on “indirect transfers” is however a dampener as the requirement for tax payment is in a manner an endorsement of the retrospective amendment introduced by the previous Government. While the resolution of this issue is not easy, this Budget proposal for settlement of indirect transfers by payment of the tax amounts may not garner adequate support. This critical issue unfortunately continues to remain unresolved. 

The tone and tenor of the budget is positive and pro-India at all levels. "

"The Finance Minister(FM) has done a truly commendable job of addressing the multiple challenges on growth, stress in agriculture,infrastructure and tax reforms. Specifically on tax reforms,there is a clear direction to move towards a more transparent and fairer tax regime. So we have a one time amnesty for domestic tax payers,a dispute resolution scheme for past disputes upto appellate levels and an opportunity to finally achieve  closure on  the much debated retrospective tax on indirect transfers by waiving interest and penalties. There is also a relook at the draconian penalty provisions on the statute for time immemorial and,perhaps for the first time,strict accountability on the Assessing Officer(AO) to give appeal effects in a time bound manner or the Revenue will suffer a higher interest at 9% on refunds due to the taxpayers. Staying of tax demands if the taxpayer pays 15% of the disputed tax will go a long way to end “tax terrorism” by attaching bank accounts on sometimes high pitched demands raised during assessments. Corporate tax reforms by way of phasing out tax incentives in a calibrated manner in lieu of the reduced corporate tax rate of 25% is on expected lines except that Industry may be disappointed that the lower rate will apply only to manufacturing companies. Finally,Thomas Pickety has prevailed in ensuring that the surcharge on the “super rich” goes up from 12 to 15% as also a 10% tax on dividends earned by individuals earning over 10 lacs dividend." 

This Budget for the NDA government has been important in various ways.  The Hon’ble Finance Minister has maintained the fiscal discipline by keeping the target of fiscal deficit of 3.5% of GDP without compromising with the outlay on the various social sector schemes.

The substantial increase of outlay on various social sector schemes like MNREGA, Swachh Bharat mission, Crop Insurance and Housing, power and education for all will go long way the strengthen the economy. 

Certain tax proposals like clarity on taxation of Riets, AIF,  will further boost to the economy.  The tax boosters given for start up are a welcome measure. However, maintaining corporate tax rate @ 30% + Surcharge is a disappointment.

Measure for additional resources mobilisation like additional dividend distribution tax @ 10% in the hands of high networth individuals, restricting the exemption for PF contributions, TCS on sale of vehicles was unexpected and infact undesirable. Various steps and announcements made for dispute resolutions will not only relieve the business from litigations but also boost the revenue collection for government. Certain actions based on BEPS were expected and the deferment of POEM is very welcome step. 

The additional levy of Krishi Kalyan Cess will increase the burden on the already stressed industry. Further, the guidance on timeline of GST was expected. However, the FM’s speech is silent on the same.

"Budget 2016, an incremental move in the backdrop of global uncertainty.  Maintaining a fiscal deficit of 3.5% a very credible step for the financial markets, robust outlays for infrastructure, agriculture, rural and socio economic schemes, however, one can argue that more could be provided for recapitalization of Banks.  No change in capital gains tax regime for listed stocks a positive for the stock exchange, however an additional tax 10% on dividends in excess of 10 lakhs and increase in STT on options a dampener for the markets. No change in individual slabs, POEM deferral, GARR confirmation,  Action point on BEPS master file and country by country report,  road map to reduction to lower tax rates and phase out of exemptions along expected lines.  Introduction of Amnesty scheme can be questioned.  Further, many provisions to build confidence with the tax payers with a view to reduce litigations and commitment to no retrospective amendment.    All in all, in the backdrop of the prevailing global scenario, Budget 2016 a good pragmatic balancing act.

Maintaining the fiscal deficit of 3.5% a credible signal to the global investors and good news for the bonds markets

Higher allocations to rural programs such as MNREGA, Swach Bharat etc,  a big flip to Rural demand 

Budget 2016 Focus on nine pillars of growth, a pragmatic approach to inclusive growth."

"'Nine' transformation pillars in the Budget, of which tax reforms is one, and 'nine' focus areas for tax reforms summarises the broad approach. Budget 2016 is positively focused on reducing litigation and further enabling dispute resolution. In this context, a limited period compliance window for domestic taxpayers has been introduced, which involves payment of an all-inclusive tax at 45%, and a dispute resolution scheme for disputes arising on account of retrospective amendments. 

Budget 2016 has also proposed a reduction of 1% for relatively small enterprises with turnover not exceeding 5 crores and a reduction of 5% for new manufacturing companies not claiming any incentives. However, incentives such as accelerated depreciation and weighted deductions have been reduced for all eligible taxpayers. There is an additional burden on rich taxpayers by way of additional tax on dividend income of 10% in case dividend exceeds 10 lakhs and increase in surcharge on total income from 12% to 15%.   

Other positives include introduction of a special tax regime for income from ‘patents’, a deferral of POEM by one year, reduction in the holding period for long term gains on unlisted shares from 3 to 2 years and no increase in service tax rates, although Krishi Kalyan cess of 0.5% has been levied. The intent to introduce GAAR next year was reinforced, which is aligned to the other commitments to introduce BEPS related developments such as CbC reporting."

"There were hopes prior to the Budget that the Finance Minister will walk the talk of easing doing business in India and providing a favorable tax and regulatory environment for international investors investing into India.

The budget proposals tried to address the low hanging fruit and addressed issues such as reduction of the long term capital gains tax rates for private companies to 10% and the holding period to 2 years, issues relating to pass through in relation to securitization trusts and also exemption on dividend distribution tax on distributions to be REITs/ InVicts.

At the same time progress has been made in respect of reforming tax administration especially in respect of tax litigation with a view to reduce the litigations that are currently happening. Some pre-budget promises such as a removal of MAT for foreign investors and providing incentives to start ups have also been addressed.  Similarly, in case of funds, the sore point on applicability of withholding taxes on distributions to foreign investors and treaty entitlement also appears to have been addressed and at the same time the exemption for safe harbour provisions for fund managers also seems to have been eased. The Finance Minister has also used the opportunity to provide incremental relaxations on the FDI policy and the proposals to get into legislations on various regulatory aspects to ease up doing business is also a positive.

However, the Budget has still not addressed contentious issues for such as the place of effective management or the general anti avoidance rules, preferring to take the path of deferring the same. Similarly, the overhang over the retrospective nature of the indirect transfer tax issues have also not been resolved, with the finance minister trying to take a path of having a dispute resolution procedure whereby the interest / penaltieis will be waived instead of actually removing such retrospective levy. Issues such as introduction of incremental dividend tax in the hands of the shareholder, non-reduction in corporate taxes for a large companies, withholding tax on advertisement income of foreign e-commerce entities are a dampener that were not expected as part of budget.

Proposal to levy tax at the rate of 10% on income from specified patent exploitation is in conformity with emerging trend in developed economies such as the UK (10%)Netherlands (5%),‎Italy (5%) etc. 

On an overall basis, while the budget has made an incrementally positive progress towards easing some of the complexities in the Indian tax legislation, without actually addressing some of the core issues that have been of concern to foreign investors."

"The Hon'ble Union Finance Minister has presented a well thought through Budget. The investments in pipeline are well protected by giving a liberal time frame for withdrawal of the incentives. The presumptive tax regime has been expanded with a higher threshold and there is also scope expansion to professional services, which is welcome. These measures help in widening the tax base. Taxing dividend in excess of Rs 10 lakhs serves the purpose of equity but there is an element of double taxation.  The window for declaration of undisclosed income is a reinforcement of the drive to address the menace of black money. There is parity in the tax treatment of all pension schemes.  The reduction of corporate tax rate has been proposed very interestingly.  An option has been given to new manufacturing companies to opt for the rate of 25% + SC + Cess.  It allows for two sets of corporate tax rates to assess the preference for rates amongst tax payers. The proposal for patent box regime is timely as most countries have adopted similar policies.  The incentives for housing would encourage only low cost housing, though there is a vast requirement for urban housing, where the price points are higher.

Deferment of POEM for foreign companies by a year is practical as the guidelines are yet to be finalised.  The requirement of CbC reporting as an unilateral measure would put Indian headquartered enterprises at a disadvantage unless it is similarly adopted by other leading trade partners of India. The adoption of recommendations of Dr Shome's TARC and Justice Easwar Committee would augur well for tax administrative reforms.  The rationalisation of penalty provisions would encourage compliance and reduce litigation. The pay-out of higher interest on refunds for delayed implementation of appellate orders is restoring partial parity. The fixing of accountability is an assurance that tax administration will be fair to the tax payers. 

Overall, adherence to FRMB is a commitment that the Government would not allow profligacy. Congratulations to the Finance Minister and his team for such a detailed consideration of various representations by various Trade bodies and other stakeholders."

"The Finance Minister presented the Budget 2016 proposals earlier today. It is interesting to note that India, being a member of the G20 is committed to the BEPS project. It has taken cognizance of the Action Plans recommended and has proposed the following amendments in the tax laws. The first among them is, the implementation of country by country reporting of the transfer pricing documentation where a threshold of Eur 750 million is met. 

Another  key BEPS influenced proposal that will impact many Indian corporates and particularly companies that function in the digital domain is the Equalisation Levy. This is a new levy introduced vide this Finance Bill and it fits itself into a separate Chapter. A tax resident of India paying to a non-resident a fee for “specified services” shall subject the payment to a 6% withholding, viz. equalization levy. The only prescribed service currently is online advertisement and related services.This income of the non-resident is exempt in his hands under the Income-tax Act, 1961. In other words, the non-resident should not be subject to tax further after the Equalization Levy is remitted. However, a person failing to withhold the levy will be subject to disallowance under the Income-tax Act, 1961. 

A lot of clarity is required in the administration of this levy and it is expected that some of it may emerge as the rules are framed. It is also unclear whether the Equalisation Levy will be covered within the ambit of existing tax treaties. 

The third BEPS related amendment is that of introduction of a Special Patent Regime. If an Indian company earns royalty on a patent registered in India and exploited by an overseas company, then, such income will be subject to tax at the rate of 10% in India. No expenses can be offset against such income.   

Further the deferment of POEM to 1st April 2017,  introduction of Income-disclosure scheme and Dispute Resolution scheme are positive looking measures. 

Apart from the above, a couple of other amendments that will impact the non-residents is that they may not be subject to the withholding rate of 20% if certain other documents (other than PAN) as prescribed are furnished.  

It is also interesting to note that many of the Tax Simplification Committee recommendations, chaired by R V Easwar have been accepted."

“The Budget seeks to introduce a paradigm shift in the Corporate Tax Regime by finally seeking to start implementing the move towards a “simplified” tax regime by phasing out deductions & exemptions & with lower Corporate Tax rates. Apart from reducing scope for litigation in future, this could effectively create a more level playing field for Corporates with minimal tax differential irrespective of the sectors (for instance Infrastructure, renewables) or geographies (for instance backward area incentives) in which they operate, the nature of income earned (for instance Foreign Exchange earnings), the nature of activity (for instance R&D) etc. The deferral of POEM by a year especially given the delay in the Guidelines demonstrates once again the Governments intent to bring in a sense of fairness in the tax regime. One would similarly expect that if indeed GAAR is to become effective from 1 April 2017, the relevant steps for ensuring preparedness be taken forthwith including issue of detailed draft Guidelines. While some of the Eashwar Committee recommendations have been incorporated, more could have been achieved (for instance deferral of ICDS). The proposed introduction of the Equalisation Levy may be a significant step especially in view of the ongoing global debate in regard to Taxation of the Digital Economy.”

"The Budget has brought in CbCR compliance requirements and Indian companies need to gear up to meet the documentation requirments. This clearly indicates India’s commitment to the BEPS initiative. The Finance Minister also addressed the concern of the tax payers by reducing TP related penalties. One of the most significant changes from a TP perspective is the introduction of dispute resolution options, through settlement mechanisms and making DRP orders non-appealable by the Revenue.  "

“The nine point agenda underlying the tax proposals of Union Budget, 2016 demonstrates government’s policy leanings towards fiscal goals of equity, certainty and economic development. Extending relief to small taxpayers in the form of tax rebates, extension of presumptive taxation, incentives for first time home buyers and creation of a pensioned society are all measures directed towards a more equitable tax regime. On the other hand and too such end, the Hon’ble finance minister has imposed increased surcharge rates on the rich and introduced dividend taxation in the hands of shareholders. In the sphere of corporate taxation, the tax proposals seek to boost growth – the roadmap for reduced corporate tax rate alongside phasing out of exemptions has been actioned, tax incentives for startups, research and manufacturers have been put in place. On the international tax front, deferral of POEM, re-commitment to GAAR and return of black money  implementation of BEPS reporting requirements and the introduction of the equalization levy are key changes to look out for. Reinforcing Government’s commitment to a non-adversarial and certain tax environment, the budget proposes a compliance window for domestic taxpayers to set their house straight, a new dispute resolution scheme with focus on settlement with the tax department and introduces the concept of accountability of tax officers \. Further, Government’s swift implementation of relatively straightforward recommendations of the Justice Easwar Committee such as mitigating the rigour of section 206A, and rationalization of TDS provisions is a commendable step towards a more rational and simple income tax regime. At first blush, Union Budget, 2016 contains some potentially transformative changes which we must look out for.”

“Road Map on phasing out of deductions/exemptions, POEM deferment by one year, CBCR detailing, Provisions for taxing Digital Economy transactions, etc are highlights of this Budget for Indian Corporates & MNCs.  Also provisions for New Dispute Resolution Scheme 2016 indicate Government’s resolve to not only provide clarity on tax provisions, but also address pending litigation and perhaps unlock taxes held up in litigation. Overall looks balanced, trying to cure some evils/ provide clarity – a basic requirement of tax regime”. 

"As expected & per commitment to G 20 / OECD BEPS Action Plan ,  it is proposed to introduce CbC reporting at India.

Indian HQ companies having consolidated group turnover of Euro 750 Million ( INR 5300 Cr Approx.) will be required to submit the prescribed template containing information on the various group companies operating outside India.  Indian Subsidiaries will also be required to submit the same with Indian tax authorities in case their foreign parent does not submit the same with their tax jurisdiction.

The information will cover transactions with related / unrelated parties , profit before taxes , number of employees , capital & tangible assets deployed.  In summary, the CbC template gives an overview of the business model & pricing policies applied.

It is hoped that tax authorities will apply the CbC for risk assessment & not for transfer pricing assessments. It is also advisable   the criteria of no of employees, asserts deployed be not  used for global formalatory  apportionment - a variant of profit split.

It will be advisable to also simultaneously introduce efficient dispute resolution mechanism like MAP & APA while introducing of CbC. 

While transparency is welcome tax policy makers have also assured that sufficient measures will be taken to ensure confidentiality of information submitted by the taxpayer under CbC."

FM Jaitley presented his third budget earlier today.  There are some interesting proposals on unclogging the dispute system and creating accountability.  The budget has proposed the Direct Tax Dispute Resolution Scheme, 2016.  The scheme provides that any cases pending before the Commissioner (Appeals) on today’s date, can be settled by the taxpayer.  This is laudable, especially since the lack of settlements has been a key deficiency in our dispute process.  However, the settlement being offered may not be attractive enough.  The tax payer has to pay the tax and interest upto date of assessment, to settle.  Therefore, the penalty and the interest (after the date of assessment) is reprieved.  Further, if the tax is in excess of Rs 10 lakhs, then the penalty is also not fully reprieved, but a 25% penalty applies.  With these terms, the only takers for this scheme will be taxpayers who have no basis for their appeals and are merely taking a chance, which cannot be too many.  

On accountability, the budget proposes a 9% (instead of 6%) rate of interest for refunds not granted within 90 days of winning the appeal … in his speech, the FM suggested that the tax officers would be accountable for the additional interest.  Again, a very progressive idea, however, the actual change may not have done enough.  There is no good reason to keep the rate of interest lower than the interest of 12% charged by the Revenue, especially since this is only for the period after the taxpayer has won the appeal.  In addition, the tax officers have the option to get an extension of 180 days, citing hardship, with the approval of the Commissioner.  This gives a window for discretion to the Revenue.  While these themes are steps in the right direction, and reflect the tenor of the Government to make the tax regime progressive and non-adversarial, the fine print may bely the same.  Nonetheless, we take comfort in the small steps which are all in the right direction.

"The Union Budget is pragmatic and sensible with well-defined objectives. For small tax payers, select measures have ensured lower tax burden. For new manufacturing enterprises an attractive rate of 25 percent corporate tax and for startups a tax holiday for 3 years as promised. The overall rate cut for corporate tax has eluded.

There were worries that capital gains and dividend taxation would be adversely impacted. The FM has wisely balanced the provisions by limiting the change only for dividends exceeding Rs 10 Lakh being taxable at a rate of 10 percent in hands of shareholders. In a way, well off shareholders will have dividends at an effective cost of 30 percent. 

The macro-economic stability has been reassured with fiscal deficit sensibly in control and  quality spending on roads, rail and public infrastructure. The PPP model is being revived with new legislative measures and the nation was assured that ease in business continues with the proposed changes in tax and corporate laws. The ghost of retrospective taxation arising from indirect transfer provision may get buried finally with the framework of settlement that has been proposed along with a one time window for tax amnesty and tax litigation settlement being proposed for wider set of tax payers. The FM has sought to deliver on a rather wide and bold agenda within the limits of fiscal prudence."

"My first cut reaction is that this is a good Budget giving focus on 9 Pillars which include focus on Infra, rural areas, relief to small tax payers, creating ease of doing business, affordable housing and so on and so forth. Fiscal deficit has been proposed to be kept at 3.5% which is a big positive without compromising development agenda. 

On taxation front, there are simplification and rationalization measures, introducing presumptive taxation for small and medium tax payers. Keeping in line with objective of unearthing black money, the FM has proposed to introduce Domestic black mint by laying 30% tax, 7.5% surcharge and 7.5% penalty thus totaling 45% to be operational from June 1, 2016 to Sept 30, 2016 in a manner that tax will be paid within 2 months of declaration. Number of measures have been introduced for reducing tax litigation. Most recommendations of Tax reforms administration report and Easwar Committee have been accepted - this is a good simplification and rationalization measures. 

On capital market front, additional tax on dividend has been introduced at 10% in addition to DDT if dividend income exceeds Rs.10 lakhs. Short term capital gains tax period for non-listed companies has been reduced from 3 years to 2 years - the FM was silent on listed companies. 

Corporate tax rate has been reduced from 30% to 29% in restricted cases thus the path to reducing tax rate and also corresponding incentives will need to be examined in detail. 

3 year tax holiday has been introduced for startups with keeping Minimum alternate tax leviable. Introducing 10% tax on patent companies is a big boost for IPR related companies and it looks like it is in line with country like UK. 

On international taxation, Base Erosion and Profit Shifting measures including Country by Country regime. Also the FM made a declaration to resolve retro taxation by paying tax and no interest and penalty. Deferring POEM by a year is a good measure. GAAR will be introduced by01/04/2017 as proposed last year. This looks like a big measure to create certainly, predictability and non-adversarial tax regime and create ease of doing business in India.   

Overall, on tax front there are good rationalization measures on both direct and indirect taxation. Also there are good 9 Pillars of FM's speech which should take India to an increased growth story soon. "

"A landmark budget where Corporates demands have been significantly met which includes deferment of POEM, RITES demands  have been addressed and acceptance of number of the recommendations of Easwar Committee  report to simply and rationalize the tax. The commitment of the FM to maintain the fiscal prudence by sticking to the fiscal deficit to 3.9 % in FY 2016 and 3.5 % in 2017 demonstrates  the conviction to maintain fiscal sanity in the economy.

Prudent balancing between populist demands for welfare spending vis  rationalization and simplification  of taxes and addressing the retrospective and indirect transfer of assets clearly reflects that the FM has struck all with one stroke.   

The budget every year is a step and opportunity in doing the undoing of the past though with the vision on the future. Support to export sector by widening of the scope of duty drawback, would benefit the exporters. Increase in service tax rate by 0.5% on all taxable services in form of Krishi Kalyan Cess, though Cenvatable, easing Cenvat Credit flow and removing exemption on garments are measures towards Good and Service Tax.  "

"From a tax perspective the entire thrust seems to be reduce litigation and dispute resolution.

• The voluntary disclosure or amnesty scheme by paying of 45% in taxes and penalties would help tax payers come clean and reduce litigation. Similarly, a small window is provided to cases covered under retrospective indirect transfer amendment for companies to pay off taxes in lieu of waiver of interest and penalties. Also, providing stay of demand by paying 15% of the demand at the first appellate level will also reduce disputes and provide relief to the tax payers. Generally the norm was 30%-50%. This is based on Easwar Committee recommendations. Government to pay interest @9% p.a. instead of 6% p.a. in case of delay by tax department in giving effect to an appellate order – this shows confidence of Government in improving tax administration in India.
• Also, reduction in corporate tax rate to 25% for new manufacturing companies would give boost to manufacturing. The extension of sunset clause for SEZs to 2020 will also give a fillip to SEZ and exports.
• From a foreign tax payer perspective, not levying penal withholding tax rate of 20% for non-resident taxpayers without PAN, as against lower rates under law / tax treaty, on submission of alternate document will definitely provide ease and relief to foreign companies doing business with India.
• Indian Patent box - 10% tax rate on income from specified patent exploitation is a landmark move to encourage IP development and registration in India. will have to read the fine print for the same.
• Dividend Tax rate of 10% for individuals/HUF if dividend in excess of 1 Million per annum would hurt the promoters but could be surprise revenue generator for the Government 
• Country by country reporting introduced – thankfully the OECD BEPS limit has been retained which means it will impact very small number of Indian corporates"

This Budget was expected to be a tight rope walk for the Finance Minister. I think the Finance Minister has done well by sticking to the fiscal target and yet presenting a populist budget.  The 9 pillars of the budget show that the Budget is inclusive and recognized the long term issues which plague India and done well to pay attention to them.  

On the taxes front, thought there is not much to cheer for individual tax payers on the tax burden, the simplification and rationalization provisions would definitely take care of the irritants which they face while dealing with the tax department. For the corporate tax payers, there is quite a lot to cheer. Focus on reducing litigation and disputes are very welcome. Giving an opportunity to foreign investors to settle outstanding retrospective tax case by removing penalty and interest may result in some cash coming to the coffers to the government as till now they haven’t got a penny. Deferral of POEM was expected and the industry would be much better prepared next year.  Lower TDS on small value transactions for residents and non-requirement of PAN for non-resident tax payers doing business with India is definitely a very welcome move and would reduce a lot of hardships. The patent box regime is welcome and would expected to book R&D. Taxing the super-rich by taxing dividends and increasing in surcharges is surely positive from an overall progressive tax regime. Another positive was the acceptance of lot of Easwar committee recommendations to create a non-adversial tax regime. 

"Easwar commmittee stamp all over"

Budget announcements seem well directed with focus on rural economy, infrastructure spending, social  welfare schemes and ‘digital’ initiatives. Rationalization of indirect tax and duty structures for various sectors such as IT hardware, defence, mineral and petrochemical, aviation to name a few, with a view to encouraging Make in India initiative is a welcome move. Overall, coverage of various sectors of the economy was comprehensive with focus on keeping the Government spending within acceptable limits of fiscal prudence.

On the taxation front, the focus on dispute resolution through creation of new tribunal benches, alternative settlement schemes and commitment to refrain from retrospective taxation going forward was encouraging and progressive. However, their efficacy would need to be evaluated based on the fine print of the associated regulations. While no firm commitment on Goods and Services Tax (GST) timelines was made, the industry expectation was to align existing central indirect tax regime with the proposed GST framework. Withdrawal of miscellaneous cesses and rationalization of CENVAT credit mechanism appear to be small steps in this direction. However, introduction of new cesses in addition to those introduced in the previous year, run contrary to that expectation and appears regressive.

On the whole, there is an estimated net increase in tax revenue by almost Rs. 20,000 crores. The sectors contributing to the incremental taxes and resultant impact on the economy as a whole will be keenly watched.

1. It is welcome that Duty drawback schemes will be widened, to give impetus to sagging exports. But emphasis shall also be on fine tuning the existing schemes and promote transparency;

2. Budget outlay of more than 2lakh crore in infrastructure sector, would fuel economic activity and kicky start the economy;

3. The budget outlays for infrastructure sector would help  the cement and steel industry to improve their performance;

4. Service tax on spectrum fees will increase the cost of providing telecom services, and will hit telecom companies and the quality of service

Reduction in litigation, simplification and use of technology seems to be the focus of this year’s budget proposals for indirect taxes.No discernible roadmap for GST implementation may be disappointing.

In the backdrop of make in India initiative, the manufacturers have been spared the rate increase, except in a few sectors like automobile and Tobacco. Rate increase has been spared for service providers too, but for the levy of KrishiKalyan Cess for which input tax credit would be available.

Rate structure rationalization of customs and excise duties for specific sectors such as information technology, capital goods would address the inverted duty structures faced by some of these industries. Housing gets a boost with relief from service tax and exemption from excise duties on ready mix concrete for affordable housing programs.

The dispute resolution scheme rightly targeted at I st appellate level would benefit litigation reduction for those taxpayers who did not take the benefit of lower penalties at earlier stages of dispute or those tax payers with smaller demands who are no longer required to pay penalties.

Simplification and rationalization of CENVAT credit was long due with provisions relating to apportionment of credit between exempt and taxable services clearly found wanting. Improving the flow of credit, reducing compliance burden would help all tax payers. Input credit distribution form a common warehouse would help multi locational manufacturers.

Deferred payment of customs duties would help accredited importers to release cargo before payment of duty, thus reducing dwell time and bring down transaction costs.

Budget 2016 does not have any dramatic changes in the indirect tax regime. However, a few points stand out.

Currently, interest on delayed payment of service tax which is as high as 30% was effectively a deterrent for an assessee to dispute a service tax demand. The rate has now been reduced to 15% and aligned with the excise and customs laws.

A welcome change in the banking sector is an amendment in the CENVAT Credit Rules which allows banks and other financial institutions to reverse credits in respect of exempted services on actual basis.  

On GST, political analysts have calculated that due to the expected retirement of certain members in the Rajya Sabha, the NDA government and its allies are likely to have a 2/3 majority in the Rajya Sabha in the course of this year. Therefore, the passage of the Constitution Amendment Bill for GST this year seems likely. This is ironic given that the Finance Minister has not even mentioned GST in his budget speech.

The Union Budget 2016-17 with a view to maintaining the fiscal deficit at 3.5% of the GDP and to mobilise resources for development of agriculture and farmer welfare, infrastructure and environment related initiatives has introduced the Krishi Kalyan Cess (@0.5% on taxable services), for Service tax, Infrastructure Cess (1% to 4%) as a duty of Excise on motor vehicles and increased the Clean Environment Cess (earlier known ad the Clean Energy Cess).

Changes in customs and excise duty rates have been made on certain inputs to reduce costs and improve competitiveness of domestic industry in sectors like Information technology hardware, capital goods, defence production, textiles, maintenance repair and overhauling [MRO] of aircrafts and ship repair etc.

A welcome change towards reducing the pending litigation is the introduction of the Indirect tax Dispute Resolution Scheme, 2016. Also, the FM announced 11 new benches of the CESTAT. The interest rates for non-payment have also been made uniform across indirect taxes and brought down to 15% (except in cases where Service tax has been collected but not deposited). The exorbitantly high interest rate for service tax has finally been withdrawn.

The Budget is geared more towards the social agenda of the Government and the widely anticipated steps for roll out of GST have not been initiated. A road map for introduction of GST would have assured the Industry for this crucial tax reform.

The Union Budget 2016 placed in the Parliament, amidst volatility in the Global economic situation seems to have considered recommendations put forth by various sectors as could be seen by the spectrum of amendments carried out in indirect taxes. While the mean rate of any of the Central Taxes is not tinkered with, which is laudable, the introduction of a New Krishi Kalyan Cess of 0.5% on value of taxable services in addition to the existing Swachh Bharat Cess of 0.5% is something which the industry would not have hoped for. This effectively increased the service tax rate to 15%.

 This budget seems to have undone certain unfriendly measures introduced in the last couple of Budgets such as increased interest rates for delayed payments, exemptions withdrawn last year for projects / contracts in the infrastructure sector which were entered into before withdrawal of the exemption etc. Reduction of interest rates to 15% and prescribing a maximum rate of interest of 24%  only to cases where tax is collected but not paid, as against earlier interest rates extending to 30% is a welcome measure.

While there is no special mention about the way forward for the introduction of GST, the way in which the exemptions have been pruned specifically like braded garments, certain types of jewellery and streamlining the Cenvat Credit Rules clearly suggest the intention of the Government to increase the current assesse base and provide measures to increase the available credit.

Emphasis has been made to rationalise the Customs procedures whereby many amendments have been carried out to the warehousing of goods including omission of warehouse rent and other charges in view of privatisation of services and free market determination of rates, options to pay customs duty on a deferred basis.

An attempt to please all?

This was the Honourable Finance Minister’s third Budget and expectedly, he has tried to cater to the needs of all key sectors.

From a macroeconomic perspective, a lot of emphasis was laid on agriculture – the change of focus from food security to income security of farmers is a laudable move by the government.  Several favourable announcements were made in the infrastructure/PPP space – the announcement of the PPP regulator and general guidelines for renegotiation apropos PPP projects are in line with Kelkar committee recommendations and should go a long away to ease India’s infrastructure woes.

On the tax front, the biggest discernible policy emphasis is on mitigation of litigation. Several litigation mitigation measures have been announced including establishment of several new CESTAT benches and announcement of Indirect Tax Dispute Resolution Scheme, 2016 (for all central indirect taxes) which prima facie, appears similar to the erstwhile VCES under service tax. Also, it was announced that the CENVAT Credit scheme is being rationalized to ease flow of credits with particular emphasis on resolving issues arising out of reversal of credit under Rule 6. The fine print in this regard merits deep examination to evaluate if the avowed objective would be achieved.

A discordant note has been struck on the indirect tax front by including “assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof” in the list of ‘Declared Services’. The objective is to include assignment by the Government of the right of use the radio-frequency spectrum and its subsequent transfers as a declared service – this can add significantly to the service tax outgo for telecom service operators especially given the spectrum trading transactions recently concluded/under discussions.

However, on the Income tax side, a new section 35ABA has been proposed to be added in the Income-tax Act relating to expenditure for obtaining right to use spectrum for telecommunication services. The proposed section seeks to provide that any capital expenditure incurred and actually paid by an assessee on the acquisition of any right to use spectrum for telecommunication services shall be allowed as a deduction. 

Further, while the fine print is yet to be examined, it appears that beyond the expansion of Duty Drawback scheme (and extension of S. 10AA benefit for SEZ to 2020), not much has been done on the tax front to boost exports. 

Further nuances would emerge upon deeper analysis – as the cliché goes, devil lies in the detail.

Amid high expectations to revive the market, the Finance Minister (‘FM’) has played his cards in a balanced manner and has provided much needed relief on some of the Indirect Tax issues, though few of the measures have been regressive. 

The key highlights of the budget include keeping the median rate of Indirect Taxes intact in midst of speculation increase in rate of service tax by 1.5 percent or more. In line with the spirit of GST, the Finance Minister has abolished 13 different cesses levied under various Acts. At the same breadth, the introduction of two new cesses, Krishi Kalyan Cesson services (0.5 percent) albeit creditable and Infrastructure Cess on cars (1 to 4 percent) non-creditable, are regressive.

The Budget is also characterised by positive amendments on some pertinent issues that have been a subject matter of debate for long. One of them was taxability of information technology software, which has been taken care in this Budget. Another is grant of excise duty exemption to Ready Mix Concrete manufactured at the constructionsiteswhich came in dispute due to a recent Supreme Court judgment 

Cenvat Credit Rules, 2004 (Credit Rules) have been rationalised especially for taxpayers engaged in taxable and exempted activity. The credit pool for taxpayers has been enlarged by allowing distribution of credit even to job-workers. There are some more procedural relaxations in the Credit Rules. However, the much needed amendment in the definition of ‘input service’ to clarify and widen its scope, has not been made. 

In order to fasten the process of disposal of litigations, 11 new benches of CESTAT have been proposed.Further, the increase in monetary limit of cases that will be decided by Single Member Bench of CESTAT is an appreciable move. This will reduce the burden of cases handled by each Tribunal. However, the enhancement of period of limitation by 1 year for issuing Show Cause Notice in cases not involving fraud etc., will enable the tax department to raise higher tax demand on the taxpayers. 

Overall, the Budget looks positive with some laudable proposals that were overdue for long.

With a view to simplify the tax administration and promote ‘make in India’ campaign, the Finance Minister has proposed multiple changes in the Indirect Tax Regime. The Cenvat Credit Rules have been amended to improve credit flows, reduce the compliance burden and associated litigation. This is also a stepping stone necessary for introduction GST. Further, the multiple interest in various indirect taxes have been rationalized to a common rate of 15%, with an exception for cases, where service tax has been collected but not deposited. In such cases interest rate would be 24% per annum.

The budget has also proposed reduction in excise and customs duty rates of various inputs, raw materials, intermediaries and components with simplified import/exemption procedures, so as to reduce the cost and improve competitiveness of the domestic manufacture. Such changes would provide impetus to various industries including, IT, hardware, defence production, textiles, chemicals. Mineral fuels and mineral oils etc.

However, steps like increase in clean energy cess and levy of infrastructure cess @ 1% - 4% would make motor vehicles expensive and may adversely impact the demand for automotive industry. Further, imposition of Krishi Kalyan Cess @ 0.5% on all taxable services w.e.f. 1 June 2016 would make the taxable services more expensive.

It is heartening to see the fine print in the Finance Bill 2016 especially under the Indirect tax laws, for the number of provisions rationalised which otherwise are already a part of the rich crop of litigation or are potential leaders for tomorrow. To start with is the reduction in interest rates of service tax from the top of 30% to 24% that too only if tax is collected and not paid. This is realistic. Another tax payer friendly measures include clipping the powers of departmental officers in relation to arrest merely because of “reason to believe” that tax has been evaded. The biggest bone of contention in every departmental audit whether it was excise or service tax was the reversal of cenvat credit utilised for “taxable” and “exempt” goods or services. The new rule 6(3) does usher in fresh air to resolve the numerous disputes between the tax payer and the department. One would still be cautious to state that all disputes would be over on this account, but for sure this would ease out the current situation considerably.

The intention of the government to pay heeds even to smaller items like that of exempting Ready Mix Concrete used at site from Excise duty in addition to Concrete mix is worth applauding since this issue came up very recently only because of a recent Supreme Court decision. This means a reasonable relief for the otherwise reeling real estate industry. 

On the macro front, the push to “Make in India” reforms in terms of benefits to manufacturing industry and also making the tax procedures more technology driven and better with a thrust on reducing litigation is a huge impetus to the Indian economy and would surely imbibe great confidence in the global community and obviously improve the country’s ranking on every count. Undoubtedly the huge commitments – both in terms of finance and also timelines for various projects from infrastructure to agriculture would be a dream come true for the Modi government, but it also means more and more expectations on what is stated and what would really unfold.

The Budget 2016 turned out to be a rather neutral Budget which probably neither made nor broke anything as far as indirect tax is concerned. With ‘Ease of Doing Business’ setting the tone for most of the indirect tax changes, this Budget prioritized the growth ‘Make in India’ preferred industries like defence production, textiles, mineral fuels & mineral oils, chemicals & petrochemicals, paper, paperboard & newsprint, etc. by reducing the customs and excise duty rates on their inputs to reduce cost of production. True to the tone, this budget also proposed to ease indirect tax litigations, rationalized of interest rates and also proposed systematic digitization of government compliance procedures.  Further, while there is no increase in the excise duty rate, positively, a total of 13 Cesses is proposed to be removed. Separately, the Finance Minister also indicated towards Tax litigation reforms alongwith, wherein in respect of cases pending before Commissioner (Appeals), the assessee, after paying the duty, interest and penalty equivalent to 25% of duty, can file a declaration, is being introduced. This is a welcome move as it will free the time of Commissioner (Appeals). Further, to address the backlog of cases it is proposed that there will be 11 new benches of CESTAT/ Tribunal.However on a negative tone, it begs notice that apart from the non creditable Swachh Bharat Cess, the service receivers will now have to bear an additional tax named Krishi Kalyan Cess (KKC), at 0.5%. KKC will cumulatively increase service tax from 14.5% to 15%. Further changes like increased ‘Clean Energy Cess’, Increased excise duty on Rs. 1000+ readymade garments by 2%, Service tax on Telecom spectrums , Infrastructure Cess  on Automobiles will also add up to the woes of ‘Aam Aadmi’.

With GST being under a political embargo, the expectations from this budget were never that high, however positive current indirect tax changes were certainly expected.

There were enormous expectations from the Finance Minister as this is their 3^rd budget. Announcements regarding GST were expected, however there was no commitment of a date for GST introduction in the Finance Minister’s speech apart from a mention that focus would be to introduce it at the earliest. 

Introduction of 12 new benches of the CESTAT should help in reducing the congestion currently existing in the litigation system. However, levy of new Krishi Kalyan Cess of 0.50% on all services, though creditable, is a setback as it would increase the cost of services. This cess would have an impact on all aspects of the economy, since all taxable services will attract this cess. Further, levying and reporting service tax would be more complex as service tax and Krishi Kalyan cess would be creditable but Swachh Bharat cess would not be.

Overall, it’s a budget with some reform but it leaves us with an expectation  that more could have been done

The Finance Minister rose to present his third budget by stating that the global economy is weak but India has done well.  With a fiscal deficit target of not exceeding 3.5% as budgeted, the Finance Minister surely seems to have done his bit to make it happen.

The Finance Minister very clearly seems to have focused on empowering the ‘Make In India’ initiative by removing customs and excise duty exemptions on a variety of goods.  The thrust seems to be more on electronics, hardware and the infrastructure industry where duty exemption has been provided to imported parts and components for manufacture of chargers/adapters, speakers (to be used for manufacture of mobile phones), parts & components for use manufacture of routers, broadband modems, set-top boxes, DVRs, CCTV cameras etc. These exemptions are available only when the companies import such items for their actual use since direct import of these items (without the importer actually using such imported goods) has been made taxable on import.

Prolonged litigation seems to have taken a toll on Government’s administration machinery and this seems to be corrected by proposing a one-time Dispute Resolution Scheme allowing the tax payer to settle the tax dispute pending with the first appellate authority.  

The Budget also seems to encourage ‘export of goods’ by not only announcing a widening of the duty drawback schemes but also providing a retrospective amendment to allow refund of input service tax credit on services used beyond the factory gate for manufacture of goods subsequently exported out of India.  This is a welcome measure considering the retrospective amendments are generally towards garnering tax rather than allowing tax benefits. 

A great push has also been made to affordable housing sector by way of exempting service tax on construction projects involving small dwelling units and also exempting the concrete mix manufactured at site from 12.5% excise duty.  This is surely going to reduce the tax burden on the sector, making cash bled housing sector a slight fillip.  

The much-needed demand for reducing interest rate on delayed payment of customs & excise duty and service tax seems to have found a favour by the Finance Minister with the rate getting reduced from 18% to 15% subject to few conditions. 

On the aspects of ease of doing business that has been one of the mantras of Mr. Narendra Modi to the investors, few measures seem to be visible on a first look of the Finance Bill.  Increase in monetary limits for prosecution, restricting the situations for arrest of defaulting taxpayers and introducing the provisions for deferred payment of customs duties for certain classes of importers and exporters seem to be a welcome measure.

Overall, the Budget seems to be quite populist with a larger focus on creating value addition in India, remove cascading effect by streamlining credit mechanism and create a conducive environment for doing business with ease.

This is a budget with an eye on the Farm sector and thrust to infrastructure. We hope that this will have a positive collateral impact on our businesses. Doing away with export duty on Iron Ore and increase in customs duty on aluminum is a welcome move but this upside gets neutralized for us by the additional clean energy cess on coal. The metals and oil & gas business, being inextricably linked to manufacturing and infrastructure, we would have liked to see significant changes on the indirect tax side to aid domestic businesses but we hope that the Government maintaining their fiscal deficit target will bring confidence and ease liquidity in the market and spur the economy.