The tax proposals in the Union budget 2012-13 were guided by the need to move towards the Direct Tax Code(DTC) in the case of direct taxes and Goods & Services Tax (GST) in the case of indirect taxes. In the Budget Estimates for 2012-13, the Gross Tax Receipts were estimated at 1077612 crore rupees which is an increase of 15.6 per cent over the Budget Estimates and 19.5 per cent over the revised estimates for 2011-12.
After devolution to States, the net tax to the Centre in 2012-13 is estimated at 771071crore rupees. The Non Tax Revenue Receipts were estimated at 164614crore rupees and Non-debt Capital Receipts at 41650 crore rupees. The total expenditure for 2012-13 is budgeted at 1490925 crore rupees. Of this 521025crore rupees is the Plan Expenditure while 969900 crore rupees is budgeted as Non Plan Expenditure.
The budget stated that individual income upto 2 lakh rupees will be free from income tax; income upto 1.8 lakh rupees was exempt in 2011-12. Income above 5 lakh rupees and upto 10 lakh rupees will carry tax at the rate of 20 per cent.
The following provisions were stated under Direct Taxes:
• Tax proposals for 2012-13 mark progress in the direction of movement towards DTC and GST.
• DTC rates proposed to be introduced for personal income tax.
• Exemption limit for the general category of individual taxpayers proposed to be enhanced from 180000 rupees to 200000 rupees giving tax relief of 2000 rupees.
• Upper limit of 20 per cent tax slab proposed to be raised from 8 lakh rupees to 10 lakh rupees.
• Proposal to allow individual tax payers, a deduction of upto 10000 rupees for interest from savings bank accounts.
• Proposal to allow deduction of upto 5000 rupees for preventive health check up.
• Senior citizens not having income from business proposed to be exempted from payment of advance tax.
• To provide low cost funds to stressed infrastructure sectors, rate of withholding tax on interest payment on ECBs proposed to be reduced from 20 per cent to 5 per cent for 3 years for certain sectors.
• Restriction on Venture Capital Funds to invest only in 9 specified sectors proposed to be removed.
• Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent upto 31.3.2013.
• Investment link deduction of capital expenditure for certain businesses proposed to be provided at the enhanced rate of 150 per cent.
• New sectors to be added for the purposes of investment linked deduction.
• Proposal to extend weighted deduction of 200 per cent for R&D expenditure in an in house facility for a further period of 5 years beyond 31 March 2012.
• Proposal to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services.
• Proposal to extend the sunset date for setting up power sector undertakings by one year for claiming 100 per cent deduction of profits for 10 years.
• Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from 60 lakhs rupees to 1 crore rupees .
• Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery.
• Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector.
• Reduction in securities transaction tax by 20 per cent on cash delivery transactions.
• Proposal to extend the levy of Alternate Minimum Tax to all persons, other than companies, claiming profit linked deductions.
• Proposal to introduce General Anti Avoidance Rule to counter aggressive tax avoidance scheme.
• Measures proposed to deter the generation and use of unaccounted money.
• A net revenue loss of 4500 crore rupees estimated as a result of Direct Tax proposals.
Given below are the major provisions under the Indirect Taxes
Service Tax
• Sevice tax confronts challenges of its share being below its potential, complexity in tax law, and need to bring it closer to Central Excise Law for eventual transition to GST.
• Overwhelming response to the new concept of taxing services based on negative list.
• Proposal to tax all services except those in the negative list comprising of 17 heads.
• Exemption from service tax is proposed for some sectors.
• Service tax law to be shorter by nearly 40 per cent.
• Number of alignment made to harmonise Central Excise and Service Tax. A common simplified registration form and a common return comprising of one page are steps in this direction.
• Revision Application Authority and Settlement Commission being introduced in Service Tax for dispute resolution.
• Utilization of input tax credit permitted in number of services to reduce cascading of taxes.
• Place of Supply Rules for determining the location of service to be put in public domain for stakeholders’ comments.
• Study team to examine the possibility of common tax code for Central Excise and Service Tax.
• New scheme announced for simplification of refunds.
• Rules pertaining to point of taxation are being rationalised.
• To maintain a healthy fiscal situation proposal to raise service tax rate from 10 per cent to 12 per cent, with corresponding changes in rates for individual services.
• Proposals from service tax expected to yield additional revenue of 18660 crore rupees.
Other proposals for Indirect Taxes
• Given the imperative for fiscal correction, standard rate of excise duty to be raised from 10 per cent to 12 per cent, merit rate from 5 per cent to 6 per cent and the lower merit rate from 1 per cent to 2 per cent with few exemptions.
• Excise duty on large cars also proposed to be enhanced.
• No change proposed in the peak rate of customs duty of 10 per cent on nonagricultural goods.
• To stimulate investment relief proposals for specific sectors - especially those under stress.
Agriculture and Related Sectors
• Basic customs duty reduced for certain agricultural equipment and their parts;
• Full exemption from basic customs duty for import of equipment for expansion or setting up of fertiliser projects upto 31 March 2015.
Infrastructure
• Proposal for full exemption from basic customs duty and a concessional CVD of
• 1 per cent to steam coal till 31 March, 2014.
• Full exemption from basic duty provided to certain fuels for power generation.
Mining
• Full exemption from basic customs duty to coal mining project imports.
• Basic custom duty proposed to be reduced for machinery and instruments needed for surveying and prospecting for minerals.
Railways
• Basic custom duty proposed to be reduced for equipments required for installation of train protection and warning system and upgradation of track structure for high speed trains.
Roads
• Full exemption from import duty on certain categories of specified equipments needed for road construction, tunnel boring machines and parts of their assembly.
Civil Aviation
• Tax concessions proposed for parts of aircraft and testing equipment for third party maintenance, repair and overhaul of civilian aircraft.
Manufacturing
• Relief proposed to be extended to sectors such as steel, textiles, branded readymade garments, low-cost medical devices, labour-intensive sectors producing items of mass consumption and matches produced by semi-mechanised units.
Health and Nutrition
• Proposal to extend concessional basic customs duty of 5 per cent with full exemption from excise duty/CVD to 6 specified life saving drugs/vaccines.
• Basic customs duty and excise duty reduced on Soya products to address protein deficiency among women and children.
• Basic customs duty and excise duty reduced on Iodine.
• Basic customs duty reduced on Probiotics.
Environment
• Concessions and exemptions proposed for encouraging the consumption of energy-saving devices, plant and equipment needed for solar thermal projects.
• Concession from basic customs duty and special CVD being extended to certain items imported for manufacture for hybrid or electric vehicle and battery packs for such vehicles.
• Proposal to increase basic customs duty on imports of gold and other precious metals.
After devolution to States, the net tax to the Centre in 2012-13 is estimated at 771071crore rupees. The Non Tax Revenue Receipts were estimated at 164614crore rupees and Non-debt Capital Receipts at 41650 crore rupees. The total expenditure for 2012-13 is budgeted at 1490925 crore rupees. Of this 521025crore rupees is the Plan Expenditure while 969900 crore rupees is budgeted as Non Plan Expenditure.
The budget stated that individual income upto 2 lakh rupees will be free from income tax; income upto 1.8 lakh rupees was exempt in 2011-12. Income above 5 lakh rupees and upto 10 lakh rupees will carry tax at the rate of 20 per cent.
The following provisions were stated under Direct Taxes:
• Tax proposals for 2012-13 mark progress in the direction of movement towards DTC and GST.
• DTC rates proposed to be introduced for personal income tax.
• Exemption limit for the general category of individual taxpayers proposed to be enhanced from 180000 rupees to 200000 rupees giving tax relief of 2000 rupees.
• Upper limit of 20 per cent tax slab proposed to be raised from 8 lakh rupees to 10 lakh rupees.
• Proposal to allow individual tax payers, a deduction of upto 10000 rupees for interest from savings bank accounts.
• Proposal to allow deduction of upto 5000 rupees for preventive health check up.
• Senior citizens not having income from business proposed to be exempted from payment of advance tax.
• To provide low cost funds to stressed infrastructure sectors, rate of withholding tax on interest payment on ECBs proposed to be reduced from 20 per cent to 5 per cent for 3 years for certain sectors.
• Restriction on Venture Capital Funds to invest only in 9 specified sectors proposed to be removed.
• Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent upto 31.3.2013.
• Investment link deduction of capital expenditure for certain businesses proposed to be provided at the enhanced rate of 150 per cent.
• New sectors to be added for the purposes of investment linked deduction.
• Proposal to extend weighted deduction of 200 per cent for R&D expenditure in an in house facility for a further period of 5 years beyond 31 March 2012.
• Proposal to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services.
• Proposal to extend the sunset date for setting up power sector undertakings by one year for claiming 100 per cent deduction of profits for 10 years.
• Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from 60 lakhs rupees to 1 crore rupees .
• Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery.
• Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector.
• Reduction in securities transaction tax by 20 per cent on cash delivery transactions.
• Proposal to extend the levy of Alternate Minimum Tax to all persons, other than companies, claiming profit linked deductions.
• Proposal to introduce General Anti Avoidance Rule to counter aggressive tax avoidance scheme.
• Measures proposed to deter the generation and use of unaccounted money.
• A net revenue loss of 4500 crore rupees estimated as a result of Direct Tax proposals.
Given below are the major provisions under the Indirect Taxes
Service Tax
• Sevice tax confronts challenges of its share being below its potential, complexity in tax law, and need to bring it closer to Central Excise Law for eventual transition to GST.
• Overwhelming response to the new concept of taxing services based on negative list.
• Proposal to tax all services except those in the negative list comprising of 17 heads.
• Exemption from service tax is proposed for some sectors.
• Service tax law to be shorter by nearly 40 per cent.
• Number of alignment made to harmonise Central Excise and Service Tax. A common simplified registration form and a common return comprising of one page are steps in this direction.
• Revision Application Authority and Settlement Commission being introduced in Service Tax for dispute resolution.
• Utilization of input tax credit permitted in number of services to reduce cascading of taxes.
• Place of Supply Rules for determining the location of service to be put in public domain for stakeholders’ comments.
• Study team to examine the possibility of common tax code for Central Excise and Service Tax.
• New scheme announced for simplification of refunds.
• Rules pertaining to point of taxation are being rationalised.
• To maintain a healthy fiscal situation proposal to raise service tax rate from 10 per cent to 12 per cent, with corresponding changes in rates for individual services.
• Proposals from service tax expected to yield additional revenue of 18660 crore rupees.
Other proposals for Indirect Taxes
• Given the imperative for fiscal correction, standard rate of excise duty to be raised from 10 per cent to 12 per cent, merit rate from 5 per cent to 6 per cent and the lower merit rate from 1 per cent to 2 per cent with few exemptions.
• Excise duty on large cars also proposed to be enhanced.
• No change proposed in the peak rate of customs duty of 10 per cent on nonagricultural goods.
• To stimulate investment relief proposals for specific sectors - especially those under stress.
Agriculture and Related Sectors
• Basic customs duty reduced for certain agricultural equipment and their parts;
• Full exemption from basic customs duty for import of equipment for expansion or setting up of fertiliser projects upto 31 March 2015.
Infrastructure
• Proposal for full exemption from basic customs duty and a concessional CVD of
• 1 per cent to steam coal till 31 March, 2014.
• Full exemption from basic duty provided to certain fuels for power generation.
Mining
• Full exemption from basic customs duty to coal mining project imports.
• Basic custom duty proposed to be reduced for machinery and instruments needed for surveying and prospecting for minerals.
Railways
• Basic custom duty proposed to be reduced for equipments required for installation of train protection and warning system and upgradation of track structure for high speed trains.
Roads
• Full exemption from import duty on certain categories of specified equipments needed for road construction, tunnel boring machines and parts of their assembly.
Civil Aviation
• Tax concessions proposed for parts of aircraft and testing equipment for third party maintenance, repair and overhaul of civilian aircraft.
Manufacturing
• Relief proposed to be extended to sectors such as steel, textiles, branded readymade garments, low-cost medical devices, labour-intensive sectors producing items of mass consumption and matches produced by semi-mechanised units.
Health and Nutrition
• Proposal to extend concessional basic customs duty of 5 per cent with full exemption from excise duty/CVD to 6 specified life saving drugs/vaccines.
• Basic customs duty and excise duty reduced on Soya products to address protein deficiency among women and children.
• Basic customs duty and excise duty reduced on Iodine.
• Basic customs duty reduced on Probiotics.
Environment
• Concessions and exemptions proposed for encouraging the consumption of energy-saving devices, plant and equipment needed for solar thermal projects.
• Concession from basic customs duty and special CVD being extended to certain items imported for manufacture for hybrid or electric vehicle and battery packs for such vehicles.
• Proposal to increase basic customs duty on imports of gold and other precious metals.
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