11 July, 2014

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Pains of Budget 2014 – An Indirect Tax Legislative Perspective



Pains of Budget 2014 – An Indirect Tax Legislative Perspective

ü  Mandatory Pre-Deposit for Filing Appeal (Its Ironical that large proportion of Demands by Revenue gets quashed in appeals!!)
A mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both for  filing of appeal before the Commissioner(Appeal) or   the Tribunal at the first stage, and 10% of the duty demanded or penalty imposed or both for filing   second stage appeal   before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of Rs 10 Crore.
All pending appeals/stay application would  be  governed  by  the statutory provisions prevailing at the time of filing such stay applications/appeals. This new provisions would, mutatis mutandis, apply to Service Tax.


ü  Section 87 recovery out of specified assets of successor now applicable to Service tax
Section 87 is being amended to incorporate power to recover dues of a predecessor from the assets of a successor purchased from the predecessor as it is presently provided for in section 11 of the Central Excise Act, 1944.

ü  Section 80 (reasonable cause for non levy of penalty) amended to exclude the reference to Section 78(1) proviso

Section 80 is being amended to exclude the reference of first proviso to section 78. This amendment, in effect, removes the power to waive the 50% penalty imposable in cases where service tax has not been levied, not paid or short levied or short paid on account of suppression of facts or willful misstatement but details of transactions are available in the specified record.

ü  Capping of Time Limit of Cenvat Credit to Six Months (What is yours is not yours after 6 Months !!  - Harsh Provision)

A manufacturer or a service provider shall take credit on inputs  and input services within a period of six months from the date of issue of invoice, bill or challan  w.e.f. 1st September,2014 [ newly inserted proviso to rule 4 (1) and fifth proviso to rule 4(7) refer]

Demands confirmed under litigation were given the benefit of Cenvat entitled.. What happens to that...? Does the Constitution needs a Right to Cenvat Now!!

ü  Indian Commission Agent – Liable to Service tax

The definition of intermediary is being amended to include the intermediary of goods in its scope. Accordingly, with effect from 1.10.2014, an intermediary of goods, such as a commission agent or consignment agent shall be covered under rule 9(c) of the Place of Supply of Services Rules.

ü  Interest Rates made voraciously high for Delayed Defaults – (This can crush a lot of small and litigant assessees !!)

Extent of delay
Simple interest rate per annum
Up to six months
18%
More than six months &                                 18% for first six months, and                                 24% for the period of
upto one year
18% for first six months, and 24% for the period of upto one year delay beyond six months

More than one year
18% for first six months,24% for second six months,and 30% for the period of delay beyond  one year


Author’s View :- Some of the above amendments proposed needs a serious review. The stringencies should be increased based on value of tax paid instead as a “Blanket” provision, otherwise it will hurt the small assessees also.








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