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Against the backdrop of the present government having an absolute majority in Parliament, the expectations were for a bold, business-friendly Budget. In line with the expectations, the Budget focuses on boosting the domestic manufacturing sector. A number of exemptions under customs and central excise have been granted on input goods besides correcting the inverted duty structure to encourage indigenous manufacturing. For example, basic customs duty (BCD) on fatty acids, crude palm stearin, etc, used in the manufacturing of soaps and oleochemicals has been reduced to nil from 7.5%.
To promote green energy initiatives, full exemption from BCD and excise duty has been granted on specified input materials used for solar energy equipment. Specific exemptions from BCD and countervailing duty have been granted on inputs for LED panels and lights.
However, to garner additional revenue, the Budget has proposed an additional duty of 5% on aerated waters containing added sugar. Cigarette, pan masala and tobacco products are proving to be favourite cash cows to garner additional revenue, hence, there is an increase in rate of duty on such products.
A big positive for the manufacturing sector is perhaps the amendment that has been introduced under Central Excise Valuation Rules to reverse the negative impact of the Supreme Court judgment in the case of Fiat India. The relevant provision has been amended to provide that even if goods are sold at a price below the cost of production, where there is absence of any additional consideration flowing from the buyer to the assessee, the transaction value shall hold good.
As a measure to reduce litigation, the Budget proposes to extend the route of advance ruling to the domestic private companies. Similarly, towards the speedier resolution of disputes the scope of settlement commission has been expanded.
On the service tax front, the negative list of services has been pruned to exclude radio cabs. Similarly, sale of space for advertisements on online media, mobiles, websites, out-of-home media are also excluded from negative list, hence made liable to tax.
The Finance Bill has proposed pre-deposit of 7.5% of the tax liability including penalty thereon as a precondition for filing an appeal against the order of adjudication authority and in case of the second appeal a further amount of 10% has to be deposited with the tribunal.
Though the intention is to expedite the disposal of matters by directly taking up the main appeal, the proposal would adversely affect the cash flows