India Budget 2012 - Summary and Analysis

Document Sample
India Budget 2012 - Summary and Analysis Powered By Docstoc
					                          A                              publication




          Guide to

          BUDGET
          2012-13
          Summary and Analysis




Information in this publication is intended to provide a general outline of the subjects covered. It
should neither regarded as professional advice nor our opinion of any the topics covered herein. The
copy is not for sale and only for private circulation amongst clients and firm personnel only. MGS
Advisors accepts no responsibility for any loss arising from any action taken or abstained using this
publication.
                                   INDIA BUDGET 2012-13

                                         Disclaimer:
     Contributors to this Budget
     edition:                            This document has been compiled for internal
                                         use of clients and company. The contents of
                                         this document are solely for informational
     • CA Man Mohan                      purpose. It does not constitute any
        manmohan@mgsadvisors.com         advertisement or sales promotion, nor does it
                                         constitute any professional advice. Reliance on
     • CA Gaurav Gupta
        gaurav@mgsadvisors.com
                                         the content of the document is the sole desire
                                         of the reader and it is advised that professional
     • CA Amit Porwal                    advice be taken before applying information as
        amit@mgsadvisors.com
                                         provided in the document. The document has
     • CS Kirti Gupta                    been forwarded at the request of the client
        kirti@mgsadvisors.com            and is made with utmost professional caution.
                                         However, MGS Advisors does not provide any
     • Shashank Goel, Advocate
        shashank@mgsadvisors.com
                                         certification on accuracy, authenticity or
                                         completion of any or all parts of this
     • CA Anuj Aggarwal                  document. If you are not the intended
        anuj@mgsadvisors.com
                                         recipient of this document, please send a mail
     • Sonali Garg                       at contact@mgsadvisors.com.
        sonali@mgsadvisors.com




                                           Informed Solutions. Committed Advice.



                                          MGS Advisors
                                          Management Consultants
                                          Tax . International Tax . Project Finance . Corporate Law .
                                          507 B, D Mall, Netaji Subhash Place, Pitampura,
                                          Delhi – 110034.
                                          +91 11 42137240, +91 11 3296 2487
                                          +91 98110 13940
                                          contact@mgsadvisors.com
                                          www.mgsadvisors.com




Private And Confidential                                                                    Page | 1
For Client and firm use only                                  © 2012, MGS Advisors. All rights reserved
                                          INDIA BUDGET 2012-13


Table of Contents
1.     Budget 2012-13: A Splendor...................................................................... 5
2.     Glossary ...................................................................................................... 7
3.     The Economic Survey 2011-2012 ............................................................... 8
     3.1.      Sectoral growth .................................................................................. 9
       3.1.1.          Agriculture and allied sectors ..................................................... 9
       3.1.2.          Industry..................................................................................... 10
       3.1.3.          Services ..................................................................................... 11
     3.2.      Key performance indicators ............................................................. 11
       3.2.1.          Agriculture and allied sector .................................................... 11
       3.2.2.          Industry..................................................................................... 11
       3.2.3.          Services ..................................................................................... 11
     3.3.      Sectoral investment growth rate ..................................................... 12
     3.4.      Private final consumption expenditure ............................................ 13
     3.5.      Savings and investments .................................................................. 15
     3.6.      Prices ................................................................................................ 16
     3.7.      Monetary management ................................................................... 16
     3.8.      International scenario ...................................................................... 17
     3.9.      Miscellaneous information............................................................... 17
     3.10.         Sectoral details ............................................................................. 18
       3.10.1.         Industrial................................................................................... 18
       3.10.2. Service sector ............................................................................... 20



Private And Confidential                                                                                   Page | 2
For Client and firm use only                                                  © 2012, MGS Advisors. All rights reserved
                                         INDIA BUDGET 2012-13

4.     MACROECONOMIC FRAMEWORK STATEMENT (Economic performance)
       22
5.     Budget financials at a glance .................................................................... 23
6.     Budget proposals ...................................................................................... 24
     6.1.      Direct tax .......................................................................................... 24
       6.1.1.          Highlights .................................................................................. 24
       6.1.2.          Income Tax ............................................................................... 25
       6.1.3.          Widening of Tax Base ............................................................... 27
       6.1.4.          Changes in respect of Cash Credits and undisclosed income .. 29
       6.1.5.          Changes in Capital Gain provisions .......................................... 30
       6.1.6.          Furnishing of return and assessment ....................................... 31
       6.1.7.          Tax Deductions and Exemptions .............................................. 32
       6.1.8.          Changes in TDS and TCS provisions .......................................... 33
       6.1.9.          Changes in respect of International Tax ................................... 36
       6.1.10.         Other Changes .......................................................................... 40
     6.2.      Custom duty ..................................................................................... 41
       6.2.1.          Highlights .................................................................................. 41
       6.2.2.          Double Impact of EC & SHE Cess removed............................... 41
       6.2.3.          Changes in Special Additional Duty .......................................... 42
       6.2.4.          Increase in limit of Duty Free Baggage ..................................... 42
       6.2.5.          BCD and CVD rate change ........................................................ 43
       6.2.6.          Procedural Changes .................................................................. 45
       6.2.7.          Other changes .......................................................................... 45


Private And Confidential                                                                                 Page | 3
For Client and firm use only                                                 © 2012, MGS Advisors. All rights reserved
                                         INDIA BUDGET 2012-13

       6.2.8.          Amendments in First Schedule of CETA: .................................. 46
       6.2.9.          Amendments in Second Schedule of CETA :............................. 46
       6.2.10. Amendments in Customs (Import of Goods at Concessional
       Rate of Duty for Manufacture of Excisable Goods) Rules, 1996: ............. 46
    6.3.       Excise duty ........................................................................................ 47
       6.3.1.          Highlights .................................................................................. 47
       6.3.2.          Changes in Rate Duty ............................................................... 47
       6.3.3.          Other changes / Exemptions .................................................... 50
       6.3.4.          Introduction of items in Section 4A.......................................... 50
       6.3.5.          Inclusion of activity in manufacture ......................................... 50
       6.3.6.          Procedural Changes .................................................................. 51
    6.4.       Service tax ........................................................................................ 52
       6.4.1.          Highlights .................................................................................. 52
       6.4.2.          Rate of Tax [Effective from April 1, 2012] ................................ 52
       6.4.3.          Taxable Services ....................................................................... 53
       6.4.4.          Existing status of proposed exempted services ....................... 67
       6.4.5.          Changes in point of taxation .................................................... 70
       6.4.6.          Change in Valuation Rules ........................................................ 71
       6.4.7.          Changes in service tax rules ..................................................... 72
       6.4.8.          Changes in Cenvat Credit Rules: ............................................... 73
       6.4.9.          Other Changes .......................................................................... 74




Private And Confidential                                                                                 Page | 4
For Client and firm use only                                                 © 2012, MGS Advisors. All rights reserved
                                INDIA BUDGET 2012-13

1.           Budget 2012-13: A Splendor

FM has mentioned FY 2011-12 as the “year of recovery interrupted”. Indian Economy
grew by 6.9% during 2011-12 in terms of GDP at factor cost which is lower than earlier
years. The deterioration of global economy led to withdraw of capital from Indian
subcontinent leading to pressures on exchange rate. Inflation remained at high levels
throughout mainly on count of high food price inflation, rising global commodity prices
and spilling over of commodity inflation to manufacturing as well. Government
interventions in terms of interest rate hike and other measures resulted in controlling
inflation to some extent but on the other hand had put pressure on economic growth.
Industry showed a low growth primarily on account of global slowdown, Eurozone crisis,
inflation, prices of crude oil, commodity prices etc. Increased apportionment towards
subsidy due to factors like increase in crude prices have stumbled the projections of the
government. Government has decided to cap the subsidy at 2% of GDP. The move aims
to cap the fiscal deficit. More so, deregulation of interest rate and relaxation in foreign
debts helped in raising investment funds to some extent. Steps are proposed for greater
participation in Indian markets like two way fungibility in IDRs and bringing transparency in
transactions like IPOs. This will attract more foreign investments into country. Also,
Viability Gap Funding is seen as an important tool in attracting private investment into the
infrastructure sector. Permission is granted for ECB to part finance the rupee loan of
power projects. Sectors like aviation have been allowed ECB for working capital as well.
Thus, keeping in view the theme of inclusive growth, FM has tried to address the weaker
sectors of economy while keeping in focus on the growth of infrastructure sector. Black
money also enjoyed its legitimate focus in Budget Speech with FM proposing a lot of
measures to unearth black money.

On the tax side, GST did not saw the light of the day. DTC also missed the expected
deadline, however, has made its impact by way of introduction of certain sections in the IT
Act. The AAM admi theme did not find highlight this time but the focus was plugging Tax
evasions and fiscal gaps. Foreign transaction like that of Vodafone have been brought
under tax net and amendments propose to even review transaction which have already
been executed in past. More amendments like Advance Pricing Agreement aims to reduce
tax litigations. Restriction on VCC/ VCF to invest only in nine sectors is proposed to be
removed. Budget proposals also included due focus on investment and R& D linked
deductions. The proposal of promoting the shift of investment from house properties into


Private And Confidential                                                                Page | 5
For Client and firm use only                                © 2012, MGS Advisors. All rights reserved
                                INDIA BUDGET 2012-13

business is a promotional step to fuel the real growth of the economy by bringing the
money from non-productive sources to productive one without transitional tax losses.
Provisions like TCS on cash purchase of jewellary or TDS on sale of House property has
been introduced to curb black money. Penalty and prosecution provisions on tax evasions
are proposed to be strengthened. However, detrimental provisions like introduction of
AMT on all persons claiming profit linked deductions also found place in budget proposal.
In the indirect tax regime, negative list of services was the much awaited big item in the
list. This aims to tax all services except 17 services. The next big item has been the
increase in rate of service tax and excise from the present rack rate of 10% to 12%. Other
proposals include simplification of return form, introduction of Revision application
authority and Settlement commission in service tax, reduction of import duty on machines
required for infrastructure projects, reduction of effective duty on ready-made garments,
reduction of duties on solar thermal projects, health related items, plugging growth of
gold imports, certain rationalization measures etc.

Budget 2012-13 was the last big budget before elections with the government wherein
reforms could have been brought in a big manner by the Finance Minister. As for obvious
reasons, the reforms cannot be forseen in the next Budget which is the year before the
general elections and the same is more likely to be a popular budget. Budget 2012-13
drew mixed reactions as the India Inc. was looking forward for more as this was the year
available to government to bring back good to receding economy. No doubt, the changes
in tax regime are humungous but all of them aim to squeeze funds out of tax payer.
However, the proposal might result in long term easing of inflation, steady and inclusive
growth and stabalisation of economy as a whole. While, favourable announcements were
made in sectors like power, infrastructure, agriculture and aviation, the hike of excise and
service tax disappointed the entrepreneurs. Everyone expects that this tax hike as
inflationary and shall delay the much needed GDP growth. Thus, Budget 2012-13 seems to
bring some short term strict measures but looks like it will provide the much needed
stimulus and direction to the economy.

CA Gaurav Gupta
FCA, LLB, DISA
+91 98110 13940




Private And Confidential                                                               Page | 6
For Client and firm use only                               © 2012, MGS Advisors. All rights reserved
                                     INDIA BUDGET 2012-13

2.           Glossary
Glossary of various abbreviations used is as under:
AOP                            Association of Persons
AY                             Assessment Year
BCD                            Basic Customs Duty
BOI                            Body of Individuals
Bps                            Basis Points
Companies Act                  Companies Act, 1956
Credit Rules                   Cenvat Credit Rules, 2004
DTAA                           Double Taxation Avoidance Agreement
DTC                            Direct Tax Code
EC                             Education Cess
ECB                            External Commercial Borrowing
FY                             Financial Year
GAAR                           General Anti Avoidance Rules
GDP                            Gross Domestic Product
GST                            Goods and Services Tax
HUF                            Hindu Undivided Family
IIP                            Index of Industrial Production
IT                             Information Technology
Income Tax Act                 Income Tax Act, 1961
J&K                            Jammu and Kashmir
MAT                            Minimum Alternate Tax
QFI                            Qualified Foreign investor
RBI                            Reserve Bank of India
SAD                            Special Additional Duty
Service Tax Act                Finance Act, 1994
SHE Cess                       Secondary and Higher Education Cess
SMEs                           Small and Medium Enterprises
TCS                            Tax collection at Source
TDS                            Tax deduction at Source
VCC                            Venture Capital Company
VCF                            Venture Capital Fund
WPI                            Wholesale price index




Private And Confidential                                                                   Page | 7
For Client and firm use only                                   © 2012, MGS Advisors. All rights reserved
                                INDIA BUDGET 2012-13

3.           The Economic Survey 2011-2012



Highlights:


     o     Estimated GDP growth of 6.9%
     o     Sectoral growth less than expected, especially in industrial sector
     o     Continuous inflation easing in recent months
     o     Domestic savings as a ratio of GDP at current market prices (savings rate)
           declined from 33.8 % in 2009-10 to 32.3 % in 2010-11
     o     Deregulation of Saving bank interest
     o     Inflation (WPI) continued remained high 9.4%
     o     RBI hiked the repo rate 13 times between March 2010 and January 2012,
           cumulatively by 375 bps
     o     To ease tightness in liquidity the RBI conducted Open Market Operations
           (OMOs) aggregating over INR 70,000 crore over the period November 2011 to
           mid-January 2012
     o     USA has been displaced by the UAE as India’s largest trading partner
     o     QFIs were allowed to directly invest in Indian equity markets
     o     Trade deficit (on customs basis) increased by 8.2 % to US$ 118.6 billion in
           2010-11
     o     India’s external debt stock stood at US$ 326.6 billion at end-September 2011
     o     Average exchange rate remained high (47.70) when compared to last year
           (45.56)

The Economic Survey 2011-2012 reports the estimated GDP growth of 6.9% during
this year. This indicates a slowdown compared not just to the previous two years,
when the economy grew by 8.4%, but also from 2003 to 2011, except 2008-9
economic downturn, when the growth rate was 6.7 percent. The slowdown can be
attributed almost entirely to weakening industrial growth. However, the Economic
Survey 2011-12 predicts 7.6% GDP growth in 2012-13 and 8.6% in 2013-14.




Private And Confidential                                                             Page | 8
For Client and firm use only                             © 2012, MGS Advisors. All rights reserved
                                            INDIA BUDGET 2012-13

3.1.          Sectoral growth

At sectoral level, growth is estimated to be 2.5 % for 2011-12 for agriculture and allied
sectors, a little lower than expected. However, this has to be seen in light of the high
growth of 7 % achieved in 2010-11. Growth in the services sector is likely to be 9.4 %
in 2011-12 as against 9.3 % in 2010-11. Thus, it is primarily the dip in growth in
industry to 3.9 % in 2011-12 that has led to the slowdown in real GDP growth


                 Rate of GDP Growth at Factor Cost
                       at 2004-05 prices (%)
                                  2009-10PE        2010-11QE      2011-12AE
                                                      11.111.2
                                                  10.3                 10.4
                                9.7                              9.4          9.1
                                                                                      8.4 8.4
                7                     7.6
                                                                                                 6.9

                                            3.9
                    2.5
          1


        Agriculture,           Manufacturing Trade, hotels, Financing,    GDP at factor
         forestry &                           transport & insurance, real     cost
           fishing                          communication    estate &
                                                             business
                                                             services

PE: Provisional Estimate QE: Quick Estimate                 AE: Advance Estimate

3.1.1. Agriculture and allied sectors
• Agriculture and allied sectors continues to perform well by achieving an
     estimated growth rate of 2.5% in 2011-12 with food grains production likely to
     cross 250.42 million tonnes owing to increase in the production of rice in some
     States.


Private And Confidential                                                                       Page | 9
For Client and firm use only                                       © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

•     In terms of composition, out of a total share of 14.5 % in GDP in 2010-11,
      agriculture alone accounted for 12.3 %, followed by forestry and logging at 1.4 %,
      and fishing at 0.7 %.
•     The average annual growth in agriculture and allied sectors realized during the
      Eleventh Plan Period was 3.3 % against the targeted growth rate of 4 % due to
      severe drought experienced in most parts of the country during 2009-10 and
      drought/deficient rainfall in some state.

3.1.2. Industry
• Industrial growth, measured in terms of the IIP, shows fluctuating trends. Index
     of Industrial production showed growth at 3.6% (April – Dec 2011) when
     compared to 5.3 and 8.2 in last two years 2009-10 and 2010-11 respectively.
• Growth had reached 15.5 % in 2007-8 and then started decelerating. Initial
     deceleration in industrial growth was largely on account of the global economic
     meltdown.
• Overall growth during April-December 2011 reached 3.6 % compared to 8.3 % in
     the corresponding period of the previous year.
• There was a contraction in production in the mining sector, particularly the coal
     and natural gas segments. Contraction in output also resulted in its contribution
     to growth turning negative.
• Electricity sector contributed 22.6 % to overall industrial growth, which was more
     than twice its weight in the IIP.
• In terms of use-based classification of the IIP, in the current year (April-
     December), basic goods with a growth of 6.1 % and consumer nondurables with a
     growth of 6.1 % had relatively better growth compared to the corresponding
     period of the previous year.
• There was moderation in growth in other segments of the IIP and negative
     growth was observed in capital goods and intermediates.
• Contribution of basic goods segment to overall IIP growth at 65.7 % not only
     exceeded its weight in the IIP, but was also the highest.
• Contribution of consumer non-durables at 28.1 % also exceeded its weight in the
     IIP.



Private And Confidential                                                            Page | 10
For Client and firm use only                             © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

3.1.3. Services
• The share of services in India’s GDP at factor cost (at current prices) increased
     from 33.5 % in 1950-1 to 55.1 % in 2010-11 and 56.3 % in 2011-12 as per Advance
     Estimates.
• Trade, hotels, and restaurants as a group, with 16.9 % share, is the largest
     contributor to GDP among the various services sub-sectors, followed by financing,
     insurance, real estate, and business services with 16.4 % share.
• In the years 2009-10 and 2010-11, the services sector registered a growth rate of
     10.5 % and 9.3 % respectively.
• In 2011-12, as per the Advance Estimates, the growth rate of services has been
     placed at 9.4 %.
• While agriculture continues to be the primary employment-providing sector, the
     services sector is the principal source of employment in urban areas.

3.2.      Key performance indicators
Major sectors of the economy are agriculture, industry and service sector. The
structure of the economy has undergone significant changes over time. The changes
in relative shares of these sectors in GDP are shown below:

3.2.1. Agriculture and allied sector
Agriculture including allied activities accounted for 13.9 % of GDP at 2004-5 prices in
2011-12 as compared to 14.5 % in 2010-11.

3.2.2. Industry
The industrial sector has performed poorly, retreating to a 27% share of the GDP.

3.2.3. Services
The services sector continues to be a star performer as its share in GDP has climbed
from 58% in 2010-11 to 59% in 2011-12 with a growth rate of 9.4%.




Private And Confidential                                                           Page | 11
For Client and firm use only                            © 2012, MGS Advisors. All rights reserved
                                    INDIA BUDGET 2012-13


                       Sectoral Composition of GDP
    80

    60
                                                                              Agriculture
    40
                                                                              Industry
    20                                                                        Services
       0
              1970-71          1990-91   2010-11 QE 2011-12 AE

Source: CSO data

3.3.         Sectoral investment growth rate

Annual growth rates of investment both at aggregate and sectoral levels may vary,
depending on expectations of profitability, sales, etc.
• There are large scale variations in the growth rates of sectors over time.
• Most of the sectors in 2010-11 registered positive growth in real terms in
    investment levels except communications and railways.
• The marginal negative growth in communications in 2009-10 and 2010-11 is not
    surprising after the very high growth in this sector in the previous two years.
• The growth in real investment in railways turned negative after showing a
    positive trend for several years. This partly reflects the inability to raise tariffs in
    order to meet increasing expenditures.




Private And Confidential                                                              Page | 12
For Client and firm use only                               © 2012, MGS Advisors. All rights reserved
                                                       INDIA BUDGET 2012-13


                                                   2008-09          2009-10                   2010-11
         Agriculture, forestry &


                                   Manufacturing



                                                     Construction




                                                                    Trade, hotels &


                                                                                      real estate & business



                                                                                                                  Railways



                                                                                                                                 Communication
                                                                                       Financing, insurance,
                                                                      restaurants


                                                                                              services
                 fishing




Source: CSO

3.4. Private final consumption expenditure
• As against an overall growth of private final consumption expenditure that was in
     the range of 7.1-9.2 % during the period 2005-6 to 2010-11, the rates of growth
     of the consumption groups food, beverages, and tobacco and gross rent, fuel and
     power have generally been lower.
• On the other hand, the growth rates of items like furniture and furnishing,
     transport and communications and miscellaneous goods and services have
     generally been higher.
• The composition of private final consumption expenditure in terms of shares
     underwent changes as shown below:




Private And Confidential                                                                                                                         Page | 13
For Client and firm use only                                                                              © 2012, MGS Advisors. All rights reserved
                                          INDIA BUDGET 2012-13

      Private Final Consumption Expenditure: Annual Growth and Shares at 2004-05 prices


                                                    2009-10
                           Others, 20.1
                                                                                 Food,
                                                                              beverages &
             Recreation,                                                     tobacco, 32.7
             education &
               cultural
             services, 2.9



                   Transport &
                 communication
                      , 19.6

                                                                        Clothing &
                               Medical care &                         footwear, 8.4
                               health servcies,           Gross rent, fuel
                                     4.8                  & power, 11.5




                                                    2010-11

                                           Others
                                            21%            Food,
                Recreation,                             beverages &
                education &                               tobacco
              cultural services                             32%
                     3%




                Transport &
              communication                                             Clothing &
                   20%
                         Medical care &                      Gross rent, footwear
                          health servcies                   fuel & power 8%
                                5%                               11%

Source: CSO


Private And Confidential                                                                      Page | 14
For Client and firm use only                                       © 2012, MGS Advisors. All rights reserved
                                   INDIA BUDGET 2012-13

3.5.      Savings and investments
• The growth rate of investment in the economy is estimated to have registered a
     significant decline during the current year.
• The year has been witnessing a sharp increase in interest rates that resulted in
     higher costs of borrowings; and other rising costs affecting profitability and,
     thereby, internal accruals that could be used to finance investment.
• Domestic savings as a ratio of GDP at current market prices (savings rate)
     declined from 33.8 % in 2009-10 to 32.3 % in 2010-11
• There was a reduction in investment rates, both in the public and private sectors,
     in 2010-11. Reduction in corporate investment could be attributed to fall in global
     economy in the second half of 2010 as well as to domestic factors, namely
     increased interest rates (increased to control inflation).
• Fixed investment as a ratio of GDP peaked in 2007-08 and has continued to
     register a decline since then, falling from 31.6 % in 2009-10 to 30.4 % in 2010-11.
• At 2.8 % of GDP, the savings-investment gap during 2010-11 remained at the
     same level as in 2009-10. This reflected the need to finance the investment
     requirement from foreign savings (current account deficit).
• The gap, in excess of 2 % of GDP, has been at relatively elevated levels (since
     2008-09), as compared to 0.4-1.3 % in 2004-05 to 2007-08.
• Savings bank account interest rates were deregulated with effect from 25
     October 201, wherein banks will have to keep a uniform rate of interest for
     savings accounts with deposits up to ` 1 lakh, while differential interest rates
     could be set for savings deposits over ` 1 lakh. This was made to enhance the
     attractiveness of savings accounts.
         Ratio of savings and Investment to GDP (at current market prices %)
                                                 2009-10 PE       2010-11 QE
           Gross capital formation(investment)   36.6              35.1
           Public Sector                         9.2              8.8
           Private Sector                        25.2             24.9
           Corporate Sector                      12.7             12.1
           Household Sector                      12.4             12.8
           Saving-investment gap                 -2.8             -2.8
Source: CSO


Private And Confidential                                                            Page | 15
For Client and firm use only                             © 2012, MGS Advisors. All rights reserved
                                    INDIA BUDGET 2012-13

3.6.         Prices
•            Compared to a relatively stable inflationary period in the earlier part of the
             last decade, average headline WPI inflation started to rise in 2008-09 and
             persisted. The pressure was mainly from primary and fuel products with
             average inflation in these commodities remaining continuously in double
             digits for a major period since 2008-9.
•            In comparison, inflation in manufactured products remained relatively stable,
             dropping sharply in 2009-10 because of the global economic crisis and its
             impact in India, before it started to pick up and exceed its long-run average
             of around 5 % in early 2011-12.
•            Monetary policy was tightened by the Reserve Bank of India (RBI) during the
             year to control inflation and curb inflationary expectations.
•            In the current financial year (2011-12), the gap between WPI and CPI
             inflation has significantly narrowed due to a fall in food inflation.
•            Inflation (WPI) continued to remain over 9% at 9.4% (April – Dec 2011).
    12                                                    9.6
    10                                                                            9.1
                      8.1
     8
     6                                  3.8
     4
     2
     0
                  2008-09             2009-10          2010-11               2011-12
                                                                          (April 2011-Jan
                                                                               2012)
                               Inflation WPI (12 month average) % change


3.7.         Monetary management
•            Reining in inflation and containing inflationary expectations were the
             dominating objectives of monetary policy during 2011-12.
•            The RBI hiked the repo rate 13 times between March 2010 and January 2012,
             cumulatively by 375 bps. The recent months have seen a reversal in this
             policy.

Private And Confidential                                                                Page | 16
For Client and firm use only                                 © 2012, MGS Advisors. All rights reserved
                                  INDIA BUDGET 2012-13

•            To ease tightness in liquidity the RBI conducted Open Market Operations
             (OMOs) aggregating over INR 70,000 crore over the period November 2011
             to mid-January 2012.

3.8.         International scenario
•            The USA has been displaced by the UAE as India’s largest trading partner,
             followed by China, since 2008-09.
•            QFIs were allowed to directly invest in Indian equity markets in January 2012.
             This was done to widen the class of investors, attract more foreign funds,
             reduce market volatility, and deepen the Indian capital market.
•            In November 2011, the ECB policy was modified keeping in view
             developments in the global financial markets and macroeconomic conditions.
•            The all-in-cost ceiling was enhanced and the proceeds of the ECBs raised
             abroad for rupee expenditure in India were required to be brought back
             immediately.
•            Trade deficit (on customs basis) increased by 8.2 % to US$ 118.6 billion in
             2010-11 from US$ 109.6 billion in 2009-10. However, trade deficit for 2011-
             12 (April-January) at US $ 148.7 billion was 40.4 % higher than the US $ 105.9
             billion in 2010-11 (April-January).
•            The current account deficit increased to US$ 32.8 billion in the first half of
             2011-12, as compared to US$ 29.6 billion during the corresponding period of
             2010-11, which was mainly attributed to higher trade deficit.
•            Net capital flows at US$ 41.1 billion in the first half of 2011-12 remained
             higher as compared to US$ 38.9 billion in the first half of 2010-11.
•            India’s external debt stock stood at US$ 326.6 billion at end-September 2011,
             recording an increase of US$ 20.2 billion (6.6 %) over end March 2011
             estimates of US$ 306.4 billion. This increase was primarily on account of
             higher commercial borrowings and short-term debt, which together
             contributed over 80 % of the total increase in the country’s external debt.

3.9.         Miscellaneous information
•            Import growth exceeded the growth of exports.
•            Forex reserves remained near around 300 bn US$.


Private And Confidential                                                               Page | 17
For Client and firm use only                                © 2012, MGS Advisors. All rights reserved
                                  INDIA BUDGET 2012-13

•            Gross fixed capital formation continued its decline trend. It has fallen to 5.6
             as compared to 7.5 last year.
•            Average exchange rate remained high (47.70) when compared to last year
             (45.56).
•             In the current fiscal, on month-to-month basis the rupee depreciated by
             12.4 % from ` 44.97 per US dollar in March 2011 to ` 51.34 per US dollar in
             January 2012.

3.10.        Sectoral details

3.10.1. Industrial

National Manufacturing Policy (“NMP”)
1.      The government released the NMP on 4 November 2011 with the following
        objectives:
        o increase manufacturing sector growth to 12-14 % over the medium
             term;
        o enable manufacturing to contribute at least 25 % of GDP by 2022;
        o create 100 million additional jobs in the manufacturing sector by 2022;
        o create appropriate skill sets among the rural migrant and urban poor;
        o increase domestic value addition and technological depth in
             manufacturing;
        o Enhance global competitiveness of Indian manufacturing.
2.      The NMP envisages simplification of business regulations without diluting
        their intent.
3.      Interventions for SMEs relating to technology upgradation; adoption of
        environment-friendly technology; and equity investments.
4.      Constitution of a high-level Manufacturing Industry Promotion Board (MIPB)
        to ensure coordination amongst central ministries and state governments.

Draft National Policy on Electronics 2011 (NPE 2011)
The draft National Policy on Electronics, which was released on 3rd October 2011,
provides a roadmap for the development of the sector in the country. Salient features
of the policy are:


Private And Confidential                                                                Page | 18
For Client and firm use only                                 © 2012, MGS Advisors. All rights reserved
                                 INDIA BUDGET 2012-13

1.           Multi-fold growth in production, investment and employment: For
             achieving a turnover of about US $ 400 billion by 2020 involving an
             investment of about US $ 100 billion and employment opportunities to
             around 28 million people in the electronic sector, the following specific
             initiatives have been proposed:
             o Setting up of semiconductor wafer fabs for manufacture of
                   semiconductor chips.
             o Special Incentive Package Scheme providing for the disabilities in
                   manufacturing
             o Electronic Manufacturing Clusters Scheme with world class
                   infrastructure.
             o Preferential market access for domestically manufactured electronic
                   goods
             o Policy for stable tax regime.
2.           Multi-fold growth in Export: To increase export from US$ 5.5 billion to US$
             80 billion by 2020.
3.           Security Eco-system: Creating a completely secure cyber eco-system.
4.           National Electronic Mission (NEM): NEM will be set up to formulate policy,
             implement approved policy, and promote ‘Brand India’ in electronics.
5.           To develop core competencies in identified sectors

Micro, Small and Medium Enterprises (MSME) Sector
Some major initiatives that have been taken by the government in 2011-12 for MSME
sector are:
1.       Public procurement policy which envisages that every central ministry/PSU
         shall set an annual goal for procurement from the MSME sector with the
         objective of 20% procurement from such sector over the period of three
         years.
2.       SEBI has permitted setting up of a stock exchange / trading platform for
         SMEs. Accordingly, BSE and NSE have been given final approval for launching
         SME platforms.
3.       Conduct skill development programmes along with various programmes for
         development of self-employment opportunities.


Private And Confidential                                                             Page | 19
For Client and firm use only                              © 2012, MGS Advisors. All rights reserved
                                         INDIA BUDGET 2012-13

4.           Cluster approach for enhancing the productivity and competitiveness of
             MSMEs.

Central Public Sector Enterprises (CPSEs)
1.       Introduction of the Maharatna Scheme enhancing financial delegation to
         CPSEs.
2.       Steps on revival / restructuring of sick and loss-making CPSEs.

3.10.2. Service sector

Foreign Direct Investment (FDI) in Service Sector
•       FDI projects in the services sector declined from US$ 392 billion in 2009 to
        US$ 338 billion in 2010, resulting in its share in sectoral FDI declining from 33
        % to 30 %.
•       Allowing FDI in multi-brand retail is one of the major issues in the trade
        sector, which is under discussion with concerned bodies.

3.11.    Performance of various services
The estimates and forecasts as provided by Centre for Monitoring Indian Economy’s
(CMIE) for certain sectors are as under:
Sector                         Performance
Transport logistics            The sales of this sector are estimated to have grown by a 17.5 % during
                               2010-11 mainly because of a combination of higher cargo volumes and
                               better realizations. In 2011-12, the sales are expected to grow by 9.6 %
                               and PAT at 17.8 %.
Shipping                       The shipping sector’s sales had fallen by 4.8 % in 2010-11. In the year
                               2011-12, this sector is likely to grow at a modest 2.9 %. Major
                               contributor to growth of this sector are exchange rate fluctuations and
                               port and offshore operations. However, the industry’s PAT is likely to
                               decline by a phenomenal 75.7 %, mainly due to increase in interest
                               expenses. During 2012-13, sales are expected to grow by 5.7 % and PAT
                               by 49.2 %
Aviation                       During 2010-11, sales had grown by 24.2 %. In the year 2011-12, sales
                               are expected to grow by 10.5 % on count of higher passenger volumes.
                               However, weaker rupee is likely to contribute in the rise of operational
                               expenses. During 2012-13 sales are expected to grow by 13.5 %

Private And Confidential                                                                        Page | 20
For Client and firm use only                                         © 2012, MGS Advisors. All rights reserved
                                         INDIA BUDGET 2012-13

Retail sector                  Retail trading companies have witnessed a decline in sales growth in
                               2010-11 by 12 % and so far in 2011-12 by 9.4 % on count of rise in prices.
                               A sharp rise in prices of branded apparels is on count of imposition of
                               10.3 % excise duty and rise in prices of yarn and fabrics. However, during
                               2012-13 sales are expected to grow by 15.7 %.
Health Services                During 2010-11, sector sales had grown by 25.4 %. During 2011-12 and
                               2012-13, sales are expected to grow by 18.6 % and 20.5 % respectively.
                               This is because of higher occupancy levels in hospitals and higher
                               revenues per occupied bed. However, faster growth of Salaries and other
                               operating expenses would results in fall of PAT by 24 % in 2011-12.
                               However it is expected to grow by17 % in 2012-13.
Hotel                          The sector reported sales growth of 14.3 % during 2010-11 and is
                               expected to maintain the rate in 2011-12 and 2012-13. PAT is expected
                               to grow at 36.2 % in 2011-12 and 26.4 % by 2012-13. The growth in
                               tourist inflows in 2012-13 and 2013-14 is likely to be driven by tourists
                               from Asian regions like South Asia, East Asia, and South East Asia.
Telecom                        After rising to 10.5 % during 2010-11, sales growth of the telecom
                               industry is expected to be 8.7 % in 2011-12 and 10.6 % in 2012-13. PAT
                               during 2011-12 is expected to fall by 84.7 %, mainly on account of the
                               sharp rise in the industry’s interest outgo and higher depreciation
                               charges due to the heavy borrowings for 3G license and services.
Software                       During 2010-11, sales had increased by 17.1 % and PAT by 15 %. For
                               2011-2012, the industry’s sales are expected to grow by 20.5 % and by
                               18.5 % during 2012-13. PAT is expected to grow by 13.1 % in 2011-12
                               and 14.2 % in 2012-13.
Construction and               PAT had declined by 9.1 % during 2010-11 and is expected to decline by
allied activities              10.4 % during 2011-12. This will be on account of rising construction
                               costs and higher interest outgo. During 2012-13, sales and PAT are
                               expected to grow by 18.6 % and 17.4 % respectively.




Private And Confidential                                                                         Page | 21
For Client and firm use only                                          © 2012, MGS Advisors. All rights reserved
                                   INDIA BUDGET 2012-13

4.           MACROECONOMIC FRAMEWORK STATEMENT (Economic performance)
                                 (Data is for April – Dec unless stated otherwise)
Sl.        Particular                                       2010-11                   2011-12
1.         GDP at factor cost (` thousand crore) at             7,157                     8,280
           current prices
2.         Index of Industrial Production (%                       8.3                       3.6
           change)
3.         WPI (% change)                                          9.6                       9.4
4.         CPI (% change)                                         11.0                       8.8
5.         Imports at current prices (% change)                   23.8                      34.5
6.         Exports at current prices (% change)                   29.6                      29.9
7.         Trade Deficit (in US$ million)                    -96,210                -1,33,272
8.         Foreign Exchange Reserves (in US$                2,97,334                  2,96,688
           million)
9.         Current Account Balance (In US$                   -29,599                   -32,842
           million)
10.        Tax revenue (Net) (in ` Crore) (for the          5,69,869                6,42,252*
           year)
11.        Fiscal deficit (in ` Crore) (for the year)       3,73,591                5,21,980*
12.        Fiscal deficit (%)(for the year)                        4.9                      5.9*

*Revised Estimates




Private And Confidential                                                           Page | 22
For Client and firm use only                            © 2012, MGS Advisors. All rights reserved
                                      INDIA BUDGET 2012-13

5.           Budget financials at a glance
                   Non-tax                                           Non debt
                   revenue            ` Comes From                     capital
                     9%                                               receipts
           Service tax &                                                 2%
                                                             Borrowings &
            other taxes                                          other
                7%                                             liabilities
                     Union Excise                                 29%
                       Duties
                         11%


                     Customs                           Corporation
                       10% Income-tax                      Tax
                                    11%                   21%


                                                          Non-paln
                      State's share       ` Goes to     assistance to
                      of taxes and                       State & UT
                          duties                            Govts
                           17%                               4%         Plan
                                                                   assistance to
                                                                    State & UT
                 Other non-                                              7%
                    plan
                                                               Central plan
                 expenditure
                                                                  22%
                    11%

                        Subsidies
                          10%
                                                       Interest
                                Defence                payment
                                 11%                     18%




Private And Confidential                                                             Page | 23
For Client and firm use only                              © 2012, MGS Advisors. All rights reserved
                                  INDIA BUDGET 2012-13

6.           Budget proposals

6.1.         Direct tax

6.1.1.       Highlights


       o     Budget did not replace Income Tax Act; however certain provisions from
             DTC introduced.
       o     Personal taxation exemption limit raised to ` 200,000
       o     Scope of taxable income enhanced to include share premium etc.
       o     Strong measures to curb black money and tax evasion proposed
             particularly in case of foreign assets.
       o     Tax incentives introduced primarily for infrastructure sector and by
             removal of sectoral restrictions in case of VCC/ VCF.
       o     Reduction in the age specified for senior citizens from 65 years to 60 years.
       o     Assessment specified in case of charitable organisations when commercial
             receipts exceeds specified limits
       o     Investment linked weighted deduction extended to new sectors
       o     Limit for getting accounts audited increased from ` 60 Lakhs to ` 1 Crore
       o     Due date of furnishing return in case of non corporate assess having
                                                       th
             international transactions changed to 30 November.
       o     Presumptive taxation under Section 44AD not to apply to certain
             professions
       o     Unexplained income / money to be taxed @ 30% without allowing any
             deductions
       o     Prohibition of cash donations in excess of ` 10,000 under Section 80 G
       o     Deduction allowed in respect of interest earned on saving account deposits
       o     GAAR introduced to counter aggressive tax planning
       o     Rationalisation and modification of international tax provisions
       o     Coverage of transaction covered under TDS / TCS enlarged to cover
             property transaction and cash purchase of jewelry
       o     Changes in provisions related to Dispute Resolution Panel
       o     TDS on remuneration of independent directors
       o     Alternate minimum tax introduced on all persons other than Company

Private And Confidential                                                               Page | 24
For Client and firm use only                                © 2012, MGS Advisors. All rights reserved
                                      INDIA BUDGET 2012-13

6.1.2.       Income Tax

A.           Rates of tax
i.           Personal tax rates
                           Existing                                    Proposed
Income (`)
        `                             Rate (%)          Income (`)                         Rate (%)

0-1,80,000                                        Nil   0-2,00,000                                   Nil
1,80,001-5,00,000                                10%    2,00,001-5,00,000                          10%
5,00,001-8,00,000                                20%    5,00,001-10,00,000                         20%
8,00,001 and above                               30%    10,00,001 and above                        30%
Note:
• The above proposed exemption limit shall be considered as ` 200,000 in case of
    resident women below the age of 6o years, ` 2,50,000 in case of senior citizens
    aged 60 years but less than 80 years and ` 5,00,000 in case of very senior citizens
    of the age 80 years or more. For persons above 80 years, the slab shall be as
    follows:
             Income (`)
                     `                                Rate (%)
0-5,00,000                                                                                   Nil
5,00,001-10,00,000                                                                         20%
10,00,001 and above                                                                        30%
•     EC of 2% and SHE Cess of 1% is leviable on the amount of income tax, if any.

ii.       Corporate tax rates
Existing (for FY 2011-12):
Particular                                                    Rate of Tax
Domestic Company having total income <` 1 Crore               30%
Domestic Company having total income >` 1 Crore               30% plus surcharge of 5%
Foreign Company having total income < ` 1 Crore               40%
Foreign Company having total income > ` 1 Crore               40% plus 2%
EC of 2% and SHE Cess of 1% shall be levied over and above the above taxes.
Proposed (for FY 2012-13):
No Change is proposed in the above rates.


Private And Confidential                                                                  Page | 25
For Client and firm use only                                   © 2012, MGS Advisors. All rights reserved
                                        INDIA BUDGET 2012-13

iii.      Firms
Existing (for FY 2011-12):
Flat Rate of 30%. EC of 2% and SHE Cess of 1% shall be levied over and above the
same.

Proposed (for FY 2012-13):
No Change is proposed in the above rates.

iv.       Cooperative Societies
Existing (for FY 2011-12):
                           Particular                                      Rate of Tax
Having total income of less than ` 10,001                   10%
Having total income of more than ` 10,000 but               ` 1,000 plus 20% of total income in
less than ` 20,001                                          excess of ` 10,000
Having total income of more than ` 20,000                   ` 3,000 plus 30% of total income in
                                                            excess of ` 20,000
EC of 2% and SHE Cess of 1% shall be levied over and above the above taxes.

Proposed (for FY 2012-13):
No Change is proposed in the above rates.




            •      No Change in tax rates except in the case of individuals, HUF, AOP
                   and BOI.
            •      For a person below the age of 60 years, having total income upto `
                   5,00,000, relief amounts to ` 2,060, while for a person having total
                   income of ` 10 Lakhs would get relief of ` 22,660




Private And Confidential                                                                      Page | 26
For Client and firm use only                                       © 2012, MGS Advisors. All rights reserved
                                    INDIA BUDGET 2012-13

6.1.3. Widening of Tax Base
• Introduction of Alternate Minimum Tax (“AMT”): [Effective from April 1, 2013]
     Provisions of Chapter XII-BA have been extended to all persons (other than a
     company (on company which MAT is applicable). Earlier this Chapter was
     applicable only on LLPs. Accordingly, AMT shall now be applicable to all persons
     (other than a company on which MAT is applicable) claiming deductions under
     Chapter VI-A (except Section 80P) or under Section 10AAA of the Income Tax Act.
     AMT is applicable at the rate of 18.5% on adjusted total income. Adjusted total
     income means income as arrived by adding deductions under Chapter VI-A
     (except Section 80P) or under Section 10AAA of the Income Tax Act to the total
     income as computed under normal scenarios. The provision also required
     certification of such computation of AMT from an Accountant. Such AMT is
     allowed to be carried forward as credit (akin to MAT) and is allowed to be
     adjusted against normal income tax payable by the person in subsequent years,
                       th
     not exceeding 10 year. Relief from AMT is provided in case the person is an
     individual, HUF, AOP or BOI and adjusted income of such person does not exceed
     ` 20 Lakhs.

•     Share Premium in excess of fair market Value
      Portion of consideration as received for issue of shares of a closely held company
      which exceeds the fair market value of the shares shall be deemed to be the
      income of the recipient except when received from a venture capital company or
      venture capital fund. The method of determination of fair market value is to be
      prescribed or to be proved by the Company to the satisfaction of the Assessing
      Officer. However, it may be interesting to note that no amendment in Section 2
      has been made to include such capital transaction within the ambit of the term
      ‘income’ [Effective from April 1, 2013]


        •     AMT has been introduced on non-corporate assessees
        •     Share Premium in excess of fair market Value in case of a closely held company
              made taxable.




Private And Confidential                                                                   Page | 27
For Client and firm use only                                    © 2012, MGS Advisors. All rights reserved
                                   INDIA BUDGET 2012-13

•     Daily tonnage income of a shipping company
      Rates of Daily tonnage income specified in case of shipping company have been
      enhanced as under [Effective from April 1, 2013]:

                Qualifying ship   Existing amount of daily     Proposed amount of daily
                having net        tonnage income               tonnage income
                tonnage
                Upto 1,000        ` 46 for each 100 tons       ` 70 for each 100 tons
                Greater than      ` 460 plus ` 35 for each     ` 700 plus ` 53 for each
                1000 but upto     100 tons exceeding 1000      100 tons exceeding 1000
                10,000            tons                         tons
                Greater than      ` 3,610 plus ` 28 for each   ` 5,470 plus ` 42 for each
                10,000 but upto   100 tons exceeding 10,000    100 tons exceeding 10,000
                25,000            tons                         tons
                Greater than      ` 7,810 plus ` 19 for each   ` 11,770 plus ` 29 for each
                25,000            100 tons exceeding 25,000    100 tons exceeding 25,000
                                  tons                         tons


•     Transfer Pricing Regulations to apply to certain domestic transactions [Effective
      from April 1, 2013]
      It is proposed to extend the Transfer pricing regulations to the transactions
      entered into by domestic related parties as encapsulated in section 40A(2)
      (related party transactions), Section 80A, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID, 80-IE,
      (all Sections relate to deductions from profits) and section 10AA (exempted units)
      or any other prescribed transaction for the purposes of computation of income,
      disallowance of expenses etc. The provisions shall apply if aggregate amount of
      all such domestic transactions exceeds ` 5 crore in a year. Thus, related parties in
      the domestic arena would now be required to keep documentations and
      workings for determination of arm’s length price for transactions undertaken
      amongst them.

        Domestic transactions amongst related units shall now require determination of
        transaction value being at arms length




Private And Confidential                                                                  Page | 28
For Client and firm use only                                   © 2012, MGS Advisors. All rights reserved
                                  INDIA BUDGET 2012-13

6.1.4. Changes in respect of Cash Credits and undisclosed income
• Scope of Cash credits enhanced to presume include any share application or
     share capital money (including premium) as income unless source of such amount
     in the hands of the resident shareholder (other than VCC/VCF) is explained by the
     Closely held company. This is in extension of the amendment made under
     Section 56 wherein issuance of shares at premium which is higher than their fair
     market value has been made taxable. [Effective from April 1, 2013]
• Deemed income under Section 68, section 69, section 69A, section 69B, section
     69C and section 69D of the IT Act is proposed to be taxed at 30% (plus applicable
     surcharge and cess) and no deduction in respect of any expenditure or allowance
     shall be allowed to the assessee. The apparent impact of the transaction is that
     the undisclosed income or fictious entries would now be exigible to the highest
     rates of tax. However, in addition, this is also a provision of concern for return
     filers with small income of less than 5 lakhs who used to file their returns without
     having proper details about the source of receipts like teaching income, tailoring
     jobs etc, while enjoying the benefit of slab rates allowing the capital formation at
     much lower rate of tax. This would also plug the possibilities of planning taxes of
     spreading a higher income in multiple hands to enjoy lower slab structure, and
     thereby creating capital at much lower tax rates. [Effective from April 1, 2013]
• Injunction from Penalty is proposed to be removed where the assessee admits
     the undisclosed income in the course of search. [Effective from July 1, 2012]
• Increase in the time limit is proposed for issue of notice for reopening an
     assessment to 16 years in cases where the income in relation to any asset
     (including financial interest in any entity) located outside India which was
     chargeable to tax has escaped assessment. This has provided more time to the
     department for unearthing black money / properties in foreign countries not
     easily accessible to department. [Effective from July 1, 2012]
• Prosecution provisions have been strengthen and limit for evoking prosecution
     has been raised cases involving tax evasion of more than ` 25Lakhs. [Effective
     from July 1, 2012]

       If source from which resident shareholder had given the Share application or capital is
       not provide to the satisfaction of assessing officer, the same shall would constitute
       income.


Private And Confidential                                                                   Page | 29
For Client and firm use only                                    © 2012, MGS Advisors. All rights reserved
                                  INDIA BUDGET 2012-13

6.1.5. Changes in Capital Gain provisions
• Extension of provision of considering Cost of assets as cost of acquisitions in the
     hands of previous owner, to be extended to the following transactions (which are
     not considered as transfer for the purpose of capital gains):
     o Transfer of capital assets on conversion of sole proprietor or firm into
          company
     o Transfer of capital assets on corporatization of recognized stock exchange
          [proposed retrospectively from April 1, 1999]
• Benefit of exemption under Section 54B on sale of agricultural land as available to
     an individual is proposed to be extended to an HUF as well. [Effective from April
     1, 2013]
• It is proposed that in cases where the Assessing officer considers that the value of
     asset as on 1.4.1981 as taken by the assessee is at variance from the fair market
     value as on 1.4.1981, he can refer the same to a Valuation officer. [Effective from
     July 1, 2012]
• Provisions of Capital gain in case of amalgamation of a subsidiary into the holding
     company have been rationalized by deleting the requirement of issuance of
     shares by the holding company to its subsidiary under the scheme of
     amalgamation. This was a technical shortcoming which is proposed to be
     removed. [Effective from April 1, 2013]
• It has been proposed that in cases where consideration of an asset is not
     determinable on its transfer, fair market value shall be considered as
     consideration on transfer of such an asset. [Effective from April 1, 2013]
• Relief is granted to an individual or HUF from long-term capital gains tax on
     transfer of residential property if invested in the equity of a SME company
     engaged in manufacturing before due date of filing of return (such equity cannot
     be disposed within 5 years). Such equity is required to be invested by the SME in
     specified new asset within one year from such subscription. [Effective from April
     1, 2013].


        Long term capital gain from a residential house by an Individual or HUF when invested
        in a specified SME has been exempted from levy of tax




Private And Confidential                                                                  Page | 30
For Client and firm use only                                   © 2012, MGS Advisors. All rights reserved
                                   INDIA BUDGET 2012-13

6.1.6. Furnishing of return and assessment
• Furnishing of return of income under section 139 may be made mandatory for
     every resident having any asset (including financial interest in any entity) located
     outside India or signing authority in any account located outside India [Effective
     from April 1, 2012]
• Due date of filing of audit report in case of international transactions by non-
     corporate assessee has been shifted to November 30. [Effective from April 1,
     2012]
• Extension of time limit for assessments [Effective from July 1, 2012]
         It is proposed to increase the time limit for completion of assessment as
         under:
      Proceedings under        Existing time allowed for completion     Proposed time allowed
      Section                  of proceeding                            for completion of
                                                                        proceeding
      143 (Assessments)        21 months from the end of the A.Y.       24 months
      143 and 92CA             33 months from the end of the A.Y.       36 months
      148                      9 months from the end of the F.Y. in     12 months
                               which notice issued
      148 and 92CA             21 months from the end of the F.Y. in    24 months
                               which notice issued
      250 or 254 or 263        9 months from the end of the F.Y. in     12 months
                               which notice issued
      250 or 254 or 263,       21 months from the end of the F.Y. in    24 months
      and 92CA                 which notice issued
•     Processing of return under Section 143(1) shall no longer be required to be made
      in cases where notice of assessment under Section 143(2) is issued [Scrutiny
      assessment]. [Effective from July 1, 2012]
•     Central government is proposed to be empowered to specify cases or class of
      persons, where search was conducted, in which compulsory reopening of past six
      years shall not be required by the Assessing Officer. [Effective from July 1, 2012]
•     It is proposed to narrow the definition of related person in cases of application
      filed before Settlement Commission to include beneficial owner holding 20% or
      more of shares at the time of search in place of earlier definition providing “at
      any time during the previous year”. [Effective from July 1, 2012]

Private And Confidential                                                                  Page | 31
For Client and firm use only                                   © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

6.1.7. Tax Deductions and Exemptions
• Any interest paid by a specified company to a non-resident in respect of
     borrowing made in foreign currency from sources outside India between 1st July,
     2012 and 1st July, 2015, under an agreement, including rate of the interest
     payable, approved by the Central Government, shall be taxable at the rate of 5%
     (plus applicable surcharge and cess). [Effective from July 1, 2012]
• Extension of the provision allowing taxing the dividends received by an Indian
     Company from foreign companies. [Effective from April 1, 2013]
• Norms for VCC / VCF relaxed in terms of sectoral restrictions, however TDS
     provisions introduced. [Effective from April 1, 2013]
• Provisions of DDT relaxed to avoid tax on tax in case of a mutli tier corporate
     structure. Earlier it was relaxes for a two tier holding – subsidiary company.
     [Effective from July 1, 2012]
• Exemption provided to a foreign company on account of sale of crude oil as
     received in India in Indian currency [Effective from April 1, 2012]
• Extension of benefit of initial depreciation in the first year to companies engaged
     in the business of generation or generation and distribution of power. [Effective
     from April 1, 2013]
• Extension of benefit of weighted deduction for in house scientific research and
     development for five more years. [Effective from April 1, 2013]
• Weighted deduction of 150% of the expenditure incurred on agricultural
     extension project. [Effective from April 1, 2013]
• 20% reduction in STT [Effective from July 1, 2012]
• Definition of specified business which is eligible for 100% capital expenditure in
     first year has been expanded to include enterprise which commence operation on
     or after April 1, 2012 and are engaged in setting up and operation of an inland
     container depot or a container freight station, bee-keeping and production of
     honey and beeswax, setting up and operating a warehousing facility for storage
     of sugar. [Effective from April 1, 2012]
• Weighted deduction of 150% allowed in respect of certain specified business
     which commence operation on or after April 1, 2012 and are engaged in setting
     up and operation of a cold storage chain, agricultural warehousing facility,



Private And Confidential                                                          Page | 32
For Client and firm use only                           © 2012, MGS Advisors. All rights reserved
                                INDIA BUDGET 2012-13

      hospital with more than 100 beds, production of fertilizer, developing and
      building affordable housing scheme. [Effective from April 1, 2013]
•     Extension of sunset date for tax holiday for power sector. [Effective from April 1,
      2013]
•     Deduction under Section 80D allowed for payment made for preventive health
      check-up of self, spouse, dependent children or parents(s). [Effective from April 1,
      2013]
•     Deduction of upto 10,000 provided on interest earned on a saving account by an
      individual or HUF. [Effective from April 1, 2013]
•     Deduction under Section 80G and 80GGA has been restricted in cases where
      donation is made in cash for amounts greater than ` 10,000. [Effective from April
      1, 2013]
•     Any sum received under a life insurance policy where premium are less than 20%
      of their capital sum assured are exempt from income tax. The limit of premium
      on future policies issued after April 1, 2012 is proposed to be restricted to 10%.
      Corresponding changes are also made in Section 80C providing for deduction in
      such policies. It is further proposed that the capital sum shall be the minimum
      amount assured during the tenure of policy. [Effective from April 1, 2013]

6.1.8. Changes in TDS and TCS provisions
• Introduction of TDS on transfer of immovable properties other than agricultural
     land:
     TDS is now required to be deducted by the transferee at the time of making
     payment or crediting any sum by way of consideration for transfer of immovable
     property (other than agricultural land), at the rate of 1% of such sum, if the
     consideration paid or payable for the transfer of such property exceeds :–
     (a) ` 50 Lakhs when situated in a specified urban agglomeration; or
     (b) ` 20 Lakhs in case such property is situated in any other area.
    The value of consideration shall be the consideration actually paid or as adopted
     for the purpose of levy of stamp duty. Properties shall not be registered till the
     point proof of deposit of such TDs is not shown to the registrar [Effective from
     October 1, 2012].




Private And Confidential                                                             Page | 33
For Client and firm use only                              © 2012, MGS Advisors. All rights reserved
                                INDIA BUDGET 2012-13

•     TDS shall now be required to be deducted on remuneration of directors other
      than directors who qualify as employees of the Company. This shall primarily
      cover payments made to independent directors. [Effective from July 1, 2012]
•     TCS is now required to be withheld on cash sale of bullion and jewelry @1% in
      cases where the consideration for such sale exceeds ` 200,000. [Effective from
      July 1, 2012].
•     TCS @1% shall now be required to be collected on sale of Coal, lignite and iron
      lore except when purchased for personal consumption or for the purpose of
      manufacturing, processing, producing articles or things. [Effective from July 1,
      2012]
•     Rationalisation of TDS and TCS provisions [Effective from July 1, 2012]
      o In case of non-deduction of TDS by payee and payment of taxes on such
           income by payer, the payee shall not be held as assessee-in-default if he
           provides certificate from an Accountant certifying that adequate tax has
           been paid on such income of the payee and also providing information as
           required by the IT Act in this regard.
      o In the above case, from the date, TDS was deductible on such income till the
           date of payment by payer, interest shall be charged from the payee.
      o Similar amendments are proposed in TCS.
•     Disallowance of expense under Section 40(a)(ia) shall not made in case the payer
      is not treated as assesse in default in case of payments to a resident payee.
      [Effective from April 1, 2013]
•     Penalties for non-compliances [Effective from July 1, 2012]
      o Penalty on late furnishing of TDS return enhanced from `100 to `200 per day
           with an upper ceiling of total tax deductible in the return and in case of non-
           furnishing penalty has been proposed ranging from `10,000 to `1,00,000.
           However, penalty in case of non-furnishing of TDS return shall not be made if
           the TDS statement is furnished within one year of the prescribed due date
           after payment of tax deducted along with applicable interest and fee.
      o Penalty ranging from `10,000 to `1,00,000 has been proposed for furnishing
           incorrect information in the TDS statement.
      o Similar provisions have been proposed for TCS as well.



Private And Confidential                                                             Page | 34
For Client and firm use only                              © 2012, MGS Advisors. All rights reserved
                                    INDIA BUDGET 2012-13

•     Computer intimation as generated after processing of TDS statement is proposed
      to be equated to a notice of demand from the assessing authority capable of
      being rectified, appealed and effected. [Effective from July 1, 2012]
•     Person responsible for making compliance specified in relation of TDS/ TCS in the
      case of payment by Central Government or a State Government. [Effective from
      July 1, 2012]
•     Order providing for assessee in default in case of TDS / TCS can now be passed
      within 4 years from the end of the financial year in which no TDS / TCS statement
      has been filed. [effective retrospectively from April 1, 2010]
•     Limit over which TDS is required to be deducted enhanced in following scenarios
      [Effective from July 1, 2012]:
        Transaction                                 Existing limit (`)
                                                                    `            Proposed Limit (`)
                                                                                                 `

        Interest on any debentures                          2,500                         5,000
        Compulsory acquisition of land                     100,000                      200,000
        (other than agricultural land)




        TDS / TCS is now required to be deducted/collected on the following transactions:

        o      By transferee at the time of making payment for the purchase of Property above a
               specified limit
        o      By Company on remuneration of independent directors
        o      By Seller on cash sale of bullion / jewelry above ` 200,000
        o      By Seller on sale of Coal, lignite and iron lore




Private And Confidential                                                                     Page | 35
For Client and firm use only                                      © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

6.1.9. Changes in respect of International Tax
I. Income arising on account of transaction between two non-residents
Changes in respect of International Tax have been brought in retrospectively from
April 1, 1962, and are introduced as clarifications aiming to clarify provisions in regard
to scope of income arising out of transaction outside India. Though Apex Court has
already ruled otherwise in this context, still, Finance bill, 2012 seeks to bring such
transactions within the ambit of Indian Income Tax through these clarifications. The
whole idea is to tax transactions where there is a gain arising out of transfer of any
derivative (including shares) where the denominator of such derivative is asset based
in India. The corresponding clarifications as proposed to be introduced in different
sections are as under:
• Changes in Section 2 in certain definitions:
     o Property: includes any rights in or in relation to an Indian company, including
          rights of management or control or any other rights whatsoever
     o Transfer: Disposing of or parting with an asset or any interest therein, or
          creating any interest in any asset in any manner whatsoever by way of an
          agreement or otherwise, notwithstanding, that such transfer of rights has
          been characterized as being effected or dependent upon or flowing from the
          transfer of a share or shares of a company registered or incorporated outside
          India.
     Since all the above changes are in the form of clarifications and are
     retrospectively proposed to be introduced, their effective validity is not
     commented on at this stage.
• Changes in Section 9 (Income arise or deemed to arise in India):
     o The expression ‘through’ as used in reference to business connection shall
          mean and include and shall be deemed to have always meant and included
          “by means of”, “in consequence of” or “by reason of”. Thus, even if an
          income accrues outside India by reason of a business connection in India,
          such income is now proposed to be taxable in India.
     o Share of a company which is incorporated outside India and which derive,
          directly or indirectly, its value substantially from the assets located in India
          shall be deemed to be situated in India. The word ‘substantially’ has not



Private And Confidential                                                             Page | 36
For Client and firm use only                              © 2012, MGS Advisors. All rights reserved
                                  INDIA BUDGET 2012-13

             been defined and thus, would require judicial pronouncements for
             clarification.

•     Changes in Section 195 (TDS on payments to non-residents)
      o Provisions of section 195 creates obligation on all persons including non-
          residents to deduct TDS on payments made to non-residents as those taxable
          in India.

II. Scope of Royalty under Section 9 explained
As in above, by way of clarification, the amendment seeks to bring in clarification in
respect of exigibility of Royalty income on certain transactions, as provided below:
• Royalty to include transfer of all or any right for use or right to use computer
     software (including granting of a license). Thus, transaction wherein a license is
     granted for use without alienation of rights in respect of software shall fall within
     the ambit of Royalty.
• Royalty includes and has always included consideration in respect of any right,
     property or information, whether or not:
     o the possession or control of such right, property or information is with the
          payer;
     o such right, property or information is used directly by the payer;
     o the location of such right, property or information is in India.
• “Process” includes transmission by satellite (including up-linking, amplification,
     conversion for down-linking of any signal), cable and optic fibre or by any other
     similar technology, whether or not such process is secret.
                                                            st
These amendments will take effect retrospectively from 1 June, 1976.

III. Notice to agent of Non-resident - extension of time limit [Effective from April 1,
     2012]
• It is proposed to extend the time limit for issuance of notice in case of a person
     who is treated as agent of a non-resident from two years to six years.

        “Look through” provision introduced for taxing international transaction between non
        residents involving assets located in India. GAAR introduced to counter aggressive tax
        planning. Scope of taxation of software under Royalty expanded.

Private And Confidential                                                                  Page | 37
For Client and firm use only                                   © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

IV. Compulsory requirement of making application for determining rate of TDS in
    specified cases [Effective from July 1, 2012]
• It is proposed to empower Board to specify class of persons or cases wherein it
    shall be mandatory to make application to Assessing Officer to determine
    appropriate rate of TDS as to be deducted in cases of payment to non-resident(s).

V. Validation Clause [Effective from the date of enactment of the Finance Bill, 2012]
• This clause of Finance Bill seeks to validate all demands and actions of
   government which aimed to tax transactions involving alienation of shares which
   derive their value from Indian assets and provide injunctions from all disabilities
   to all such demand and actions thereof.

VI. Introduction of General Anti Avoidance Rules (GAAR ) [Effective from April 1,
    2013]
• Introduction of GAAR has been pre-poned by the FM keeping in view the
    aggressive tax planning with the use of sophisticated structures. The introduction
    aims to codify the doctrine of “substance over form”.
• The main features of the proposed regime are as follows:
    o The proposal aims to cover any transaction which whose main purpose is to
         obtain tax benefits and which satisfies one of the following tests:
         (a) The arrangement creates rights and obligations, which are not normally
             created between parties dealing at arm’s length.
         (b) It results in misuse or abuse of provisions of tax laws.
         (c) It lacks commercial substance or is deemed to lack commercial
             substance.
         (d) Is carried out in a manner, which is normally not employed for bonafide
             purpose.
    o Detailed discussion on transaction aimed to be covered under GAAR and
         procedure of evoking GAAR is provided in the proposed Sections.
• Suitable amendments have been proposed to override powers GAAR over DTAAs.

VII.  Changes in respect of Transfer pricing
• Advance Pricing Agreement (“APA”) [Effective from July 1, 2012]


Private And Confidential                                                           Page | 38
For Client and firm use only                            © 2012, MGS Advisors. All rights reserved
                                    INDIA BUDGET 2012-13

      o     It is proposed to provide a framework for APA under the Income Tax Act.
      o     It empowers Board to enter into an APA with any person undertaking an
            international transaction.
      o Such APAs shall include determination of the arm’s length price or specify the
            manner in which arm’s length price shall be determined and this shall have
            overriding effect on other provisions in this regard.
      o APA shall be valid for number of years as specified in the agreement of five
            year whichever is less.
      o APA shall not be binding in case of any change of law.
      o APA obtained by fraud can be declared void ab-initio.
      o Scheme in this regard to be prescribed.
•     It is proposed to enhance the power of the Transfer Pricing Officer to determine
      Arm’s Length Price in case of an international transaction not reported by the
      assessee. [proposed retrospectively from 1st June, 2002]
•     Definition of International transactions and intangible property proposed to be
      introduced.
•     Penalty @2% of the value of the international transaction is proposed on non-
      reporting of international transaction, failure to maintain prescribed documents,
      maintenance of incorrect records. [Effective from July 1, 2012]

VIII.      Changes in respect of Dispute Resolution Panel (“DRP”)
• It is proposed to provide for provision allowing filing of appeal by the Assessing
      Officer against the order of DRP. [Effective from July 1, 2012]
• It is proposed to clarify that powers of DRP includes power to consider any matter
      arising out of the assessment proceedings relating to the draft assessment order.
      [effective October 1, 2009]
• Time limit for assessment of search cases referred to DRP shall be guided by time
      limit specified in Section 144C. [effective October 1, 2009]


          Board to specify class of persons or cases wherein it shall be mandatory to make
          application to Assessing Officer to determine appropriate rate of TDS as to be deducted
          in cases of payment to non-resident(s)



Private And Confidential                                                                    Page | 39
For Client and firm use only                                     © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

6.1.10. Other Changes
• Presumptive taxation under Section 44AD of Income tax Act shall not apply to the
     following class of persons:
     o Professionals as specified under Section 44AA of the Income tax Act
     o Persons earning commission or brokerage income
     o Person carrying on agency business
     This amendment has been proposed retrospectively from April 1, 2011.
• It is proposed to make the assessee liable to deposit advance tax on all income as
     are received without effecting TDS by the payer on such amounts. [Effective from
     April 1, 2012]
• Amendments in MAT provisions [Effective from April 1, 2012]
     o Profit and loss prepared by Companies (other than those liable to prepare
          profit and loss as per Schedule VI of Companies Act) in accordance with the
          provisions of the regulatory acts of such companies shall be taken as the
          basis for computing book profits for computation of MAT
     o In cases of disposal of asset, when the amounts in revaluation reserve as
          attributable to such disposed asset is credited directly to General reserve in
          the books of a company without crediting the same to Profit and Loss
          account, such amount shall be added to compute book profits for the
          purpose of MAT.
• RBI has been exempted from wealth tax on its net wealth retrospectively from AY
     1957-58.
• Any sum received by an HUF from its members has been excluded from the scope
     of Section 56(2)(vii). [proposed to be amended retrospectively from October 1,
     2009]
• Turnover limits for compulsory audit under Section 44AB of Income Tax Act has
     been raised to ` 1 Crore in case of business and to ` 25 Lakhs in case of
     profession. [Effective from April 1, 2013]
• Thresh hold of Salary of employee who has been allotted a house has been raised
     to ` 10 Lakhs. Such house shall not be included in assets in cases of such
     employee. [Effective from April 1, 2013]




Private And Confidential                                                            Page | 40
For Client and firm use only                             © 2012, MGS Advisors. All rights reserved
                                          INDIA BUDGET 2012-13

     6.2.         Custom duty

     6.2.1.       Highlights


         o     Peak customs duty rate to remain constant at 10 percent
         o     Introduction of ‘air freight stations’ equivalent to ‘inland container depot’ to
               facilitate logistics of international air cargo
         o     Rationalization of customs duty calculation to avoid double levy of EC
         o     Provision for electronic payment of Customs duty
         o     Prosecution provisions made more stringent
         o     SAD exemption on specific items to draw more formalities


     6.2.2. Double Impact of EC & SHE Cess removed
     EC and SHE Cess are first charged on the CVD portion of customs duty and thereafter
     on the aggregate of customs duties (excluding special CVD). Thus, leading to dual levy
     of ED and SHE Cess. It is proposed to remove the dual effect as illustrated here under:
                                    Particulars          Present                  Proposed
     A       Assessable value (CIF + Landing Charges)         100,000                   100,000
     B       Basic customs duty (BCD) 10%                      10,000                     10,000
     C       Value for CVD (A+B)                              110,000                   110,000
     D
CVD equivalent to central excise duty 10%                      11,000                     11,000
     E       Educational Cess on CVD 2%                            220                          -
     F       Sec. and Higher Educational Cess 1%                   110                          -
     G       Customs duty for calculation of Cess              21,330                     21,000
     H       Customs Educational cess 2%                           430                        420
     I       Customs Secondary and higher educational              210                        210
             cess 1%
     J       Value for SAD                                    121,970                   121,640
     K       SAD @ 4%                                           4,880                      4,865
             Total Duty                                        26,850                     26,495



     Private And Confidential                                                                 Page | 41
     For Client and firm use only                                  © 2012, MGS Advisors. All rights reserved
                                 INDIA BUDGET 2012-13

6.2.3. Changes in Special Additional Duty
                               th
Changes effective from March 17 , 2012
• Change in SAD rate:

Item                                         Existing            Proposed
Brass scrap                                  5%                  Nil
Wood in the rough, dredgers                  5%                  Nil
Equipments for setting up of solar           5%                  Nil
thermal projects
CRGO steel                                   Full                Exemption restricted to
                                             exemption           Prime Quality of Such Steel

•     Change in procedures:

Particular                               Existing          Proposed

Destination & VAT Declaration of         No Such           Declaration of the State of
Specified Goods at the time of           declaration       destination where the goods are
import by the importer who               Required.         intended to be sold for the first
intends to claim exemption of SAD                          time after import and the VAT
on such import                                             registration number. Applicable
                                                           on or after 1st May, 2012.
Transfer of unutilized credit of SAD     Not               Allowed w.e.f. 01/04/2012
lying in balance at the end of each      Allowed
quarter to other registered
premises of same manufacturer.

6.2.4.       Increase in limit of Duty Free Baggage


    Category of Passengers (Indian origin)        Present                      Proposed
    Children upto 10 year                         12,000                       15,000
    Others                                        25,000                       35,000



Private And Confidential                                                                  Page | 42
For Client and firm use only                                   © 2012, MGS Advisors. All rights reserved
                                  INDIA BUDGET 2012-13

6.2.5. BCD and CVD rate change
                                th
[Changes effective from March 17 , 2012]
                               Item                                Existing          Proposed
Completely Built Units (CBUs) of large cars/ MUVs/ SUVs            60%               75%
permitted for import without type approval
Boric acid                                                         5%                7.5%
Digital Still Cameras of specific description                      Nil               10%
Flat rolled products (HR and CR) of non-alloy steel                5%                7.5%
Graded Gold bars, other than tola bars, and gold coins             2%                4%
having gold content not below 99.5%
Platinum                                                           2%                4%
Graded Gold tola bars, and gold coins having gold content          5%                10%
below 99.5%
Gold ore/concentrate and dore bars having gold content             1%                2%
not exceeding 95% for refining
Cut & Polished Coloured Gemstones                                  Nil               2%
Bicycles                                                           10%               30%
Parts of Bicycle                                                   10%               20%
Poly Laminated Aluminium tape and poly laminated steel             Exempt            Exemption
tape                                                               form BCD          withdrawn
Initial setting up and substantial expansion of fertilizer                           Nil
projects.
Steam coal                                                                           Nil
Natural gas/Liquified Natural Gas imported for power                                 Exempt
generation by a power generation company
Uranium concentrate, sintered natural uranium dioxide,             7.5%              Nil
sintered uranium dioxide pellets for generation of nuclear
power
Railway safety (Train Protection and Warning System)               10%               7.5%
equipment and railway track laying machines
Specified items for the manufacture of coronary                                      Nil
stents/coronary stent systems and artificial heart valves
subject to actual user condition


Private And Confidential                                                               Page | 43
For Client and firm use only                                © 2012, MGS Advisors. All rights reserved
                                INDIA BUDGET 2012-13

Equipment imported for road construction projects                 As                Nil
awarded by Metropolitan Development Authorities
Tunnel excavation and specified lining equipment                                    Nil
Coal mining projects                                                                Nil
New and retreaded aircraft tyres                                                    Nil
Parts of aircraft and testing equipment for maintenance                             Nil
and repair of aircraft by third party MRO unit
Tunnel boring machines for certain projects                                         Nil
Tri-band phosphor                                                                   Nil
Waster paper                                                                        Nil
Lithium ion batteries for specified purpose                                         Nil
Isolated soya protein and soya protein concentrate                30%               10%
Probiotics                                                        15%               10%
Machinery and instruments for surveying and prospecting           10%               7.5%
of mines
Titanium Dioxide                                                  10%               7.5%
Six specified life saving drugs/vaccines and their bulk drugs     10%               5%
Specified coffee plantation and processing machinery                                5%
Coffee brewing and vending machines                                                 5%
Specified soluble fertilizers and liquid fertilizers              10%/              5%/2.5%
                                                                  7.5%
Iodine                                                                              5%
Certain agricultural machine / parts                              7.5%              2.5%
Parts required for manufacture of such coffee vending and         10%               2.5%
brewing machines
Specified raw materials for the manufacture of syringes,                            2.5%
needles, catheters, cannulae
Parts and components for the manufacture of blood                                   2.5%
pressure monitors and Gluco meters
Capital goods, plant and equipment imported for setting                             2.5%
up or substantial expansion of iron ore pellet plants or iron
ore beneficiation plants




Private And Confidential                                                              Page | 44
For Client and firm use only                               © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

6.2.6. Procedural Changes
• Section 28AAA has been introduced to provide for recovery of duties from the
     person who has obtained duty credit scrips by means of collusion or wilful mis-
     statement or suppression of facts and such instruments have been used by
     another person. This recovery is in addition to the action which can be initiated
     against the importer of goods. To empower recovery of such amounts, suitable
     amendments have been made to make the provisions relating to provisional
     attachment of property. [Effective from the date of enactment of Finance Bill,
     2012]
• Central Government has been empowered to notify the class or classes of
     importers who shall be liable to pay customs duty electronically. [Effective from
     the date of enactment of Finance Bill, 2012]
• All offences under the Customs Act except an offence punishable with term of
     imprisonment of three years or more shall be non-cognizable and bailable. It also
     provides that all offences punishable with a term of imprisonment of three years
     or more shall be cognizable. [Effective from the date of enactment of Finance Bill,
     2012]
• The period of stay for duty free import of aircraft not registered or intended to be
     registered in India for a flight to or across India, is being reduced from six months
     to 15 days or as extended by the competent Authority not exceeding 60 days.
     [Effective from the date of enactment of Finance Bill, 2012]
• Bail in the case of offences punishable with a term of imprisonment of three
     years or more shall not be granted by a Court or Magistrate without an
     opportunity being given to the Public Prosecutor to present his case. However, in
     the case of minors, infirm and women the bail provisions are relaxed. [Effective
     from the date of enactment of Finance Bill, 2012]

6.2.7. Other changes
Effective from the date of enactment of Finance Bill, 2012
• Airfreight stations have been introduced as one of the places where customs
     goods can be imported in India.
• Service of any order/decision/summons/notice through courier which is
     approved by the Commissioner shall be treated as a valid service of notice.


Private And Confidential                                                             Page | 45
For Client and firm use only                              © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

•     Monetary limits for adjudication of cases involving confiscation of goods and
      imposition of penalty has been enhanced from 2,00,000 to 5,00,000 for Deputy/
      Assistant Commissioners and from ` 10,000 to ` 50,000 for Gazetted officer
      lower in rank to Assistant/ Deputy Commissioner

6.2.8. Amendments in First Schedule of CETA:
• Clarification has been provided that, if the paper and paper products of heading
     4811, 4816 or 4820 are printed with any character, name, logo, motif or format
     they shall remain classified under Chapter 48 as long as such products are
     intended to be used for further printing.
•     Align the entries relating to copper scrap, brass scrap, nickel scrap, aluminium
     scrap, lead scrap and zinc scrap with the revised ISRI classification.

6.2.9. Amendments in Second Schedule of CETA :
Export Duty:
Item                           Present                     Proposed
Chromium Ore                   Rs 3,000 Per ton            30% ad valorem

6.2.10. Amendments in Customs (Import of Goods at Concessional Rate of Duty for
Manufacture of Excisable Goods) Rules, 1996:
• Eligibility Certificate can be obtained for a period not exceeding a year instead of
     consignment wise or quarterly certificate at present;
• Permitting re-export of unused/ rejected goods imported at concessional duty
     under the said Rules with the prior permission of the jurisdictional Assistant
     Commissioner of Deputy Commissioner of Central Excise, as the case may be,
     subject to the condition that-
     o Such re-export takes place within six months from the date of importation
     o The re-export value should not be less than the value of the imports.
• Maintenance of separate accounts for these rules should not be insisted upon as
     long as the records maintained




Private And Confidential                                                          Page | 46
For Client and firm use only                           © 2012, MGS Advisors. All rights reserved
                                      INDIA BUDGET 2012-13

6.3.         Excise duty

6.3.1.       Highlights



   o     Rate of Excise increased to 12%. Merits rates increased to 2% and 6% .
   o     Rates on certain items like Cement, footwear etc. rationalized
   o     Penalty provisions made more stringent




6.3.2. Changes in Rate Duty
• Standard rate of Central Excise duty for non-petroleum products has been
     enhanced from 10% to 12% ad valorem. [Effective from March 17, 2012]
• Merit rate of excise duty for non-petroleum goods that hitherto attracted 5% has
     been increased to 6%. [Effective from March 17, 2012]
• Rate of duty of 1% imposed on 130 items in the Budget 2011-12 has been
     increased to 2% except coal, all goods of Chapter 31, articles of Jewellary, mobile
     handsets and cellular phones. [Effective from March 17, 2012]
• Other changes in rates are as under [Effective from March 17, 2012]:
                               Item              Existing Rate              Proposed Rate
        Packaged Cement manufactured            10% + ` 30 PMT             6% + ` 120 PMT
        in a mini plant
         Packaged Cement manufactured          10% + ` 80 / ` 160         12% + ` 120 PMT
         in a plant other than a mini           PMT (depending
         plant                                    upon RSP)
         Cement not cleared in packaged              10%                           12%
         form
         Cement Clinkers                        10% + ` 200 PMT                    12%
         Motor Vehicles with length not              10%                           12%
         exceeding 4 meters and
         specified engine capacity
         Motor Vehicles with length not              10%                           12%


Private And Confidential                                                              Page | 47
For Client and firm use only                               © 2012, MGS Advisors. All rights reserved
                                 INDIA BUDGET 2012-13

        exceeding 4 meters and with
        Engine capacity not exceeding
        1500 cc (diesel)
        Other motor Vehicles with                  22%                             24%
        Engine capacity not exceeding
        1500 cc
        Other motor Vehicles with            24% + ` 15,000 per                    27%
        Engine capacity exceeding 1500              unit
        cc
        Cigars, Cheroots and cigarillos      10% or ` 1227 per           12% or ` 1370 per
                                            thousand, whichever              thousand,
                                                 is higher               whichever is higher
        Hand rolled Bidis                    `8 per 1000 sticks          `10 per 1000 sticks
        Machine rolled Bidis                `19 per 1000 sticks          `21 per 1000 sticks
        Footwear with RSP not               Exempted upto RSP `                Exempted
        exceeding ` 500 per pair.            250 and over ` 250
                                                   at 5%
        Footwear with RSP exceeding `       5% upto RSP ` 750                      12%
        500 per pair                        per pair. Above that
                                                normal rate.
        Unbranded metal (except Silver)           Exempt                            1%
        jewellery manufactured
        Refined gold                               1.5%                             3%
        Refined Silver                                                              4%
        Sale of Gold Jewellary from                 5%                             10%
        EOUs to DTAs
        chassis falling under heading         10% / 22% and                    15% / 25%
        8706                                `10,000 per chassis
        Batteries supplied to                      10%                              6%
        manufacturers of electrically
        operated vehicles
        Cess leviable as a duty of excise    ` 2500 per metric            ` 4500 per metric


Private And Confidential                                                              Page | 48
For Client and firm use only                               © 2012, MGS Advisors. All rights reserved
                                   INDIA BUDGET 2012-13

        on crude petroleum                       tonne                          tonne
        Specified raw materials for               10%                        Exempted
        manufacture of Coronary
        stents/ coronary stent system
        and artificial heart valve on
        actual user basis
        Refills and inks in bulk packs          10% / 1%                     Exempted
        (not meant for retail sale) used
        for manufacture of pens of
        value not exceeding ` 200 per
        piece
        Intraocular lens                          1%                         Exempted
        Matches manufactured by                   10%                             6%
        “semi-mechanised” units
        LED lamps                                 10%                             6%
        Iodine                                    10%                             6%
        Processed food products of soya           10%                             6%
        Parts of Blood Pressure                   10%                             6%
        Monitors and Blood glucose
        monitoring systems on actual
        user basis
        Specified raw materials for               10%                             6%
        manufacture of syringe, needle,
        catheters, and cannulae on
        actual user basis
        Polished marble slabs of                  10%                    ` 30 per square
        heading 68022190                                                      metre
        MS pipes of diameter 30cm                 10%                        Exempted
        used in collector well,
        infiltration well for water
        purification




Private And Confidential                                                            Page | 49
For Client and firm use only                             © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

6.3.3. Other changes / Exemptions
• Notification No. 1/2010 – CE dated February 6, 2010 has been amended
     retrospectively to provide that for undertaking which are established in J&K and
     have taken substantial expansion, the exemption period of ten years would be
     computed from the date of commercial production from the expanded capacity.

6.3.4.    Introduction of items in Section 4A
                                  th
          Effective from March 17 , 2012
•     Cement:                        Abatement of 30% from RSP is notified
•     Cigarettes:                    Abatement of 50% from RSP is notified
•     Ready-made Garments:            Abatement of 70% from RSP is notified

6.3.5. Inclusion of activity in manufacture
                       th
Effective from March 17 , 2012
Item                                        Process
Cigarettes                                  Processes of packing or repacking of
                                            cigarettes and their labeling or relabeling
                                            including declaration or alteration of
                                            Retail Sale Price
Lithium Ion batteries                       Processes of matching, batching and
                                            charging or making of battery packs
Precious metals                             Process of affixing or embossing trade
                                            name or brand name on articles of
                                            jewellery or on articles of goldsmiths‟ or
                                            silversmiths‟ wares of precious metal or
                                            of metal clad with precious metal
Flat rolled products of iron or non-steel   Process of oiling and pickling
alloy, of a width of 600mm or more, hot-
rolled, not clad, plated or coated
Aluminum foils                              Cutting, Slitting and Printing




Private And Confidential                                                           Page | 50
For Client and firm use only                            © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

6.3.6. Procedural Changes
Effective from date of enactment of Finance Bill, 2012
• In cases of offences punishable with imprisonment up to seven years and fine,
     the duty involvement limit has been increased from ` 100,000 to ` 30 Lakhs.
• Offences, other than offences punishable with imprisonment of three years or
     more under section 9, shall be non-cognizable. This provision is akin to the
     provision as is introduced in Customs.
• In offences punishable with imprisonment of three years or more bail shall not be
     granted without an opportunity being given to the Public Prosecutor (provisions
     relaxed for minors, infirm and women).
• Searches shall be carried out as per the procedure laid down in the Code of
     Criminal Procedure
• Reduction in penalty is proposed in cases when duty along with interest and
     penalty is paid within 30 days of communication of order.




Private And Confidential                                                         Page | 51
For Client and firm use only                          © 2012, MGS Advisors. All rights reserved
                                  INDIA BUDGET 2012-13

6.4.         Service tax

6.4.1.       Highlights


   o     Rate of service tax increased from 10% to 12%
   o     Shift of service tax levy from a Positive list to all services except Negative List
         base
   o     Rules determination of place of provision of services to replace Export and
         Import Rules
   o     Provisions for special audit to be initiated by revenue proposed
   o     Period of limitation increased from 12 month to 18 months
   o     Period for raising the invoices extended from 14 days to 30 days
   o     Monetary limit for self-adjustment of excess service tax paid removed
   o     Condition of availing CENVAT credit relaxed
   o     Provisions in respect of Settlement Commission provisions introduced



6.4.2. Rate of Tax [Effective from April 1, 2012]
• Effective rate of Service Tax proposed to be raised from 10.3% to 12.36%.
• Corresponding changes in Service tax rates prescribed in other parts also
     rationalized:
     o Life insurance services: Where the entire premium is not towards risk cover,
          the first year premium shall be taxed at 3% and for subsequent years at 1.5%.
     o Works Contract Service: Composition rate increased from 4% to 4.8%
     o Service of promotion, marketing, organizing or in any manner assisting in
          organizing lottery :
               Limit of ` 6,000 on every ` 10 lakh of aggregate face value of lottery
               tickets printed has been increased to ` 7,000.
               Limit of ` 9,000 on every 10 lakh of aggregate value of lottery tickets
               printed has been increased to ` 11,000.




Private And Confidential                                                                 Page | 52
For Client and firm use only                                  © 2012, MGS Advisors. All rights reserved
                                           INDIA BUDGET 2012-13

      o      In relation to purchase or sale of foreign currency:
                    Gross amount of currency                      Existing                        Proposed
                    exchanged for an amount
               Upto ` 100,000                           0.1 % subject to minimum        0.12 % subject to
                                                        of ` 25                         minimum of ` 30
               Exceeding ` 100,000 and upto `           ` 100+ 0.05 %                   ` 120 + 0.06 %
               10,00,000
               Exceeding ` 10,00,000                    ` 550 + 0.01 % subject to       ` 660 + 0.012 % subject to
                                                        maximum of ` 5,000              maximum of ` 6,000
      o      Cenvat Credit: Reversal in case of services under Rule 6(3)(i) increased from
             5% to 6%.

6.4.3. Taxable Services
The structure of taxing services has been proposed to be altogether renewed by
changing the levy which was earlier on specified services (known as taxable services)
to services per se. While the earlier regime was effected by defining the taxable
services, the new regime focuses on defining the term ‘services’ and then carving out
the services which are held as non-taxable (referred to as ‘negative list’). This
amendment does away with the requirement of classification and categorization of
services. Thus, the question has changed under the new proposed structure from “Is
the activity under consideration is a taxable service under Service Tax Act” to “Is the
activity under consideration is a non-taxable service under Service Tax Act”.
Henceforth, the process of reviewing one’s liability of paying service tax:

Examine the defintiion of "Service" to determine if the activity falls within
its ambit. Special review of "declared Service" required.


          If the answer is affirmative, look out for its exclusion in negative list


                If not found in Negative list, look out for the Service as being exempt
                under Notification No. 12/2012-ST dated March 17 , 2012

                       If not found there also, check for abatement / partial exemption
                       under Notification No.13/2012-ST dated March 17 , 2012

                               Lastly, check as to whether the liability to deposit service tax is not
                               on the receipient of Service




Private And Confidential                                                                                 Page | 53
For Client and firm use only                                                 © 2012, MGS Advisors. All rights reserved
                                      INDIA BUDGET 2012-13

We shall now examine each of the above steps in detail as under:
A.       Inclusion in definition of Service:
"Service" has been defined to mean:

     any activity carried out by a
                                             and includes a
       person for another for                                              but shall not include
                                            declared service
            consideration




          Only Commercial            • Renting                                • Sale of goods
           transactions to           • Construction activity                  • Transactions
             get covered.            • Allowing use of IP                       involving only
           Other activities          • Activities in relation to IT             money or actionable
            not involving              Software                                 claim
            consideration            • agreeing to do or to refrain           • Services under
              not part of              from an act                              employment
              definition             • hire purchase                          • Services of Court or
                                     • Supply of goods without                  Tribunal
                                       RTU


Services shall also not include the following:
•    functions performed by the Members of Parliament, Members of State Legislative,
     Members of Panchayats, Members of Municipalities and Members of other local
     authorities in that capacity
•    duties performed by any person who holds any post in pursuance of the provisions of the
     Constitution in that capacity
•    duties performed by any person as a Chairperson or a Member or a Director in a body
     established by the Central Government or State Governments or local authority and who
     is not deemed as an employee




Private And Confidential                                                                         Page | 54
For Client and firm use only                                          © 2012, MGS Advisors. All rights reserved
                                 INDIA BUDGET 2012-13

 B.      Exclusion in Negative list
 Negative list of Services can be broadly divided under the following categories:
 • Services provided by government and foreign diplomats
 • Services relating to basic / social needs
 • Services relating to financial transactions
 • Services relating to transportation
 • Services in relation to manufacturing and trading of goods
 • Other Miscellaneous services

 The different services under each of the categories are provided as follows:
Services                                     Exceptions (taxable)
Services provided by government and foreign diplomats

By Government or a local authority           •   Certain Services by the Department of
                                                 Posts to a person other than
                                                 Government;
                                             •   Services inside or outside the precincts
                                                 of a port or an airport;
                                             •   Transport of goods or passengers; or
                                             •   Support services, provided to business
                                                 entities;
By RBI                                       No Exception
By Foreign diplomatic mission in India       No Exception
Services relating to basic / social needs

Admission to entertainment events or         No Exception
access to amusement facilities
Specific services relating to agriculture    No Exception
primarily upto the stage of primary
market
Transmission or distribution of              No Exception
electricity by an electricity transmission
or distribution utility


 Private And Confidential                                                              Page | 55
 For Client and firm use only                               © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

Preschool education, qualification            No Exception
recognised by any law, approved
vocational education course
Renting of residential dwelling for use       No Exception
as residence
Funeral, burial, crematorium or               No Exception
mortuary services including
transportation of the deceased
Services relating to financial transactions

•   Extending deposits, loans or              No Exception
    advances in so far as the
    consideration is represented by
    way of interest or discount
•   Inter se sale or purchase of foreign
    currency amongst banks or Ads
Services relating to transportation

Service of transportation of passengers:
• Stage carriage
• Railways                                    First class, Air conditioned coaches
• metro, monorail or tramway
• inland waterways
• public transport in a vessel of less
    than 15 tonne                             Primarily for Tourism
• metered cabs, radio taxis or auto
    rickshaws
Transportation of goods by road               • a goods transportation agency
                                              • a courier agency
Transportation of goods by an aircraft        No Exception
or a vessel from a place outside India to
the first customs station in India
Transportation of goods by inland             No Exception

Private And Confidential                                                                Page | 56
For Client and firm use only                                 © 2012, MGS Advisors. All rights reserved
                                 INDIA BUDGET 2012-13

waterways
Services in relation to manufacturing and trading of goods

Trading of goods                         No Exception
Process amounting to manufacture or      No Exception
production of goods
Other Miscellaneous Services

Selling of space or time slots for       Advertisements broadcast by radio or
advertisements                           television
Toll charges                             No Exception
Betting, gambling or lottery             No Exception

C.       Exempt services
                                              th
Notification No 12/2012-Service Tax dated 17 March, 2012 exempts certain services
from the whole of the service tax leviable thereon. The main categories of services
are as under:
• Services provided to government and UN
• Services relating to health care
• Social Services including charitable, education, religious, cultural and media
• Services in relation to Sports
• Services relating to infrastructure
• Services relating to personal consumption of individuals
• Services relating to transportation
• Other Miscellaneous services
• Services provided by person located outside India

The list of exempted services as categorized under the above broad heads are as
follows:
[Effective from the date of enactment of Finance Bill, 2012]:




Private And Confidential                                                           Page | 57
For Client and firm use only                            © 2012, MGS Advisors. All rights reserved
                                   INDIA BUDGET 2012-13

                        Services                              Condition
Services provided to Government and UN

To the UN or a specified international
organization
To the Government or local authority by       Relating to:
way of Erection, Construction,                • Non-industrial or non-commercial
Maintenance, Repair, Alteration,                  use of structures
Renovation, Restoration                       • Archeological or heritage buildings
                                              • Educational, clinical or cultural
                                                  establishments
                                              • Canal, dam or other irrigation works
                                              • Pipeline, conduit or plant for water
                                                  supply, treatment or disposal
                                              • Use of residential complex by
                                                  employees or other specified
                                                  persons
Provided to Government or a local             By way of:
authority                                     • Repair of a ship, boat or vessel
                                              • Effluents and sewerage treatment
                                              • Waste collection or disposal
                                              • Storage or testing or drinking water
                                              • Transport of water by pipeline
Services relating to health care:

Health care services by:                      •   a clinical establishment
                                              •   authorized medical practitioner
                                              •   para-medics
Health care of animals or birds by a
veterinary clinic
By way of:                                    By a clinical research organization
• technical testing or analysis of newly      approved to conduct clinical trials by
    developed drug;                           the Drug Controller General of India


Private And Confidential                                                           Page | 58
For Client and firm use only                            © 2012, MGS Advisors. All rights reserved
                                 INDIA BUDGET 2012-13

•   including vaccines and herbal
    remedies; and
•   on human participants
Social Services including charitable, education, religious, cultural and media

Charitable services by:                           •   an entity registered under section
                                                      12AA of Income Tax Act,1963
By a person in the form of:                       •   renting of precincts of a religious
                                                      place for general public
                                                  •   conduct of a religious ceremony
Training or coaching services in recreational     Relating to arts, culture or sports.
activities
Services to an educational institution            By way of catering under any centrally
                                                  assisted mid-day meal scheme by
                                                  Government
Use of copyright covered under the Indian         Relating to original literary, dramatic,
Copyright Act, 1957                               musical, artistic work or films
By a performing artist in classical art form      Excluding as a brand ambassador
Providing news by an independent
journalist, Press Trust of India or United
News of India
By an unincorporated body or entity               By way of reimbursement or share of
registered as a society to own members            contribution:
                                                  • As a trade union
                                                  • For providing exempt services to a
                                                      third person
                                                  • Up to an amount of Rs.5,000 per
                                                      month per person for common use
                                                      of its members
Services to or by an institution in relation to   By way of:
exempt educational services                       • transportation of students or staff
                                                  • admission to such education



Private And Confidential                                                                Page | 59
For Client and firm use only                                 © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

Services relating to Sports:

To a recognized sports body                   By:
                                              • an individual as a player, referee,
                                                  umpire, coach or manager for
                                                  participating in a tournament or
                                                  championship.
                                              • Another recognized sports body.
Sponsorship of tournaments or                 Organized by:
championships                                 • Specified bodies; or
                                              • As a part of specified schemes
Services relating to Infrastructure:

By an incubate                                •   Having total business turnover less
                                                  than 50 Lakhs during preceding FY
                                              •   Who has entered into an
                                                  agreement for a period more than 3
                                                  years
By way of erection, construction,             Relating to:
maintenance, repair, alteration, renovation   • Road, bridge, tunnel or terminal for
or restoration                                    general public use
                                              • Building owned by specified entities
                                                  for religious use
                                              • Pollution control or effluent
                                                  treatment plant
                                              • Electric crematorium
By way of erection or construction of         Pertaining to:
original work                                 • Airport, port or railways
                                              • Single residential unit
                                              • Low cost houses approved by some
                                                  competent authorities
                                              • Post-harvest storage infrastructure
                                                  for agricultural produce


Private And Confidential                                                           Page | 60
For Client and firm use only                            © 2012, MGS Advisors. All rights reserved
                                INDIA BUDGET 2012-13

                                               •   Machinery or equipment for units
                                                   processing agricultural produce
Services relating to personal consumption of individuals:

To any person other than a business entity     •   an individual as an advocate
by:                                            •   a person represented on and as
                                                   arbitral tribunals
Renting of commercial places for               Having tariff less than or equal to
residential use                                Rs.1,000 per day
Serving of food or beverages by eating         Which are not air conditioned
joints
Services relating to transportation:

Transportation of specified goods by rail or
a vessel from one port to another in India
Transportation of specified goods by a
goods transport agency
Providing vehicles on hire                     •   To a state transport undertaking for
                                                   carrying more than 12 passengers
                                               •   To a goods transport agency for
                                                   transportation of goods
Transport of passengers by                     • Air in some specified states
                                               • Contract carriage
Motor vehicle parking services to general      Excluding leasing of space to an entity
public
Miscellaneous other Services:

General insurance services provided under
some specified schemes
•       Sub-broker or an authorized person
        to a broker
•       Authorized person to a member of
        the commodity exchange


Private And Confidential                                                             Page | 61
For Client and firm use only                              © 2012, MGS Advisors. All rights reserved
                                 INDIA BUDGET 2012-13

•       Mutual fund agent
•       Selling or marketing agent of lottery
        tickets
•          Selling agent or distributor of SIM
           cards
•          Business facilitator to a banking
           company or insurance company in
           rural areas
Intermediate production process                  In relation to:
                                                 • Agriculture, printing or textile
                                                      processing
                                                 • Gemstones or precious metals
                                                 • Any good bearing appropriate duty
                                                 • Manufacture of cycle or sewing
                                                      machine parts up to Rs. 150 Lakh
                                                      subject to certain conditions
Business exhibitions held outside India
Telephone calls from specified public
telephone booths
By way of slaughtering of bovine animals
Services provided by person located outside India:

Services received from a provider located in     By:
non-taxable territory                            • The Government or local authority
                                                     on relation to any purpose except
                                                     industry, business or commerce
                                                 • Registered entities under the
                                                     Income Tax Act, 1961 providing
                                                     charitable activities




Private And Confidential                                                             Page | 62
For Client and firm use only                              © 2012, MGS Advisors. All rights reserved
                                     INDIA BUDGET 2012-13

D.       Abatements / Partial Exemption
                                 th
Notification No 13/2012 dated 17 March, 2012 provides details of various services
which are partially exempt from Service Tax subject to relevant conditions [Effective
from the date of enactment of Finance Bill, 2012]:
 S.No.          Description of taxable service       % of valve of     Conditions
                                                    services which
                                                   shall be taxable
      1         Representing interest in
                Financial leasing services               10                           Nil
                including equipment leasing and
                hire purchase
      2         Transport of goods by rail               30                           Nil
      3         Transport of passengers, with or         30                           Nil
                without accompanied
                belongings by rail
      4         Supply of food or any other              70            CENVAT credit on any
                article of human consumption                           specified goods has not
                or any drink, in a premises,                           been availed
                including hotel, convention
                center, club, pandal, shamiana
                or any place specially arranged
                for organizing a function
      5         Transport of passengers by air,          40            CENVAT credit on inputs
                with or without accompanied                            and capital goods, used for
                belonging                                              providing the taxable
                                                                       service, has not been
                                                                       availed.
      6         Renting of hotels, inns, guest           60                   Same as above.
                houses, clubs, campsites or
                other commercial places meant
                for residential or lodging
                purposes.
      7         Transport of goods by road by            25            CENVAT credit on inputs,
                Goods Transport Agency                                 capital goods and input
                                                                       services, used for providing
                                                                       the taxable service, has not


Private And Confidential                                                                    Page | 63
For Client and firm use only                                    © 2012, MGS Advisors. All rights reserved
                                     INDIA BUDGET 2012-13

                                                                been taken availed
      8         Services provided in relation to    70                 Same as above.
                chit
      9         Renting of any motor vehicle        40                 Same as above.
                designed to carry passengers
     10         Transport of goods in a vessel      50                 Same as above.
                from one port in India to
                another
   11 (i)       (i)Services provided or to be       25          (i) CENVAT credit on inputs,
                provided to any person, by a                    capital goods and input
                tour operator in relation to a                  services, used for providing
                package tour                                    the taxable service, has not
                                                                been availed.
                                                                (ii) The bill issued for this
                                                                purpose indicates that it is
                                                                inclusive of charges for
                                                                such a tour.
   11 (ii)      Services provided or to be          10          (i) CENVAT credit on inputs,
                provided to any person, by a                    capital goods and input
                tour operator in relation to a                  services, used for providing
                tour, if the tour operator is                   the taxable service, has not
                providing services solely of                    been availed
                arranging or booking                            (ii) The invoice, bill or
                accommodation for any person                    challan issued indicates
                in relation to a tour                           that it is towards the
                                                                charges for such
                                                                accommodation.
                                                                (iii) This exemption shall
                                                                not apply in such cases
                                                                where the invoice, bill or
                                                                challan issued by the tour
                                                                operator, in relation to a
                                                                tour, only includes the
                                                                service charges for
                                                                arranging or booking
                                                                accommodation for any



Private And Confidential                                                            Page | 64
For Client and firm use only                             © 2012, MGS Advisors. All rights reserved
                                     INDIA BUDGET 2012-13

                                                                             person and does not
                                                                             include the cost of such
                                                                             accommodation
   11 (iii)     Services, other than services              40                (i) CENVAT credit on inputs,
                specified in (i) and (ii) above,                             capital goods and input
                provided or to be provided to                                services, used for providing
                any person, by a tour operator                               the taxable service, has not
                in relation to a tour                                        been availed.
                                                                             (ii)The bill issued indicates
                                                                             that the amount charged in
                                                                             the bill is the gross amount
                                                                             charged for such a tour.


E.       Liability of service recipient to pay service tax
Following are the taxable services and the extent of service tax payable thereon as
notified by the Central Government through notification no 15/2012-Service Tax
         th
dated 17 March, 2012 [Effective from date of enactment of Finance Bill, 2012]:

 S. No.         Description of the service             Percentage of                Percentage of
                                                       service tax payable          service tax payable
                                                       by the provider              by the recipient
 1              in respect of services provided or
                agreed to be provided by an                     Nil                           100%
                insurance agent to any person
                carrying on insurance business
 2              in respect of services by a goods
                transport agency in respect of                  Nil                           100%
                transportation of goods by road in
                case of specified service recipients
 3              in respect of services provided or
                agreed to be provided by way of                 Nil                           100%
                sponsorship in case of specified
                service recipients
 4              in respect of services provided or
                agreed to be provided by an                     Nil                           100%
                arbitral tribunal to any business


Private And Confidential                                                                         Page | 65
For Client and firm use only                                          © 2012, MGS Advisors. All rights reserved
                                     INDIA BUDGET 2012-13

                entity
 5              in respect of services provided or
                agreed to be provided by              Nil                           100%
                individual advocate to any business
                entity
 6              in respect of services provided or
                agreed to be provided by way of       Nil                           100%
                support service by Government or
                local authority to any business
                entity
 7 (i)          in respect of services provided or
                agreed to be provided by way of       Nil                           100%
                renting or hiring any motor vehicle
                designed to carry passenger on
                abated value
 7 (ii)         in respect of services provided or
                agreed to be provided by way of       60%                            40%
                renting or hiring any motor vehicle
                designed to carry passenger on
                non-abated value.
 8              in respect of services provided or
                agreed to be provided by way of       25%                            75%
                supply of manpower for any
                purpose
 9              in respect of services provided or
                agreed to be provided by way of       50%                            50%
                works
                contract
 10             in respect of any taxable services
                provided or agreed to be provided     Nil                           100%
                by
                any person who is located in a
                nontaxable territory and received
                by any person located in the
                taxable territory




Private And Confidential                                                               Page | 66
For Client and firm use only                                © 2012, MGS Advisors. All rights reserved
                                    INDIA BUDGET 2012-13

6.4.4. Existing status of proposed exempted services
The following table provides a quick comparison of present status of the services
proposed to be exempted from the levy of service tax vide Notification No. 12/ 2012:
   S.                            Service                                     Existing Status
  No.
 1         Services provided to the UN or an International        Exempt via notification no
                                                                                       nd
           Organisation                                           16/2002-S.T. dated 2 Aug, 2002
 2         Health care services by a clinical establishment       Exempt via notification no
                                                                                       th
                                                                  30/2011-ST dated 25 April, 2011
 3         Veterinary clinic services related to health care of   Non Taxable
           animals or birds
 4         Services provided by an entity by way of               Not Applicable
           charitable services
 5         Renting of precints of a religious place or conduct    Non Taxable#
           of any religious ceremony by any person
 6         Services provided to any person other than a           Non Taxable
           business entity by an individual as an advocate or
           by a person represented on and as arbitral
           tribunals
 7         Technical testing or clinical research services        Non Taxable#
 8         Training or coaching in recreational activities        Sports- Non taxable
           relating to art, culture or sports                     Art or culture- Taxable
 9         a. Mid-day meals catering to an educational            Exempt via notification no
                                                                                      rd
              institution sponsored by Government                 47/2010 ST dated 3 Sept, 2010
           b. Educational services by way of transport of         Non Taxable#
              students
           c. Educational services by way or services in          Non Taxable
              relation to admission to education
 10        Services as a player, referee, umpire, coach for       Non Taxable
           participating in a tournament
 11        Sponsorship of tournaments or championships            Exempt via notification no
                                                                                       nd
                                                                  30/2010 ST dated 22 June, 2010
 12        Erection, construction, maintenance services
           provided to the government in relation to certain      Non Taxable
           services



Private And Confidential                                                                     Page | 67
For Client and firm use only                                      © 2012, MGS Advisors. All rights reserved
                                     INDIA BUDGET 2012-13

 13        Erection, construction services relating to road,     Non Taxable#
           bridge etc.
 14        a. Erection or construction of original works         Non Taxable#
              pertaining to airport, ports etc
           b. Single residential unit otherwise as a part of a   Non taxable
              residential complex
           c. Low cost houses                                    Exempt via notification no
                                                                                      nd
                                                                 28/2010 ST dated 22 June, 2010
           d. Post-harvest storage structure for agricultural    Exempt via notification no
                                                                                      th
              produce or mechanized food grain handling          12/2010 ST dated 27 Feb, 2010
              system
 15        Copyright services covered under clause (a) or (b)    Clause (a) was only excluded
           of sub-section (1) of sec 13
 16        Performing artist in folk or classical forms of       Taxable
           dance, music or theatre
 17        Collecting or providing news                          Non taxable
 18        Renting of commercial places for residential          Exempt via notification no
           purpose with tariff of less than Rs. 1000 per day     31/2011-ST dated 25 April, 2011
 19        Non air conditioned restaurants serving food or       Non Taxable#
           beverages including alcohol
 20        Transportation of certain goods by rail from one      Exempt via Notification no
                                                                                    th
           port in India to another                              8/2010 ST dated 27 Feb, 2010
 21        Transportation of fruits, vegetables etc. by a        Exempt via notification nos.
           goods transport agency                                33/2004 ST and 34/2004 ST dated
                                                                  rd
                                                                 3 Dec, 2004
 22        a. Motor vehicle given on hire to a state             Non Taxable
              transport agency
           b. Means of transportation hired by a goods           Exempt via notification no 1/2009
                                                                           th
              transport agency                                   ST dated 5 Jan, 2009
 23        a. Transport of passengers by air within some         Exempt via notification no
                                                                                      nd
              specified states                                   27/2010 ST dated 22 June, 2010
           b. Contract carriage for transportation of            Exempt via notification no
                                                                                  th
              passengers                                         20/2009 dated 7 July,2009
 24        Motor vehicle parking to general public on vacant     Non Taxable#
           land
 25         Services provided to the Government by way of:


Private And Confidential                                                                    Page | 68
For Client and firm use only                                     © 2012, MGS Advisors. All rights reserved
                                    INDIA BUDGET 2012-13

           a. Repair of a ship, boat or vessel
           b. Effluents and sewerage treatment                Taxable
           c. Waste collection or disposal                    Non taxable
           d. Storage, treatment or testing of water for      Non taxable
              drinking purposes                               Non Taxable
           e. Transport of water by pipeline                  Non Taxable#
 26        General Insurance Scheme under:
           a. Coconut Palm Insurance Scheme                   Taxable
           b. Other schemes                                   Exempt via notification no 3/94
                                                                         th
                                                              ST dated 30 June,1994
 27        Services by an incubate up to a total business     Exempt via notification no 9/2007
           turnover of 50 lakh                                ST
 28        Services by an unincorporated body to own
           members by way or reimbursement of charges or
           contribution:
           a. As a trade union or for provision of exempt     Non Taxable#
              services to a third party
           b. Up to Rs. 5000 P.m. per member for sourcing     Exempt via notification no 8/2007
                                 rd
              of goods from a 3 party for common use in a     ST
              residential complex
 29        a. Sub-broker or his authorized person             Non Taxable#
           b. Authorized person to a member of a              Taxable
              commodity exchange
           c. Mutual fund agent                               Taxable
           d. Selling or marketing agent of lottery tickets   Exempt via notification no
                                                                                th
                                                              20/2010 dated 8 Oct, 2010 if
                                                              optional composition scheme has
                                                              been availed.
           e. Selling agent of SIM cards                      Taxable if sales tax not levied
           f. Business facilitator to a banking company       Taxable
 30        Intermediate production in relation to:
           a. Agriculture, printing or textile processing     Exempt via notification no
                                                              14/2004
           b. Gemstones or plain and studded jewellery of     Exempt via notification no
                                                                               th
              gold                                            21/2005 dated 7 June, 2005
           c. Duty payable on any goods by principal          Exempt via notification no 8/2005



Private And Confidential                                                                 Page | 69
For Client and firm use only                                  © 2012, MGS Advisors. All rights reserved
                                   INDIA BUDGET 2012-13
                                                                       st
              manufacturer                                     dated 1 March, 2005
           d. Electroplating and related processes during      Exempt via notification no
                                                                                 th
              manufacture of parts of cycles or sewing         42/2009 dated 12 Nov, 2009
              machines
 31        Business exhibition held outside India              Exempt via notification no 5/2011
                                                                         st
                                                               ST dated 1 March, 2011
 32        Telephone calls made from departmentally run        Exempt via notification no 3/94
                                                                          th
           public telephones or free telephone where no        ST dated 30 June, 1994
           bills are issued
 33        Slaughtering of bovine animals                      Non taxable
 34        Services received from a service provider located   Not Applicable
           in non-taxable territory
# Non Taxable since excluded from the definition.

6.4.5. Changes in point of taxation
                                      th
Notification no 4/2012 ST dated 17 March, 2012 amends the Point of Taxation Rules,
2011 now called Point of Taxation (Amendment) Rules, 2012 (“POT Rules”). [Effective
from April 1, 2012]
• It has been clarified that change in effective rate of tax includes a change in the
     portion of value on which tax is payable.
• Concept of Date of Payment has been introduced in POT Rules whereby, it has
     been provided that the date of payment shall be the date on which the payment
     is entered in the books of accounts or is credited to the bank account, whichever
     is earlier. However, the following one exception has been provided to the above
     definition whereby date of payment shall be the date of credit of payment in
     bank:
     o When payment is made by a bankable instrument and there is a change in
          the effective rate of tax or a service becomes taxable for the first time during
          the period between such entry in books of accounts and its credit in the bank
          account and credit happens within four days of such change.
• Increase in the time period of issuing invoices from 14 days to 30 days.
• The date of completion of continuous supply of service shall be deemed to be the
     date of completion of provision of service and separate provision in this regard
     has been deleted.


Private And Confidential                                                                  Page | 70
For Client and firm use only                                   © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

•     When a service is taxed for the first time, no tax shall be payable if:
      o Invoice has been issued and payment received before levy of tax
      o Payment has been received before the service becomes taxable and invoice
          issued within 14 days of the date when service is taxed for the first time.
•     Rule 8A has been inserted stating that when point of taxation cannot be
      determined, the same shall be based on the judgment of concerned person after
      being heard.

6.4.6. Change in Valuation Rules
                                             th
Notification no 11/2012 ST dated 17 March, 2012 amends Service Tax
(Determination of Value) Rules, 2006 now called amends Service Tax (Determination
of Value) Amendment Rules, 2012 [Effective from date of enactment of Finance Bill,
2012].
• Determination of value of works contract has been provided as under:
     o Total value of goods on which VAT under respective state VAT law has been
         charged shall first be deducted,
     o If such goods are not subject to state VAT, then still, the service provider can
         determine the value of property in goods transferred and deduct the same
         from the total value
     o If the value is not determinable in the above manner, value shall be
         calculated at the rate of 40% of the total amount charged for works contract
         in case of execution of original works and 60% in other cases. In case of
         original works, when gross amount includes value of land, service tax shall be
         charged at the rate of 20%. For this purpose, Original works will include all
         new constructions and all types of additions and alterations to abandoned or
         damaged structures to make them workable
     o for contracts involving construction of complex or building for sale where any
         part of the consideration is received before the completion of the building,
         such value shall be 25% of the total amount.
• Value of taxable service involving supply of food or drinks for consumption shall
     be determined as the percentage of total amount as given below:




Private And Confidential                                                           Page | 71
For Client and firm use only                            © 2012, MGS Advisors. All rights reserved
                                   INDIA BUDGET 2012-13



         Description                                                Percentage of total
                                                                    Amount
         Supply of food or any other article of human
         consumption or any drink
         at a restaurant                                                      40
         outside the restaurant                                               60
      For the above amendments, total amount means sum total of gross amount and
      value of all goods, excluding VAT. Fair market value shall be considered in case
      value of goods and service supplied free if there value cannot be ascertained.
•     The scope of manner of determination of value has been extended to include
      value of unascertainable considerations in place of transaction where
      consideration is not received in money.
•     The value of taxable services of only telecommunication services shall be the
      gross amount paid by the person to whom telecom service is provided by
      telegraph authority instead of all services earlier specified.
•     Value of taxable services also includes the amount realized as demurrage for the
      provision of the service beyond the period originally contracted.
•     Value of taxable services now excludes interest on deposits and delayed payment
      of any consideration instead of interest on loans.
•     Value of taxable services also excludes accidental damage due to unforeseen
      action as not related to provision of service.

6.4.7.     Changes in service tax rules
                          st
          Effective from 1 April, 2012.
•     Partnership firms to include LLPs for all purpose of service tax
•     Time limit for issuance of invoice has been raised from 14 days from the date of
      completion of service or receipt of any payment towards the service to 30 days.
      However, in case of BOFS, such limit is increased to 45 days.
•     Limit of 2 Lakhs on permissible self-adjustment of excess service tax paid has
      been removed
•     No invoice is required to be issued wherever an amount up to ` 1,000 is received
      in excess of the amount indicated in the invoice.

Private And Confidential                                                           Page | 72
For Client and firm use only                            © 2012, MGS Advisors. All rights reserved
                               INDIA BUDGET 2012-13

•     Benefit under Export of Services Rules, 2005 is made available when payment is
      received within the period specified by RBI including extended period from time
      to time.
•     Benefit of payment by proprietorship and firms paying service tax on receipt basis
      has been restricted to firms whose aggregate value of taxable services provided
      from one or more premises is ` 50 lakhs or less. Corresponding provision from
      POT Rules has been deleted.

6.4.8. Changes in Cenvat Credit Rules:
• Reversal requirement under Banking and other financial services is being
     amended in light of changed definition o value of taxable services. Now, the
     formulae for reversal shall be on actual basis. The value of service being net
     interest subject to a minimum of 50% of the interest paid on deposits.
• Procedure for refunds of Cenvat Credit further simplified for exporters
• Cenvat credit allowed on certain motor vehicles to specified manufacturers/
     specified service providers.
• Cenvat Credit taken on Capital goods which are removed after use as second
     hand or scrap need to be paid to be higher of following:
     o Cenvat taken as reduced by a prescribed percentage
     o Duty payable on transaction value
• Interest is not payable on Cenvat Credit wrongly availed. Interest payable only
     on Cenvat Credit wrongly utilized.
• Relaxation in norms of bringing the inputs or capital goods to the premises of
     service provider
• Cenvat credit reversal not required when output services provided to SEZ (being
     exempt)
• Cenvat Credit distributed by an input service distributor has been subjected to
     certain conditions, namely:
     o Credit distributed against a document cannot exceed amount of service tax
          paid thereon
     o Credit attributable exclusively to an exempt unit shall not be distributed
     o Credit attributable exclusively to a unit shall be given to that unit only.



Private And Confidential                                                            Page | 73
For Client and firm use only                             © 2012, MGS Advisors. All rights reserved
                                  INDIA BUDGET 2012-13

      o      Credit of service tax attributable to service used in more than one unit shall
             be distributed pro rata on the basis of the turnover

6.4.9. Other Changes
• Computation of aggregate value for small service provider (for calculation of 10
     lakh limit) made on the basis of first consecutive invoices issued or required to be
     issued by such service provider.
• Special audit by an accountant in specified circumstances is proposed to be
     introduced. Vide this proposed introduction, Commissioner can direct any
     assessee audited by an Chartered Accountant or Cost Accountant nominated by
     him, to the extent and for the period, of he has reason to believe that such
     person:
     o has failed to declare or determine the value of a taxable service correctly
     o has availed and utilised wrongful credit of duty or tax paid
     o has operations spread out in multiple locations and it is not possible or
          practicable to obtain a true and complete picture of his accounts
• 1 year time limit for issuance of notice for offences prescribed under section
     73(1) of Service Tax Act is being increased to eighteen months.
• Pursuant to service of a notice under Section 73(1), if a statement containing
     details of service tax demand is served upon by the Central Excise Officer on the
     assessee, then such service shall be equal to the service of a notice under the said
     section, provided, grounds relied in computing the demand are same as those of
     the notice served.
• Section 83 is being amended to make the Settlement Commission provisions and
     revision mechanism applicable to Service Tax. Both the provisions shall be
     borrowed from Central Excise Act, 1944.
• If a person providing taxable services of renting pays his service tax payable along
     with applicable interest as due upto March 6, 2012, no penalty shall be levied
     under Section 76, 77 and 78 of the Service Tax Act on him.
• Time limit for filing of appeal has been reduced as under:




Private And Confidential                                                               Page | 74
For Client and firm use only                                © 2012, MGS Advisors. All rights reserved
                                     INDIA BUDGET 2012-13


        Appeal to be           Existing limitation          Proposed limitation
        filed before
        Commissioner           3 months + power of          2 months + power of
                               Commissioner to condone it   Commissioner to condone it
                               for a further period of 3    for a further period of 1
                               months                       month
        Appellate              Not prescribed               3 months
        Tribunal


      The above limitation is bifurcated basis the order passed before and after the
      enactment of Finance bill.
•     Scope of rebate of input services received in case of goods exported enhanced to
      include services used for removal and export along with existing services of
      manufacturing or processing.
•     Services of repair of roads has been made nontaxable during the period from
      16th day of June, 2005 to the 26th day of July, 2009 and in case any service tax
      has been paid, said amount shall be refundable provided an application is made
      to this extent within 6 months from the enactment of Finance bill, 2012. Similar
      provision is made for management, maintenance or repair of non-commercial
      Government buildings, for the period from 16th day of June, 2005 till the
      enactment of this Bill. Refund shall be available in both cases to the extent
      service tax is collected by the Service provider.
•     Sub-rule 6A of the Credit Rules, 2004 was introduced in 2011 to allow Cenvat
      credit on input services availed by the service providers located in the DTA
      relating to their output services to the authorized operations of SEZ (which are
      exempt from tax). The application of sub-rule 6A is being given retrospective
      effect from 10.02.2006.
•     Exemption to Service provided by an association of dyeing units in relation to
      common effluent treatment plants has been exempted retrospectively from
      16.06.2005.




Private And Confidential                                                                Page | 75
For Client and firm use only                                 © 2012, MGS Advisors. All rights reserved
                                   INDIA BUDGET 2012-13

•     A list of notifications have been issued whose effect is discussed as under:
           Notification                         Subject                           Date of effect
            number
      01/2012-Service          Exemption as available to dyeing units            March 17, 2012
      Tax                      extended to all registered cooperative
                               societies
      02/2012-Service          Change in rate of service tax from 10% to           April 1, 2012
      Tax                      12% by receding Notification No. 8/2009
      03/2012-Service          Changes in Service Tax Rules                        April 1, 2012
      Tax
      04/2012-Service          Changes in Point of taxation Rules                  April 1, 2012
      Tax
      05/2012-Service          Computation of taxable turnover in case             April 1, 2012
      Tax                      of small service provider to be based on
                               first consecutive invoices issued or
                               required to be issued (excluding value of
                               exempt services)
      06/2012-Service          Abatement allowed in relation to air                April 1, 2012
      Tax                      service provider
      07/2012-Service          Recession of exemption to transport of            March 17, 2012
      Tax                      goods by rail deferred till July 2012
      08/2012-Service          Exemption to certain goods by rail                March 17, 2012
      Tax                      deferred till July 2012
      09/2012-Service          Introduction of abatement on transport            March 17, 2012
      Tax                      of goods by rail deferred till July, 2012
      10/2012-Service          Change in rate from 4% to 4.8% in Works             April 1, 2012
      Tax                      Contract (Composition Scheme for
                               Payment of Service Tax) Rules, 2007
      11/2012-Service          Amendment in Determination of Value                Enactment of
      Tax                      Rules, 2006                                         finance bill
      12/2012-Service          List of exempt services under the new              Enactment of
      Tax                      Service tax concept of comprehensive                finance bill


Private And Confidential                                                                 Page | 76
For Client and firm use only                                  © 2012, MGS Advisors. All rights reserved
                                      INDIA BUDGET 2012-13

                               levy
      13/2012-Service          List of abatement allowed under new                  Enactment of
      Tax                      Service tax concept of comprehensive                  finance bill
                               levy
      14/2012-Service          Exemption in relation to R&D cess under              Enactment of
      Tax                      new Service tax concept of                            finance bill
                               comprehensive levy
      15/2012-Service          Specifies list of person liable to pay               Enactment of
      Tax                      service tax under reverse charge                      finance bill
The impacts of each of these notifications have been discussed in the document at
relevant places.




Private And Confidential                                                                   Page | 77
For Client and firm use only                                    © 2012, MGS Advisors. All rights reserved
                                   INDIA BUDGET 2012-13




MGS Advisors is a consulting company which provide solutions to suit
the requirements of the business. MGS Advisors is a company which
aims to deliver solutions which range from domestic and international
taxation to project finance to corporate advisory and secretarial
services. The aim is to bring the best to our clients under one roof and
accordingly, a team has come together to provide legal, information
technology and accounting services.

Our areas of expertise include Accounting, handling compliance of All
India taxes, Software solutions for commerce, Process Development
and Training. We provide cost effective solutions to our clients in the
areas of Tax Management, Regulatory Compliance, Management of All
India Taxes, International Taxation, Technology Management and
technology integration, Consultancy and Risk Management Services.
We provide pragmatic solutions that are evolved from a comprehensive
understanding of the industry that you operate in, your company as a
whole and your business and Technical objectives. We provide end to
end consulting solutions in the following fields:
• Domestic Taxation
• International Taxation
• Project Finance
• Corporate Law and Secretarial Services
  MGS Advisors
  Management Consultants
  Tax . International Tax . Project Finance . Corporate Law
  507 B, D Mall, Netaji Subhash Place, Pitampura,
  Delhi – 110034.
  +91 11 42137240, +91 11 3296 2487
  contact@mgsadvisors.com
  www.mgsadvisors.com
Private And Confidential                                                                 Page | 78
For Client and firm use only                                  © 2012, MGS Advisors. All rights reserved

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:142
posted:4/4/2012
language:English
pages:79