"Oil & GAs Budget"
19 March 2012 Budget PLUS 2012 - Key features of India's Union Budget Impact on – Oil & Gas Sector No changes have been proposed in the corporate tax Foreword Key direct tax proposals impacting „ rates or MAT rate Oil & Gas companies Alternate Minimum Tax (‘AMT’) The Union Finance Minister presented the Union Budget Taxation of indirect transfers „ It has been proposed to expand the scope of MAT on 2012 on 16 March 2012. „ The Vodafone-Essar transaction had triggered a non-corporate taxpayers if they are claiming tax controversy on taxability of gains from transfer of holiday. Consequential amendment for availability of This Alert summarizes key direct and indirect tax shares of an offshore entity resulting in transfer of credit of AMT has also been provided proposals impacting the Oil & Gas companies. assets / business situated in India. While the Supreme Court of India held that such transactions Foreign dividends cannot be taxed in the absence of enabling provisions under the domestic tax law, the Budget 2012 has „ The lower tax rate of 15% on dividends received by an proposed a retrospective amendment effective from Indian company on the dividend declared, distributed 1 April 1962 to bring such indirect transfers under or paid by a subsidiary foreign company has been the tax net extended for another year i.e. financial year 2012-13 Anti-avoidance measures Exemption from sale of crude oil in India „ Budget 2012 has also proposed to introduce General „ It has been proposed that the receipt of income in Anti Avoidance Rule (GAAR) to deal with aggressive India by a foreign company from sale of crude oil in tax planning or transactions which are mainly India will not be taxable if the agreement has been designed to gain tax benefit without any substance. executed or approved by the Indian Government and These provisions provide a mechanism to empower the foreign company does not have any other tax authorities to look through a particular business activity in India. While most foreign transaction which meets the tests specified therein companies receive the consideration for sale of crude oil outside India, this provision provides additional „ To prevent misuse of these powers by the assessing protection against taxability when consideration is authorities, the power to invoke GAAR has been received in India vested with an Approving Panel after approval from Commissioner Key indirect tax proposals impacting Income-tax rates Oil & Gas companies „ Basic exemption limit applicable for individuals has Customs Duty been proposed to be increased to INR 200,000 from INR 180,000 and the slab for taxation at 20% rate „ Standard customs duty rates remain unchanged has been increased from Rs 800,000 to 1,000,000 2 EY Tax Alert „ Education cess and Secondary & Higher Education from Rs. 2500/- per metric tonne to Rs. 4500/- per „ Amendments have been proposed in the Point of cess is exempt on the additional customs duty on metric tonne. This is effective from 17 March 2012 Taxation Rules, 2011 (‘PoT Rules’) which would be import of goods effective 1 April 2012: „ Rate of excise duty on avgas has been increased from „ Basic customs duty on steam coal has been reduced 5% to 6% „ Time period for raising invoice has been from 10% to Nil. Additional customs duty has been extended to 30 days from 14 days reduced from 5% to 1%. This benefit is available up to Service Tax „ Specific rule for determining point of taxation in 31 March 2014 case of proposed change in rate from 1 April „ The peak rate of service tax has been increased to 2012 „ Import of dredgers is exempt from basic customs 12% from 10% from 1 April 2012 duty and special additional duty of customs „ Amendments have been proposed in the Service Tax „ It has been proposed to introduce the levy of service Rules, 1994 which includes: „ Natural gas/ Liquefied Natural Gas imported for tax based on a Negative List, as per which power generation by power generation plants is „ Alignment of service tax and excise procedures exempt from basic customs duty. Exemption is not „ All services would be taxable unless included in (from a date to be notified) available to imports by captive generation plants Negative List or specifically exempt „ Common PAN based tax code „ Basic customs duty on survey instruments, 3D „ 9 declared services such as renting of „ Common registration format modelling software for ore body simulation cum mine immovable property, construction of complex, „ Common returns planning and exploration (geophysics and temporary transfer of IPR, agreeing to an „ Simplification of return format geochemistry) equipment required for surveying and obligation to refrain from an act or tolerate an „ Monthly service tax returns for large prospecting of minerals reduced to 2.5% subject to act to also attract service tax assessees specified conditions „ 17 services to be included in the Negative List, „ Amendments have also been introduced in the „ Import of foreign going vessels is exempt from including services provided by Government, RBI, assessment procedures which include provisions for additional customs duty subject to payment of duty local authority, trading of goods and any special audit, increase in the time period for issuance at the time of its conversion to coastal run and process amounting to manufacture of a notice from 12 months to 18 months and fulfillment of prescribed conditions alignment of the time period for filing of appeals with „ Existing service tax exemptions to be removed, that of central excise modified or merged (final tally of exemptions limited to 10) Central Excise Duty „ It has been proposed to introduce the Place of Provision of Service Rules (‘PoS Rules’) Goods and Service Tax „ The standard rate of excise duty on non-petroleum products increased from 10% to 12% „ The Export of Services Rules and the Import „ No announcement was made on the GST Rules would be rescinded on implementation of implementation date „ Excise duty on Coal remains unchanged to 1% PoS Rules „ Recommendations awaited from the Parliamentary „ Cess levied under the Oil Industries Development Act, Standing Committee on the Constitution 1974 on production of crude oil has been increased Amendment Bill 3 EY Tax Alert „ The GST Network (‘GSTN’) is proposed to be operational from August 2012. 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