| I- T dept to simplify norms on ECB interest payment |
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New Delhi, 13 February The Income Tax ( I- T) Department is looking at ways to relax and simplify the rules on tax collection and credit associated with foreign investments into the country, especially via external commercial borrowing ( ECB). Concern has been raised on the method of identification for providing tax credit and the requirement of a permanent account number (PAN) for deduction of withholding tax. Industry had raised these two issues before a Central Board of Direct Taxes committee looking into the matter, said a senior finance ministry official. The panel is to soon give its report to the ministry and is expected to suggest simpler norms, said the official. One member of an apex business chamber, who'd taken part in the discussions, said the PAN requirement for a lower withholding tax on ECB interest payments was seen as a major trouble area. From April 1, 2010, under Section 206A of the I- T Act, any person entitled to receive a sum or income or amount on which tax is deductible in these cases is required to furnish his PAN to the person responsible for deducting such tax. If the PAN isn't there, tax has to be deducted at 20 per cent. The Finance Act, 2012, introduced Section 194LC in the I- T Act, providing for a lower withholding tax at five per cent on interest payments by Indian companies on borrowings made in foreign currency by such companies from a source outside India. The chamber representative said with foreign investors reluctant to get into the process of getting a PAN, this differential treatment was proving an irritant. The ministry official said the department will have to find a way out in which individual investors were not troubled but the required information was also with the department. |
| Govt likely to harmonise excise, service tax laws in Budget |
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New Delhi, 13 February As a prelude to the Goods & Services Tax ( GST), the finance ministry might harmonise service tax and excise duty laws in Budget 2013- 14. Also, it is likely to simplify Cenvat credit rules that allow set- off of excise duty or service tax paid on inputs against tax liability on the final product. It is also considering bringing some health and education categories in the negative list for taxation of services. At present, excise duty and service tax are levied under two Acts. The ministry has shown its intent to merge the laws as a step towards GST. To begin with, it might harmonise essential processes like registration, return and assessment compliance. Cenvat credit and provisions related to the settlement commission and appellate matters are common for service tax and excise duty. A finance ministry official said the Central Board of Excise & Customs was also trying to address the issues related to input tax credit. It was in the process of simplifying the existing Cenvat credit scheme. "If Cenvat credit rules are simplified, it will be a good reform. They should also address the concerns with regard to inverted duty structure, where raw material duty is higher than the finished product," said Pratik Jain, partner, KPMG. He added wherever there was a difference between the provisions of central excise and service tax, rules should be aligned. If a refund was allowed on export of excise- exempt goods, that should be allowed for export of services, too. In last Budget, too, Cenvat credit rules were amended to simplify the procedure for refund of unutilised credit on account of exports. Credit was allowed on sale, supply, repair, rent and insurance of motor vehicles. The amendments allowed credit on delivery of goods and payment of service tax by the service receiver on areverse- charge basis. However, experts say it has not helped much. Officials also said some education and health categories might be brought under the negative list, which keeps 17 services outside the tax net. Currently, education is kept under the negative list at the pre- school level, up to higher secondary school, as part of acurriculum to obtain a qualification, and as part of an approved vocational course. Auxiliary educational services and renting of immovable property by educational institutions in respect of education have been exempted from service tax. Healthcare services provided by clinical establishments, authorised medical practitioners or para- medics are also exempt. Budget might move some of these services, as well as bring in some more services taxed currently, to the negative list. Move seen as prelude to GST rollout; rules for Cenvat credit also likely to be simplified RUN- UP TO THE BUDGET 2013- 14 |Harmonising excise duty and service tax laws on cards in Budget |GST is a tax on both goods and services. As such, laws governing goods and services cannot be different |FM would meet the empowered committee of state finance ministers on GST thursday |Outline of GST likely to be given in Budget |Some more health and education services likely to be included in the negative list TOWARDS GST |
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Company Secretary, Chennai
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