A slew of additional taxes announced in the Budget, including agriculture cess on services, equalisation levy, higher securities transaction tax on sale of options and tax collection at source on cash purchases for goods and services over Rs 2 lakh, will kick in from Wednesday.
The 0.5 per cent Krishi Kalyan Cess (KKC) on all services increases the total tax chargeable on services to 15 per cent, making it expensive to dine out or travel.
The equalisation levy of six per cent on cross-border digital transactions is aimed at foreign multinational digital companies without a permanent establishment in India, such as Facebook, Google, Yahoo and Twitter, making them liable to be taxed in India for their earnings from local advertisers. The levy could potentially drive up costs for advertisers, with the digital companies expected to pass on the extra tax cost.
The payment in cash for buying goods and services worth more than Rs 2 lakh, excluding jewellery, will attract one per cent extra tax at source from June 1. The existing similar tax of 1 per cent on cash purchase of over Rs 5 lakh of jewellery and over Rs 2 lakh of bullion will continue.
The sale of options will also attract increased Securities Transaction Tax (STT) of 0.05 per cent from Wednesday. Currently, STT is 0.017 per cent.
A one-time settlement tax scheme for resolving disputes emanating from retrospective amendments to the Income Tax Act will also come into effect from Wednesday.
Apart from all this, the four-month window under the Income Declaration Scheme, which gives a chance to domestic tax payers to declare undisclosed income or assets and avail immunity from penalty and prosecution by paying tax 45 per cent, also kicks in on Wednesday.
The Central Board of Direct Taxes (CBDT) released the first set of 14 FAQs to dispel doubts related to the scheme last week. The scheme requires declaration of undisclosed asset at its fair market value (FMV) as on date of commencement of the scheme and will be regarded as cost of acquisition of the asset for any subsequent transfer. The CBDT members Rani Nair and S K Sahai in a 'Talkathon' on Tuesday said declarants under the scheme will enjoy immunity from prosecution under various laws like the Wealth Tax and Income Tax Acts. "No questions will be asked from them. Once this window closes and we get to know that a person has black money, we will tax it and the I-T department will take action," Sahai said.
A similar scheme for undisclosed assets stashed overseas fetched exchequer Rs 2,428.4 crore from disclosures worth Rs 4,147 crore.
The Dispute Resolution Scheme provides an opportunity to taxpayers to settle tax disputes once and for all by paying tax, interest and 25 per cent penalty by December 31. "It is an accepted fact that a huge number of cases are pending at various stages of appeal, adding to uncertainty to taxpayers as well as the tax department. The scheme is a win-win situation for taxpayers as well as the government. However, the scheme should have been made broader to provide certainty to a greater number of taxpayers. Further, asking taxpayers to pay penalty of 25 per cent above tax and interest might dampen the enthusiasm of taxpayers to avail the scheme, particularly when in majority of cases disputes are due to aggressive approach of tax authorities in assessment," said S P Singh of Deloitte.
The Direct Tax Dispute Resolution Scheme, which seeks to resolve cases pending in various courts, tribunals, arbitrations or are in mediation under the Bilateral Investment Protection Agreement (BIPA), will come into effect from Wednesday and provide an opportunity to settle retrospective tax cases. The scheme allows companies to pay the basic tax demand and get waiver on interest and penalty.
The scheme is seen as an opportunity for companies like Vodafone and Cairn, which have been facing multi-billion dollar tax liability, following retrospective tax amendments in 2012.
STARTING TODAY
- A 0.5% Krishi Kalyan Cess
- Equalisation levy of 6% on cross-border digital transactions
- Payment in cash for buying goods and services worth more than Rs 2 lakh, excluding jewellery, will attract 1% extra tax at source
- Sale of options will attract increased STT of 0.05%
- One-time settlement tax scheme for resolving disputes emanating from retrospective amendments to the I-T Act
- Four-month window under the Income Declaration Scheme
- Direct Tax Dispute Resolution Scheme
Business Standard New Delhi, 1st June 2016
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