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Showing posts from January 30, 2017

A tale of two tax provisions

The right to plan tax affairs is a fundamental right of every taxpayer. However, there are times when tax planning results in tax avoidance. To prevent this, rules have been introduced, both globally as well as in India, to ensure that appropriate taxes are levied. Though there were Specific Anti-Avoidance Rules (SAAR) in India through provisions in the Income-Tax Act, there were no codified General Anti-Avoidance Rules (GAAR) until they were introduced in the Finance Act, 2012, only to be deferred and then made applicable from April 1, 2017.

Under the GAAR provisions, the tax authorities have the powers to regard an arrangement as an impermissible avoidance one if its main purpose is to obtain a tax benefit by taking recourse to arm’s length pricing, or if it results in abuse of provisions of tax laws, lacks commercial substance, or is carried out in a manner not ordinarily employed for bona fide purposes. In such cases the tax authorities can re-characterise and determine the tax cons…

EC raps RBI on withdrawal limits

After the Reserve Bank of India (RBI) turned down its request to increase the weekly cash withdrawal limit for candidates contesting in the coming Assembly polls, the Election Commission (EC) of India has written back to RBI Governor Urjit Patel, expressing “serious concern about the cursory manner in which the issue has been dealt with”. In a letter on Sunday, EC asked RBI to realise the ‘gravity of the situation’, virtually charging the central bank with impeding the democratic process.

One letter by the EC was in the context of the low withdrawal limits for candidates and asked these be relaxed. There are several bills that candidates in the election can only pay by cash. The EC has received a large number of complaints where candidates are facing constraints. This effectively means curtailing the candidate’s right to campaigning in a free and fair election, the poll body had indicated. Right to withdraw cash should not hamper the democratic process, it had said and asked RBI to act…

Jaitley may raise service tax to 16-18%

Finance Minister Arun Jaitley  may hike service tax rate to 16-18 percent from the current 15 percent in the Budget, due on Wednesday,asaprecursortothe GoodsandServicesTax(GST)rollout. The move,that will make flying,eating out,phone bills and a host of other services expensive, would be an attempt to take the rates closer to the proposed tax slabs for GST. GST,which will subsume central and state levies like excise duty, service tax and VAT, is scheduled to be rolled outfrom July 1. The tax slabs decided for the GST are 5,12,18and28 percent and taking service tax closer to one of the slabs is a logical move in the Budget,tax experts said. Tax experts say,Jaitley,who had in his previous budgethiked service tax rate by 0.5 percent to 15 percent,may raise the levy by at least one percent age point to 16 percent. Some others feel there could be different service tax rates with a lower 12 percent for basic services and a higher 18 percent for the rest. Business Standard New Delhi,30th January 20…

Digital push likely in Budget

Finance Minister Arun Jaitley  may hike service tax rate to 16-18 percent from the current 15 percent in the Budget, due on Wednesday,asaprecursortothe GoodsandServicesTax(GST)rollout. The move,that will make flying,eating out,phone bills and a host of other services expensive, would be an attempt to take the rates closer to the proposed tax slabs for GST. GST,which will subsume central and state levies like excise duty, service tax and VAT, is scheduled to be rolled outfrom July 1. The tax slabs decided for the GST are 5,12,18and28 percent and taking service tax closer to one of the slabs is a logical move in the Budget,tax experts said. Tax experts say,Jaitley,who had in his previous budgethiked service tax rate by 0.5 percent to 15 percent,may raise the levy by at least one percent age point to 16 percent. Some others feel there could be different service tax rates with a lower 12 percent for basic services and a higher 18 percent for the rest. Business Standard New Delhi,30th January 20…

Service tax not to cover materials

In service and maintenance contracts, cost of parts and materials used are excluded for evaluating service tax, the Supreme Court has held in a batch of appeals from different states referring to companies retreading tyres. It reversed the finding of the excise appellate tribunal that it is the entire of the gross value of the service rendered that is liable to service tax. The tribunal had maintained that there is no sale or deemed sale of the parts or other materials used in the execution of the contract of repairs and maintenance. The court stated that several government notifications like those in 2003 and 2004 have made it clear that goods and materials sold by the service provider to the recipient of service are exempted. The only condition is that there should be documentary proof specifically indicating the value of the goods and materials, the court stated in its judgment in the leading case, Safety Retreading Co vs Commissioner of Central Excise. An assessee is liable to pay…