India: SKP's Indirect Tax Wish List

Last Updated: 30 January 2017
Article by SKP  

The Union Budget 2017 session will commence a month earlier on 31 January 2017 and industry as a whole is expecting some major economic reforms to be introduced, such as the Goods and Services Tax (GST).

Over the past two years, the implementation of GST has been a top priority of the government. Subsequently, the government introduced the 122nd Constitutional Amendment Bill (CAB) to enable the implementation of GST in India, which received Presidential assent in September 2016.

One of the expectations from this year's budget is a roadmap on the implementation procedure of GST in India. Trade and industry expect the government to disclose facts such as the timeline for GST implementation, provide clarity on the Goods and Services Tax Network (GSTN), introduce the final Central Goods and Services Tax (CGST) and the Integrated Goods and Services Tax (IGST) Bill and explain the implementation strategy.

Furthermore, there are sentiments in the market that an amendment could be proposed in the Union Budget to align the present indirect tax levies with the GST legislation which should include an increase in the rate of service tax from 15% to 18%, withdrawal of certain exemptions and clarifications on the liability of entities (doing business in India) who are located outside India to pay tax in India.

We anticipate that the following amendments and clarifications could be addressed in the Union Budget 2017:

Customs Duty

  • Clarification on the inclusion of value of services and intangible rights procured in relation to imported goods to avoid double taxation under customs duty as well as service tax
  • Restoration of basic customs duty from 10% to 7.5% on specified goods in Chapter 84 and 85 of the Customs Tariff Act
  • Relaxation on the conditions of Customs Notification no. 102/2007 (for special additional refund (SAD) refund) and implementation of procedures to expedite the process of sanctioning a refund
  • Increase in the interest-free warehousing period for imported goods
  • Guidelines should be given on how to reduce multiple procedural compliances, introduction of a single window co-ordination and processes for faster closure of Special Valuation Branch (SVB) procedures

Excise Duty

  • Removal of the inverted duty structure for Active Pharmaceutical Ingredients (APIs) and other pharmaceutical inputs/raw materials
  • Exemption from the applicability of central excise duty on making a change in the label of the product for providing additional information about the product without altering the Maximum Retail Price (MRP)
  • Introduction of an option for adjustment of excess central excise duty paid against the future liability instead of claiming a refund
  • Provision for single registration under the central excise duty for first stage dealers/importers who have a presence in multiple locations
  • A facility for single consolidated returns for all factories/premises could be provided in place of independent returns for each factory/premises
  • Provision for revision of returns should be introduced in central excise duty

Service Tax

  • For consideration received inclusive of service tax, provide appropriate clarification on the computation of service tax liability
  • Provide clarification against assigning notional values which are liable to the service of guarantees received/provided by the corporates to group companies free of cost
  • Exemption from the levy of service tax under reverse charge on statutory fees paid by chemical/pharma companies to foreign governments and agencies outside India
  • Introduction of provisions to treat intermediary services where the recipient is located outside India and the services provided for conducting business in India are considered as an export of services
  • Provide guidelines to rationalise manual scrutiny procedures and the issuance of reports/intimations by authorities on the closure of the same
  • Exemption from service tax for services provided by Special Economic Zone (SEZ) units to recipients who are located outside India but are taxable in India under Rule 4 or Rule 7 of the Place of Provision of Services Rules, 2012.
  • Clarification on the applicability of service tax for 'sharing of expenses' between two associated companies/sister concerns where there is no margin
  • Clarification on the manner to register a person located in a non-taxable territory in India under the service tax legislation in India (specifically in light of recent amendments in services of online information database access, retrieval services and transportation of goods by a vessel from a place outside India up to the customs station of clearance in India)


  • Clarity on the availability of Central Value Added Tax (CENVAT) credit should be provided with respect to the input services consumed by an employee relating to the business during his employment
  • Restriction on the scope of exempt service definition under Rule 2(e) of CENVAT Credit Rules, to exclude activities such as job-work services provided to principal manufacturers, services by way of interest or discount on deposits, loan or advances, etc.
  • Clarification on the requirement for CENVAT credit reversal on the sale of securities where the assessee does not trade in such securities
  • Credit availability of Swachh Bharat Cess to manufacturers and service providers for the payment of central excise duty or service tax dues
  • Credit availability of the Krishi Kalyan Cess for the payment of central excise duty or service tax dues
  • Enable utilisation of unutilised/accumulated credit of the Education Cess and Secondary and Higher Education Cess (EC and SHEC) for the payment of central excise duty or service tax dues

Central Sales Tax

  • Akin to the Central Sales Tax (CST) exemption provided to SEZ units, Software Technology Parks (STPs), Export Oriented Units (EOUs) and Electronic Hardware Technology Parks (EHTPs) should also be allowed to avail the CST exemption against Form I on interstate purchase


  • Withdrawal of the provision for a mandatory pre-deposit on filing an appeal before the Commissioner (Appeals) and Tribunal and introduce a merit-based pre-deposit provision
  • Vacancies in the Tribunal should be filled and additional benches should be constituted to expedite the disposal of long pending cases. A fast track system for disposal of cases should be introduced to deal with high revenue cases and settled issues in light of the upcoming GST law

All the orders passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) and the adjudicating authority/Commissioner (Appeals) should be made available on their websites for the reference of the industry. The Central Board of Excise and Custom (CBEC) may play a proactive role and issue clarifications on the problems and issues of the industry which are similar in nature to avoid problems resulting in litigation at a later stage.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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