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Undoubtedly, many eyes were on the Union Budget 2016. Many new measures are proposed including reforms for reduction in tax litigation.


To boost Make in India the Finance Minister indicated that the invert duty structure for many sectors will be corrected. The Finance Minister also indicated that the Customs Act will be amended to allow deferred payment of Customs duty for specified importers. This is a un-precedented step and likely to benefit the compliant importers.  Ease of supervision for customs bonded warehouse announced as a procedural relaxation. 



No increase in generic rate of excise i.e. 12.50% was indicated in the Budget Speech. Rather, on a positive front a total of 13 Cesses is proposed to be removed.  On procedural front, it was indicated that the Excise returns can be revised now.


Tax litigation Reforms

The Finance Minister also indicated towards Tax litigation reforms alongwith new dispute resolution. Further, there may not be any penalty / reduced penalty in such cases. Also, to address the spiralling litigations it is proposed that there will be 11 new benches of CESTAT/ Tribunal. This is a welcome move.



On CENVAT Credit it is proposed that the CENVAT credit Rules specifically to financial sector (including Rule 6 which provides for availment of credit taxable and exempt goods/ services) to be amended to provide for simplification.


Service Tax

No increase in generic rate of service tax i.e. 14% is proposed.  For boosting the Affordable housing space, it is proposed that no service tax will apply on specified affordable housing schemes.  It is proposed to be clarified that the assignment of right to use ``spectrum`` (say for radio) could also attract Service Tax.


Krishi Kalyan Cess

A new Krishi Kalyan Cess 0.50% on all services will be applicable from 1 June 2016. This cess will be leviable apart from Swachh Bharat Cess. The CENVAT Credit Krishi Kalyan Cess is expected to be available.


Clean Energy Cess

The Clean Energy Cess will be renamed as Clean Environment Cess and will be increased from current Rs 100 per tonne to Rs 400 per tonne



There was no discussion in the Budget Speech from GST perspective.

Author: Pratik Shah - Partner Indirect Tax, SKP Group