ELP-Exclusive Analysis Budget 2017

An Exclusive Analysis
UNION BUDGET 2017

© Economic Laws Practice 1|P a g e

Table of Contents
Preface: ................................................................................................................................................................. 3
Budget Highlights: ................................................................................................................................................. 4
Indirect Taxes .......................................................................................................................................................................... 4
Direct Tax ................................................................................................................................................................................ 4
Budget Proposals Addressing: .............................................................................................................................. 5

Move towards GST .................................................................................................................................................................. 5
Demonetisation....................................................................................................................................................................... 6
Amendments influenced by Global Trends ............................................................................................................................. 7
Key initiatives of the Government of India ............................................................................................................................. 8
Indirect Taxes: ..................................................................................................................................................... 10

Service Tax ............................................................................................................................................................................ 11
Excise..................................................................................................................................................................................... 15
Customs ................................................................................................................................................................................ 18
Direct Tax: ........................................................................................................................................................... 25

Amendments in respect to indirect transfer provisions (Chapter 2 of the IT Act) ................................................................ 25
Exemptions under Section 10 ............................................................................................................................................... 26
Income from House Property ................................................................................................................................................ 28
Business Income .................................................................................................................................................................... 29
Capital Gains ......................................................................................................................................................................... 31
Income from Other Sources .................................................................................................................................................. 34
Deductions ............................................................................................................................................................................ 34
Transfer Pricing ..................................................................................................................................................................... 37
Rationalization of MAT provisions ........................................................................................................................................ 38
Special Income ...................................................................................................................................................................... 39
TDS and TCS Provisions ......................................................................................................................................................... 41
Settlement Commission, Advance Ruling and Appeals ......................................................................................................... 43
Banking, Finance, Infrastructure and Capital Markets ....................................................................................... 49

Infrastructure ...................................................................................................................................................... 53
Capital Markets ................................................................................................................................................... 57
Legislative Reforms ............................................................................................................................................. 59
Glossary of Terms: .............................................................................................................................................. 63

Preface:
Dear Reader,
Since our inception in 2001 (15 years ago!) ELP has been providing a detailed analysis and update on the proposals in Union
Budget. Over the years, printed booklets and physical presentations have made way for a webinar and dissemination on
social media. Yet, what has remained constant is ELP’s rigorous analysis of the budget proposals.
In the aftermath of the demonetization, a soothing balm was the need of the hour and that is what has been delivered.
The flush of funds has manifested itself in huge expenditure on infrastructure and welfare schemes. There is something for
everyone here:
 Farmers get a plan to double their income in 5 years through irrigation projects, reform in procurement and agri
credit
 The rural population gets a 25% increase in MNREGA allocation
 Youth get multiple programs for education and job creation through aggressive allocation to ‘Skill India’ programs
 Real estate, especially affordable housing gets a huge push. Besides ‘Infrastructure Status’, which will ease
lending, there are substantial tax benefits
 Infrastructure (including railways) is to receive large amount of investment. Passenger safety and comfort,
technology, coastal roads and roads around ports are the focus.
 For the ease of doing business:
 The FIPB will be abolished
 There is a focus on new laws and amendments to existing laws to alleviate several issues
 Predictably, there are deterrents to (and incentives not to) use cash as a mode of payment
 For corporates there is tax relief for over 90% of corporate taxpayers
 Individual taxpayers also see reduction in rates with a view to increasing the tax base
Conspicuous by its absence is a firm date for the GST. In anticipation of the GST, there were minimal changes to the indirect
tax rates, so the commitment to GST remains firm.
We hope you benefit from our legal and tax analysis contained in this publication. As always, we invite your queries,
comments and suggestions.
Best,
Suhail Nathani
Managing Partner

Budget Highlights:
Indirect Taxes
 No significant amendments, on account of rollout of GST
 No change in peak rate in Customs, Excise or Service tax
 Rate changes to address inverted duty structure
 Exemption to digital pay devices and their parts for promoting digital economy
 GST Council has finalized its recommendations on almost all the issues
 Government to reach out to trade and industry for awareness on GST from April 1, 2017
 Merger of Authority of Advance Rulings for Direct and Indirect tax
Direct Tax
 Beneficial corporate tax rates for companies with turnover or gross receipts less than INR 50 crores
 Holding period for long term capital gains on immovable property reduced to 24 months from 36 months
 MAT credit carry forward period extended to 15 years from 10 years
 Foreign Portfolio Investors (Category 1 and 2) exempted from the ambit of indirect transfers
 Clarity on taxability of joint development agreement and conversion of preference shares to equity shares
 Base year for computing indexed capital gains shifted from 1981 to 2001
 Measures to discourage cash transactions introduced
 Taxability of transactions for inadequate or without consideration extended to all persons
 FMV to be full value of consideration in case of transfer of unlisted shares, undertaken for lower than FMV
 Scope of domestic pricing provisions curtailed
 In line with BEPS Action Plan 4, interest deduction curtailed for certain taxpayers

Budget Proposals Addressing:

Move towards GST
The financial year 2016-17 so far has been full of unprecedented events, more particularly, the progress made towards the
introduction of GST, being one of the tectonic policy initiative of this Government. The passage of the Constitution
Amendment Bill for Goods and Services Tax (GST) by passage in both houses of the Parliament unanimously, the ratification
by the requisite number of States, and moreover, the efforts made by the GST council to iron out dissenting views, have
marked a decisive crossing over the hump in the rollout of the ambitious reform, which has been hanging fire since 2010.
With its onset, the Government has been persistently and tirelessly making efforts to achieve its target of replacing current
indirect taxes with GST. Some of the crucial steps taken by the Government to make GST a reality include holding 9 GST
Council meetings and achieving resolution of key concerns after spirited debate and discussions, such as the launch of a
new GST portal to facilitate registration of assessees, formulating the broad contours of the four tier GST rate structure,
release of the Model GST law, deciding on the details of compensation to States, resolution of the issue of dual control etc.
against all odds. Additionally, the preparation of the IT system for GST is also on schedule. This demonstrates that the
Government is committed to implementing the ambitious tax reform as early as July 1, 2017.
With GST nearing reality, trade and industry were anticipating that Budget 2017 will bring about various alterations to the
existing indirect tax regime to align it with the proposed GST regime and to make progressive steps to come closer to GST.
Some of these anticipations included introduction of amnesty schemes to reduce existing litigation, increase in courts /
appellate authorities for speedy disposal of pending matters, increase in rate of Service tax, rationalization of taxes on
companies engaged in manufacture of petroleum products, reduction in rate of Central Sales Tax, scrapping of several
cesses, trimming down existing exemptions, liberalization of the credit rules, addressing instances of inverted duty
structure etc.
As against popular expectations, the Hon’ble Finance Minister preferred to not make any changes in Excise and Service tax
for the reason that these levies are to be replaced by GST and any alteration at this stage would be short-term and may
turn out to be counter-productive.
The most important hurdles, that of resolution of the issue of dual control, and release of the Draft Model GST law have
been crossed. The Government, as is seen from the Hon’ble Revenue Secretary’s statements, is taking several measures to
ensure that GST is rolled out, preferably by July, 2017. In his speech, the Hon’ble Finance Minister also committed that
extensive efforts would be made to reach out to trade and industry for GST from April 1, 2017 to make them aware of the
new taxation system. This also signals that by April 1, 2017, the final print of the GST legislation would be released to
enable trade and industry to understand and analyze the levy with all its nuances.
Given that not much time is left, it is crucial and imperative for assessees to take steps to be GST-ready at the earliest,
including in respect of software infrastructure, accounting systems, training of personnel, suppliers/vendors etc. and
gearing up for the transition.

Demonetisation
The Union Budget 2017 has assumed significant importance as it has been presented after the historic movement of
demonetisation of high-value notes. The Government’s move came in the wake of multiple issues within India’s cash-
dependent economy, ranging from accumulation of black money, corruption, counterfeiting, etc. Whilst, the move has
been decried by few as futile and against the stated objectives, as also for the inconvenience caused by it during its
implementation; on the other hand, it has also been championed and heralded as bold and visionary. Both the sides,
however, agree that the move is beneficial in long run to the Indian economy.
Even though the macroeconomic impact of such a move is yet to be properly determined, there are quite divergent views
about the expected impact. In light of the move, the RBI and the Economic Survey 2016-17 released on January 31, 2017
have revised its estimate of growth projections for India from 7.6 to 7.1 percent, the Asian Development Bank from 7.4 to 7
percent and the IMF from 7.6 to 6.6 percent. Others believe that such adverse impact on the economy is only temporary
and the economy will not only recover very soon but will also reap the benefit of a larger taxbase.
The Economic Survey 2016-17 has recommended some ‘follow-up actions’ which would minimize the costs and maximise
the benefits of demonetisation. Some of these are:
 fast, demand-driven, remonetisation;

 tax reforms including bringing land and real estate into the GST,
 reducing tax rates and stamp duties; and
 acting to allay anxieties about overzealous tax administration.
The Finance Minister in his Budget Speech addressed the topic headon and reiterated that the objectives of
demonetisation are the following:
 Curbing tax evasion and the parallel economy;

 Elimination of corruption, black money and counterfeit currency;
 Greater formalisation of the economy;
 Surplus liquidity in the banking sector.
The Finance Minister clarified that the benefits of demonetisation would be reaped by India in the medium to long-term
and any drop in economic activity will only be transitory in nature – the ‘normal’ GDP in the long run will be “bigger,
cleaner and real”. The Finance Minister was confident to state that the effects of demonetisation will not spill over into the
next year.
According to the Finance Minister, the availability of surplus liquidity in the banking sector due to demonetisation has
already resulted in reduced lending rates offered by the banks. Additionally, the Finance Minister has laid down the
following proposals to address the objectives of demonetisation:
 Restricting cash donations and measures to discourage cash transactions;

 Disallowance of depreciation under Section 32 and capital expenditure under Section 35AD on cash payment;
 Measures to promote digital payments in case of small unorganized businesses;

Amendments influenced by Global Trends

Limitation of interest deduction in certain cases
Driven by the political and public focus around the world on the taxation of multi-national enterprises (‘MNEs’), the OECD
on July 19, 2013 released its Action Plan on Base Erosion and Profit Shifting (‘BEPS’), listing 15 focus areas for potential
change in international tax rules and treaties. The Action Plan aims to ensure that profits are taxed where economic
activities generating the profits are performed and where value is created. The first set of reports and recommendations
were delivered on September 16, 2014.
India has taken strong cues from the BEPS recommendations and ushered in amendments in its domestic law. The
Equalization Levy is a measure introduced by the Finance Act, 2016, which was influenced by these recommendations.
Similarly, Country-by-Country (CbC) Reporting is another fallout of the BEPS Action Plan.
The Union Budget for FY 2017-18 proposes to adopt further measures in line with recommendations in BEPS Action Plan 4,
on the issue of excess interest deductions by MNEs. The Budget outlines a scheme for curtailing interest deductions that
companies can claim, by inserting a new Section 94B in the IT Act, to provide that interest expenses claimed by an entity
qua its associated enterprises shall be restricted to 30% of its earnings before interest, taxes, depreciation and
amortization (EBITDA) or interest paid or payable to associated enterprise, whichever is less. In order to target only large
interest payments, the threshold of interest expenditure has been kept at INR 1,00,00,000, exceeding which the provision
would be applicable. This provision appears to have been introduced focusing on companies with thin capitalization and
greater borrowing and prohibits claiming tax deductions for interest paid to foreign entities. This will eliminate the
possibility of using thin capitalization to shift income to a lower-tax jurisdiction. This proposal seems to also be aligned with
the United States’ ‘earnings stripping’ rules/ the New Republican Tax Proposal (released on June 24, 2016) discouraging /
disincentivising interest deductions and driving taxpayers to rely on equity financing for their investments.
Secondary adjustments in certain cases
In line with the OECD's Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD transfer
pricing guidelines) and international best practices, the Budget proposes the insertion of new Section 92CE in the IT Act. In
2014, in the case of PMP Auto Components Pvt. Ltd. [TS-263-ITAT-2014(Mum)-TP], the ITAT ruled in favour of the taxpayer
holding that secondary adjustment is not permissible as per the then existing transfer pricing provisions of the IT Act.
The proposed insertion of Section 92CE in the IT Act is aligned with the position in certain other countries, including
Canada, Korea, South Africa. It is proposed to provide that where, as a result of primary adjustment to the transfer price,
there is an increase in the total income or reduction in the loss, as the case may be, of the assessee, the excess money
which is available with its associated enterprise, if not repatriated to India within the time as may be prescribed, shall be
deemed to be an advance made by the assessee to such associated enterprise, and the interest on such advance, shall be
computed as the income of the assessee, in the manner as may be prescribed.
The above amendments will take effect from April 1, 2018 and will, accordingly, apply in relation to AY 2018-19 and
subsequent years.

Key initiatives of the Government of India

Amidst the ‘Transform, Energise and Clean India’ (TCE) agenda for 2017-18, the Budget has introduced certain proposals to
continue to support the key initiatives of the Government of India.
Make in India
Launched in September 2014, ‘Make in India’ has been one of the flagship campaigns of the Government of India, aimed at
reviving the growth of the manufacturing sector in India. Various initiatives have been taken in the past to foster growth of
this sector, some of the key ones being: reduced corporate taxation rate of 25% for new domestic manufacturing
companies, relaxed FDI norms, etc. As announced by the Hon’ble Finance Minister, India has become the sixth largest
manufacturing country in the world, up from its earlier position at number nine due to these initiatives taken in the last
two years. In continuation of these efforts and to provide further impetus to this campaign, the following key policies have
been announced in this Budget:
 Reduced corporate income tax rate of 25% for all domestic companies with turnover up to INR 50 crores
 Increase in time limit for carry forward of MAT credit from 10 to 15 years
 Reduction in applicable Customs duty on various inputs and raw materials (such as LNG, parts for use in
manufacture of LED lights, nickel etc.) so as to support domestic value addition
 Increased allocation of INR 745,00,00,000 to the Modified Special Incentive Package Scheme (‘M-SIPS’) and
Electronics Development Fund (‘EDF’) to make India a global hub for electronics manufacturing
 Implementation of a special scheme for leather and footwear industries, similar to the already launched scheme for
the textile sector, to incentivize these labour intensive industries.
Start-ups
Announced in August 2015, ‘Startup India’ has been an important initiative of the Government of India to support and
nurture budding entrepreneurs in the country. In pursuance of this campaign, various benefits such as self-certification
based compliances for specified labour and environment laws, fast-tracking of patent applications etc. have been provided
in the past. The following additional benefits have been announced in this budget for lending further support to start-ups:
 Unlike other business entities, start-ups would be entitled to carry forward business losses even if there is no
continuous holding of 51% of voting rights, provided that the holding of the original promoters continues
 The profit-linked deduction granted under Section 80-IAC of the IT Act can be claimed in a block of three consecutive
years out of the first seven years (instead of the earlier requirement of claiming such deduction within three
consecutive years of the first five years).
Ease of doing business in India
India is ranked 130 out of 190 countries in the World Bank Group's annual report on the ease of doing business. The said
report has, however, recognized the concerted efforts made by India, and stated that “India has embarked on an ambitious
reform path”. In line with the same, and in hopes of improving the current ranking, the Budget has presented certain
proposals under the broad mission of bringing about a transformative shift in the way the country is governed.

The aim is to move from a discretionary-based administration system to a policy and system based administrator, along
with transparency and objectivity in decision-making. To achieve this, following are proposed:
 The scope of domestic transfer pricing would be restricted to only those cases where one of the entities enjoy specified
profit-linked deductions
 Increase in the threshold limit for audit of business entities opting for presumptive income scheme from INR 1 crore to
INR 2 crore
 Time period for revising a tax return is being reduced to 12 months from the completion of the FY, whereas the time for
completion of scrutiny assessments is being compressed from 21 months to 18 months for AY 2018-19 and further to
12 months for AY 2019-20 and thereafter
 A specific programme for development of multi-modal logistics parks, together with multi modal transport facilities, is
proposed to be drafted and implemented.
Digital Economy
Promotion of a digital economy is an integral part of the Government of India’s strategy to clean up the system and weed
out corruption and black money. India is currently on the cusp of a massive digital revolution and the present Budget seeks
to propel India along the path towards a cashless economy by proposing certain policy initiatives, which are summarised as
follows:
 Aadhar Pay - a merchant version of Aadhar Enabled Payment System - is proposed to be launched shortly for those
without debit cards, mobile phones or e-wallets
 On the recommendation of a Special Investigation Team on Black Money, no transaction above INR 3,00,000 will be
permitted in cash subject to certain exceptions
 Referral bonus schemes for individuals and cashbacks chemes for merchants are proposed to be introduced to promote
the use of the BHIM (Bharat Interface for Money)
 Exemptions from Excise and Customs are proposed for digital pay devices and their parts
 Amendments are proposed in the Negotiable Instruments Act, 1881 to ensure that payees of dishonoured cheques are
able to realise their payments.
Foreign Direct Investment (FDI)
 The FIPB, which offers a single window clearance for applications on FDI in India that are under the approval route, is
proposed to be abolished in 2017-18
 Further liberalisation of the consolidated FDI policy is under consideration and announcements will be made in due
course.

Indirect Taxes:
Effective date for various changes in indirect taxes
Particulars Effective Date of Change

Legislative changes in Service tax, Excise and Customs Date of enactment of Finance Bill, 2017, unless
otherwise specified
Change in rates of Customs Duty February 02, 2017, unless otherwise specified
Change in rates of Excise Duty February 02, 2017, unless otherwise specified
Amendments to CENVAT Credit Rules, 2004 February 02, 2017, unless otherwise specified
Notes:
© Economic Laws Practice 10 | P a g e

Service Tax
Legislative Changes
Advance Rulings ELP Comments
Sections 96A to 96J of the Finance Act contain provisions relating to advance The proposed consolidation of the Authority
rulings in Service tax. The following amendments are prepared: for Advance Ruling (Central Excise, Customs
and Service Tax) and the Authority for
Advance Ruling (Income Tax) is a welcome
 The definition of “Authority” is sought to be substituted to mean the step. It is hoped thatwith this amendment,
Authority for Advance Ruling as constituted under Section 245-O of the the Authority will effectively be able to clear
Income-tax Act. the backlog.
 Section 96HA is proposed to be inserted to provide for transferring the
pending applications before the Authority for Advance Rulings (Central
Excise, Customs and Service Tax) to the Authority constituted under
Section 245-O of the IT Act from the stage at which such proceedings stood as on the date on which the Finance Bill,
2017 receives the assent of the President.
 The application fee for seeking advance ruling is sought to be enhanced from INR 2,500 to INR 10,000.
 It is proposed to extend the existing time limit from ninety days to six months for the Authority to pronounce its ruling.
Exemptions/Concessions
New Exemptions / Concessions (w.e.f February 02, 2017 unless otherwise specified)
Sr. No. Description of Services

1. Services provided to the Government by way of transport of passengers, with
or without accompanied belongings, by air, embarking from or terminating at
a Regional Connectivity Scheme Airport, against consideration in the form of
Viability Gap Funding.
It has been provided that this entry shall not apply on or after the expiry of a
period of one year from the date of commencement of operations of the
Regional Connectivity Scheme Airport as notified by the Ministry of Civil
Aviation.
2. Service tax exemption to taxable services provided agreed to be provided by
the Army, Naval and Air Force Group Insurance Funds by way of life insurance
to members of the Army, Navy and Air Force under the Group Insurance
Schemes of the Central Government, is being made effective retrospectively
from September 10, 2004, the date from when the services of life insurance
became taxable. Refund applications will have to be made within a period of
six months from the date on which the Finance Bill, 2017 receives the assent
of the President.

Sr. No. Description of Services

3. Benefit of Exemption Notification No. 41/2016-ST dated September 22, 2016 is
being extended with effect from June 1, 2007, the date when the services of
renting of immovable property became taxable. The said Notification exempts
one time upfront amount (known as premium, salami, cost, price,
development charges or, by any other name) payable for grant of long-term
lease of industrial plots (30 years or more) by State Government industrial
development corporations/ undertakings to industrial units was exempted.
Refund applications will have to be made regard shall be made within a period
of six months from the date on which the Finance Bill, 2017 receives the
assent of the President.
ELP Comments: The Delhi Bench of the Tribunal, in Greater Noida Industrial
Development Authority vs. Commissioner of Central Excise [2014-TIOL-1741-
CESTAT-DEL] held that the salami or premium cannot be considered to have
been paid towards continuous enjoyment of property and thus cannot be
charged to Service Tax. This amendment overcomes the above ruling.
Existing Exemptions / Concessions Amended (w.e.f February 02, 2017 unless otherwise specified)
Sr. No. Taxable Service Existing Entry Substituted Entry ELP Comments
1. Education Services provided by the Services provided by the The word “residential” has
Services Indian Institutes of Indian Institutes of been omitted.
Management by way of 2 Management by way of the
year full time residential following educational It thus appears that the
Post Graduate Programmes programs: intention is to broaden the
in Management (other than 2 year full time Post exemption benefit even to
executive development Graduate Programmes in non-residential
programme), admissions to Management (other than programmes, provided the
which are made through executive development subject programmes fulfill
Common Admission Test programme), admissions to the other specified
conducted by Indian which conditions.
Institutes of Management. are made through Common
Admission Test conducted
by Indian Institutes of
Management.
2. Job-work Carrying out an intermediate Services by way of carrying The entry has been
Related production process as job in out - amended to realign and
relation to – (i) any process amounting consolidate Service tax
Services
(a) agriculture, printing or to manufacture or exemptions in relation to
textile processing; production of goods Job-work of final and/or
(b) cut and polished excluding alcoholic liquor intermediate products
diamonds and gemstones; or for human consumption; or (whether or not amounting
plain and studded jewellery (ii) any intermediate to manufacture or
of gold and other precious production process as job production of goods).
metals, falling under Chapter work not amounting to

Sr. No. Taxable Service Existing Entry Substituted Entry ELP Comments
71 of the Central Excise Tariff manufacture or production Hither to, services by way of
Act, 1985 (5 of 1986); in relation to – carrying out “any process
(c) any goods excluding (a) agriculture, printing or
amounting to manufacture
alcoholic liquors for human textile processing;
or production of goods
consumption, on which (b) cut and polished
appropriate duty is payable diamonds and gemstones; excluding alcoholic liquor
by the principal or plain and studded for human consumption”
manufacturer; or jewellery of gold and other formed part of the negative
(d) processes of precious metals, falling list of services in Section
electroplating, zinc plating, under Chapter 71 of the 66D(f) – which now stands
anodizing, heat treatment, Central Excise Tariff Act,
omitted.
1985 (5 of 1986);
powder coating, painting
(c) any goods excluding
including spray painting or alcoholic liquors for human This exemption shall be
auto black, during the course consumption, on which effective from the date on
of manufacture of parts of appropriate duty is payable which the Finance Bill, 2017
cycles or sewing machines by the principal receives assent of the
upto an aggregate value of manufacturer; or President.
taxable service of the (d) processes of
specified processes of one electroplating, zinc plating,
hundred and fifty lakh INR in anodizing, heat treatment,
a financial year subject to powder coating, painting
the condition that such including spray painting or
aggregate value had not auto black, during the
exceeded one hundred and course of manufacture of
fifty lakh INR during the parts of cycles or sewing
preceding financial year. machines upto an
aggregate value of taxable
service of the specified
processes of one hundred
and fifty lakh INR in a
financial year subject to the
condition that such
aggregate value had not
exceeded one hundred and
fifty lakh INR during the
preceding financial year.

Amendments to Rules
ELP Comments
Service Tax (Determination of Value) Rules, 2006
Rule 2A is proposed to be amended with effect from July 01, 2010 The Delhi High Court in Suresh Kumar Bansal vs
retrospective effort so as to make it clear that value of service portion in Union of India [2016-TIOL-1077-HC-DEL-ST]
held that in the absence of machinery
execution of works contract involving transfer of goods and land or
provision, to exclude cale of property or goods
undivided share of land, as the case may be, shall not include value of transferred, the levy fails and no service tax is
property in such land or undivided share of land. chargeable (w.e.f. July 01, 2010). This
amendment overcomes the judgment in Suresh
Kumar Bansal’s case.
Also, sub-Rule (2) has been inserted in Rule 2A to provide an alternative
valuation mechanism of 25% or 30% of the gross amount charged (for
different periods) in case of works contract. The gross amount charged for
this purpose is defined to include the value of goods as well as land or undivided share of land.
Others
Research and Development Cess ELP Comments
 Research and Development Cess Act, 1986 is proposed to be repealed. This development does result in full Service tax
levy along with cesses (Swachh Bharat Cess and
Krishi Kalyan Cess) on the subject taxable
 Notification No. 14/2012-ST dated March 17, 2012 exempts the taxable services on a going forward basis.
service involving import of technology from so much of the service tax
leviable thereon as is equivalent to the amount of cess payable on the However, this is likely to be beneficial for the
said import of technology under the Research and Development Cess assessees inasmuch as the credit of excessive
Act, 1986. Consequently, with effect from the enactment of the Finance Service tax so paid ought to be admissible
Bill, 2017, the exemption from Service tax under the said Notification (subject to fulfillment of other conditions);
would not be available to a taxable service involving import of whereas, the Research and Development Cess
technology on which Research and Development Cess is not payable and paid hither to used to be a cost in the
transaction (as its credit was not permissible in
full ST will be applied on the gross amount charged.
terms of the CCR).

Excise
Legislative Changes
Advance Ruling
Proposals are identical to those in Service Tax law
Settlement of Cases
 Scope of Section 32E has been widened to include any person not restricted to the persons specified in sub Section (1)
and who can make an application to the Settlement Commission.
 In terms of new sub-Section (5A) to Section 32F, the Settlement Commission can now amend its order to rectify any
error apparent on the record.
Remission of duty ELP Comments
 Sub rule (2) is being inserted in Rule 21 of the CE Rules to provide the time limit of Earlier there was no time limit
three months (further extendable by 6 months) for granting remission of duty. prescribed for remission of duty.
Clarifications with respect to applicability of Exemption Notifications to EOU
 EOUs are not entitled to claim exemption from payment of duty on procurement of raw material / inputs used in
respect of finished goods sold to DTA, which finished goods are exempt from duty. However, it has been clarified that in
such a scenario EOU also can claim the benefit of exemptions provided under various notifications with respect to such
raw materials / inputs.
Tariff Changes
Changes in Rate of Central Excise Duty

There has been no change in the peak rate of Excise Duty @ 12.5%
Sr. Existing Rate Revised Rate

CETH Description of Goods
No. (%) (%)
1 21069020 Pan Masala ( not containing Tobacco) 6 9
2 2401 Un-manufactured tobacco and tobacco 4.2 8.3
refuse, bearing a brand name
3 24039910 Chewing Tobacco 6 12
4 24039930 Jarda Scented Tobacco 6 12
5 24039990 Pan Masala containing Tobacco ‘Gutkha’ 6 12
6 Any chapter All items of machinery, including Respective schedule 6
instruments, apparatus and appliances, rate as applicable to (Subject to
transmission equipment and auxiliary each item production of a
equipment (including those required for certificate from Dy.

testing and quality controls) and Secretary,

components, required for- Government of
(a) Initial setting up of fuel cell India, Ministry of
based system for generation of New and Renewable
power or for demonstration Energy)
purposes; or
(b) Balance of systems operating
on bio-gas or bio-methane or
by-product hydrogen.
7 24031929 Handmade Paper Rolled biris INR 21 per Thousand INR 28 per thousand
8 24031929 Machine made paper rolled biris INR 21 per Thousand INR 78 per thousand
9 3101 All goods other than those which are 1 Excluded from
clearly not to be used as fertilizer (as per 12/2012) 12/2012 as tariff
rate itself is ‘Nil’
10 38159000 Catalyst for use in the manufacture of 12.5 NIL
cast components of wind operated (Actual user
electricity generator condition)
11 39094090 Resin for use in the manufacture of cast 12.5 NIL
components of wind operated electricity (Actual user
generator condition)
12 39211900 Membrane sheet and tricot / spacer for 12.5 6
use in manufacture of reverse osmosis (Actual user
(RO) membrane for household type condition)
filters
13 70 Solar tempered glass for use in Nil 6
manufacture of: (Actual user
(a) Solar photovoltaic cells or condition)
modules;
(b) Solar power generating
equipment or systems;
(c) Flat plate solar collector;
(d) Solar photovoltaic module and
panel for water pumping and
other applications.
14 Any chapter Parts/Raw material for use in 12.5 6
manufacture of solar tempered glass for (Actual user
use in: condition)
(a) Solar photovoltaic cells or
modules;
(b) Solar power generating
equipment or systems;
(c) Flat plate solar collector;
(d) Solar photovoltaic module and
panel for water pumping and
other applications.
15 84 or 85 The following goods namely: Respective schedule Nil
(i) Micro ATMs as per standards rate as applicable to (Actual user
version 1.5.1; each item condition)
(ii) Fingerprint readers/scanner
(iii) Iris scanner;
(iv) Miniaturised POS card readers

for mPOS (other than mobile

phone or tablet computer);
(v) Part and components for use in
manufacture of the goods
mentioned in (i) to (iv) above.
16 Any chapter All inputs for use in manufacture of LED Respective schedule 6
lights and Fixtures or LED Lamps (except rate as applicable to
LED driver and MCPCB used in each item
manufacture of LED Lamps which were
already subjected to 6%)
17 2402 10 10 Cigar and Cheroots 12.5 or INR 3755 per 12.5 or INR 4006 per
thousand, whoever thousand whichever
is higher is higher
18 2402 10 20 Cigarillos 12.5 or INR 3755 per 12.5 or INR 4006 per
is higher is higher
19 2402 90 10 Cigarettes of tobacco substitute INR 3755 per INR 4006 per
thousand thousand
20 2402 90 20 Cigarillos of tobacco substitute 12.5 or INR 3755 per 12.5 or INR 4006 per
is higher is higher
21 2402 90 90 Others of tobacco substitutes 12.5 or INR 3755 per 12.5 or INR 4006 per
is higher is higher
22 8702 90 21, Motor Vehicles for the transport of ten 27 12.5
8702 90 22, or more person, including the driver
8702 90 28 &
8702 90 29
Pan Masala
Rate of duty per packing machine per month increased for:
 Pan Masala containing more than 15% Betel Nut following under CETH 21069020
 Pan Masala containing Tobacco, commonly known as gutkha following under CETH 24039990
This is further followed by revised percentage of apportionment of duty so paid into the duty leviable under the CE Act;
Additional Duty of Excise leviable under Section 85 of the Finance Act, 2005, and National Calamity Contingent Duty
leviable under Section 136 of the Finance Act, 2004.
Waste & Scrap

Nil rate of duty as applicable to waste and scrap of precious metals or metals clad with precious metals, arising in the
course of manufacture of goods falling under Chapter 71, subject to condition No. 52A which bars availment of credit on
inputs, input services and capital goods.
Strips, Wires, Steels etc.

Nil rate of duty as applicable to strips, wires, sheets, plates and foil of silver, subject to condition No. 52A which bars
availment of credit on inputs, input services and capital goods.

Silver Coins
Nil rate of duty as applicable to “Silver coins of purity 99.9% and above, bearing a brand name when manufactured from
silver on which appropriate duty of customs or excise has been paid” subject to condition No. 52A which bars availment of
credit on inputs, input services and capital goods.
Silver Jewellery
Nil rate of duty as applicable to “articles of silver jewellery, other than those studded with diamond, ruby, emerald or
sapphire” subject to condition No. 52A which bars availment of credit on inputs, input services and capital goods
Tobacco
Rate of duty per packing machine per month increased for:
 Unmanufactured tobacco, bearing brand name, falling under CETH 2401

 Chewing tobacco falling under CETH 2403 99 10
 Jarda scented tobacco falling under CETH 2403 99 30
This is further followed by revised percentage of apportionment of duty so paid into the duty leviable under the CE Act;
Additional Duty of Excise leviable under Section 85 of the Finance Act, 2005, and National Calamity Contingent Duty
leviable under Section 136 of the Finance Act, 2004.
Customs
Legislative Changes
Definitions
 The definition of ‘beneficial owner’ has been proposed to be inserted to mean any person on whose behalf the goods
are being imported or exported or who exercises effective control over the goods being imported or exported.
 The definition of ‘customs station’ has been proposed to be amended to include foreign post office and international
courier terminal.
 The definition of ‘importer’ and ‘exporter’ are proposed to be amended to include a ‘beneficial owner’ in addition to
‘owner’.
Advance Rulings
The proposals in relation to amendment of Sections 28E to 28M of the Customs Act dealing with advance rulings in
Customs matters are identical to those in Service Tax law.
Other Changes
 Section 17(3) is proposed to be amended to substitute the terms “contract, broker’s note, insurance policy, catalogue
or other document” with “any document or information”. Further, the sentence “and to furnish any information
required for such ascertainment which is in his power to produce or furnish” is proposed to be omitted. Accordingly,
Section 17 has been proposed to be amended to rationalize the requirement of documents for verification of self
assessment.
 Clause (g) is proposed to be inserted in Section 27(2) to specifically include an additional situation where the aount
refundable is to be paid to the applicant and not required to be credited to the Consumer Welfare Fund which is where

excess duty has been paid before an order permitting clearance of goods for home consumption is made and where (i)
the excess payment of duty is evident from the self-assessed bill of entry; or (ii) the duty actually payable is reflected in
reassessed bill of entry.
 Section 46(3) is proposed to be substituted so as to make it mandatory to file the Bill of Entry before the end of the
next day following the day (excluding holidays) on which the vessel or aircraft or vehicle carrying the goods arrives at a
customs station.
 Section 47(2) is proposed to be amended so as to provide the manner of payment of duty and interest thereon in the
case of self-assessed Bills of Entry.
 Section 49 is proposed to be amended to extend the facility of storage to imported goods entered for warehousing
before their removal.
 Section 69 relating to clearance of warehoused goods for exportation is proposed to be amended to align it with the
proposed omission of Section 82.
 A new sub-section is proposed to be introduced in Section 127C to specifically empower the Settlement Commission to
amend the order passed by it to rectify any error apparent on the face of the record, either suo motu or when the error
is brought to its notice by the Customs authorities.
International Trade
Legislative Changes
In terms of clause (c) of sub-section (3) of Section 9 of Customs Tariff Act, the countervailing duty shall not be levied unless
it is determined that:
 the subsidy relates to export performance;

 the subsidy relates to the use of domestic goods over imported goods in the export article; or
 the subsidy has been conferred on a limited number of persons engaged in the manufacture, production or export of
articles, unless such subsidy is for
(i) research activities conducted by or on behalf of persons engaged in the manufacture, production or export;
(ii) assistance to disadvantaged regions within the territory of the exporting country; or
(iii) assistance to promote adaptation of existing facilities to new environmental requirements.
The proposed amendment seeks to remove the exemption to subsidies pertaining to research activities, assistance to
disadvantaged regions and assistance to promote environmental compliance which were classically categorized as ‘non-
actionable subsidies’ under the WTO’s Agreement on Subsidies and Countervailing Measures (‘ASCM’).

Tariff Changes
Changes in Rate of Customs Duty
Sr. No. CTH Description of Goods Existing Rate Revised Rate

(%) (%)
Basic Customs Duty
1. 2008 19 10 Cashew nut, roasted, salted or roasted and salted 30 45
2. 8421 99 00 Reverse Osmosis (RO) for household type filters 7.5 10
3. Any Chapter All items of machinery, including, instruments, 7.5/10 5
apparatus and appliances, transmission
equipment and auxiliary equipment (including
those required for testing and quality control)
and components, required for initial setting up of
fuel cell based system for generation of power or
for demonstration purposes [Subject to fulfilment
of prescribed conditions]
4. 2711 11 00 Liquefied Natural Gas (LNG) 5 2.5
5. 2902 41 00 O-Xylene 2.5 NIL
6. 2914 61 00 Anthraquinone (For use other than manufacture 2.5 10
of Hydrogen Peroxide)
7. 2914 69 90 2-Ethyl Anthraquinone, for use in manufacture of 7.5 2.5
Hydrogen Peroxide [Subject to actual user
condition]
8. 2917 36 00 Medium Quality Terephthalic Acid (MTA) and 10 5
Qualified Terephthalic Acid (QTA)
9. 3201 20 00 Wattle extract 7.5 2.5
10. 3201 90 20 Myrobalan fruit extract 7.5 2.5
11. 3404 20 00 Vinyl Polyethylene Glycol for use in manufacture 10 7.5
of Poly Carboxylate Ether [Subject to actual user
condition]
12. 3815 90 00 Catalyst for use in the manufacture of cast 7.5 5
components of Wind Operated Electricity
Generator [Subject to actual user condition]
13. 3909 40 90 Resin for use in the manufacture of cast 7.5 5
Generator [Subject to actual user condition]
14. 5404 19 90 Monofilament yarn for use in monofilament long 7.5 5
line systems for tuna fishing [Subject to actual
user condition]
15. 70 Solar tempered glass or solar tempered (anti- 5 NIL
reflective coated) glass for manufacture of Solar
cells/panels/modules [Subject to actual user
condition]


(%) (%)
16. 7208 Hot rolled coils for use in manufacture of welded 12.5 10
tubes and pipes falling under CTH 7305 or CTH
7306 [Subject to actual user condition]
17. 7212 40 00 Co-polymer coated MS tapes/stainless steel tapes NIL 10
for use in manufacture of telecommunication
grade optical fibres or optical fibre cables
[Subject to actual user condition]
18. 7225 19 90 Magnesium Oxide (MgO) coated cold rolled steel 15 5
coils for use in manufacture of cold rolled grain
oriented steel (CRGO) falling under CTH 7225 11
00 [Subject to actual user condition]
19. 75 Nickel and articles thereof 2.5 NIL
20. 2818 20 90 Clay 2 Powder (Alumax) for use in ceramic 10 5
substrate for catalytic convertors [Subject to
actual user condition]
21. 8483 40 00 Ball Screws for use manufacture of all types of 7.5 2.5
CNC machine tools falling under CTH 8456 to
8463
22. 8566 93 90 Linear Motion Guides for use in manufacture of 7.5 2.5
all types of CNC machine tools falling under CTH
8456 to 8463
23. 8537 10 00 CNC Systems for use in the manufacture of 10 2.5
all types of CNC machine tools falling under
headings 8456 to 8463
24. 84 or 85 The following goods, namely : 7.5/10 Nil
I. Micro ATMs as per standards version 1.5.1;
II. Fingerprint reader/scanner;
III. Iris scanner;
IV. Miniaturised POS card reader for mPOS
(other than Mobile phone or Tablet
Computer);
V. Parts and components for use in the
manufacture of the goods mentioned at (i) to
(vi) [Subject to actual user condition]
25. Any Chapter All parts for use in the manufacture of LED lights 7.5/10 5
or fixtures including LED Lamps [Subject to actual
user condition]
26. Any Chapter All inputs for use in the manufacture of LED (Light 7.5/10 5
Emitting Diode) driver or MCPCB (Metal Core
Printed Circuit Board) for LED lights and fixtures
or LED Lamps [Subject to actual user condition]
Countervailing Duty
27. 71 Silver medallions and coins having silver content NIL 12.5


(%) (%)
not below 99.9 percent other semi-manufactured
forms of silver or articles of silver
Special Additional Duty
28. 3815 90 00 Catalyst for use in the manufacture of cast 4 NIL
Generator (Effective upto June 30, 2017)
29. 3909 40 90 Resin for use in the manufacture of cast 4 NIL
generator (Effective upto June 30, 2017)
30. 84 or 85 The following goods, namely: 4 NIL
I. Micro ATMs as per standards version 1.5.1;
II. Fingerprint reader/scanner;
III. Iris scanner;
IV. Miniaturised POS card reader for mPOS
(other than Mobile phone or Tablet
Computer);
V. Parts and components for use in the
manufacture of the goods mentioned at (i) to
(vi) [Subject to actual user condition]
31. 8517 70 Populated Printed Circuit Boards (PCBs) for use in 4 2
the manufacture of mobile phones (Effective
upto June 30, 2017)
32. 84 & 85 Populated PCBs of mobile phones NIL 4
Export Duty
33. 2606 00 90 Other aluminium ores including laterite - 15
Other Amendments
 Serial number 519 of Notification No. 12/2012-Customs dated March 17, 2012 has been amended to exempt goods
imported through postal parcels, packets and letters, of CIF value not more than INR 1,000 per consignment from BCD,
CVD and SAD.
 The exemption limit for duty free imports of Buckles, ‘D’ rings, eyes, rivets, studs etc. imported by a manufacturer of
leather footwear or synthetic footwear or other leather products for exports by that manufacturer is being increased
from 3 percent of the FOB value of goods exported during the preceding financial year to 5 percent of the FOB value of
goods exported during the preceding financial year.
 Condition No. 40A [S.No.357A] of Notification No.12/2012-Customs dated March 17, 2012 is being amended so as to
allow the goods imported for petroleum or coal bed methane operations by availing of the benefit of the exemption,
which are no longer required for the said purpose, to be disposed of on payment of applicable Customs Duties, on the

depreciated value calculated as per straight line method (subject to depreciated value not being less than 30 percent
of the original value) of such goods.
CENVAT Credit Rules, 2004

Transfer of CENVAT Credit
Rule 10 of the CCR that deals with the transfer of CENVAT credit with respect to cases where a manufacturer or provider of
output service shifts his factory to another site, or shifts or transfers business, on account of change in ownership or due to
sale, merger, amalgamation, lease or transfer etc.
Further, such transfer of the CENVAT credit is allowed only if the stock of inputs as such or in process, or the capital goods
is also transferred along with the factory or business premises to the new site or ownership and the inputs, or capital
goods, on which credit has been availed of are duly accounted for to the satisfaction of the Deputy Commissioner of
Central Excise or, as the case may be, the Assistant Commissioner of Central Excise.
The language used in Rule 10 has led to plethora of disputes inasmuch as the departmental authorities have asserted that
permission is required for transfer of CENVAT credit whereas the assessees have taken a position that intimation is
sufficient to transfer the credit (subject to observance of specified conditions). In fact, in one of the judgement (M/s. S.C.
Johnson Products (P) Ltd. Vs. Commissioner of Central Excise Chandigarh 2016 (337) E.L.T. 422 (Tri. - Del.)) the Hon’ble
Tribunal has held that no permission is required to transfer the CENVAT credit in terms of Rule 10.
In this backdrop, a new sub-rule 4 is being inserted in Rule 10, to provide that transfer of CENVAT Credit shall be allowed by
the jurisdictional Deputy or Assistant Commissioner of Central Excise, within 3 months (to be further extended to 6 months
on sufficient cause being shown) from the date of receipt of application from the manufacturer or service provider in this
regard, subject to the fulfillment of other conditions.
Thus, the procedure of transfer of CENVAT credit seems to have been streamlined as this amendment clearly sets out that
an application is mandated to be filed by the assessee and it needs to be disposed of by the departmental authorities in a
time bound manner.
Payment of CENVAT Credit with respect to Banking, financial company and NBFC
Rule 6(3) to Rule 6(3D) of the CCR deals with the proportionate reversal of CENVAT credit of Excise duty and/or Service tax
paid on inputs and/or input services where a manufacturer or service
provider is engaged in both taxable and exempt activities. ELP Comments
In this regard, special provisions have been extended to banking companies, This amendment leads to enhancement of
financial institutions including NBFCs. These entities can either avail 50 reversal of credits by the stated entities in case
percent of the credits available in a particular month or resort to they follow the proportionate reversal
mechanism in view of Rule 6(3) and Rule 6(3A)
proportionate reversal with regard to the ratio of exempted turnover to
of the CCR.
total turnover.
For the purpose of valuation of turnover and reversals, Explanation

provides that the value under Rule 6(3) and 6(3A) shall not include the

value of services by way of extending deposits, loans or advances in so far as the consideration is represented by way of
interest or discount.
It has now been provided that the stated exclusion meant for computing value of turnover shall not be applicable to a
banking company, financial institution including NBFC engaged in providing services by way of extending deposits, loans or
advances.
Notes

Direct Tax:
Amendments in respect to indirect transfer provisions (Chapter 2 of the IT
Act)
ELP Comments
Retrospective exclusion of investment held by a non-resident in FPI
[Section 9]  Section 9 of the IT Act prescribes incomes that
shall be deemed to accrue or arise in India.
Explanation 5A is being inserted in Section 9(1)(i) of the IT Act to effectively Pursuant to the Finance Act, 2012,
Explanation 5 was inserted in Section 9(1)(i)
exclude from its purview investments held by non-resident, directly or
w.e.f. April 1, 1962, clarifying that an asset or
indirectly, in Category-I or Category II FPI registered under the SEBI (FPI)
capital asset, being any share or interest in a
Regulations, 2014. Such exclusion has not been proposed to be applicable to company or entity registered or incorporated
Category III FPI. outside India, shall be deemed to be situated
in India, if the same derives its value
This amendment would apply retrospectively from April 1, 2012. substantially from the assets located in India.

It has also been proposed to issue a clarification that the indirect transfer Subsequently, CBDT issued Circular No 41 of
provision shall not apply in case of redemption of shares or interest outside 2016 dated December 21, 2016 to provide
India as a result of or arising out of redemption or sale of investment in India specific guidance in relation to indirect
which is chargeable to tax in India. transfers pertaining to assets held by FPI. In
terms of the circular, the identical transaction
was being taxed at multiple levels i.e. in hands
of the FPI as well as in the hands of the non-
resident investor. The proposed amendment
seeks to address this issue and provides relief
to the non-resident investor.
Relaxation of corpus fund norms for an eligible investment fund in the year of winding up [Section 9A]
In terms of Section 9A of the IT Act, fund management activity carried out in India by an eligible investment fund does not
constitute a ‘business connection’ subject to specified conditions. One of the specified conditions stipulated that the fund
is required to maintain a monthly average of its corpus to be not less than one hundred crore INR.
Vide the proposed amendment a proviso to clause (j) of Section 9A(3) is sought to be inserted whereby the aforesaid
condition shall not be applicable to the previous year in which the eligible investment fund has been wound up.
This amendment will apply retrospectively from April 1, 2016.
The proposed amendment addresses the practical concerns of the stakeholders.

Exemptions under Section 10

Exemption of long term capital gains
Under the existing provisions of the Section 10(38), the income arising from a transfer of long term capital asset, being
equity share of a company or a unit of an equity oriented fund or a unit of a business trust is exempt from tax if the
transaction of sale is undertaken on or after October 1, 2004 and is chargeable to STT. It is now provided that for the
purpose of availing benefit under Section 10(38), STT should also have been paid at the time of acquisition of shares,
acquired on or after October 1, 2004. However, it is proposed to notify transfers for which the condition of chargeability to
STT on acquisition shall not be applicable. The memorandum has indicated that such exemption from STT would be
available for genuine cases such as acquisition of share in IPO, FPO, bonus or right issue by a listed company acquisition by
non-resident in accordance with FDI policy of the Government etc.
This amendment will take effect from April 1, 2018 and will, accordingly, apply in relation to the AY 2018-19 and
subsequent AY’s.
Exemption from long term capital gains on transfer of specified capital assets in the State of Andhra
Pradesh
With a view to provide relief to an individual or Hindu undivided family who have transferred specified capital assets under
the land pooling scheme introduced by the Government of Andhra Pradesh in 2014, exemption has been provided from
capital gains arising from such transfers.
Specified capital assets have been defined to mean the following:
 the land or building or both owned by the assessee as on June 2, 2014 and which has been transferred under the
scheme; or
 the land pooling ownership certificate issued under the scheme to the assessee in respect of land or building or
both referred to in clause above; or
 the reconstituted plot or land, as the case may be, received by the assessee in lieu of land or building or both
referred to in clause above in accordance with the scheme, if such plot or land, as the case may be, so received is
transferred within two years from the end of the financial year in which the possession of such plot or land was
handed over to him
This amendment will take effect retrospectively, from April 1, 2015 and will, accordingly, apply in relation to the
AY 2015-16 and subsequent years.
Exemption of income of Foreign Company from sale of leftover stock of crude oil from strategic reserves
at the expiry of agreement or arrangement
Currently, the exemption on any income accruing or arising to a foreign company on account of storage of crude oil in a
facility in India and sale of crude oil there from to any person resident in India shall be exempt, only during the period
specified under the agreement or arrangement entered into with the Central Government in this regard. The benefit of
exemption presently is not available to sale of the leftover stock of crude oil after the expiry of said agreement or the
arrangement.

It is proposed to insert a new clause (48B) in Section 10 so as extend the benefit of the exemption to left over crude oil to
persons residing in India even after the expiry of an agreement or an arrangement, subject to such conditions as may be
notified by the Central Government in this behalf.
This amendment will take effect from April 1, 2018 and will, accordingly, apply in relation to AY 2018-19 and subsequent
years.
Tax exemption to partial withdrawal from National Pension System [Section 10(12B)]
The existing provision of Section 10(12A) provides that payment from National Pension System Trust to an employee on
closure of his account or opting out shall be exempt up to 40% of total amount payable to him. It is proposed to insert a
new clause 12B under Section 10 so as to extend the exemption to partial withdrawal not exceeding 25% of the
contribution made by an employee in accordance with the terms and conditions specified under Pension Fund Regulatory
and Development Authority Act, 2013 and regulations made there under.
subsequent AY’s.
Rationalization of provisions of [Section 10AA]
Under the existing provisions of Section 10AA, deduction is allowed from the total income of an assessee, in respect of
profits and gains from unit operating in SEZ, subject to fulfilment of certain conditions. There have been disputes as to
whether the deduction is to be allowed from the total income of the SEZ
undertaking or from the total income of all the units of the assessee put ELP Comments
together. It is proposed to clarify that the amount of deduction referred to in
The Hon’ble Supreme Court in the case of CIT
Section 10AA shall be allowed from the total income of the assessee
vs M/S Yokogawa India Ltd [Civil appeal no.
computed in accordance with the provisions of the IT Act, before giving effect
8498 of 2013] held that deductions
to the provisions of this Section and the deduction under Section 10AA in no contemplated in Section 10A is qua the
case shall exceed the said total income. eligible undertaking of an assessee standing
on its own and without reference to the other
This amendment will take effect from April 1, 2018 and will, accordingly, eligible or non-eligible units or undertakings of
apply in relation to the AY 2018-19 and subsequent assessment years. the assessee. This clarification has overcome
the decision of the Hon’ble Supreme Court
with prospective effect.

Restriction on exemption in case of corpus donation by exempt entities to other exempt entities [Section
11]
As per the existing provisions, donations made by a trust to any other trust or institution registered under Section 12AA or
to any fund or institution or trust or any university or other educational institution or any hospital or other medical
institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of Section 10,
except those made out of accumulated income or vice versa, is considered as application of income for the purposes of its
objects.
It is proposed to insert an Explanation to Section 11 and amendment to Section 10 (23C) providing that the amount
credited or paid by the above mentioned entities being voluntary contribution made with a specific direction that they shall
form part of the corpus of the trust or institution shall not be treated as application of income to the objects for which such
entities have been established.
subsequent years.
Other amendments
 With a view to reflect the correct definition of the expression "person resident outside India", it is proposed to
amend existing sub-clause (ii) of clause 4 of Section 10 to reference the correct clause of FEMA instead of FERA. The
amendment is clarificatory in nature and will take effect retrospectively from April 1, 2013.
 Under the existing provisions contained in clause (23C) of Section 10, exemption is provided in respect of income of
certain funds which, inter-alia, include, the Prime Minister's National Relief Fund. Exemption has also been
extended to the Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund, being of the same nature at
the level of state or the Union Territory. This amendment will take effect retrospectively from the April 1, 1998.
Income from House Property

Restriction on set-off of loss from House Property [Section 71]
Section 71 of the IT Act is proposed to be amended to provide that for the ELP Comments
set-off of loss under the head ‘Income from House property’ would be
The amendment seeks to restrict the loss
restricted to INR 2 Lakhs in that AY. However, the unabsorbed losses, if any,
under the head ‘Income from House property’
shall be allowed to be carried forward for set-off in subsequent years.
to be set off against any other head in that AY
This amendment will be effective from April 01, 2018 and will, accordingly
apply in relation to AY 2018-19 and subsequent years.
No Notional Income from House property held as Stock-in-trade [Section 23]
Section 23 of the IT Act is proposed to be amended to provide that where the house property is held as stock-in-trade and
the property or any part of the property is not let out during the PY, the annual value of such property or part of the
property, for the period upto one year from the end of the FY in which the completion certificate is obtained from the
competent authority, shall be Nil.

This amendment will take effect from April 1, 2018 and will, accordingly apply in relation to assessment year 2018-19 and
subsequent years.
Business Income
ELP Comments
Disallowance of expenditure; payment of which is made in cash
As a measure towards digital economy and in
line with its policy of TEC India, Government
In order to discourage the cash payments, it has been proposed to disallow has proposed to reduce allowable expenses
various expenses made in cash while computing profits and gains of business made in cash above a minimum threshold of
and profession apart from payments made by an account payee cheque or an INR 10,000.
account payee bank draft or use of electronic clearing system through a bank
account.
Sr. No Section Proposed amendment
Restriction introduced for disallowing of the capital

1. 35AD(8)(f) expenditure made to a person in a day in cash exceeding INR
10,000
Disallowance of any expenditure incurred in respect of which
2. 40A(3) payment or aggregate of payments made to a person in a day
exceeding INR 10,000 reduced from INR 20,000
Where an allowance has been made in the any previous year
for any expenditure, the payment made in subsequent year will
be deemed to be the profits and gains of business and
profession for such subsequent year if the payment or
3. 40A(3A)
aggregate of payments made to a person in a day in cash
exceeds INR 10,000 (except the specified payments mentioned
under Rule 6DD of the Income-tax Rules, 1962) reduced from
INR 20,000
Restriction introduced for expenditure incurred for acquisition
of any asset or part thereof in respect of which payment or
4. 43(1) aggregate of payments made to a person in a day exceeds INR
10,000 shall be ignored for the purposes of determination of
actual cost
The above proposed amendments will be effective from April 1, 2018; applicable for AY 2018-19 and subsequent years.
Deduction limit in respect of provision of bad and doubtful debts made by specified banks – [Section 36]
It is proposed to enhance the present limit of deduction from seven and a half percent to eight and a half percent. This is
with a view to strengthen the financial health of the eligible banks.
Section 36(1)(viia) of the IT Act enables a scheduled bank, non-scheduled bank or a co-operative bank to claim deduction of
the provision for bad and doubtful debts to the extent of seven and a half percent of the total income.
The proposed amendment will be effective from April 1, 2018; applicable for AY 2018-19 and subsequent years.

Clarity on determination of actual cost of capital asset for the purpose of calculation of depreciation –
[Section 43]
Section 35AD of the IT Act provides for investment linked deduction on capital expenditure incurred for the purpose of
business. Further, as per Sub-Section (7B) of Section 35AD the deduction in respect of the capital assets not used in the
specified business is deemed to be the income (net of depreciation) of the assessee, i.e. deduction is disallowed. In terms
of Section 32 of the IT Act, depreciation is calculated inter alia on the basis of the actual cost of the asset. The term ‘actual
cost’ is defined under Section 43 of the IT Act.
It has been proposed to amend Section 43 of the IT Act to provide for determination of actual cost in such situation where
deduction under Section 35AD (7B) is disallowed/withdrawn. It is proposed that the actual cost would be the actual cost to
the assessee as reduced by an amount equal to the depreciation calculated at the rate in force that would have been
allowable had the asset been used for the purpose of business since the date of its acquisition.
The said proposal is based on the recommendation of Income Tax Simplification Committee [Easwar Committee] which is
to clarify the mechanism to determine the actual cost for calculating the depreciation on the capital goods in respect of
which the deduction allowed under Section 35AD is withdrawn.
The proposed amendment will be effective from April 1, 2018, applicable for AY 2018-19 and subsequent years.
Deductions available on actual payment of interest on loan or advance from co-operative banks [Section
43B]
Under Section 43B(e) of IT Act, deductions are available to assessee on actual payment of interest on loans taken from
scheduled banks. With the proposed insertion of “co-operative bank other than a primary agricultural credit society or a
primary co-operative agricultural and rural development bank”, to the aforesaid Section, deductions will also be available
to the specified taxpayers on actual payment of interest on loans taken from co-operative banks.
Co-operative banks would mean to include a State co-operative bank, a central co-operative bank and a primary co-
operative bank, as defined in Part V of the Banking Regulation Act, 1949 (10 of 1949).
Extension of scope of Section 43D to co-operative Banks
 Under Section 43D(a) of the IT Act, the income by way of interest, received by public financial institutions, scheduled
banks, State financial corporations, State industrial investment corporation, in relation to prescribed categories of bad
or doubtful debts, was chargeable to tax in the previous year in which it was entered in their profit and loss account or
in the year these institutions actually received the interest, whichever was earlier.
 The facility under Section 43D of the IT Act, is an exception to the accrual system of accounting which is generally
followed by assessees like public financial institutions, scheduled banks, State financial corporations, State industrial
investment corporation for computation of total income.
 The said benefit is proposed to be extended to co-operative banks as well.
 These amendments will take effect from April 1, 2018 applicable for AY 2018-19 and subsequent years.

Increasing the threshold limit for maintenance of books of accounts in case of individuals and HUF not
carrying on specified profession [Section 44AA(2)]
Under Section 44AA(2) of the IT Act, every person (not carrying on certain notified business or profession) is obligated to
maintain books of accounts where their income exceeds INR one lakh twenty thousand or the total sales, turnover or gross
receipts, as the case may be, exceeds INR ten lakh in any one of the three years immediately preceding the previous year.
The said monetary threshold for maintaining books of accounts is proposed to be increased for individuals and HUF to
income of INR two lakh fifty thousand total sales, turnover or gross receipts of INR twenty five lakhs.
Exclusion of certain specified person from requirement of audit of accounts [Section 44AB]
Under Section 44AB, certain specified persons carrying on business or profession are required to get their accounts for the
previous year audited by an accountant and furnish such audit report by the due date for furnishing the return for income
prescribed under Section 139(1) of the IT Act.
It is proposed to exclude eligible persons who declare profits and gains for the previous year in accordance with the
provisions of sub-section (1) of section 44AD i.e. where profit and gains of business are computed on presumptive basis
and the total sales, turnover or gross receipts, as the case may be, in business does not exceed INR 2 crores in such
previous year, from such audit requirement.
Measures for promoting digital payments in case of small unorganized businesses [Section 44AD]
Section 44AD of the IT Act, inter alia, provides for a presumptive income scheme in case of eligible assesses carrying on
eligible businesses. Under this provision, in case of an eligible assessee engaged in eligible business having total turnover or
gross receipts not exceeding INR two crore in a previous year, a sum equal to eight percent of the total turnover or gross
receipts, or, as the case may be, a sum higher than the aforesaid sum declared by the assessee in his return of income, is
deemed to be the profits and gains of such business chargeable to tax under the head profits and gains of business or
profession.
It is proposed that if the total turnover or gross receipts (not exceeding INR two crores) have been received through
electronic clearing system through a bank account, the presumptive profit and gains of the business or profession shall be
calculated at six% instead of eight percent.
Capital Gains
Changes under long term capital gain
 The period of holding to qualify as long term capital assets has been reduce from existing 36 months to 24 months in
case of immovable property being land or building or both.
 It is proposed to amend Section 55 of the IT Act, so as to revise the base year for computation of long term capital gain
(“LTCG”) from April 1, 1981 to April 1, 2001. Further, it is provided that the cost of acquisition of an asset acquired
before April 1, 2001 shall be allowed to be taken as fair market value as on April 1, 2001 and the cost of improvement
shall include only those capital expenses which are incurred after April 1, 2001.
 It is proposed to amend Section 54EC so as to provide exemption from LTCG on investment in any other bond as may be
notified by the Central Government and redeemable after 3 years.

Extension of capital gain exemption to Rupee Denominated Bonds
 Currently, the gains arising to non-resident investor (subscriber) on redemption of rupee denominated bonds is not
liable to income tax.
 It is proposed to amend proviso to section 48 of IT Act, to extend the aforesaid exemption to secondary holders as well.
 Additionally it is also proposed to amend section 47 of the IT Act, to state that any transfer of rupee denominated bond
of Indian company, by a non-resident to any other non-resident shall not be regarded as transfer.
All the above amendment related to LTCG will come into force from April 1, 2018 and will, accordingly, apply in relation to
the assessment year 2018-19 and subsequent assessment years.
Capitals gains in case of Joint Development agreement [Section 45(5A)]
Section 45(5A) is proposed to be introduced to provide the point of taxation for ELP Comments
individuals and HUFs entering into Joint Development
Taxability of Joint Development Agreement
 The capital gains shall be chargeable to tax in the previous year in which has been an area of controversies. The
certificate of completion is issued by the competent authority. Full value proposed amendment clarifying and shifting
of consideration for the purpose of determining the capital gains will be the point of taxation to the event of issuance
of certificate of completion is welcome move.
stamp duty valuation of land or building as on the completion date along
This proposal overcomes the judgement of the
with monetary consideration received, if any.
Bombay High Court in the case of Chaturbhuj
 It is also clarified that these provisions shall not apply in case the assessee Dwarkadas Kapadia vs Commissioner Of
transfers his share in the project to any other person on or before the Income-Tax, (260 ITR 491 Bom) wherein it was
issuance of certificate of completion. held that tax liability triggers on the transfer –
date of the contract between the parties.
Notably, this proposal will be applicable to
individuals and HUF’s, and not corporate -
assessees and firms.

Fair market value provisions in case of sale of shares of unlisted ELP Comments
company [Section 50CA]

 Under provisions of Section 56(2)(viia) and
the proposed Section 56(2)(x), liability is also
Section 50CA is proposed to be introduced to provide that where
cast on the buyer, if the transaction is
consideration for transfer of shares of unlisted company is less than the FMV
undertaken for a consideration that is less
of such shares, determined in accordance with the prescribed manner, the
than the FMV. With these amendments
FMV shall be deemed to be the full value of consideration for the purpose of
there may arise a concern as to the taxation
computing income under the head ‘Capital Gains’.
of both buyer and seller.
Clarification on cost of acquisition in case of capital assets of

charitable institutions [Section 49(8)]
 Sub-section (8) has been proposed to be inserted in Section 49 to bring about clarity in the determination of cost of
acquisition of assets for the purpose of computation of tax on accreted income of trusts and institutions in terms of
Section 115TD of the Act. The cost of acquisition shall be the fair market value of the capital asset which has been
taken into account for computation of accreted income.
This provisions has been amended with retrospective effect from June 1, 2016.
Conversion of preference shares into equity shares (Section 47(xb)) ELP Comments
Clause (xb) to Section 47 is proposed to be introduced to include conversion This is a welcome move, which removes
of preference shares to equity shares. As per the said proposal, conversion of ambiguity and provides for tax neutrality.
preference shares into equity shares will not be regarded as transfer thus not
attract tax. Consequential amendments have been proposed in Section 49
and Section 2(42A) which deal with the cost of acquisition and period of holding for the purpose of capital gains arising on
sale of equity shares. The cost and date of acquisition of preference shares will be considered when computing capital
gains liability upon transfer of the equity shares.
Transfer of shares of Indian Entity by demerged foreign entity [Section 49]
It is proposed to amend Section 49 so as to provide that cost of acquisition of the shares of an Indian company referred to
in Section 47(vic) in the hands of the resulting foreign company shall be the same as it was in the hands of demerged
foreign company. Under the existing provision of Section 47(vic), the transfer of shares of an Indian company by a
demerged foreign company to a resulting foreign company is not regarded as transfer.
Transfer of units in consolidated mutual fund plan [Section 47(xix)]
Transfer of units in consolidating plan of mutual fund will not be regarded as transfer. Cost of acquisition for the purpose
will be cost of units in consolidated plan and period of holding will be computed from the date of purchase of units in such
consolidated plan.

Income from Other Sources

ELP Comments
Widening scope of Income from Other Sources [Section 56(2)(x)]
The existing anti-abuse provisions under
Section 56(2)(vii) of the IT Act provides that any sum of money or any Section 56(2)(vii) and 56(2)(viia) of the IT
property which is received without consideration or for inadequate Act are applicable only in case of
consideration (in excess of the specified limits) by an individual or HUF is individual, HUF, firm or company in
certain cases. It has now been expanded
chargeable to income-tax subject to certain exceptions. Section 56(2)(viia) of
to include all categories of assessees
the IT Act provides that the receipt of certain shares by a firm or a company
irrespective of the status of the assessee.
in which the public are not substantially interested without consideration or
for inadequate consideration, is chargeable to income-tax where such receipt As regards the existing provisions, a
is in excess of the specified limits. sunset clause has been introduced
making the same applicable on or before
It is proposed to insert a new clause (x) to Section 56(2) of the IT Act to widen
April 1, 2017.
the scope of ‘Income from Other sources’ to include all categories of
assessees who receive money or any property without consideration or for
inadequate consideration in excess of the specified limits. Further, it is
proposed that the amendment would not apply to certain specified transactions which are not regarded as ‘transfer’ under
Section 47 of the IT Act.
This amendment will take effect from April 1, 2017 and the said receipt of sum of money or property on or after April 1,
2017 shall be chargeable to tax in accordance with the provisions of proposed provision.
Deductions
Deduction in relation to start ups [Section 80-IAC] ELP Comments
 In terms of the Finance Act 2016, eligible start ups were allowed  Considering the gestation period of
deduction of 100 per cent of the profit and gains derived from eligible start ups and as a measure for
business for any three consecutive years out of the five years beginning stimulating growth and to promote
from the year in which the start-up is incorporated Start-up India, the Government has
 The five year period is proposed to be extended to seven years with effect proposed to incentivise start-ups by
from April 1, 2018
relaxing the conditions for profit linked
 Additionally, Section 79 is also proposed to be amended to provide for
deductions and by allowing carry
carry forward and set off of losses for start ups. The loss incurred in any
forward of losses.
year prior to the previous year can be carried forward and set off against
the income of the previous year, subject to following two conditions –
 all the shareholders holding shares carrying voting power on the last
day of the year in which loss was incurred continue to hold those
shares on the last day of such previous year; and
 such loss has been incurred during the period of seven years beginning from the year in which such company is
incorporated

Deductions to promote affordable housing [Section 80-IBA]
 In terms of the Finance Act, 2016, 100 per cent deductions were provided in respect of the profits and gains derived
from developing and building certain housing projects
 Following relaxations have been proposed to make the scheme more attractive:
 The size of residential unit is proposed to be measured by taking into account the ‘carpet area’ instead of the
‘built-up area’
 The restriction of 30 square meters on the size of residential units is proposed to be applicable only to places
within the municipal limits of Mumbai, Delhi, Kolkata and Chennai and not to extend to any place located within a
distance of 25 kms from these municipal limits
 The period of completion of project for claiming deduction is proposed to be increased from three years to five
years
 The amendment proposed to be with effect from April 1, 2018
ELP Comments
Deduction to restrict donations in cash [Section 80G]
 As a move towards digital economy, the
Deduction of cash donations of a general nature proposed to be restricted
Government has reduced the limit of
upto INR 2000 as against INR 10000 with effect from April 1, 2018
deduction in respect of cash donations
Deduction respect of pension scheme of the Central Government [Section 80CCD]
 In terms of the Finance Act 2016, 10 percent deduction was provided in

respect of money paid or deposited under a pension scheme notified by ELP Comments
the Central Government, to either an individual who is an employee, or an
individual who is self-employed.  The particular amendment is sought to
 In addition to the above, a further deduction of 10 percent was allowed to be introduced to negate the disparity of
an individual who is an employee, in respect of any contribution made to the deductions allowable under this
the said scheme by his employer. Therefore effectually, a cumulative total
Section between an employee-assessee
of 20 percent deduction was available for an individual who is an
and a self-employed assessee.
employee.
 It is proposed to increase the deductions allowable to an individual who is 
self-employed to 20 percent of his gross total income to bring it on par 
with deductions allowable to an individual who is an employee.
ELP Comments
Withdrawal of deductions in respect of investments made under
notified equity savings scheme [Section 80CCG]  The phasing out of the deductions is to
rationalize the multiplicity of deductions
 In terms of the Finance Act, 2016, 50 percent deduction (upto the extent currently available under the IT Act and
of INR 25,000) was available to a new retail investor in respect of as it is stated that only limited number
acquisition of listed equity shares or listed units of an equity oriented fund of individuals availed this deduction.
in accordance with a notified scheme.
 It is proposed that such deduction will be phased out with effect from AY
commencing on April 1, 2018.

Rebates in case of certain individuals [Section 87A] ELP Comments
 Under Section 87A, an individual assessee whose total income did not Such measure has been taken to avoid
exceed INR 5,00,000 was entitled to deduction of an amount of INR 5000 duplication of benefits as the tax rate for
or equal to 100 percent of the income tax payable by him(whichever is the bracket between INR 2,50,000 to INR
less), from the amount of income tax payable by him before allowing any 5,00,000 has been reduced from the
deductions. current 10% to 5%.
 It is proposed that such deduction amount would be reduced to INR 2500

and the same will be allowed for an individual whose total income does
not exceed INR 3, 50,000.
Notes:

Transfer Pricing ELP Comments
Scope of ‘Specified Domestic Transactions’ curtailed to exclude The objective of introducing domestic transfer
payments made for expenses to related entities [Section 92BA] pricing vide the Finance Act, 2012 was to
reduce tax leakages whereby domestic
entities framed tax structures in order to
Section 92BA of the IT Act, which deals with ‘Specified Domestic Transactions’
minimize their tax obligations. However,
has been proposed to be amended with effect from April 1, 2017 to exclude
inclusion of transactions between most of the
from its scope, the payments by an asseesse to the related entities under related parties within the scope of the
Section 40A(2)(b). Thus, payments made to specified related entities such as domestic transfer pricing has resulted in
relative of an individual, director of a company, companies having substantial compliance burden on the domestic
interest in assessee’s business etc. will no longer attract ‘domestic transfer companies. The entities covered under the
pricing’ provisions. domestic transfer pricing had gone up
substantially resulting in scrutiny even when
Resultantly, the domestic transfer pricing provisions will be restricted to such both the associated enterprises are subject to
transactions, where one of the entities specified profit-linked incentive viz. Income tax assessments. The proposed
undertakings claiming industry based tax holidays, undertakings in SEZ etc. amendment will reduce compliance burden
and is a welcome amendment.
“Secondary adjustments” for non-arm’s length transactions [Section

92CE] ELP Comments
The proposed amendment aims at aligning the

A new Section 92CE is proposed to be inserted with effect from April 1, 2018,
transfer pricing provisions with the OECD
which provides that an assessee undertaking a non-arm’s length transaction transfer pricing guidelines and international
shall be required to make a “secondary adjustment” where the “primary best practices relating to ‘primary and
adjustment” to the transfer price has been made in certain specified cases. secondary adjustments’. In the case of PMP
Auto Components P. Ltd. [TS-263-ITAT-
A “primary adjustment” to the transfer price has been defined to mean 2014(Mum)-TP] the Hon’ble ITAT held that
determination of transfer price in accordance with the arm’s length principle, secondary adjustments in case of transfer
which invariably results in additional taxable income of the assessee. pricing is not permitted in absence of any
provision for this purpose in the IT Act.
A “secondary adjustment” means adjustment in the books of account of the However, introduction of this provision will
assessee and its associated enterprise, consistent with the transfer price now permit such adjustments and will result
determined as a result of primary adjustment, thereby removing the in higher tax burdens either in the form of
imbalance between the cash account and the actual profit of the assessee. income tax on deemed interest income (in
case on non-repatriation) or dividend
The proposal shall apply if the primary adjustment exceeds INR one crore in distribution tax (in case of repatriation to the
any previous year and the excess adjusted money available with the asseesse in India) and subsequent higher
allocation of profits in the form of dividend to
associated enterprise outside India is not repatriated to India within the
the associated enterprises outside India.
prescribed time. In case of non-repatriation, excess money is deemed to be
an advance made by the assessee to its associated enterprise outside India
and prescribed interest on such advance would be liable to tax in India.
However, it is to be noted that any primary adjustment made on or before
April 1, 2016 are excluded from the scope of this Section.

Rationalization of MAT provisions

Objective
 To provide necessary adjustment to book profit determined as per Ind AS (which are converged with International
Financial Reporting Standards) by the companies, in the year of adoption and thereafter. The key issue faced by such
companies was manner in which adjustment of “other comprehensive income” was to be made for computing MAT
liability.
 The OCI includes certain items that will permanently be recorded in reserves and never be reclassified to the statement
of profit and loss for computation of profits. These inter-alia can be in nature of revaluation / fair market valuation,
notional / unrealized income etc.
Adjustment for Indian AS compliant financial statement
OCI shall be included in book profit for the purpose of payment of MAT at the point of time specified below:
Items Point of time

Changes in revaluation surplus of property, plant or To be included in book profits at the time of realisation/
equipment (PPE) or intangible asset disposal/ retirement or otherwise transferred
Gains and losses from investments in equity instruments To be included in book profits at the time of realisation/
designated at fair value through other comprehensive disposal/ retirement or otherwise transferred
income (Indian AS 109)
Remeasurements of defined benefit plans (Indian AS 19) To be included in book profits every year as the
remeasurements gains and losses arise
Any other item To be included in book profits every year as the gains and
losses arise
The proposed amendments are essentially to enable computation of book profit for companies required to comply with Ind
AS. As the Ind-AS is required to be adopted by certain companies for FY 2016-17 mandatorily, these amendments were
much-awaited.
Adjustment for first time adoption of Ind AS
 The adjustments arising in OCI on account of transition to Ind AS from existing Indian Generally Accepted Accounting
Principles, which would subsequently be reclassified to the profit and loss, shall be included in book profits in the year
in which these are reclassified to the profit and loss
 The treatment for those adjustments recorded in OCI which subsequently will not be reclassified to the profit and loss
shall be met in the same manner as tabulated above
 All other adjustments recorded in Reserve and Surplus (excluding Capital Reserve and Securities Premium Reserve)
which would never be subsequently reclassified to the profit and loss shall be included in book profit equally over a
period of 5 years starting from year of first time adoption of Ind AS, subject to following:
 For PPE and intangible assets, fair value to be considered as deemed cost, and adjustments in retained earnings on first
time adoption shall be ignored for computation of book profits
 For investments in subsidiary, joint ventures and associates, fair value to be considered as deemed cost and
retained earnings adjustments shall be included in book profit at time of realisation of such investment

 Cumulative translation difference (for all foreign operations) on the date of transition, which have been transferred
to retained earnings, shall included shall be included in the book profit at time of disposal of foreign operations. All
other adjustments to retained earnings at time of transition, shall be included in book profit equally over the period
of 5 years starting from the year of first adoption of Ind AS
 The companies which adopt Ind AS for the first time are required to prepare an opening balance sheet for the previous
year and restate the financial statements for the comparative period. And make first time adoption adjustments for
computation of MAT liability.
Carry-forward and adjustment of MAT and AMT
 Currently, credit of MAT / AMT paid can be carried forward for a period upto ten years immediately succeeding the
assessment year in which the tax credit becomes allowable. The time period to carry forward such credit is proposed to
be extended to fifteen years.
 The amount of credit in respect of MAT / AMT shall not be allowed to be carried forward to the extent such credit
relates to the difference between (i) the amount of FTC allowed against MAT / AMT and (ii) FTC allowable against the tax
computed under regular provisions of Act other than the provisions relating to MAT/AMT.
 The proposed changes are in line with sub-Rule 7 of recently notified Rule 128 of Income Tax Rules, 1962 relating to FTC.
The proposed amendment will take effect from April 01, 2018.
Special Income
Introduction of “specified assessee” under Section 115BBDA
 It is proposed to amend Section 115BBDA of the IT Act to tax the dividend earned by an assessee in excess of Rs. 10
lakhs at the rate of 10% on gross basis in case of all “specified assesses” resident in India. The term “specified assessee”
has been defined to mean a person except a domestic company; certain funds/ institutions/ trust/ educational
institution/ university/ hospital/ or other medical institution as specified under Section 10(23C) of the IT Act or a trust or
an institution registered under Section 12AA of the IT Act. Presently, Section 115BBDA is applicable only to assesses,
being an individual, HUF or a firm resident in India.
 For the purpose of Section 115BBDA, the term “dividend” will in its scope and ambit exclude any payments made by a
company (not being a company in which public are substantially interested), by way of loan or advance to shareholder
or any payment on behalf or for individual benefit of shareholder.

Income from transfer of carbon credits [Section 115BBG]

ELP Comments
 A new Section 115BBG is proposed to be introduced, and income arising
on transfer of carbon credits will be liable to tax at the rate of 10%, on the
gross income. No deduction shall be allowable in respect of any The Karnataka High Court in
expenditure or allowance under any provisions of the IT Act in computing Commissioner of Income Tax- III v.
the income by way of transfer of carbon credits. Subash Kabini Power Corporation Ltd.
(IT Appeal No. 169 of 2015) and the
Andhra Pradesh High Court in the case
of Commissioner of Income Tax,
Hyderabad v. My Home Power Ltd.
(365 ITR 82), subsequently followed by
various judicial fora, have held that
carbon credits are entitlements or
accretion to capital, hence income
earned on the same are capital receipt
and not taxable under the IT Act as
business income. However there are
contrary decisions to this position as
well. The amendment is geared to
clarify this contentious issue.

TDS and TCS Provisions

Insertion of new provisions for TDS in specified cases:
ELP Comments
Proposed Rate of TDS
Section Income Head
(%)
Since an individual and HUF (not covered
under Section 44AB), being a payer are
194 IB Payment of rent by certain individuals or 5%
currently outside the scope of Section 194 I,
HUF with effect from June 1, 2017 Section 194 IB has been inserted to bring
them under the purview of withholding of tax
194 IC Payment made to a resident under 10% provisions. The threshold limit is INR 50,000,
but furnishing TAN under Section 203A is done
agreement referred to in Section 45 (5A) away with.
(in relation to transfer of capital assets)
w.e.f. April 1, 2017
ELP Comments
The provision of TDS has been made

applicable in relation to the payments made
under the joint development agreements in
order to ensure compliance.
Revision of existing TDS rates in following provisions
Section Income Head Existing Rate of Proposed Rate

TDS (%) of TDS (%)
194J Payments made to a resident, 10% 2%

in respect of professional
services, fee for technical
services or royalty, engaged
only in the business of
operation of call centre.
[w.e.f. June 01, 2017]

Amendment under Section 194LA to 206C of the IT Act

 Section 194LA:
The existing provision under Section 194LA of the IT Act provides for deduction of tax in respect of payments made in the
nature of compensation or enhanced compensation or the consideration or enhanced consideration on account of
compulsory acquisition, under any law for the time being in force, of any immovable property.
A proviso is proposed to be inserted, providing that no deductions shall be effected on any payments made in respect of
any award or agreement which has been exempted from levy of income tax under Section 96 of the Right to Fair
Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
 Section 194LC:
The existing provision under Section 194LC of the IT Act provides for deduction of tax in respect of income payable to a
non-resident, as interest from an Indian Company. The provisions were applicable till July 1, 2017. Section 194LC is
proposed to be amended to extend the timeline to July 1, 2020.
A new sub clause (ia) is proposed to be inserted after sub-clause (a), with retrospective effect from April 1, 2016, whereby
the monies borrowed by the Indian Company from a source outside India by way of issue of rupee denominated bonds
before the July 1, 2020, have been included within the said provision.
 Section 194LD:
The current provision under Section 194LD of the IT Act provide for deduction of tax in respect of payment made as
interest on rupee denominated corporate bonds and Government securities. The time limit for such payment made by way
of interest, for the purpose of this section, is proposed to be increased till July 1, 2020 (instead of the existing time limit of
July 1, 2017), with effect from April 1, 2018.
 Section 197A:
Section 197A of the IT Act provides that where a resident is able to furnish an appropriate declaration, as required under
the IT Act, stating that the tax payable in respect of income specified under Section 194 or 194EE is nil, then no deduction
of tax shall be made by the payer.
Section 197A is applicable notwithstanding the provisions specified under certain Sections, viz. 192 A, 193, 194 A, 194 DA,
194 I, 194 K, within which Section 194D has also been added.
 Section 204:
Section 204 of the IT Act defines the scope and the meaning of the term ‘person responsible for paying’ for the purpose of
Chapter XVII, and Section 285 of the IT Act.
In relation to the payments of income chargeable under the head ‘Interest on securities’, a new sub-section (iib) is
proposed to be inserted, thereby further expanding the scope to include the payer himself, or, if the payer is a company,
the company itself including the principal officer thereof only in the case of furnishing of information relating to payment
to a non-resident, not being a company, or to a foreign company, of any sum, whether or not chargeable under the
provisions of the IT Act.

 Section 206C:
Section 206C provides for collection of tax at source in respect of profits and gains from the business of trading in alcoholic
liquor, forest produce, scrap, etc. The specific reference to the term ‘jewellery’ in sub-sections 1D and 1E has been done
away with.
Further, vide an omission of sub-clause (b) of clause (11), a buyer engaged in the retail sale of such goods purchased for
personal consumption, has been removed from the purview of the present provision.
Mandatory requirement to furnish PAN in respect of tax collection at source:
Section 206CC is proposed to be introduced, thereby mandating that any person paying any sum on which tax is collectable
at source under Chapter XVII – BB of the IT Act, shall furnish its PAN to the person collecting such tax. Failure to do so
would entail collection of tax at a higher rate (twice the rate applicable or at the rate of 5%, whichever is higher).
Interest on refund due to deductor
Sub-Section (1B) is being added to Section 244A, by way of which a deductor will also be entitled to interest at the rate of
one-half percent on the refund amount arising out of excess payments of advance tax, tax deduction or collection at
source.
Settlement Commission, Advance Ruling and Appeals

Settlement Commission
 The Settlement Commission can be approached for settlement of a ‘case’

i.e. any proceeding for assessment pending before an assessing officer. In ELP Comments
this regard, sub-clause (iv) of clause (b) of Section 245A provides when an
assessment proceeding would be deemed to have been commenced and  As a step toward movement to the
concluded. In this regard, an amendment is proposed to revise the time
GST regime, enabling provision has
limit for conclusion of assessment in cases where no assessment is made
from “two years from the end of the relevant assessment year” to “the time been created to transfer the
specified for making assessment under sub-section (1) of section 153”, i.e. pending applications for settlement
twenty-one months from the end of the AY. under the Customs Act, CE Act and
 The definition of “Applicant” provided under Section 245N is proposed to Finance Act, 1994 to the Income
be enlarged to cover the following: tax Settlement Commission.
 An applicant as defined in clause (c) of Section 28E of the Customs Act;
 An applicant as defined in clause (c) of Section 23A of the CE Act.
An applicant as defined in clause (b) of Section 96A of the Act.

Authority for Advance Ruling
 The constitution of the Authority for Advance Ruling provided under Section 245O is proposed to be amended as under:
Sub-Section Earlier Provision Proposed provision

3(a) Chairman, who has been a Judge of the Chairman, who has been a Judge of the Supreme
Supreme Court Court or the Chief Justice of a High Court or for at
least seven years as a Judge of a High Court
3(c) A revenue Member from the Indian A revenue member -

Revenue Service, who is a Principal Chief i) from Indian Revenue Service, who is, or
Commissioner or Principal Director is qualified to be, a Member of the
Board; or
General or Chief Commissioner or Director
ii) from the Indian Customs and Central
General
Excise Service, who is, or is qualified to
be, a Member of the Central Board of
Excise and Customs,
on the date of occurrence of vacancy
3(d) A law Member from the Indian Legal A law Member from the Indian Legal Service,
Service, who is, or is qualified to be, an who is, or is qualified to be, an Additional
Additional Secretary to the Government of Secretary to the Government of India on the date
India of occurrence of vacancy
 Sub-section 6A is proposed to be inserted providing that in the event of any vacancy in the office of Chairman by
reason of his death, resignation or otherwise, the senior most Vice-Chairman shall act as a Chairman until the
appointment of a new Chairman.
 Sub-section 6B is proposed to be inserted providing that in case the Chairman is unable to discharge his function
owing to absence, illness or any other causes, the senior most Vice-Chairman shall discharge the functions of
Chairman until the Chairman resumes.
 Similar to the amendment made in the definition of ‘Applicant’ for Settlement Commission proceedings, applicants for
the purpose of making application for Advance Ruling under the Customs Act, CE Act and the Act have also been
included within the scope of the term ‘Applicant’ as per Section 245Q of the IT Act.
Appeals to ITAT [Section 253]
As per the amendment proposed in clause (f) of sub-section (1) of Section 253 of the IT Act, any assessee aggrieved by an
order of the prescribed authority (defined to mean Chief Commissioner or Director General authorised by the CBDT to act
as such) in relation to inclusion of the following incomes in the total income can file an appeal before the ITAT:
 Section 10(23C)(iv) – Any income received on behalf of any other fund or institution established for charitable purpose;
 Section 10(23C)(v) – Any income received on behalf of any trust (including any other legal obligation) or institution
wholly for public or religious purposes or wholly for public religious and charitable purposes.

Penalty on professionals for furnishing incorrect information in the

ELP Comments
statutory report or certificate [Section 271J]
Though various provisions presently exist

A new provision, Section 271J, is proposed to be inserted in the IT Act to under the IT Act to penalise the
impose penalty where an accountant or a merchant banker or a registered defaulting assessee in case of furnishing
valuer has furnished incorrect information in any report or certificate incorrect information, there were no
furnished under the provisions of the IT Act or rules issued thereunder. The provisions to penalise the person
provision proposes to impose a penalty of INR 10,000 for each such report or responsible for certifying the same. These
certificate. The expressions ‘accountant’, ‘merchant banker’ and ‘registered provisions are a step towards ensuring
valuer’ are proposed to be defined within the said provision as under: that the persons furnishing reports or
 ‘Accountant’ means a Chartered Accountant referred to in the Explanation certificates undertake due diligence
below Sub-Section (2) of Section 288 of the IT Act. before making such certifications.
 ‘Merchant banker’ means Category I merchant banker registered with Consequential amendment has been
SEBI. proposed to Section 273B which provides
 ‘Registered valuer’ means a person defined in clause (oaa) of that if the person provides a reasonable
Section 2 of the Wealth tax Act, 1957. cause for the failure referred to in the
Section 273B, penalty shall not be
imposable under Section 271J.
Penalty for contravening the provisions of proposed Section 269ST [Section 271DA]
Section 269ST is a new provision proposed to impose restrictions on cash

transactions. The said provision proposes that ‘no person shall receive an ELP Comments
amount of three lakh rupees or more in aggregate from a person in a day, or
in respect of a single transaction, or in respect of transactions relating to one The proposed section will act as a
event or occasion from a person, otherwise than by an account payee cheque deterrent against the generation and
or an account payee bank draft or use of electronic clearing system through a hoarding of large quantum of
bank account’. unaccounted domestic black money, and
is a step towards achieving the
Section 271DA is another provision proposed to be inserted to stipulate Government’s mission to create a
provide that where a person contravenes Section 269ST of the IT Act, he shall cashless economy.
be liable to pay penalty of a sum equal to the amount of the sum received by
him. It is further proposed that penalty under Section 271DA shall not be
imposable if such person proves that there were good and sufficient reasons
for the contravention. The penalty under the new provision is to be imposed
by the Joint Commissioner.

Amendments to existing penal provisions [w.e.f. April 1, 2018 and applicable AY 2018-19 onwards]
Section 273B of the IT Act provides relief from penalties imposed under certain specified provisions where it is proved that
there was reasonable cause for the said failure attracting penalty. Section 273B is proposed to be amended to include the
proposed Section 271J within the list of penalties which will enjoy the said relief.
Section 271F of the IT Act dealing with ‘Penalty for failure to furnish return of income’ is proposed to be amended to
provide that nothing contained in Section 271F, shall apply to and in relation to the return of income required to be
furnished for any AY commencing on or after April 1, 2018.
Section 140A of the IT Act dealing with ‘Self-assessment’ is proposed be amended to include that, in case of delay in
furnishing of return of income, along with the tax and interest payable, fee for delay in furnishing of return of income shall
also be payable.
Filing of IT Return
In order to ensure that the IT Return is filed within the due date, it is proposed to insert a new Section 234F in the IT Act to
provide that a fee for delay in furnishing of return which shall be levied for AY 2018-19 and onwards in a case where the
return is not filed within the due dates specified for filing of return under sub-section (1) of Section 139. The proposed fee
structure is as follows:—
(i) a fee of INR five thousand shall be payable, if the return is furnished after the due date but on or before the 31st day of
December of the AY;
(ii) a fee of INR ten thousand shall be payable in any other case.
However, in a case where the total income does not exceed INR five lakh, it is proposed that the fee amount shall not
exceed INR one thousand.
Consequential amendments have been proposed in Section 140A, 143(1) and 271F of the IT Act.
These amendments will take effect from April 1, 2018 and will, accordingly apply in relation to AY 2018-19 and subsequent
years.
Transaction over INR 3 Lakh

In order to reduce generation and circulation of black money in the economy, the Government has proposed to insert
Section 269ST in the IT Act which provides that –
 No person shall receive an amount of INR 3 Lakh or more – (a) in aggregate from a person in a day; (b) in respect of a
single transaction; or (c) in respect of transactions relating to one event or occasion from a person.
 However, more than INR 3 Lakh can be received by an account payee cheque or account payee bank draft or use of
electronic clearing system through a bank account.
 The above restriction does not apply to the Government, any banking company, post office savings bank or co-operative
bank
It is also proposed, to insert new Section 271DA which will provide for a levy of penalty of 100% on the contravention of
proposed Section 269ST.
These amendments will take effect from April 1, 2017

Income Tax Rates
For Individuals (less than 60 years of age), HUFs, AOPs, BOIs and artificial juridical person
Existing Proposed
Income (INR) Rate (percent) Income (INR) Rate (percent)
0 -2,50,000 NIL 0 -2,50,000 NIL
2,50,001 - 5,00,000 10 2,50,001 – 5,00,000 5
5,00,001 - 10,00,000 20 5,00,001 – 10,00,00 20
10,00,001 and above 30 Above Rs. 10,00,000 30
Notes:
Sr. Particulars
Existing Proposed
No.
1 Basic exemption limits  INR 3 lakhs for individuals, resident of India, of the age of 60 years or more but less
for senior citizens than 80 years
 INR 5 lakhs for individuals, resident of India, of the age of 80 years or more.
2 Surcharge  15% is levied if the total income  10% to be levied if the total income is
exceeds INR 1 crore between INR 50 lakhs to INR 1 crore;
 15% is levied if the total income

exceeds INR 1 crore
3 Cess - Education cess
and Secondary  3%
Education cess
4 Alternate Minimum  19.06% (including cess) - If adjusted  19.06% (including cess) - If adjusted
Tax total income exceeds INR 20 lakhs but total income exceeds INR 20 lakhs but
less than INR 50 lakhs less than INR 50 lakhs
 21.91% (including cess) - If adjusted  20.96% (including cess) - If adjusted
total income exceeds INR 1 crore total income is between INR 50 lakhs
to INR 1 crore
 21.91% (including cess) - If adjusted
total income exceeds INR 1 crore
For Companies, Firms, LLP
Sr. Description Existing and Proposed Rates (%)

No. (Including Surcharge and Cess)
(A) Domestic Companies Net income does Net Income is between Net income exceeds
not exceed INR 1 INR 1 crore and INR 10 INR 10 crore
crore crore
1 Regular tax 30.90 33.063 34.608

Sr. Description Existing and Proposed Rates (%)

No. (Including Surcharge and Cess)
Regular tax for companies
whose total turnover or 25.75 27.55 28.84
gross receipts in previous (New category (New category (New category
year 2015-16 does not proposed) proposed) proposed)
exceed INR 50 crores
Regular tax for companies 28.84
covered under section 25.75 27.55
115BA
MAT under section 115JB 21.34
2 (Rate to be applied on book 19.06 20.39
profits)
23.072
3 BDT under section 115QA
(Includes surcharge of 12% and cess of 3%)
DDT under section 115-O 17.304
4
(without grossing up) (Includes surcharge of 12% and cess of 3%)
Net Income is Net income exceeds INR

Net income does
between INR 1 10 crore
(B) Foreign Companies not exceed INR 1
crore and INR 10
crore
crore
41.20 43.26
1 Regular tax 42.024
Net income does not exceed

(C) Firms and LLP Net income exceeds INR 1 crore
INR 1 crore
1 Regular tax 30.90 34.61
Adjusted total income
Adjusted total income exceeds INR 1
exceeding INR 20 lakhs but less
crore
than INR 1 crore
2 Alternate Minimum Tax 19.06 21.34
Notes - Surcharge and Cess rates
Particulars Existing and Proposed

For Domestic  NIL - If the Net income does not exceed INR 1 crore
companies  7% - If the Net Income is between INR 1 crore and INR 10 crores
 12% - If the Net income exceeds INR 10 crores
For Foreign companies  NIL - If the Net income does not exceed INR 1 crore
 2% - If the Net Income is between INR 1 crore and INR 10 crores
 5% - If the Net income exceeds INR 10 crores
For Firms and LLP  12% is levied if the total income exceeds INR 1 crore
Cess - Education cess
and Secondary  3%
Education cess

Banking, Finance, Infrastructure and Capital Markets

Banking and Finance
Introduction
The financial sector reforms under the Union Budget 2017 include certain expected changes or policies. The Government
has rightfully concentrated on reforms qua digitisation and tried to address situations on NPA. As compared to earlier
years, the Government has clearly implemented stricter legislation around recovery and insolvency. The present set of
recommendations confirms that we may expect more stringent regulations to address corruption, reduce black money and
hold defaulters responsible.
Digital Economy
Improvement of the ease of doing business in India, the fight against black money, the requirement of ensuring adequate
monitoring of transactions and, finally, customer comfort and satisfaction have propelled the Government of India to
embrace the use of technology and take steps to emphasize the importance of digital transactions. Digitization—the mass
adoption of connected digital services by consumers, enterprises, and Governments— has emerged in recent years as a key
economic driver that accelerates growth, ensures cleanliness of the system and facilitates job creation. In the current
environment of a sluggish global economy, digitisation plays an important role in assisting policymakers to spur economic
growth and employment.
In the Union Budget 2017, the Finance Minister elaborated on several steps and measures to advocate the increase of use
of technology and a move towards lesser use of cash.
 As one of the strongest measures, it was announced that there will be no cash transaction (whether payment or
receipt) in excess of INR 3 lakhs from a person in a day, or in respect of a single transaction, or in respect of
transactions relating to one event or occasion.
 Payment systems and online transactions have seen an upward trend, which has been accentuated by
demonetisation. In addition to the Government having introduced the Unified Payment Interface (“UPI”) and
launched the BHIM (Bharat Interface for Money) application, the Union Budget suggested launch of two new
schemes (Referral Bonus Scheme and Cashback Scheme for merchants) to promote usage of BHIM. The merchants
using payment systems have not yet had any respite from the merchant discount rate being charged by banks,
however, a cashback scheme may provide some impetus.
 The Finance Minister also announced the strengthening of the digital payment infrastructure and grievance
handling mechanism, which is much needed for the efficient functioning of any platform.
 Urging the economy to go cashless, the Finance Minister announced (i) introduction of Aadhar Pay, a merchant
version of the Aadhar Enabled Payment System, (ii) that banks are targeting introduction of 10,00,000 additional
POS terminals by March 2017, and (iii) usage of technology for financial inclusion and thereby reaching the rural
sections of society. There will be availability of high speed broad band connectivity to 1,50,000 gram panchayats
for access to digital services at low tariffs.
 The Government will also be considering the recommendation of the committee of Chief Ministers on digital
transactions. This committee was headed by Mr. Chandrababu Naidu and has suggested several benefits and
incentives to be provided to all involved in digital transactions. This is to be done with a motive to make people
choose digital transactions over cash payment.

 Amendments to the PSSA have been proposed.

The PSSA was enacted in order to regulate and supervise payment systems in India and to designate the RBI as the
authority for the purpose of regulation and supervision of payment systems. Under Section 3(2) of the PSSA, the RBI
was empowered to constitute a committee of its Central Board known as the Board for Regulation and Supervision of
Payment and Settlement Systems (“PSSA Board”). The Department of Economic Affairs constituted a Committee on
Digital Payments (“Digital Payments Committee”), which in its report dated December 9, 2016, provided
recommendations aiming to strengthen the ecosystem to promote digital payments in India. The focus of such
recommendations was to extend the reach of payments systems to financially and socially excluded groups. The Digital
Payments Committee inter alia recommended (i) creation of a new payments regulator in order to make regulation of
payments independent from the function of central banking, and (ii) amendment of the PSSA to provide for
competition and innovation, consumer protection, date protection and regulation of systemic risks. In light of the
recommendations of the Digital Payments Committee, the Finance Bill proposes to amend Section 3 of the PSSA to
provide for the constitution of the Payments Regulatory Board in place of the PSSA Board.
It is important to note that though the Government is advocating digital transactions, the legislators are yet to formulate
comprehensive regulations to cover all areas of the ‘fintech’ sector. In fact the RBI has formed a working group lead by Mr.
Sudarshan Sen to recommend regulations for the ‘fintech’ sector and for ‘digital banking’. The working group is yet to
provide their recommendations.
Capitalization of Banks ELP Comments
In line with the ‘Indradhanush’ roadmap, the Union Budget has The Government has been resorting to limited re-
provided INR 10,000 crores for re-capitalisation of banks in 2017-18 capitalisation to help public sector banks
and the Finance Minister in the Union Budget Speech mentioned that especially due to the non-performing assets and
additional can be provided, if required. stressed assets requiring additional provisioning.
The “Indradhanush” scheme has been focussed
on this problem for some years yet the problem
has not been resolved. Banks are in this situation
as a result of certain sectors (like steel, power and
DISCOMS), which are struggling to generate
revenue. The Government should re-evaluate its
focus on capitilisation and re-invigorate policy of
divestment in banks that they have been
proposing for some time now.

ELP Comments
In light of the difficult situation qua

Defaulters – New Legislative Regime recovery of loans, the Government has
taken clear steps to amend legislation
The Finance Minister emphasized on the need for a more stringent approach and introduce measures to improve the
to tackle loan defaulters and stated that the Government is considering situation and pose a greater threat to
introduction of legislative changes, or even a new law, to confiscate the defaulters. The Government has also
assets of such persons located within the country, till they submit to the expressed the intent to enter into cross-
jurisdiction of the appropriate legal forum. border treaties to confiscate overseas
assets of willful defaulters and recover
dues of banks.
Earlier this year, the Enforcement of

Security Interest and Recovery of Debts
Laws and Miscellaneous Provisions
(Amendment) Act, 2016 was passed by
both the houses of the Parliament in
August, 2016 which seeks to amend inter
alia the Securitisation and Reconstruction
of Financial Assets and Enforcement of
Security Interest Act, 2002 and Recovery
of Debts due to Banks and Financial
Institutions Act, 1993.
Insolvency and Bankruptcy Code, 2016 -

The Insolvency and Bankruptcy Code,
2016 is a comprehensive legislation,
which allows financial creditors and
operational creditors to apply for an
insolvency resolution process. This
envisages a corporate resolution plan,
which provides time for the company to
revive itself. If the same is unsuccessful
then the company is taken into
liquidation.
There is a clear indication for the

Government to apply stricter laws and
time-bound processes. There was
definitely a loophole qua defaulters
fleeing the country, which will be
addressed by this new legislation.

Bonds under the Union Budget
Electoral Bonds:
As part of the efforts of the Government to curb cash transactions, the Finance Minister in his Union Budget speech has
outlined certain stringent restrictions on electoral funding for political parties. The thrust of the restrictions is to use
banking channels and negotiable instruments to duly record the funding/ contributions/ donations to the political parties.
As an alternative, the Finance Minister also mentioned that the Government will be introducing a scheme through which
donors may subscribe to “Electoral Bonds”, which will be redeemable only in the designated account of a registered
political party. In order to effectuate such bonds, the Finance Bill, 2017 has indicated an amendment to Section 31(3) of the
Reserve Bank of India Act, 1934, which will provide the power to the Central Government to allow a scheduled bank to
issue such Electoral Bonds.
Contribution through the Electoral Bonds will also allow preservation of anonymity of the contributors. The Finance Bill,
2017 also amends Section 29C of the Representation of the People Act, 1951, which now exempts political parties from
reporting the source of contribution if such contribution has been made through subscription to Electoral Bonds.
However, it would be interesting to better understand the scheme to be proposed by the Government. This is because
bonds are in the nature of debt instruments. Accordingly, in case the contributors are subscribing to bonds, there would
have to be an understanding around repayment/ redemption of the relevant amounts.
Bonds in the Infrastructure sector:
The Union Budget also suggested that for the interest of the infrastructure sector, there are plans to mobilize additional
finances to the extent of INR 31,300 crore by NHAI, PFC, REC, IREDA, NABARD and the Inland Water Authority by raising
bonds. It would indeed be interesting to better understand the terms thereof and the interest shown by investors in such
bonds.
Others
NABARD:
The Finance Minister has emphasized the role being played by NABARD to provide adequate credit to the agricultural
sector. The Union Budget provides some new funds and enhancement of existing funds to NABARD for providing credit to
the farmers and thereby provide the necessary boost to agriculture.
Affordable Housing:
The Union Budget also provides an impetus to the Affordable Housing sector by bringing it under the bracket of
‘infrastructure’ and thereby allowing cheaper access loans for the sector. There are also certain tax benefits provided for
this sector, which have been dealt with separately.

Infrastructure
Introduction
Once again, infrastructure is a major theme of this year’s Budget. At the outset, the Finance Minister mentioned that apart
from rural areas and poverty alleviation, investment in infrastructure was a part of his overall approach. Indeed, this can be
noticed by the fact that the total allocation for infrastructure development in this year’s budget is a record high of INR
3,96,135 crores. Additionally, in a departure from tradition, for the first time the Railway Budget was integrated into the
general Budget with the avowed intention to facilitate multi-modal transport planning between railways, highways and
inland waterways. In fact, a major theme of the Budget in relation to infrastructure is interconnectivity of various
transportation sectors and creation of an adequate support system.
Capacity Augmentation – Sector Specific Allocations and Reforms
Railways and Metros ELP Comments
For the first combined railway and financial budget, the Financing is a challenge with regard to metro projects,
total proposed allocation is INR 55,000 crore in the Budget considering that the current Metro Railways (Operation and
towards railways. For 2017-18, the total capital and Maintenance) Act, 2002 provides for regulation of pricing by
development expenditure of the railways has been pegged a Fare Fixation Committee, which pricing may not be
at INR 1,31,000 crores, out of which INR 55,000 crores commensurate with the investment outlays involved. How
provided by the Government. The four major areas of this is addressed in the new Metro Rail Act is also significant,
focus are (i) passenger safety, (ii) capital and development as the new Act seeks greater private participation in the
works, (iii) cleanliness, and (iv) finance and accounting metro sector
reforms.
 Additionally railway lines of 3,500 kms will be commissioned in 2017-18. Existing identified corridors will be
modernized and enhanced. Railway station redevelopment is also a major initiative with 25 stations sought to be
awarded in this financial year as well as making 500 stations suitable for the differently abled.
 The theme of integration of infrastructure is quite strong in the proposal for feeding 7000 stations with solar power.
 The Finance Minister announced that a new Metro Rail Policy to focus on innovative financing models and
standardization of software and hardware. It was also proposed that a new Metro Rail Act will be enacted for greater
private participation and investment in construction and operation.

Roads
ELP Comments
 The Budget allocation for the road sector has been set
In the past year, there has been a turnaround in the road
at INR 64,900 crores in 2017-18. 2,000 kms of coastal
sector, and due to reforms in this sector, private
roads have been identified to enhance connectivity for
ports and rural areas. participation and construction of roads has greatly
increased. The Budget allocation has been increased but
Multi-modal Transport there is no specific policy reform announced.
There are no port related announcements in the Finance

The Budget contains an announcement regarding a
Minister’s speech. However, one of the significant issues
specific programme for development of multi-modal
faced by ports is the lack of connectivity. Investments in both
logistics parks, together with multi-modal transport
new and existing ports, depend in part on road and rail
facilities. This should necessarily lead to an enhancement
connectivity. The announcement relating to coastal roads
of existing transport connectivity.
would to some extent benefit the port sector.
Airports and Aviation
 In this year’s Budget, there is a proposal to award the

operation and maintenance of airports in Tier 2 cities in the PPP mode.
 A proposal was made to amend the Airports Authority ELP Comments

of India Act, 1994 (‘AAI Act’) to enable effective
monetisation of land assets. The resources, so raised, Section 19 of the AAI Act provides that all lands acquired by
will be utilised for airport upgradation. Currently, the the AAI will be considered as required for a public purpose. If
functions of the AAI Act as contained in Section 12 land already acquired by the AAI is used for commercial
thereof pertain to activities relating to operation of purposes, there could be a challenge as this could be said to
airports, aircrafts, air traffic and allied or incidental subvert the restrictions under land acquisition laws.
requirements. An express power is set out in Section
12A to lease land assets only to carry out the
functions in Section 12. Therefore, there appears to be
no authority for the AAI to actually monetise its land banks through non-airport uses, although private developers of
airports have limited rights to monetise airport real estate. This step appears to provide AAI with flexibility in this
regard. We would assume that airport and aircraft safety and security requirements in accordance with international
treaties would be a factor in the final form of such
amendment.
ELP Comments
Energy, Oil & Natural Gas
The Finance Ministry continues to focus on clean energy and
 It has been proposed to take up the second phase of village electrification in this Budget. The proposed targets,
Solar Park development for additional 20,000 MW appear to be far more modest this year, with emphasis only on
capacity. Additionally, as part of the 1000 MW solar development of solar power and meeting village electrification
mission, it has been proposed to feed 7000 railways goals. No further details were provided on the development of
stations with solar power in the medium term (out of solar parks, considering the commencement of the second
which 300 such stations are already solar powered), phase of solar parks has been in the pipeline for a while. Given
with work commencing on 2000 railway stations. that there are gaps from a regulatory and financial perspective
in the power/ energy sector, these can be plugged with a
 The Government’s continued focus on village more holistic development of policies, not only by focusing on
electrification is reflected in this Budget, with the other clean sources of energy but also by emphasizing on
strengthening the power transmission and distribution
network.

ELP Comments
Finance Minister stating that we are on our way

Where an integrated public sector ‘oil major’ is concerned, the
to achieving 100% village electrification by May
oil and gas sector is going through a period of consolidation all
1, 2018.
over the world, and, therefore, such a move would only increase
 The Budget speech proposes the establishment the negotiating and financial power of the ‘oil major’.However,
of Strategic Crude Oil Reserves. In the first phase, any such integration would need to be viewed in light of the
3 such reserves facilities have been set up. In the combination provisions of the Competition Act, 2002 and based
second phase, it has been proposed to set up on the structure as may be proposed, there could be a
caverns at 2 more locations, namely, Chandikhole requirement of approval from the Competition Commission of
in Odisha and Bikaner in Rajasthan, thereby India for what could be a large combination.
taking our strategic reserve capacity to 15.33
MMT.
 Additionally, a major reform proposed by the Finance Ministry includes an integrated public sector ‘oil major’ which
will be able to match the performance of international and domestic private sector oil and gas companies. This is to be
done keeping in view the capacity to bear higher risks, availing economies of scale, taking higher investment decisions
and creating more value for the stakeholders.
Telecom ELP Comments
The Finance Minister while stating that the The Digigaon initiative aims at providing tele-medicine, education
Indian telecom sector was an important part of and skills, the budget has not shed any light on how this is to be
the infrastructure of the country stepped up implemented. The objective of DigiGaon is to facilitate the delivery
allocation under the BharatNet Project to INR of e-governance, e-health, e-education, e-banking, Internet and
Considering
other services to the Government
the rural has the
India, while recently entered
BharatNet intoaims
Project a deal
at
10,000 Crore in 2017-18. Further, it was stated
with the United Arab Emirates (‘UAE’) for filling
providing broadband connectivity to gram panchayats. However, Mangalore
that under the BharatNet Project, 1,55,000kms
strategic
whether reservesinternet
broadband with oil is
fromtheUAE,
needit of
is not
the surprising
hour in our thatrural
the
of optic fibre cables have been laid. In order to
strategic crude oil reserves have been prioritized
sectors or whether these funds could have been allocated in this Budget.
bring greater connectivity, the Budget
The proposed
elsewhere SCOR
for rural project is
spending, part of to
remains an be
underground
tested. Inpetroleum
order to
highlighted rural telecom spending by
reserve system, hoping to mirror similar
revive the telecom sector, a concentrated effort through such theprojects
right
committing to high-speed broadband
undertaken by the US and China.
channels is required to be made by the Government, as Broadband
connectivity
penetration could have a direct impact on economic growth,
on optical fibre for more than 1,50,000 gram employment, innovation and prosperity.
panchayats. A DigiGaon initiative will be
launched to provide tele-medicine, education
and skills through digital technology.

Affordable Housing ELP Comments
Infrastructure Status has been provided to Granting infrastructure status to affordable housing would
affordable housing. allow the sector to avail flexible structuring of long-term project
loans, long-term funding from infrastructure funds at lower
rates of interest and longer tenure equivalent to the economic
life of their assets, relaxed ECB norms, issuance of
infrastructure bonds for meeting working capital requirements
as well as benefits under Income Tax Act, 1961, according to the
statement. Further, whether developers of affordable housing
would then be entitled to access funding through listed
Infrastructure Investment Trusts or through Real Estate
Investment Trusts, would need to be examined.
The definition of affordable housing itself would be debatable,

given that different standards of living prevail in different parts
of the country.

Other Significant Proposals
 In this Budget, the Finance Minister has proposed introduction of an institutional arrangement for dispute resolution
through arbitrations, for disputes in infrastructure related construction contracts, PPP and public utility contracts. This
is clearly a move towards ease of doing business, an important arm of which is quick resolution of disputes so that
businesses can move on (since the Arbitration and Conciliation Act, 1996 (‘Arbitration Act’) now provides for
arbitrations to be completed within a period of 12 months).
 The Budget proposes the listing of public sector enterprises (‘PSEs’) including shares of railway PSEs like IRCTC, IRFC and
IRCON. Since several PSEs are engaged in the infrastructure sector, it would be interesting to see which Government
infrastructure would seek listing. Certainly, access to public funds could revitalize several languishing infrastructure
PSEs.
Capital Markets
Commodities market reforms
The Finance Minister has proposed that an expert ELP Comments

committee will be constituted for the purposes of
studying and creating an operational and legal Since the FMC was merged with SEBI with effect from
framework for the integration of spot market and September 29, 2015, SEBI has been very pro-active in revising
derivatives market in commodities trading for the the existing framework of the commodities market. This
benefit of farmers. The National Agricultural Market proposal appears to be another step in this direction.
(e-NAM) - a national e-market portal created by the Moreover, the integration of the commodities market with the
Government as a national network of physical mandis e-NAM portal will greatly benefit the traders and farmers.
(market place) that can be accessed online- would also
play an important role in the aforementioned
framework.
Online registration of financial market ELP Comments
intermediaries
Pursuant to this, various intermediaries such as mutual funds,
brokers, portfolio managers, etc. would now be able to
The Finance Minister has proposed to make the entire
complete the entire registration process online. This would
process of registration of various financial market
improve ease of doing business. This is in line with the
intermediaries with SEBI an online process.
Government’s larger aims to digitize governance.

ELP Comments
Common application form for FPIs
This step will ensure that FPIs will be able to obtain the requisite
The Finance Minister has proposed a common
approvals and permissions to invest in the Indian capital and
application form for FPIs whereby they can obtain
securities market in a seamless, efficient and expeditious
their registration, open bank and demat accounts and
manner.
also apply for their PAN under one form itself. All
authorities involved, i.e. SEBI, RBI and CBDT will
collectively devise the system and procedure.
ELP Comments
PSE – Consolidation and listing The announcements in respect of the PSEs have been made
with the intention of making the Public Sector stronger and
The Finance Minister has proposed restructuring of more accountable. The Oil and Gas sector has been
PSE through mergers and acquisitions. He has also identified and is therefore expected to have some traction
proposed the listing of identified PSE in a time bound for consolidation to create a stronger PSE which are
manner to unlock value of such enterprises. This is in integrated across the value chain of a particular industry.
furtherance of the disinvestment policy of the The Finance Minister has also identified Railway PSEs to be
government announced in the previous budget. listed which would bring additional funds to the Railway
PSEs. Recent interest in the Central Public Sector Enterprises
PSE Exchange Traded Funds shows that there is appetite in
the market for such instruments and the coming is expected
to further listing of Exchange Traded Funds by the
Government.

Legislative Reforms
Introduction
In this section, we are setting out legislative reforms proposed in the Budget. As will be apparent, the reforms touch upon
varied subjects to bolster the Government’s “Transform, Energise and Clean India” agenda. We have also highlighted some
of the announcements that were made in the Budget Speech for the FY 2016-17 that have been implemented by the
Government until December 31, 2016.
ELP Comments
Consolidation of Labour Law
State Laws. The competence to legislate on employment and
Currently, the labour law regime in India is a complex
labour matters is conferred on both the Parliament and the
tapestry of several laws that cover aspects such as wages,
State Legislatures and accordingly, both Central and State
social security, safety and working conditions etc. The
legislation on labour law are extant today. Any large scale
jurisprudence on a single subject of labour law is often
consolidation would necessarily lead to a dismantling of
contained in several legislation, both at the Central and
current State laws.
State levels. Further, there are several industry specific
laws to address labour conditions that may arise in Complexity. The current complexity in labour laws in India
specific sectors such as building and construction, mining, have in part arisen due to enactment of specific laws to deal
dock working etc. The Budget proposes consolidation of with specific subjects or specific contexts. For instance, due
existing labour laws into four Codes on (i) wages; (ii) to the unique nature of labour requirements at ports, a
industrial relations; (iii) social security and welfare; and special law for dockworkers was enacted. Further, conditions
(iv) safety and working conditions. relating to labour and safety are often found in other
legislation (e.g. the Boilers Act). It may prove a challenge to
incorporate substantial jurisprudence as well the minutiae
Model Shops and Establishment Bill, 2016 contained in several laws into just four consolidated
enactments.
A reference was made to the Model Shops and
Establishment Bill, 2016 that has been provided to the Existing Infrastructure. There is considerable existing
States. The Bill envisions permitting businesses to remain infrastructure for the administration of the current labour
open 365x24x7 and seeks to bring uniformity to working laws. In particular, social welfare legislation including the
conditions in establishments and shops across the Employees Provident Fund and Miscellaneous Provisions Act,
country for ease of business and to foster competition. 1952 and the Employee State Insurance Corporation Act,
Significantly, it seeks to permit women to remain at work 1948 have established various funds and financial structures
at nights to take into account the requirements of to provide social security. The manner in which these funds
modern businesses such as information technology and and facilities will be consolidated so as to not cause any
to provide creches at work to ensure due representation hardship to any beneficiaries will be a significant challenge.
of women at the work place.

Payment of Wages (Amendment) Bill, 2016
An amendment was proposed in December 2016 to the Payment of Wages Act, 1936 to permit payment of wages by
cheque or a direct credit to the bank account to the employee in addition to cash payments. This is to recognize the
changes brought about by technology and further the Government’s aim of digitising the economy. However, the persons
covered by the Payment of Wages Act, 1936 may not currently have bank accounts and may continue to receive payments
by way of cash.
Amendment to the Motor Vehicles Act, 1988 (“MV Act”)
The previous Budget highlighted the need for reform for passenger road traffic, and for that purpose an amendment bill
was issued in August 2016 which proposed several amendments. A National Transportation Policy is required to be
developed by the Central Government with the States to (i) establish a planning framework for road transport, (ii) develop
a framework for grant of permits and schemes, and (iii) identify and specify priorities for the road transport system.
Additionally, measures for road safety have been enhanced by permitting the recall of defective vehicles, mandating
insurance, scheme for cashless treatment of accident victims in some cases, enhancing compensation for accidents and
protection of good samaritans from civil and criminal liability.The amendments contain significant reformatory steps which
seek to bring motor vehicle laws and protection of passengers, accident victims and good samaritans in line with global
standards.
Amendment to the Negotiable Instruments’ Act, 1882
The Budget also suggested that the Government is considering an amendment to the Negotiable Instruments’ Act, 1882 in
order to ease the process for payees to realise money in cases wherecheques are dishonoured. Considerable issues have
been faced by payees on the jurisdiction of proceedings for matters under Section 138 of the Negotiable Instruments’ Act,
1882. It appears that the Government is looking to streamline and clarify the process.
Amendment to the Payment and Settlement Systems Act, 2007 (‘PSSA’)
The Finance Minister proposed amendments to the PSSA which was enacted so as to regulate and supervise payment
systems in India and to designate the RBI as the authority for the purpose of regulation and supervision of payment
systems. Under Section 3(2) of the PSSA, the RBI was empowered to constitute a committee of its Central Board known as
the Board for Regulation and Supervision of Payment and Settlement Systems (‘PSSA Board’). The Department of Economic
Affairs constituted a Committee on Digital Payments (‘Digital Payments Committee’), which in its report dated December 9,
2016, provided recommendations in order to strengthen the ecosystem to promote digital payments in India. The focus of
such recommendations was to extend the reach of payments systems to financially and socially excluded groups.
Considering that the intent of this Government has been to promote greater transparency in the economy, it would be
important to ensure that the amendments to the PSSA make digital payments easily accessible to larger sections of
society.
Law to regulate Illicit Deposit Schemes
In line with the intent of the legislature to protect investors from being deceived by fraudulent schemes and in furtherance
of the Finance Minister’s Budget Speech forFY2016-17, the Finance Minister stated that a bill would soon be introduced in

order to curtail the menace of illicit deposit schemes. In 2016, the draft Banning of Unregulated Deposit Schemes and
Protection of Depositors’ Interests Bill, 2016 (‘UDS Bill’) was uploaded on the website of the Department of Financial
Services for public comments. The UDS Bill seeks to align gaps in the existing regulatory framework for deposit-taking
activities by banning all unregulated deposit schemes to protect the interest of the depositors.
The Finance Minister also indicated that the Multi State Cooperative Societies Act, 2002, which was enacted with the intent
of facilitating voluntary formation and democratic functioning of cooperative societies as people’s institutions based on
self-help and mutual aid would be amended pursuant to consultations with various stakeholders. Such a proposal comes in
light of the Finance Minister’s observations that the regulatory gaps in the Multi State Cooperative Societies Act, 2002 are
exploited by certain entities to formulate dubious schemes to exploit the poor and gullible sections of the society. The UDS
Bill proposes that a multi-state co-operative society would not be entitled to receive deposits from persons other than
voting members.
In light of numerous fraudulent schemes floated by unscrupulous entities, the introduction of a law which seeks to ban
unregulated deposit schemes is the need of the hour and would go a long way in protecting the interests of investors.
Contract Farming
In order to integrate farmers who grow fruits and vegetables with agro processing units, for better price realisation and
reduction of post-harvest losses, the Finance Minister has proposed a model law on contract farming to be prepared and
circulated among states for adoption.
At present,contract farming is present in the model Agricultural Produce Market Committees Act, 2003 (‘APMC Act’).
However, only 20 states amended their APMC Act to make provision for contract farming, out of which only 12 notified the
rules. In line with the demand of many states, the agriculture ministry in consultation with the states and NITI Aayog was
planning to separate the provisions relating to contract farming from the APMC Act and come out with a separate
legislation for contract farming. This proposal was confirmed by the Finance Minister’s Budget.
Many states like Punjab already have a separate legislation for contract farming in place. The Government might face
resistance from States especially when the model Contract Farming Act is in clear departure from existing legislation.
Proposal to de-notify perishables from APMC
The Finance Minister announced market reforms and stated that perishables would be urged to be de-notified from APMC.
The Budget announcement does not provide for an alternative regulation for the treatment of perishables and more clarity
is required in this respect.

Digitization of Land Records

The earlier Budget had announced an ambitious programme for the digitisation of land records in order to have easily
available registries for public inspection, thereby reducing land title disputes. Following this announcement, the Digital
India Land Records Modernization Programme (‘DILRMP’) is being implemented as a 100% centrally-funded scheme with
effect from 2016-17. As a part of DILRIMP, computerisation of records of rights, digitization of cadastral maps, integration
of record of rights (textual) and cadastral maps (spatial), computerisation of registration, connectivity between sub-
registrar offices and tehsil/revenue offices and integration of registration and land records, are being undertaken.
Maintenance of Land Records falls within a State Legislature’s competence. As such, the States would need to update both
their systems and laws to fully reap the benefits of this Central scheme. The information as to the digitization efforts is
available on nlrmp.nic.in.
Notes:

Glossary of Terms:
Abbreviation Meaning
AE Associated Enterprise
AIF Alternative Investment Fund
AIM Atal Innovation Mission
ALP Arms Length Price
AMT Alternate Minimum Tax
AO Assessing Officer
AOP Association of Persons
ARC Asset Reconstruction Companies
AY Assessment Year
BDT Buy-back Distribution Tax
BIPA Bilateral Investment Protection Agreement
BOE Bill of Entry
BOI Body of Individuals
CBDT Central Board of Direct Taxes
CBEC / Board Central Board of Excise and Customs
CCR CENVAT Credit Rules, 2004
CE Act Central Excise Act, 1944
CE Removal Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable
Rules Goods) Rules, 2001
CE Rules Central Excise Rules, 2002
CET Act Central Excise Tariff Act, 1985
CETH Central Excise Tariff Heading
CMD Chairman and Managing Director
CST Central Sales Tax
CST Act Central Sales Tax Act, 1956
CTA Customs Tariff Act, 1975
CTH Customs Tariff Heading
Customs Act Customs Act, 1962
DDT Dividend Distribution Tax
DTAA or Tax Double Taxation Avoidance Agreement entered into by India
Treaty
DTC Direct Taxes Code Bill, 2013
E Cess Education Cess
ECS Electronic Clearing System
EHTP Electronic Hardware Technology Park
EOU Export Oriented Unit
EPC Engineering Procurement Construction
ETF Exchange Traded Fund
FCRA Foreign Contribution (Regulation) Act, 2010
FDI Foreign Direct Investment
FEMA Foreign Exchange Management Act, 1999

FERA Foreign Exchange Regulation Act, 1973
FII Foreign Institutional Investors
FIPB Foreign Investment Promotion Board
FMC Forward Market Commission
FMV Fair Market Value
FOB Free on Board
FPI Foreign Portfolio Investor
FSLRC Financial Sector Legislative Reforms Commission
FTC Foreign Tax Credit
FTS Fees for Technical Services
FY Financial Year
GIFT Gujarat International Finance Tec-City
GST Goods and Services Tax
GTA Goods Transport Agency
HC High Court
HRA House Rent Allowance
HSN Harmonized System of Nomenclature
HUF Hindu Undivided Family
ICT Information and Communication Technology
Ind AS Indian Accounting Standards
INR Indian Rupees
InvITS Infrastructure Investment Trusts
IRDA Insurance Regulatory and Development Authority
IREDA Indian Renewable Energy Development Agency Limited
IT Act Income Tax Act, 1961
ITAT Income Tax Appellate Tribunal
KYC Know Your Customer
LIC Life Insurance Corporation of India
LLP Limited Liability Partnership
MAT Minimum Alternate Tax
MSMEs Micro, Small and Medium Enterprises
NABARD National Bank for Agriculture and Rural Development
NBFC Non-Banking Financial Company
NHAI National Highways Authority of India
NPA Non Performing Assets
OCI Other Comprehensive Income
OECD Organization for Economic Co-operation and Development
PAN Permanent Account Number
PE Permanent Establishment
PFC Power Finance Corporation
PFRDA Pension Fund Regulatory and Development Authority
POEM Place of Effective Management
POTR Point of Taxation Rules, 2011
PPP Public Private Partnership
PPSR Place of Provision of Service Rules, 2012

PSE Public Sector Enterprise
PSSA Payments and Settlement Systems Act, 2007
PSU Public Sector Undertaking
PY Previous Year
QFI Qualified Foreign Investor
RBI Reserve Bank of India
REC Rural Electrification Corporation Limited
REIT Real Estate Investment Trust
RSP Retail Sale Price
SARFAESI Act, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002 2002
SC Scheduled Caste
SDT Specified Domestic Transaction
SEBI Securities and Exchange Board of India
SETU Self-Employment and Talent Utilisation
SHE Cess Secondary and Higher Education Cess
SPV Special Purpose Vehicle
ST Scheduled Tribe
STP Software Technology Park
STR Service Tax Rules, 1994
STT Securities Transaction Tax
TAN Tax Deduction And Collection Account Number
TDS Taxes Deducted at Source
The Act Finance Act, 1994
TP Transfer Pricing
TPO Transfer Pricing Officer
TReDS Trade Receivables Discounting System
TreDS Guidelines for setting up and operating the TreDs
Guidelines
UFA Unified Financial Agency
UK United Kingdom
UNCITRAL United Nations Commission on International Trade Law
Wealth Tax Wealth Tax Act, 1957
Act
w.e.f. with effect from
w.r.t. With respect to
WTO World Trade Organisation

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Published on February 1, 2017

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An Exclusive Analysis

UNION BUDGET 2017

© Economic Laws Practice 1|P a g e

Budget Proposals Addressing: .............................................................................................................................. 5

Indirect Taxes: ..................................................................................................................................................... 10

Direct Tax: ........................................................................................................................................................... 25

Banking, Finance, Infrastructure and Capital Markets ....................................................................................... 49

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Budget Proposals Addressing:

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 fast, demand-driven, remonetisation;

 Curbing tax evasion and the parallel economy;

 Restricting cash donations and measures to discourage cash transactions;

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Amendments influenced by Global Trends

Secondary adjustments in certain cases

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Key initiatives of the Government of India

Ease of doing business in India

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Foreign Direct Investment (FDI)

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Particulars Effective Date of Change

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Advance Rulings ELP Comments

Sr. No. Description of Services

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Sr. No. Description of Services

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Research and Development Cess ELP Comments

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Proposals are identical to those in Service Tax law

Remission of duty ELP Comments

Clarifications with respect to applicability of Exemption Notifications to EOU

Changes in Rate of Central Excise Duty

Sr. Existing Rate Revised Rate

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testing and quality controls) and Secretary,

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for mPOS (other than mobile

Waste & Scrap

Strips, Wires, Steels etc.

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 Unmanufactured tobacco, bearing brand name, falling under CETH 2401

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 the subsidy relates to export performance;

(iii) assistance to promote adaptation of existing facilities to new environmental requirements.

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Changes in Rate of Customs Duty

Sr. No. CTH Description of Goods Existing Rate Revised Rate

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Sr. No. CTH Description of Goods Existing Rate Revised Rate

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Sr. No. CTH Description of Goods Existing Rate Revised Rate

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CENVAT Credit Rules, 2004

For the purpose of valuation of turnover and reversals, Explanation

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This amendment will apply retrospectively from April 1, 2016.

The proposed amendment addresses the practical concerns of the stakeholders.