Budgets for Simplified Business Process

Improving ease of doing business has been one of the primary objectives of the present Indian Government and a slew of measures like INC-29 incorporation, Startup India Action Plan and Centralised Name Approval has been already enacted. The 2016 Budget has also announced various measures as under to improve ease of doing business in India.

Abolishment of 13 Cess

In order to reduce tax and compliance burden, 13 cesses levied by Ministries or Departments, administered by the Department of Revenue, where the revenue collection from each of them is less than Rs.50 crore in a year is being abolished.

Standardisation of Interest on Delayed Payment of Tax or Duty

In order to improve ease of compliance, the interest rate on delayed payment of duty or tax across all indirect taxes is being rationalised at 15%. However, in case of service tax collected but not deposited, the rate of interest on delayed service tax payment will be 24% from the date on which the service tax payment became due. However, in the case of assesses with taxable value during the preceding year covered by the notice is less than Rs.60 lakh, the rate of interest on delayed payment of service tax will be 12%. The standardisation of interest on delayed payment of tax or duty is set to come into effect from the date of enforcement of Finance Bill, 2016.

Amendment to CENVAT Credit Rules

The 2016 Budget has announced an amendment to the CENVAT Credit Rules, 2004 to improve credit flow, reduce compliance cost and litigation. Changes in the CENVAT credit rules are being made in the provisions relating to input service distributor, including an extension of this facility to transfer input services credit to outsourced manufacturers. These amendments to the CENVAT credit rules will help manufacturers with multiple manufacturing units to maintain a common warehouse for inputs and distribute inputs with credits to the individual manufacturing units. The amendment to CENVAT credit rules are set to come into effect from 1st April 2016.

Reduction in Number of Central Excise Returns

The number of returns to be filed by a central excise assessee, above a certain threshold is being reduced from 27 to 13. From 1st April 2016, central excise assessees will be required to file only one annual and 12 monthly central excise returns. The annual return will also have to be filed by service tax assessees, above a certain threshold.

Limit for Launching Prosecution

The monetary limit for launching prosecution is being increased to Rs.2 crore of service tax evasion. Further, the power to arrest is being restricted only to situations where the taxpayer has collected the service tax payment of over Rs.2 crores, but not deposited to the Government.

Withdrawal of Small Cases

Chief Commissioners of Central Excise have been instructed to file an application for withdrawing prosecution in cases involving duty of less than Rs.5 lakhs and pending for more than fifteen years. Further, amendments are being made to Central Excise and Service Tax laws for the closure of proceedings against co-notices, once the proceedings against the main notice have been closed.

Easier Import-Export

The Customs Act is being amended to provide for deferred payment of customs duties for certain class of importers and exporters. Also, the duty-free import allowance for bonafide gift items imported by post or air or by courier service being increased to Rs.20,000. Finally, rules prescribing the procedure for import or domestic procurement of goods at concessional rates of customs and excise duties for certain specified purposes are being simplified.

Back to Learn

Frequently Asked Questions

Common questions about Simplified Business Process Budgets in India.

The main objectives of the measures announced in the 2016 Budget are to reduce tax and compliance burden, improve credit flow, reduce litigation, and simplify customs procedures for importers and exporters. These measures aim to make it easier for businesses to operate in India.

Abolishing 13 cesses where the revenue collection from each is less than Rs.50 crore in a year is a step towards reducing the tax burden and simplifying the tax structure for businesses. This move aims to reduce compliance costs and improve ease of doing business.

The interest rate on delayed payment of duty or tax across all indirect taxes is being rationalized at 15%. However, for service tax collected but not deposited, the rate will be 24%, and for assessees with taxable value below Rs.60 lakh in the preceding year, the rate will be 12%.

Amendments are being made to the CENVAT Credit Rules, 2004, to improve credit flow, reduce compliance costs, and reduce litigation. The changes include provisions for input service distributors and extending the facility to transfer input services credit to outsourced manufacturers.

The number of returns to be filed by a central excise assessee above a certain threshold is being reduced from 27 to 13. From April 1, 2016, central excise assessees will be required to file only one annual and 12 monthly central excise returns.

The monetary limit for launching prosecution is being increased to Rs.2 crore of service tax evasion. The power to arrest is being restricted only to situations where the taxpayer has collected service tax payment of over Rs.2 crores but not deposited it to the Government.

Chief Commissioners of Central Excise have been instructed to file an application for withdrawing prosecution in cases involving duty of less than Rs.5 lakhs and pending for more than fifteen years. Amendments are also being made to allow the closure of proceedings against co-notices once the proceedings against the main notice have been closed.

The Customs Act is being amended to provide for deferred payment of customs duties for certain classes of importers and exporters. Additionally, the duty-free import allowance for bona fide gift items imported by post, air, or courier service is being increased to Rs.20,000.

Rules prescribing the procedure for import or domestic procurement of goods at concessional rates of customs and excise duties for certain specified purposes are being simplified.

The key areas addressed by the measures announced in the 2016 Budget for improving ease of doing business include reducing tax and compliance burden, improving credit flow, reducing litigation, simplifying customs procedures, rationalizing interest rates on delayed payments, and withdrawing or closing small cases.