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Corporate News *   Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver   *   Imposition of anti dumping duty "Ammonium Nitrate"originating in exported from Russia, Indonesia, Georgia and Iran *   Exemption to a person making inter-State taxable supplies of handicraft goods from the requirement to obtain registration granted  *   Exemption from registration to job-workers making inter-State supply of services to a registered person granted *  The notification amends the rates of compensation cess on various motor vehicles *   Clarifcation for classification and GST rate on lottery *   Directions to Bank regarding export to Algeria *   Implementation of Notification No. 19 dated 5.8.2017 *   Enlistment of Agricultural and Processed Food Products Export Development Authority (APEDA) under Appendix 2C & 2E *   Extension in last date of  Export of preferential quota sugar to USA under TRQ quota *   Correction / Amendments in Table 2 of Appendix 3B Foreign Trade Policy 2015-20 *   Proformae for submission of applications for export of Red sanders wood and import of sandalwood notified *   Amendment in import policy of raw sugar *   Revision in Policy condition no 2 to Chapter 95 of ITC(HS), 2017 *   Clarification on difficulties related to recent amendments in Customs Act, 1962. *   Implementation of electronic sealing for containers by exporters *   Rate of exchange of conversion of the foreign currency with effect from 08.09. 2017 {See notification no 84/2017-Cus (NT),dt. 07.09.2017 in What’s new} *   Jurisdiction of customs officers for the purpose of audit defined {See notification no 85/2017-Cus (NT),dt. 07.09.2017 in What’s new} *   GST Workshop for babus held *   GST cess hike on luxury cars approved by cabinet *   Punjab Govt unable to pay salary to its employees *   Narendra Modi Proposes GST Registration for small traders. *   Govt restricts imports of gold, silver from South Korea  *   West Bengal Sweetmeat Makers go on Hunger-strike Against GST *   Appointment of officers as the Principal Chief Commissioners of Customs or Chief Commissioners of Customs and allotted their jurisdiction *   Amendment in Para 4.32(i) of chapter 4 and in para 6.01 (a) of chapter 6 of the Foreign Trade Policy 2015-20 *   Supply of essential commodities to the Republic of Maldives during 2017-18 *   Rate of exchange of conversion of the foreign currency with effect from 18th August, 2017 notified  *   Classes of persons who shall pay customs duty electronically notified *   Change in AIRs of Duty Drawback on Gold Jewellery, Silver Jewellery and Silver Articles 
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Publish Date: 15 Mar, 2016
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Hopes of Auto Industry Shattered!

Hopes of Auto Industry Shattered! 

 

An article by:-
CA Pradeep Jain
CA Neetu Sukhwani &
Somya Jain

 
Introduction:- With the forthcoming budget 2016-17 there were lot of hopes and expectations of the automobile industry that they will be encouraged by way of various tax incentives but the budget came as a curse to them. All the hopes went in vain as soon as the Finance minister announced levy of Infrastructure cess on the vehicles. The levy of infrastructure cess came as a big blow to the car manufacturers.
 
Levy of Infrastructure Cess:-Vide Budget 2016-17, the government has announced to levy infrastructure Cess at the rate of 1 to 4 per cent on manufacturing of cars.
Infrastructure Cess is being levied on motor vehicles, of heading 8703, as per details mentioned hereunder:

Rate of Infrastructure Cess – Eleventh Schedule of Finance Bill 2016 read with Notification No. 01/2016-Infrastructure Cess dated 01.03.2016
The government has provided full exemption from the levy of Infrastructure Cess without any conditions on the following motor vehicles:-

SERIAL NO. CHAPTER HEADING DESCRIPTION OF EXCISABLE GOODS
1. 8703 Motor vehicles cleared as ambulances duly fitted with all the fitments, furniture and accessories necessary for an ambulance from the factory manufacturing such motor vehicles
4. 8703 Electrically operated vehicles, including three wheeled electric motor vehicles
5. 8703 Hybrid Motor Vehicles
6. 8703 Three wheeled vehicles
8. 8703 Hydrogen vehicles based on fuel cell technology

 
Furthermore, the government has provided exemption to the following motor vehicles subject to satisfaction of conditions prescribed therein:-

SERIAL NO. CHAPTER HEADING DESCRIPTION OF EXCISABLE GOODS CONDITION NO.
2. 8703 Motor vehicles (other than three wheeled motor vehicles for transport of upto seven persons), which after clearance has been registered for use solely as ambulance 1
3. 8703 Motor vehicles (other than three wheeled motor vehicles), which after clearance has been registered for use solely as taxi 1
7. 8703 Cars for physically handicapped persons 2

 
It is also worth noting that the condition no. 1 provides the exemption by way of refund mechanism as motor vehicles after clearance has been registered as ambulance or taxi.  A certificate issued by concerned State Transport Authority that the motor vehicle has been registered for use as ambulance/taxi is also required to be submitted to Assistant/Deputy Commissioner of Central Excise within 3 months or extended period of 3 months from the date of clearance of motor vehicle.
 
Furthermore, condition no. 2 requires certification from Deputy Secretary of Department of Heavy Industries that goods are capable of being used by physically handicapped persons and affidavit by buyer of car that the car will not be sold for five years after its purchase.
Moreover, the rate of infrastructure cess for following motor vehicles has been prescribed as follows:-

SERIAL NO. HEADING DESCRIPTION OF EXCISABLE GOODS RATE
9. 8703 Motor vehicles of length not exceeding 4000 mm, namely petrol, liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven vehicles of engine capacity not exceeding 1200 cc 1%
10. 8703 Motor vehicles of length not exceeding 4000 mm, namely diesel driven vehicles of engine capacity not 2.5% - exceeding 1500 cc 2.5%

 
It is worth noting that the effective rates of the Infrastructure Cess have been made applicable with effect from 1st March, 2016.
 
Amendment in Rule 3 of Cenvat Credit Rules, 2004 renders Infrastructure Cess as ‘Non-Cenvatable’

No Cenvat credit of this Infrastructure Cess will be available under the Cenvat Credit Rules, 2004. The Notification No. 13/2016-CE (N.T.) dated 01.03.2016, has amended Cenvat Credit Rules, 2004 made applicable from 01.04.2016 wherein proviso has been inserted in Rule 3 (4) thereby stating that the cenvat credit shall not be utilised for payment of Infrastructure Cess leviable under sub-clause (1) of clause 159 of the Finance Bill, 2016. Hence, when the payment of Infrastructure Cess is to be made in cash only and no cenvat credit can be utilised for its payment, it is implied that the Infrastructure Cess is non-cenvatable. This is for the reason that restricting utilisation tantamounts to restricting availment of credit as there is no point in taking credit when the same cannot be utilised at all.
 
Good bye words:-The intention of levying Infrastructure Cess is clear from the Budget speech wherein it was clarified that the pollution and traffic situation in Indian Cities is a matter of concern and so this new levy is being introduced on motor vehicles.  However, this infrastructure cess will definitely result in hike in the prices of cars. Moreover, even the Supreme Court has already imposed a ban on registration of diesel vehicles with engine capacity of over 2000 cc in Delhi, observing the alarming rise in pollution levels. Now the government has decided to impose infrastructure cess upto 4 per cent.  
 

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PRADEEP JAIN, F.C.A.

Head Office : -

Address :
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Phone No. :
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Mobile No. :
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Fax No. :0291 - 2439496


Branch Office : -

Address:
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Phone No. :
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Mobile No. :
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E-mail :pradeep@capradeepjain.com