Highlights of Union Budget 2013-14

Below are two significant excerpts from the FM’s speech which are highly relevant for the electronics industry:

“The National Electronics Policy 2012 is intended to promote manufacture of electronic goods in India. We recognize the pivotal role of semiconductor wafer fabs in the ecosystem of manufacture of electronics. I propose to provide appropriate incentives to semiconductor wafer manufacturing facility including zero custom duty for plan and machinery.”
“to attract new investment and to quicken the implementation of projects , i propose to introduce an investment allowance for new high value investments. a company investing Rs100 crore or more in plant and machinery during the period 1-4-2013 to 31-3-2015 will be entitled to deduct an investment allowance of 15 per cent of the investment. This will be in addition to current rate of depreciation. there will be enormous spill over benefit to small and medium enterprises.”

OVERVIEW OF THE ECONOMY
 Getting back to potential growth rate of 8 percent is the challenge facing the
Country..
 Slowdown in Indian economy has to be seen in the context of slowing global
economic growth from 3.9 per cent in 2011 to 3.2 per cent in 2012.
 Between 2004 and 2008,and again in 2009-10 and 2010-11 the growth rate was over 8 per cent and crossed 9 per cent in four of those six years.
 ‘Higher growth leading to inclusive and sustainable development’ to be the
mool mantra.
Fiscal Deficit, Current Account Deficit and Inflation
 Foreign investment is an imperative in view of the high current account deficit
(CAD). FII, FDI and ECB the three main sources of CAD Financing. Foreign investment that is consistent with our economic objectives to be encouraged.
 Battle against inflation continues and efforts in the past few months have brought down headline WPI inflation to about 7 per cent and core inflation to about 4.2 percent.
 Faced with huge fiscal deficit, Government expenditure rationalised in 2012-13. Some economic space retrieved. Space to be used to further Government’s socio- economic objectives.
PLAN AND BUDGETARY ALLOCATIONS
 Revised Estimates (RE) of the expenditure in 2012-13 at 96 per cent of the Budget
 Estimates (BE) due to slowdown and austerity measures.
 During 2013-14, BE of total expenditure of Rs 16,65,297 crores and of Plan
 Expenditure at Rs 5,55,322 crore.
CONSOLIDATING GROWTH
Tax Reforms
 Work on draft GST Constitutional amendment bill and GST law expected to be
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taken forward.
 A sum of Rs 9000 Crores towards the first installment of the balance of CST compensation provided in the Budget
 Tax Administration reforms to be set up

INVESTMENT ENVIRONMENT

Investment, Infrastructure and Industry
 The 12th Plan projects an investment of Rs 55,00,000 Crores (US$ 1 Trillion) for infrastructure sector of which 47% is expected come from private sector
 Infrastructure Debt Funds will be encouraged; Tax Free Infrastructure bonds will be allowed to raise funding for this sector.
 Support to DMIC Project continues with plans for 7 new cities finalized and work on 2 new smart industrial cities to start in 2013-14
 Chennai Bengaluru Industrial Corridor being developed by DIPP and Japan Intl Cooperation Agency
 Communication with investors to be improved to remove any apprehension or
distrust, including fears about undue regulatory burden.
 Companies investing Rs 100 crore or more in plant and machinery during the
period 1.4.2013 to 31.3.2015 will be entitled to deduct an investment allowance
of 15 per cent of the investment.
 Incentives to semiconductor wafer fab manufacturing facilities, including zero
customs duty for plant and machinery.

MSME’s:
Benefits of preferences enjoyed by MSME’s to continue upto 3 years after they grow out of this category
Enhance refinancing capability of SIDBI to be enhanced from Rs 5000 to Rs 10,000 Crores
Fifteen additional Tool Rooms and Technology Dev. Centres to be set up with assistance of World Bank and Rs 2200 allocated for this.
Foreign Trade
Support to measures to be taken to boost exports of goods and services.

FINANCIAL SECTOR
 A standing Council of Experts to be constituted in the Ministry of Finance to
analyse the international competitiveness of the Indian financial sector.
 India’s first Women’s Bank to be set up under the Public Sector with Rs 1000 Crores allocation
Defence
 Allocation for Defence increased to Rs 2,03,672 crore including Rs 86,741 crore
for capital expenditure.
 Constraints not to come in the way of providing any addition requirement for the
security of nation.

Science and Technology
 Despite constraints substantial enhancements given to Science and Technology,
Space and Atomic Energy.
 200 crore to be set apart to fund organisations that will scale up S&T innovations
and make these products available to the people.

Broadcasting
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All cities having a population of more than 1,00,000 will be covered by private

FM radio services.
Post Offices
An ambitious IT driven project to modernise the postal network at a cost of Rs. 4,909 crore. Post offices to become part of the core banking solution and offer real time banking services.
Health & Education
 Rs 37,330 Cr allocated to Ministry of Health, of which Rs 21,239 Cr will be for the New Health Mission.
 Rs 4727 Cr for Medical Education, Training & Research.
 Rs 1650 Cr for 6 AIIMS like institutions.
 Rs 65,867 allocated for Human Resource development an increase of 17% with focus on Sarv Siksha Abiyan and Right to Education as well as Rashtriya Madhyamik Siksha Abhiyan.

Skill Development
 Target of skilling 50 million people in the 12th Plan period, including 9 million
in 2013-14.
 An ambitious Scheme for skilling 1 Million youth with average monetary reward of Rs 10,000 each after successfully completing the course. NSDC to set the curriculum standards for different skills.

Rural Development
Rs 80,194 Cr allocated for Ministry for Rural development with Rs 33,000 for MGNREGS for supporting employment

GOVERNANCE
Direct Benefit Transfer Scheme to be rolled out throughout India to benefit the underprivileged linked to their Bank Account and Adhaar ID number.

TAX PROPOSALS
Tax Administration Reforms Commission to be set up.
In short term need to reclaim peak of 11.9 per cent of tax GDP ratio achieved in
2007-08
Direct Taxes
 No case to revise either the slabs or the rates of Personal Income Tax. Even a
moderate increase in the threshold exemption will put hundreds of thousands of Tax Payers outside Tax Net.
 Relief for Tax Payers in the first bracket of Rs2 lakhs to Rs 5 lakhs. A tax
credit of Rs 2000 to every person with total income upto Rs 5 lakhs.
 Surcharge of 10 percent on persons (other than companies) whose taxable income exceeds Rs 1 crore to augment revenues.
 Increase surcharge from 5 to 10 percent on domestic companies whose taxable income exceed Rs10 crore.
 In case of foreign companies who pay a higher rate of corporate tax, surcharge to increase from 2 to 5 percent, if the taxabale income exceeds Rs 10 crore.
 In all other cases such as dividend distribution tax or tax on distributed income,
current surcharge increased from 5 to 10 percent.
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 Additional surcharges to be in force for only one year.
 Education cess to continue at 3 percent.
 Concessional rate of tax of 15 percent on dividend received by an Indian company from its foreign subsidiary proposed to continue for one more year.
 Proposal to increase the rate of tax on payments by way of royalty and fees for
technical services to non-residents from 10 percent to 25 percent.
 Reductions made in rates of Securities Transaction Tax in respect of certain
transaction.
 Modified provisions of GAAR will come into effect from 1.4.2016.
Personal
 No change in personal Income Tax Slabs
 Tax Credits of Rs 2000 to every person who has total income upto Rs 5 Lacs
 Donations to National Childeren’s Fund eligible for 100% Tax deduction
 Long term infra bonds also eligible for deduction; Home Loans made eligible for additional Rs 1 Lac deduction on a Loan of upto Rs 25 Lacs

Indirect Taxes
No change in the normal rates of 12 percent for excise duty and service tax.
No change in the peak rate of basic customs duty of 10 percent for non-agricultural
products.

Excise

 85.1 Excise duty on mobile handsets including cellular phones having retail sale price more than Rs. 2000/- is being increased from 1% to 6%. The duty on mobile phones priced up to and inclusive of Rs. 2000 (retail sale price) would remain unchanged. Notification No. 12/2013-CE, dated 1st March, 2013 (S. No. 263A) provides the details. Consequently notification No. 20/2011-CE, dated 24th March, 2011 is being rescinded. Notification No. 6/2013-CE, dated 1st March 2013 refers.

 Exemption provided through Notif 7/2013-CE to Intermediate goods captively consumed in the manufacture of goods by units availing area based exemption in the States of Uttrakhand and Himachal Pradesh

 87.1 The validity period of concessional excise duty of 6% granted to specified parts of hybrid and electric vehicles is being extended by two more years up to 31st March, 2015. Proviso to notification No.12/2012-C.E, as amended by notification No. 12/2013-CE, dated the 1st March 2013 refers.

Customs
 Period of concession available for specified part of electric and hybrid vehicles
extended upto 31 March 2015.

 Concessions to aircraft maintenance, repair and overhaul (MRO) industry.
 Duty on Set Top Boxes increased from 5 to10 percent.

 Duty on imported luxury goods such as high end motor vehicles, motor cycles,
yachts and similar vessels increased.

 85.1 The BCD on Integrated Decoder Receiver, also known as Set Top Box, is being increased from 5% to 10%. S. No411 of notification No.12/2012-
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Customs, as amended by notification No. 12 /2013-Customs, dated the 1st March 2013 refers.
 85.2 LCD and LED TV Panels of 19” and above are presently exempt from BCD under notification No 12/2012-Customs (S. No. 432). In this connection, a doubt has been raised whether this exemption is available for LCD and LED TV Modules or otherwise. It is clarified that LCD and LED TV Panels and LCD and LED TV Modules are one and the same thing for the purpose of exemption under this notification. 7

 85.3 Presently, all goods required for the manufacture of the goods falling under heading 8541 are exempt from BCD subject to actual user condition. Solar cells and solar modules are classified under heading 85.41. It has been brought to the notice of the Ministry that this exemption has been denied at certain places although the imported goods are required for the manufacture of solar cells and solar modules. It is clarified that the BCD exemption under S No 39 of notification No. 24/2005-Customs, dated 1st March, 2005 is available to all goods including chemicals and electronic parts required for the manufacture of solar cells whether or not assembled in modules or panels.

 87.2 BCD is being exempted on lithium ion automotive battery for manufacture of lithium ion battery packs for supply to the manufacturers of hybrid and electric vehicles. Notification No.12/2012-Customs (S. No 438), as amended by notification No. 12/2013-Customs, dated the 1st March 2013 refers.

Notifications
Refer the following notifications:
6/2013 /CE dt 1-3-2013 (Excise Duty on Mobile handsets- Rescinds 20/2011-CE)
7/2013 /CE dt 1-3-2013 (Excise Exemptions extended in Uttrakhand & Himachal)
12/2013 /CE dt 1-3-2013 (Excise Duty on Mobile Handsets at 6%)
12/2013 /CUS dt 1-3-2013 (Customs Duty on Set Top Boxes & Lithium Ion Automotive Batteries))

Service Tax
 Certain clauses introduced under Service Tax to impose higher penalties and even imprisonment in case of non compliance
 Section 78A introduced to make provision for imposition of penalty on Director, Manager/Secretary or other officer of company who is knowingly concerned with a specified contravention of service tax law
 Out of nearly 17 lakh registered assesses under Service Tax only 7 lakhs file returns regularly. Need to motivate them to file returns and pay tax dues. A onetime scheme called ‘Voluntary Compliance Encouragement Scheme’ proposed to be introduced. Defaulter may avail of the scheme on condition that he files truthful declaration of Service Tax dues since 1st October 2007.