BUDGET - BMR Advisors

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legal right of possession and effective control, service tax wouldbe applicable.It appears that the above amendment addresses transactionssuch as those covered by the judgement of the Supreme Courtin the case of Rashtriya Ispat Nigam Limited. In this case thetransaction of supply of construction equipment by the projectowner to the contractor was held to not involve transfer of right touse the machinery in favour of contractors and therefore notliable to sales tax.Construction and civil works contractors not paying value addedtax or central sales tax on similar transactions on the basis of theabove judgement would now be required to pay service tax onthe same resulting in increased cost of the project.Service Tax on customized software and other ITservicesService tax has been imposed on information technologysoftware. Consequently, exclusion of information technologyservices from “business auxiliary services” has been deleted.Necessary amendments have also been carried out by includingservice relating to IT software under the taxable categories oftechnical testing and analysis, consulting engineering,maintenance or repair, technical inspection and certification.Consequently, the excise duty on packaged software is alsoproposed to be enhanced from 8 percent to 12 percent.Infrastructure sector projects which involve extensive use ofsophisticated software would be adversely impactedCentral Sales Tax (CST)Rate of CST reducedThe rate of CST is proposed to be reduced from 3 percent to2 percent. This is seen as a precursor to the GST regime to beintroduced from 2010.Reduced rate of 2 percent would be available only against issueof Form C. However, the benefit of Form C is available only tospecified category of infrastructure projects. In case of otherprojects where project owner is obligated to procure inputs andindia<strong>BUDGET</strong>200861
capital goods and provide the same to the contractors, thebenefit of reduced rate of 2 percent may not be available.Indirect tax proposals - PowerThe budget proposals include the following:Customs• Mega power projects continue to remain fully exempt• Impact of customs duty on non mega power projects(including gas turbine power projects)– BCD remains at 5 percent– CVD reduced from 16 percent to 14 percent– ACD increased from nil to 4 percentThus, the effective rate of customs duty for non-mega powerprojects increased from 22.97 percent to 25.58 percent.• Impact of customs duty on power transmission anddistribution projects– BCD reduced from 7.5 percent to 5 percent– CVD reduced from 16 percent to 14 percent– ACD increased from nil to 4 percentThus, the effective rate of customs duty for powertransmission and distribution projects reduced from 25.97percent to 25.58 percent.• Impact of customs duty on captive power plant1– BCD reduced from 7.5 percent to 5 percent– CVD reduced from 16 percent to 14 percent– ACD remains at 4 percentThus, the effective rate of customs duty for non-mega powerprojects reduced from 31.01 percent to 25.58 percent.Excise• Supplies to mega power projects remain exempt fromexcise duty62india<strong>BUDGET</strong>2008
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indiaThought LeadershipBUDGET2008Im
Page 4 and 5:
C O N T E N T SFOREWORDECONOMIC IND
Page 6 and 7:
FOREWORDInfrastructure is the backb
Page 8 and 9:
ECONOMIC INDICATORS AT A GLANCEIndi
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period of the previous year, regist
Page 12 and 13:
GROWTH IN CRUDE PETROLEUM PRODUCTIO
Page 14 and 15: GROWTH IN STEEL PRODUCTION (IN PERC
Page 16 and 17: FY 2007-08 to 139 billion in FY 201
Page 18 and 19: Renewable energy sources which incl
Page 20 and 21: TransmissionDuring the period FY 20
Page 22 and 23: Policy developmentsElectricity (Ame
Page 24 and 25: PROJECTED INVESTMENT IN THE POWER S
Page 26 and 27: AVIATION INFRASTRUCTUREAs India’s
Page 28 and 29: necessary to carry out amendments t
Page 30 and 31: The ACP is designed to provide a fo
Page 32 and 33: estimated cost of Rs 18.08 billion,
Page 34 and 35: is projected to scale up to Rs 869
Page 36 and 37: ROADS AND BRIDGESIndia has one of t
Page 38 and 39: Carriers’ Act, 1865 and would cat
Page 40 and 41: RAILWAYSThe Indian Railways is the
Page 42 and 43: estimated cost of Rs 280 billion•
Page 44 and 45: BUDGET EXPECTATIONS - POWERThe majo
Page 46 and 47: Customs and Excise duty rationaliza
Page 48 and 49: significant cost efficiencies (both
Page 50 and 51: Central sales taxDeclared goods sta
Page 52 and 53: during initial tax holiday years, s
Page 54 and 55: Reduction of customs duty on cold s
Page 56 and 57: Reduction of CST from 3 percent to
Page 58 and 59: Name of the Scheme FY 2007-08 FY 20
Page 60 and 61: • The amendment to take effect fr
Page 62 and 63: from customs duty. However, within
Page 66 and 67: • Reduction of peak rate of excis
Page 68 and 69: • Supply of tangible goods where
Page 70 and 71: Thus, import of goods for airport d
Page 72 and 73: GLOSSARYAAIACDACPAERAATFATMBCDBIALB
Page 74: www.bmradvisors.comOUR CONTACTSNew
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