BUDGET - BMR Advisors

• Reduction of peak rate of excise duty from 16 percent to 14percent. This would reduce the cost of domesticprocurements for non-mega power projects• Excise duty cost on procurement of packaged softwaregoes up from 8 percent to 12 percent.Service taxService tax on construction and maintenance of power plantscontinues to be a cost.In addition, to the above, the Budget proposals would also leadto increase in service tax cost due to the following:• The composition rate under EPC services / Works contractservices proposed to be increased from 2 percent to 4percent. This cost is likely to double the service tax cost forconstruction of power projects Consequently, the impact ofservice tax under composition scheme under EPC services/ works contract services, equated with the 33 percentabatement scheme available to commercial and industrialconstruction services• Procurement of customized software proposed to be madeliable to service tax• Supply of tangible goods where VAT is not applicableproposed to be made liable to service tax. Likely to impactdeployment of excavators, wheel loaders, dump trucks,crawler carriers, compaction equipment, cranes , high valuemachineries, etc in projects where contractors supply thesegoods without transfer of legal right of possession andeffective control and charge rentals• Transaction between associated enterprises proposed tobe made liable to service tax on accrual basis. Likely toimpact services provided interse between group companiesCentral Sales Tax (CST)Rate of CST• CST rate proposed to be reduced from 3 percent to 2percent. Power Plants are likely to benefit on indigenousindiaBUDGET200863