INDIAN AGRO & RECYCLED PAPER MILLS ASSOCIATION

404, Vikrant Tower, 4 Rajendra Place

New Delhi – 110 008

 UNION BUDGET 2012-13

IMPACT ON PAPER INDUSTRY

We are giving below our quick take on the Union Budget 2012-13

The Budget proposals of the Government are growth oriented and the major highlights of the budget proposals as far as the paper industry is concerned are as under:

1.         Excise Duty has been increased from 5% to 6%.

2.        The excise duty on supply of paper to Text Book Corporation/ Printing Corporation has been increased from 1% to 2%.      

3.         The most significant change in the budget is reduction in the Import Duty for import of waste paper. The duty has been reduced from 2.5% to Nil Duty. As a result of this, recycled based paper industries would be substantially benefited.

Higher allocation of budget for education, infrastructure and power projects will benefit the industry, however, the budget is not saying anything related to Technology upgradation fund which is the long demand of the industry for modernization and rebuilding of the plant and machinery, which is the negative side of the budget towards the industry. The other negative side of the budget is the increase of service Tax from @10% to 12%.

Excise duty of input materials such as chemicals, etc are now increased from 10% to 12%

Notifications on the above reduction in detail are given as hereunder along with its amendment note for your information

CENTRAL EXCISE DUTY

Notification No. 12 /2012-Central Excise dated 17^th March 2012:-

G.S.R. (E).-In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) and in supersession of (i) notification of the Government of India in the Ministry of Finance ( Department of Revenue), No. 3/2005-Central Excise, dated the 24th February,2005 , published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 95(E), dated the 24th February,2005,(ii) notification No. 3/2006-Central Excise, dated the1st March,2006, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 93 (E), dated the1st March,2006,(iii) notification No. 4/2006-Central Excise, dated the 1st March,2006 , published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 94 (E) dated the 1st March,2006,(iv) notification No. 5/2006-Central Excise, dated the1st March,2006 , published in the Gazette of India, Extraordinary Part II, Section 3, Sub-section (i), vide number G.S.R 95 (E) dated the1st March,2006,(v) notification No. 6/2006-Central Excise, dated the 1st March, 2006, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 96 (E) dated the1st March,2006, and (vi) notification No. 10/2006-Central Excise, dated the1st March,2006, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 100 (E) dated the 1st March,2006, except as respects things done or omitted to be done before such supersession, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the excisable goods of the description specified in column (3) of the Table below read with relevant List appended hereto and falling within the Chapter, heading or sub-heading or tariff item of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Excise Tariff Act), as are given in the corresponding entry in column (2) of the said Table, from so much of the duty of excise specified thereon under the First Schedule to the Excise Tariff Act, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table and subject to the relevant conditions annexed to this notification, if any, specified in the corresponding entry in column (5) of the Table aforesaid:

Provided that nothing contained in this notification shall apply to the-

goods specified against serial number 296 and 297 of the said Table after the 31st day of March, 2013.

Explanation 1.- For the purposes of this notification, the rates specified in column (4) of the said Table are ad valorem rates, unless otherwise specified.

Explanation 2.- For the purposes of this notification, ―brand name‖ means a brand name,

whether registered or not, that is to say, a name or a mark, such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to a product, for the purpose of indicating, or so as to indicate, a connection in the course of trade between the product and a person using such name or mark with or without any indication of the identity of that person.

 Notification No. 21 /2012- Customs

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act,1962 (52 of 1962) and in supersession of the notifications of the Government of India, in the Ministry of Finance (Department of Revenue), No. 20/2006-Customs, dated the 1st March, 2006, published in the Gazette of India, Extraordinary, part II, Section 3, Sub-section (i), vide number G.S.R. 92 (E), dated the 1st March, 2006, and No. 29/2010-Customs, dated the 27th February, 2010, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 92 (E), dated the 27th February, 2010, except as respects things done or omitted to be done before such supersession, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of the description specified in column (3) of the Table below, falling within the Chapter, heading, sub-heading or tariff item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding entry in column (2) of the said Table, when imported into India, from so much of the additional duty of customs leviable thereon under sub-section (5) of section 3 of the said Customs Tariff Act, as is in excess of the amount calculated at the standard rate specified in the corresponding entry in column (4) of the Table aforesaid:

Provided that in respect of the goods specified in S. Nos. 2, 46, 70, 87 and 98, imported on or after the 1st day of May, 2012, the exemption contained herein shall apply if the importer, declares,-

(i) the State of destination where such goods are intended to be sold for the first time after importation on payment of value added tax; and

(ii) his value added tax registration number in that State.

CUSTOM DUTY

Notification No. 21 /2012- Customs dated 17^th March 2012

Table

Amendments to First Schedule of Central Excise Tariff Act:

15.7     The First Schedule to the Central Excise Tariff is being amended so as to carry out the following changes:

iii.        insert a note in chapter 48 to provide that notwithstanding anything contained in Note 12, if the paper and paper products of heading 4811, 4816 or 4820 are printed with any character, name, logo, motif or format they shall remain classified under Chapter 48 as long as such products are intended to be used for further printing, to avoid classification disputes;

Amendments in the First Schedule and Second Schedule to the Customs Tariff Act.

27.1 The First schedule to the Customs Tariff Act is being amended to,-

         revise the length of the lowest slab of both filter and non-filter cigarettes of length not exceeding 60 millimetres or exceeding 60 millimetres to length exceeding or not exceeding 65 millimetres

         revise the description of tariff items 2601 11 10 to 2601 11 90 dealing with iron ore and concentrates based on Fe content

         insert Note 13 in Chapter 48 to provide that notwithstanding anything contained in Note 12, if the paper and paper products of heading 4811, 4816 or 4820 are printed with any character, name, logo, motif or format they shall remain classified under Chapter 48 as long as such products are intended to be used for further printing. This would prevent classification disputes.

         align the entries relating to copper scrap, brass scrap, nickel scrap, aluminium scrap, lead scrap and zinc scrap with the revised ISRI classification. [Clause 127]

FINANCE BILL, 2012

PROVISIONS RELATING TO DIRECT TAXES

Introduction

The provisions of the Finance Bill, 2012 relating to direct taxes seek to amend the Income-tax Act, inter alia, in order to provide for-

A. Tax rates

B. Widening of tax base

C. Measures to prevent generation and circulation of unaccounted money

D. Tax incentives and reliefs

E. Rationalization of Tax Deduction at Source (TDS) provisions

F. Rationalization of international taxation provisions

G. Rationalization of transfer pricing provisions

H. General Anti-Avoidance Rule

I. Other clarifications

2.             The Finance Bill, 2012 seeks to prescribe the rates of income-tax on income liable to tax for the assessment year 2012-13; the rates at which tax will be deductible at source during the financial year 2012-13 from interest (including interest on securities), winnings from lotteries or crossword puzzles, winnings from horse races, card games and other categories of income liable to deduction or collection of tax at source under the Income-tax Act; rates for computation of “advance tax”, deduction of income-tax from, or payment of tax on, ‘Salaries’ and charging of income-tax on current incomes in certain cases for the financial year 2012-13.

3.             The substance of the main provisions of the Bill relating to direct taxes is explained in the following paragraphs.

A.           RATES OF INCOME-TAX

I.              Rates of income-tax in respect of income liable to tax for the assessment year 2012-13.

In respect of income of all categories of assessees liable to tax for the assessment year 2012-13, the rates of income-tax have been specified in Part I of the First Schedule to the Bill. These are the same as those laid down in Part III of the First Schedule to the Finance Act, 2011, for the purposes of computation of “advance tax”, deduction of tax at source from “Salaries” and charging of tax payable in certain cases.

(1)           Surcharge on income-tax—

Surcharge shall be levied in respect of income liable to tax for the assessment year 2012-13, in the following cases:—

(a)    in the case of a domestic company having total income exceeding one crore rupees, the amount of income-tax omputed shall be increased by a surcharge for the purposes of the Union calculated at the rate of five per cent. Of such income tax.

(b)   ) in the case of a company, other than a domestic company, having total income exceeding one crore rupees, the amount of income-tax computed shall be increased by a surcharge for the purposes of the Union calculated at the rate of two per cent. of such income tax. However, marginal relief shall be allowed in all these cases to ensure that the additional amount of income-tax payable, including surcharge, on the excess of income over one crore rupees is limited to the amount by which the income is more than one crore rupees.

 Also, in the case of every company having total income chargeable to tax under section 115JB of the Income Tax Act, 1961 (hereinafter referred to as ‘Income-tax Act’) and where such income exceeds one crore rupees, surcharge at the rates mentioned above shall be levied and marginal relief shall also be provided.

(2)           Education Cess —

For assessment year 2012-13, additional surcharge called the “Education Cess on income-tax” and “Secondary and Higher Education Cess on income-tax” shall continue to be levied at the rate of two per cent. and one per cent., respectively, on the amount of tax computed, inclusive of surcharge, in all cases. No marginal relief shall be available in respect of such Cess.

II.             Rates for deduction of income-tax at source during the financial year 2012-13 from certain incomes other than “Salaries”.

The rates for deduction of income-tax at source during the financial year 2012-13 from certain incomes other than “Salaries” have been specified in Part II of the First Schedule to the Bill. The rates for all the categories of persons will remain the same as those specified in Part II of the First Schedule to the Finance Act, 2011, for the purposes of deduction of income-tax at source during the financial year 2011-12, except that in case of certain interest payments made to a non-residents by a specified Indian company engaged in prescribed business of infrastructure development, the rates for deduction have been now provided in the proposed new section 194LC.

(1)           Surcharge—

The amount of tax so deducted, in the case of a company other than a domestic company, shall be increased by a surcharge at the rate of two per cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crore rupees.

No surcharge will be levied on deductions in other cases.

(2)           Education Cess—

“Education Cess on income-tax” and “Secondary and Higher Education Cess on income-tax” shall continue to be leviedat the rate of two per cent. and one per cent. respectively, of income tax including surcharge wherever applicable, in the cases of persons not resident in India including companies other than domestic company.

III.            Rates for deduction of income-tax at source from “Salaries”, computation of “advance tax” and charging of income-tax in special cases during the financial year 2012-13.

The rates for deduction of income-tax at source from “Salaries” during the financial year 2012-13 and also for computation of “advance tax” payable during the said year in the case of all categories of assessees have been specified in Part III of the FirstSchedule to the Bill.

These rates are also applicable for charging income-tax during the financial year 2012-13 on current incomes in cases where accelerated assessments have to be made , for instance, provisional assessment of shipping profits arising in India to nonresidents, assessment of persons leaving India for good during the financial year, assessment of persons who are likely to transfer property to avoid tax, assessment of bodies formed for a short duration, etc.

The salient features of the rates specified in the said Part III are indicated in the following paragraphs—

A.            Individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person

Paragraph A of Part-III of First Schedule to the Bill provides following rates of income-tax:-

(i)The rates of income-tax in the case of every individual (other than those mentioned in (ii) and (iii) below) or Hindu undivided family or every association of persons or body of individuals , whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act (not being a case to which any other Paragraph of Part III applies) are as under :—

Upto Rs. 2,00,000                                -               Nil.

Rs. 2,00,001 to Rs. 5,00,000             -              10 per cent.

Rs. 5,00,001 to Rs. 10,00,000           -               20 per cent.

Above Rs. 10,00,000                          -             30 per cent.

(ii) In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year,—

Upto Rs. 2,50,000                                -               Nil.

Rs. 2,50,001 to Rs. 5,00,000             -               10 per cent.

Rs. 5,00,001 to Rs.10,00,000            -               20 per cent.

Above Rs. 10,00,000                          -               30 per cent.

(iii) in the case of every individual, being a resident in India, who is of the age of eighty years or more at anytime during the previous year, -

Upto Rs. 5,00,000                                -               Nil.

Rs. 5,00,001 to Rs. 10,00,000           -               20 per cent.

Above Rs. 10,00,000                          -               30 per cent.

No surcharge shall be levied in the cases of persons covered under paragraph-A of part-III of the First Schedule.

WIDENING OF TAX BASE

TDS on remuneration to a director

Under the existing provisions of the Income-tax Act, a company, being an employer, is required to deduct tax at the time of payment of salary to its employees including Managing director/whole time director. However, there is no specific provision for deduction of tax on the remuneration paid to a director which is not in the nature of salary.

It is proposed to amend section 194J to provide that tax is required to be deducted on the remuneration paid to a director, which is not in the nature of salary, at the rate of 10% of such remuneration.

This amendment will take effect from 1st July, 2012.

TAX INCENTIVIES AND RELIEFS

Weighted deduction for scientific research and development

Under the existing provisions of Section 35(2AB) of the Income-tax Act, a company is allowed weighted deduction at the rate of 200% of expenditure (not being in the nature of cost of any land or building) incurred on approved in-house research and development facilities. These provisions are not applicable in respect of any expenditure incurred by a company after 31^st March, 2012.

In order to incentivise the corporate sector to continue to spend on in-house research, it is proposed to amend this section to extend the benefit of the weighted deduction for a further period of five years i.e. up to 31st March, 2017.

This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year

2013-14 and subsequent assessment years up to assessment year 2017-18.

[Clause 8]

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