Rationalization of Service Tax Abatements and various relief measures

I. Rationalization of Abatements – w.e.f. 1st April 2016 in Notification No.26/2012-ST:

1.0 Passenger/Goods Transportation by Rail – credit on input services extended:

 ♦ Earlier, the notification provided for abatement subject to not taking cenvat credit on inputs, capital goods and input services.

 ♦ The restriction regarding availment of credit on input services has been removed.

 ♦ Given the fact that such abatement is mainly given to take care of the goods portion there was no justification to restrict the credit on input services as the output service suffered tax.

 ♦ This amendment enables taking of credit on input services eventhough abatement is availed.

2.0 Transport of Goods in Containers by Rail – credit on input services extended:

 ♦  Abatement of 70% was available subject to non-availment of credit on inputs, input services and capital goods.

 ♦  Now the abatement is restricted to 60% with cenvat credit benefit on input services.

Government restores exemptions to boost infrastructural projects

I. Introduction:

With affirmation on the economic development of the country as against the global slowdown, the Hon'ble Finance Minister Mr. Arun Jaitley presented its third Union Budget for 2016-17. During the budget speech, the Finance Minister flagged various issues which are in the top most priority of the Government. One of such issue which ranks high in the agenda ever since Mr. Narendra Modi came in power is to make the tax laws of the country transparent and predictable. The Government has been vehemently promoting against retrospective amendments which imposes an unforeseeable burden on the tax payer. In the current budget, the Government has proposed to introduce three new sections under service tax law namely 101,102 and 103 so as to restore certain exemptions where were withdrawn in the previous years.

In order to understand the impact of these new sections, it is relevant to refer to serial numbers 12 and 14 of the Mega Exemption Notification 25/2012-ST dated 30.06.2012 as it stood at the time of its introduction and the subsequent amendments which happened over the years.

SEBI debars wilful defaulters from accessing capital markets

SEBI, in its Board Meeting held on March 12, 2016, approved of certain new initiatives which include imposing restrictions on wilful defaulters, proposing brightline tests for acquisition of ‘control’ under the SEBI Takeover Regulations, 2011, reviewing the manner of dealing with Audit Reports containing qualifications and approving the Budget for 2016-17. The decisions taken by the SEBI Board will have an impact on the overall market, market participants and also on the market intermediaries. The key decisions taken by the SEBI board are discussed as hereunder:

I. Certain restrictions imposed on wilful defaulters: With an intention of restricting wilful defaulters from accessing capital markets for raising funds from public, SEBI Board has approved of the following proposals:

a) Wilful defaulter to be debarred from raising funds : SEBI has proposed to prohibit the issuer company from making public issue of equity securities or debt securities or nonconvertible redeemable preference shares if such issuer company or its promoter or its directors are in the list of wilful defaulters.

b) Wilful defaulter to be restricted from taking control over other entity : If any company or its promoter or its director is categorized as ‘wilful defaulter’, then such person may not be allowed to take control over other listed entity.

However, if listed company or its promoter or its director is categorized as ‘willful defaulter’, and there is a take-over Code, 2011.

c) Criteria for determining ‘fit and proper person re-defined’ : SEBI also proposes to amend the criteria for determining a ‘fit and proper person’ in the SEBI Regulations to include that no fresh registration shall be granted to any entity if the entity or its promoters or its directors or key managerial personnel, as defined under the SEBI (ICDR) Regulations, 2009, are included in the list of ‘wilful defaulters’.