Automobile Sector Specific Impact Budget 2012
Content
www.pwc.com/in
Budget 2012 Snapshot
Automobile
20 March, 2012
Budget 2012 - Automobile sector
Foreword
The Indian automobile market has been one of the fastest growing market in the
world. The Indian automobile industry has, barring a few exceptional years, been
largely on a growth track. The industry is however quite competitive and is affected
by a number of macro-economic factors such as oil prices, interest costs and
infrastructure development. It is also subject to a myriad of taxes.
been primarily on expected or more realistic lines. The proposed increase in
indirect taxes is likely to result in ‘cosh push’ and to that extent, a potential
dampener. However, a silver lining could be the renewed focus on infrastructure
development, which will benefit the industry in the medium to longer term.
Further, the absence of any special tax on diesel vehicles, as was being envisaged in
some quarters, has been a big relief for companies with a diesel vehicle portfolio.
Direct tax impact
Given the specter of the high fiscal deficit, the industry was looking at the Union
Budget 2012 (‘Budget’) with some amount of trepidation and the consequent
expected hike in indirect axes, but at the same time that would signal policy
reforms and faster growth. Given this backdrop, the proposals in the budget have
•
No change in the corporate tax rate
1
PwC News Alert
March 2012
•
•
Increase in the income threshold for computing tax on individual’s income to
Sr.
result in more disposable income
No.
Weighted deduction of 200% for expenditure incurred on approved in-house
2
Reduced rate of tax on dividend income from foreign subsidiaries at 15% to be
continued for one more year
•
Advance Pricing Agreement (‘APA’) provisions proposed to ensure tax
certainty and unanimity of approach
•
General Anti Avoidance Rules (‘GAAR’) proposed to avoid aggressive tax
planning
•
Transfer pricing regulations extended to cover even domestic transactions for
Indirect tax impact
Service tax and Excise duty rate increased from 10% to 12%
•
Widening of service tax base by introducing a negative list of services
Excise duty
Increase in Excise duty rates for motor vehicles under chapter heading 8702
(transport of 10 or more persons) or 8703 (other than 8702 i.e. less than 10
persons) :
Rate of Basic Excise Duty
Existing rate
Proposed rate
Length not exceeding 4 meters
Engine capacity not exceeding
27% advalorem
Engine capacity exceeding
22 % advalorem +
1500cc
Rs 15,000/-
1500cc
Increase in Excise duty on chassis under chapter heading 8706 (Chassis fitted with engines)
Rate of Basic Excise Duty
Existing rate
Proposed rate
Chassis falling
10 % or 22% advalorem
15% or 25% respectively
under 8706
+ Rs. 10,000/- per
chassis
•
1
24% advalorem
2
to be rationalized
No.
22 % advalorem
Engine capacity not exceeding
Product
Product
12% advalorem
1
Cascading effect of Dividend Distribution Tax (‘DDT’) in multi-layer structure
Sr.
Proposed rate
10 % advalorem
Others
computation of certain specified deductions under the Act
•
Existing rate
Engine capacity not exceeding
1500cc (Diesel)
R&D extended for a further period of 5 years
•
Rate of Basic Excise Duty
Product
10 % advalorem
Concessional Excise duty rate of 6% prescribed for batteries supplied to
manufacturers of electrically operated vehicles (including two & three wheeler
electric motor vehicles) subject to the condition of obtaining registration by the
manufacturer with specified authorities.
Processes of matching, batching & charging or making of battery packs for Lithium
Ion batteries considered to be ‘deemed manufacture’ subject to excise duty.
Customs duty
Exemption from Education cess and Secondary and Higher Education cess on
countervailing duty leading to overall reduction in customs duty
12% advalorem
1200cc (petrol, LPG or CNG)
2
PwC News Alert
March 2012
Increase in Customs duty rate on Complete Built Units (‘CBU’) of large
cars/MUVs/SUVs permitted for import without any approval
Product
Value exceeding US$40,000 and
60%
A manufacturer of motor vehicles, in relation to motor vehicles manufactured
•
General insurance service provider in respect of motor vehicles insured or re-
•
CENVAT Credit of capital goods/ inputs allowed on delivery of the goods to the
insured
Rate of Basic Customs Duty
Existing rate
•
Proposed rate
manufacturer/ service provider, even if this is outside the factory/ premises
75%
engine capacity exceeding 3000cc
for petrol and 2500cc for diesel
CENVAT Rules amended:
•
Motor vehicles included in ‘capital goods’ except some specified vehicles
•
General insurance service and service in respect of repair of motor vehicles
included in the definition of ‘input service’ for specified persons as below:
3
Contacts
Dinesh Supekar
Executive Director
[email protected]
91 20 4100 4412
Our Offices
For private circulation only
Ahmedabad
President Plaza, 1st Floor Plot No 36
Opp Muktidham Derasar
Thaltej Cross Road, SG Highway
Ahmedabad, Gujarat 380054
Phone +91-79 3091 7000
Bangalore
6th Floor, Millenia Tower 'D'
1 & 2, Murphy Road, Ulsoor,
Bangalore 560 008
Phone +91-80 4079 7000
Bhubaneswar
IDCOL House, Sardar Patel Bhawan
Block III, Ground Floor, Unit 2
Bhubaneswar 751009
Phone +91-674 253 2279 / 2296
Chennai
PwC Center, 2nd Floor
32, Khader Nawaz Khan Road
Nungambakkam
Chennai 600 006
Phone +91-44 4228 5000
Hyderabad
#8-2-293/82/A/113A Road no. 36,
Jubilee Hills, Hyderabad 500 034,
Andhra Pradesh
Phone +91-40 6624 6600
Kolkata
South City Pinnacle, 4th Floor,
Plot – XI/1, Block EP, Sector V
Salt Lake Electronic Complex
Bidhan Nagar
Kolkata 700 091
Phone +91-33 4404 6000 / 44048225
Mumbai
PwC House, Plot No. 18A,
Guru Nanak Road - (Station Road),
Bandra (West), Mumbai - 400 050
Phone +91-22 6689 1000
Gurgaon
Building No. 10, Tower - C
17th & 18th Floor,
DLF Cyber City, Gurgaon
Haryana -122002
Phone : +91-124 330 6000
Pune
GF-02, Tower C,
Panchshil Tech Park,
Don Bosco School Road,
Yerwada, Pune - 411 006
Phone +91-20 4100 4444
For more information contact us at,
[email protected]
The above information is a summary of recent developments and is not intended to be advice on any particular matter. PricewaterhouseCoopers expressly disclaims liability to any person in respect of anything done in reliance
of the contents of these publications. Professional advice should be sought before taking action on any of the information contained in it. Without prior permission of PricewaterhouseCoopers, this Alert may not be quoted in
whole or in part or otherwise referred to in any documents
©2012 PricewaterhouseCoopers. All rights reserved. "PwC", a registered trademark, refers to PricewaterhouseCoopers Private Limited (a limited company in India) or, as the context requires, other member firms of
PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
4
Budget 2012 Snapshot
Automobile
20 March, 2012
Budget 2012 - Automobile sector
Foreword
The Indian automobile market has been one of the fastest growing market in the
world. The Indian automobile industry has, barring a few exceptional years, been
largely on a growth track. The industry is however quite competitive and is affected
by a number of macro-economic factors such as oil prices, interest costs and
infrastructure development. It is also subject to a myriad of taxes.
been primarily on expected or more realistic lines. The proposed increase in
indirect taxes is likely to result in ‘cosh push’ and to that extent, a potential
dampener. However, a silver lining could be the renewed focus on infrastructure
development, which will benefit the industry in the medium to longer term.
Further, the absence of any special tax on diesel vehicles, as was being envisaged in
some quarters, has been a big relief for companies with a diesel vehicle portfolio.
Direct tax impact
Given the specter of the high fiscal deficit, the industry was looking at the Union
Budget 2012 (‘Budget’) with some amount of trepidation and the consequent
expected hike in indirect axes, but at the same time that would signal policy
reforms and faster growth. Given this backdrop, the proposals in the budget have
•
No change in the corporate tax rate
1
PwC News Alert
March 2012
•
•
Increase in the income threshold for computing tax on individual’s income to
Sr.
result in more disposable income
No.
Weighted deduction of 200% for expenditure incurred on approved in-house
2
Reduced rate of tax on dividend income from foreign subsidiaries at 15% to be
continued for one more year
•
Advance Pricing Agreement (‘APA’) provisions proposed to ensure tax
certainty and unanimity of approach
•
General Anti Avoidance Rules (‘GAAR’) proposed to avoid aggressive tax
planning
•
Transfer pricing regulations extended to cover even domestic transactions for
Indirect tax impact
Service tax and Excise duty rate increased from 10% to 12%
•
Widening of service tax base by introducing a negative list of services
Excise duty
Increase in Excise duty rates for motor vehicles under chapter heading 8702
(transport of 10 or more persons) or 8703 (other than 8702 i.e. less than 10
persons) :
Rate of Basic Excise Duty
Existing rate
Proposed rate
Length not exceeding 4 meters
Engine capacity not exceeding
27% advalorem
Engine capacity exceeding
22 % advalorem +
1500cc
Rs 15,000/-
1500cc
Increase in Excise duty on chassis under chapter heading 8706 (Chassis fitted with engines)
Rate of Basic Excise Duty
Existing rate
Proposed rate
Chassis falling
10 % or 22% advalorem
15% or 25% respectively
under 8706
+ Rs. 10,000/- per
chassis
•
1
24% advalorem
2
to be rationalized
No.
22 % advalorem
Engine capacity not exceeding
Product
Product
12% advalorem
1
Cascading effect of Dividend Distribution Tax (‘DDT’) in multi-layer structure
Sr.
Proposed rate
10 % advalorem
Others
computation of certain specified deductions under the Act
•
Existing rate
Engine capacity not exceeding
1500cc (Diesel)
R&D extended for a further period of 5 years
•
Rate of Basic Excise Duty
Product
10 % advalorem
Concessional Excise duty rate of 6% prescribed for batteries supplied to
manufacturers of electrically operated vehicles (including two & three wheeler
electric motor vehicles) subject to the condition of obtaining registration by the
manufacturer with specified authorities.
Processes of matching, batching & charging or making of battery packs for Lithium
Ion batteries considered to be ‘deemed manufacture’ subject to excise duty.
Customs duty
Exemption from Education cess and Secondary and Higher Education cess on
countervailing duty leading to overall reduction in customs duty
12% advalorem
1200cc (petrol, LPG or CNG)
2
PwC News Alert
March 2012
Increase in Customs duty rate on Complete Built Units (‘CBU’) of large
cars/MUVs/SUVs permitted for import without any approval
Product
Value exceeding US$40,000 and
60%
A manufacturer of motor vehicles, in relation to motor vehicles manufactured
•
General insurance service provider in respect of motor vehicles insured or re-
•
CENVAT Credit of capital goods/ inputs allowed on delivery of the goods to the
insured
Rate of Basic Customs Duty
Existing rate
•
Proposed rate
manufacturer/ service provider, even if this is outside the factory/ premises
75%
engine capacity exceeding 3000cc
for petrol and 2500cc for diesel
CENVAT Rules amended:
•
Motor vehicles included in ‘capital goods’ except some specified vehicles
•
General insurance service and service in respect of repair of motor vehicles
included in the definition of ‘input service’ for specified persons as below:
3
Contacts
Dinesh Supekar
Executive Director
[email protected]
91 20 4100 4412
Our Offices
For private circulation only
Ahmedabad
President Plaza, 1st Floor Plot No 36
Opp Muktidham Derasar
Thaltej Cross Road, SG Highway
Ahmedabad, Gujarat 380054
Phone +91-79 3091 7000
Bangalore
6th Floor, Millenia Tower 'D'
1 & 2, Murphy Road, Ulsoor,
Bangalore 560 008
Phone +91-80 4079 7000
Bhubaneswar
IDCOL House, Sardar Patel Bhawan
Block III, Ground Floor, Unit 2
Bhubaneswar 751009
Phone +91-674 253 2279 / 2296
Chennai
PwC Center, 2nd Floor
32, Khader Nawaz Khan Road
Nungambakkam
Chennai 600 006
Phone +91-44 4228 5000
Hyderabad
#8-2-293/82/A/113A Road no. 36,
Jubilee Hills, Hyderabad 500 034,
Andhra Pradesh
Phone +91-40 6624 6600
Kolkata
South City Pinnacle, 4th Floor,
Plot – XI/1, Block EP, Sector V
Salt Lake Electronic Complex
Bidhan Nagar
Kolkata 700 091
Phone +91-33 4404 6000 / 44048225
Mumbai
PwC House, Plot No. 18A,
Guru Nanak Road - (Station Road),
Bandra (West), Mumbai - 400 050
Phone +91-22 6689 1000
Gurgaon
Building No. 10, Tower - C
17th & 18th Floor,
DLF Cyber City, Gurgaon
Haryana -122002
Phone : +91-124 330 6000
Pune
GF-02, Tower C,
Panchshil Tech Park,
Don Bosco School Road,
Yerwada, Pune - 411 006
Phone +91-20 4100 4444
For more information contact us at,
[email protected]
The above information is a summary of recent developments and is not intended to be advice on any particular matter. PricewaterhouseCoopers expressly disclaims liability to any person in respect of anything done in reliance
of the contents of these publications. Professional advice should be sought before taking action on any of the information contained in it. Without prior permission of PricewaterhouseCoopers, this Alert may not be quoted in
whole or in part or otherwise referred to in any documents
©2012 PricewaterhouseCoopers. All rights reserved. "PwC", a registered trademark, refers to PricewaterhouseCoopers Private Limited (a limited company in India) or, as the context requires, other member firms of
PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
4
