Good Morning Ladies & Gentlemen, It is a pleasure to address this august gathering of intellectuals of the J&K Chamber of Commerce. The Union Budget FY14–15 has acknowledged the need for resource mobilisation across major transportation & logistics related infrastructure projects by announcing various measures to augment fund raising. Encouraging public private partnerships, allocating funds for infrastructure projects across various modes, development of 16 major Ports, creating more comprehensive policy for ship building and transforming Warehousing Development & Regulatory Authority, tax incentive for development of slurry pipelines for transportation of iron ore are some of the key measures announced in the budget. Moreover, the government’s commitment to implement GST by end of this fiscal year is a much needed step which would significantly improve the supply chain efficiencies & reduce losses. However, given that several critical industry expectations are yet to be formally appreciated by the policymakers, the industry stakeholders, both supply-side players & end users, perhaps need to together reinforce the demands more effectively than ever before. Diving deeper into the budget announcements, I shall address the key aspects of the Budget while capturing significant policy & tax & regulatory developments impacting the Transport & Logistics sector. Summary Comments Allocation of funds for road-development via NHAI is a step towards decongesting hinterland connectivity, especially as road is the most significant mode of cargo transport in India. Multi modal thrust on river transport through Jal Marg Vikas, new airports through PPP, setting up new ports & decongesting existing ports, and a proposed ship building policy are steps in the right direction. Thrust on metro rail in upcoming citites will facilitate public transportation; however the funds currently proposed would need to be significantly enhanced to make a significant impact. Thrust on augmenting warehousing capacity by allocating additional funds would lead to reduction of wastage, especially for perishables. While taking a medium term view, considerable attention has been provided to improve the transportation and logistics sector in a comprehensive manner. Policy Announcements Shipping: A policy for encouraging the growth of Indian controlled tonnage will be formulated to ensure increase in employment of the Indian seafarers. Moreover, a comprehensive policy will also be announced to promote Indian ship building industry in the current financial year. • Warehousing: Warehouse Development and Regulatory Authority (WDRA) has begun a transformation plan to invigorate the warehousing sector and significantly improve post-harvest lending to farmers against negotiable warehouse receipts. • Railways: The Railway budget has laid stress on resource mobilization through PSU surplus, FDI and PPP. • Airports: Schemes to develop new airports in Tier I and Tier II cities will be launched for implementation through Airport Authority of India or PPP mode. • Roads: The government has allocated INR 37,880 cr for the development of national highways via National Highway Authority of India (NHAI) and state roads. • Ports: The government plans to announce 16 new port projects in FY15 and has allocated INR 11,635 cr for development of existing ports and harbours. It will also focus on developing special economic zones (SEZ) in Kandla port and JNPT. Recent Policy Updates Rail Tariff Authority • An independent Rail Tariff Authority is being set-up to advise the Government on fixing of fares and freight of Railways Expansion of definition of infrastructure for availing External Commercial Borrowings (ECB) Expansion of definition of infrastructure for availing External Commercial Borrowings (ECB) • The existing definition for infrastructure sector for the purpose of availing ECB has been widened taking into account the Harmonised Master List of Infrastructure sub-sectors and Institutional Mechanism for its updation approved by Government of India vide Notification F. No. 13/06/2009-INF dated March 27, 2012. Foreign Direct Investment (‘FDI’) n Courier sector under automatic route • Government of India has relaxed entry route in courier sector by permitted 100 percent FDI under automatic route which was earlier falling under approval route. New Tariff guidelines for Major Ports • Government of India has announced new guidelines for tariff setting in Major Ports which shall pave way for increased investment flows into the port sector. Union Budget 2014 Transportation & Logistics – Implications Direct Tax No change in corporate tax rate, surcharge & education cess. Maximum effective tax rate in case of domestic & non-resident corporates would continue at 33.99 % & 42.02 %, respectively Investment linked tax deduction under section 35AD extended to laying & operating a slurry pipeline for transportation of iron ore after 1 April 2014 Where any asset, in respect of which deduction claimed under Section 35AD, is not used for the specified business (including cold storage & specified warehousing facility) for a period of 8 years, the deduction claimed, net of notional tax depreciation allowable, shall be treated as income in the year of non-compliance Expenditure incurred on CSR activities as per Companies Act 2013 considered as application of Income & no deduction allowable under Section 37 The existing provisions for interest payment made by an Indian company (including company engaged in the Transport and Logistics Sector) to a non-resident, in respect of borrowing made in foreign currency between 1 July 2012 to 1 July 2015, is subject to lower withholding tax rate of 5 percent. The same is proposed to be extended to 1 July 2017. It is proposed to put in place a specific taxation regime for providing the way the income in the hands of Infrastructure Investment Trust is to be taxed & the taxability of the income distributed by such business trusts in the hands of the unit holders of such trusts It is proposed that the APA concluded may also cover 4 years preceding the years covered by the APA, subject to the rules that will be framed in this regard Concessional tax rate of 15% on dividend from foreign subsidiaries / associates to be continued (without any sunset date) In case of non deduction of tax on payments to residents, 30% of such payments will be disallowed under Section 40(a)(ia) instead of 100 percent. No disallowance of payments to non-resident if corresponding TDS on the payments is deposited before the due date of filing return of income The Budget Speech announced that resident tax payers would also be able to obtain an advance ruling in respect of their income-tax liability above a defined threshold. Relevant provisions under the income Tax Act, 1961 to be prescribed. Direct Tax • Presumptive scheme of taxation under section 44BBB to be made applicable to the road construction sector • Extension of benefit of deduction under Section 80-IA in respect of up-gradation & extension of existing airports • Service tax collected on specified shipping income to be excluded in “gross freight” for computing deemed taxable income under Section 44B • Clarity to be brought for attribution of inland & outwards transaction in respect of freight forwarding business • Deduction of capital expenditure under Section 35AD, which is allowed for warehousing of agricultural produce, to be extended to other warehousing facilities also • Appropriate guidelines to be provided in respect of ‘regular’ & ‘occasional’ shipping business. Customs Duty State Governments notified as sponsoring authorities for Metro Rail Projects covered under the Project Import Regulations, 1986. • Clarification: Customs duty exemptions available for aircraft engines & parts thereof when imported for servicing, repair or maintenance of aircrafts used for scheduled operations. Service Tax General service tax rate remains unchanged Service tax levy expanded to include services provided by radio taxis or radio cabs Place of provision of service for hire of vessel (excluding yachts) & aircraft (irrespective of the period of hire) would be the location of service receiver Goods Transport Agency : Condition for non availment of CENVAT credit to be to be satisfied by the service providers only CENVAT credit on input service of renting a motor cab allowed to a Rent a Cab operator Enhanced abatement percentage (50% to 60%) for transportation of goods by vessel (effective Service tax of 4.944% w.e.f. 01 October 2014 Partial reverse charge on renting of motor vehicles: Revision in the taxable portion between service provider & receiver where abatement has not been availed (revised ratio of 50:50, earlier 60:40) • Exemption for transportation of organic Exemption provided for services by way of loading, unloading, packing, storage or warehousing, transport by vessel, rail or road (GTA), of cotton, ginned or baled manure by vessel, rail or road (by GTA) Indirect Tax • Demand for exemption to transportation of LNG through Chartered Vessels, Maintenance of Rail projects (including Metro projects), transportation of goods by road to places outside India to countries like Nepal, Bhutan etc not considered
Posted on: Fri, 11 Jul 2014 06:37:11 +0000
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