August 2014 New 1

Materials Management Review 1 August 2014
From the Desk of The National President From the Desk of The National President From the Desk of The National President From the Desk of The National President From the Desk of The National President
My Dear Readers,
Greetings from your National President !
The first Budget of the new government has been presented in parliament. It is indeed a forward
looking budget with focus on all round development.
Finance Minister Mr. Arun Jaitely in his budget has focused on the vision of our Prime Minister
Mr.Narendra Modi Sab ka Saath Sab ka Vikas. The key areas that have been focused on are
Manufacturing & Infrastructure. The government has targeted a 7-8% growth over the next 3-4 years.
There is a plan to reduce the debt so that the future generations are not burdened.
Various steps are being initiated for all round growth by reducing and streamlining the processes. This
will definitely give an impetus to growth and would also attract big investments in these areas. The
decision making would be speeded up which was not there earlier.
The focus is on education with an increased outlay of nearly 13%. With setting up of prestigious institutes
like IITs & IIMs would result in a big boost for students and job opportunities.
The government is initiating many programs for Rural Development so that the quality of life is made
better. It also gives an opportunity for all of us to be a part of the same.
For SCM professionals this opens many new avenues and we all look forward for the development of
the profession in near future.
I would like to specifically remind you all that we have already accepted the challenge for increase in
the membership strength to 20000, I am confident that you all will contribute to achieve this goal. The
increase in students enrollment is another task ahead of us and we will have to strive hard to achieve
desired target.
With warm regards
Lalbhai Patel
National President - IIMM
Email: lppatel09@yahoo.com
From the Desk of Editor-in-Chief From the Desk of Editor-in-Chief From the Desk of Editor-in-Chief From the Desk of Editor-in-Chief From the Desk of Editor-in-Chief
Honble Finance Minister, Shri Arun Jaitely presented the Union Budget in parliament on
July 10, 2014. This is the first budget of newly formed Government under prevailing Economic
crisis with two successive years with less than 5% GDP growth, rising inflation, high Fiscal &
current Account Deficit etc.
Shri Arun Jaitely, has set the ground for reviving the economy and put back India to a growth rate of 7-8% in next
three to four years. The Fiscal Deficit is anticipated at 4.1% of GDP in 2014-15 and 3.6% in 2015-16 and 3% in
2016-17. It has clearly indicated the roadmap of Fiscal Consolidation of Indian economy over next five years.
Increase in FDI limits in Defense and insurance sector from 26% to 49% with Indian Management and Control,
will support local indigenous production and save precious foreign exchange resulting in lowering current account
deficit.
Total expenditure estimated to be at Rs 17950 billion while Plan Expenditure is at Rs 5.75 billion and non plan
expenditure is at Rs 12.19 billion. Defense gets an amount of Rs 2290 billion where as Subsidies stand out at Rs
2600 billion with Food subsidy bill raised significantly to Rs 1,15,000 Crore from Rs 92,000 Crore while petroleum
subsidy has moderated to Rs 63,427 Crores from Rs 85,480 Crores in 2013-14. Individual tax payers have also got
reason to cheer as tax slab limits raised to Rs 2.5 lakh from 2 lakh and for senior citizens, it is Rs 3 lakh from Rs 2.5
lakh.
A range of Infrastructure projects like setting up of 16 new ports, new airports in Tier I and Tier II cities, work on
Express Highways in parallel to Industrial Corridors, Jal Marg Vikas project for connecting Allahbad & Haldia as
an inland water way, Rural electrification, ultra modern power projects, creation of green power i.e. solar and
thermal power corridors are welcome move and will enhance investment in Infrastructure Sector. A fund of Rs 50
Billion has been allocated to warehouse capacity. Allowing Infrastructure loan for a longer period of time
matching the life of the asset is positive for the industry. Proposal for developing 100 smart cities will provide a
big boost to Indian Real Estate Industry and Civil Infrastructure.
Setting up of six textile clusters, pashmina clusters, seven Industrial smart cities, initiatives to revive SEZs, trade
facilitation center to promote handloom work in Varanasi are valuable steps taken towards enhancement in
manufacturing sector. Tax cuts/exemptions are other measures to promote manufacturing in power, consumer
goods and retail to create more jobs and consumption. However, wait for Implementation of GST should come to
an end to boost logistics efficiency & economic activities.
Acknowledging the importance of agriculture sector in India, the Government has set a target of sustainable
growth of 4% in Agriculture. Finance Minister has also announced a Price stabilization fund of worth Rs 500
Crore. Rs 100 Crore also set aside for Kisan Television to provide real time information on various farming and
agricultural issues.
Along with growth and investment, Government is also keen to update the existing education infrastructure and
skill developmental programmes to develop the pool of talent that can meet the demand of industries and
corporate sector. Finance Minister announced a new scheme, Skill India to increase the employability. The
budget highlights creation of five new IITs and IIMs and four new AIIMs.
Industries and corporate houses have many positives from the current budget. Reforms and Strategies adopted
for manufacturing, infrastructure and MSME sector (creation of new Textile and Pashmina clusters, revival of
SEZs) will not only create employment but also boost the foreign investments and economic growth.

(M. K. BHARDWAJ)
MATERIALS MANAGEMENT
REVIEW
Volume 10 - Issue 10 (August 2014)
C O N T E N T S
BUDGET GLOSSARY TERMS 4
TYPES OF BUDGET 7
BUDGET AT A GLANCE 8
BUDGET - DIRECT TAXES 9
BUDGET - INDIRECT TAXES 13
KEY PROPOSALS OF THE RAILWAY BUDGET 2014-15 20
ECONOMIC PERFORMANCE, PROSPECTS
AND REFORMS 22
STATISTICAL APPENDIX 24
COMMODITY INDEX 26
HIGHLIGHTS OF ECONOMIC SURVEY 2013-14 27
BUDGET 2014 OFFERS LOTS TO REVIVE
GROWTH, SPUR INVESTMENTS 29
BUDGET 2014: INFRASTRUCTURE GROWTH
CAN BE KEY FOR ECONOMIC REVIVAL 30
RAILWAY CIRCULARS ON SERVICE TAX 31
CUSTOM EXCHANGE RATES 32
FOR HIGHER FDI, REVIVE SEZS 33
WE WILL ADOPT POLICIES TO MAKE
PROCUREMENT TRANSPARENT 34
WAY FORWARD EMERGING INDIA - FOR A HIGH
SPEED RAIL (HSR) OPPORTUNITY AND CHALLENGE
IN VALUE CHAIN! 35
LIST OF CHANGES IN SERVICE TAX-BUDGET 2014-15 39
TAXATION PROPOSED CHANGES
UNION BUDGET 2014-15 - A NEW BEGINNING 41
BUDGET 2014-15: PPP IS THE NEW MANTRA FOR
INFRASTRUCTURE 47
BRANCH NEWS 48
EXECUTIVE HEALTH 56
PAGE NO.
IIMM is a charter member of
International Federation of
Purchasing & Supply Management
Editor in Chief & Publisher:
Mr. M. K. Bhardwaj
Past President, IIMM &
Former Director Ministry of Defence
Core Committee :
Mr. Ashok Sharma, President 5M India
Mr. V. K. Jain, Former ED, Air India
Mr. Tej K Magazine, Management Advisor
National President :
Mr. Lalbhai Patel
Editors :
Mr. O.P. Longia (Sr. Vice President)
Mr. H.K. Sharma, VP (North)
Mr. Samiran Basu, VP (East)
Mr. G.B.Palankar, VP (West)
Mr. R. K.Rastogi, VP (South)
Mr. A.K.Mehra, VP (Central)
Mr. P.M.Biddappa, NS&T
Mr. C. Subbkrishna, IPP
Prof.(Dr.) V. K. Gupta - IMT, Ghaziabad
Correspondence :
MATERIALS MANAGEMENT REVIEW
Indian Institute of Materials
Management
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Darya Ganj, New Delhi - 110 002.
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Edited, Printed & Published by :
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(Published material has been compiled from several sources, IIMM disowns any responsibility
for the use of any information from the Magazine if published anywhere by anyone.)
A
nnual Financial Statement : Article 112 of the
Constitution requires the government to present
to Parliament a statement of estimated receipts
and expenditure in respect of every financial year - April
1 to March 31. This statement is the annual financial
statement. The annual financial statement is usually a
white 10-page document. It is divided into three parts,
consolidated fund, contingency fund and public account.
For each of these funds, the government has to present a
statement of receipts and expenditure.
Consolidated Fund : This is the most important of all
government funds. All revenues raised by the government,
money borrowed and receipts from loans given by the
government flow into the consolidated fund of India. All
government expenditure is made from this fund, except
for exceptional items met from the Contingency Fund or
the Public Account. Importantly, no money can be
withdrawn from this fund without the Parliament's
approval.
Contingency Fund : As the name suggests, any urgent or
unforeseen expenditure is met from this fund. The Rs
500-crore fund is at the disposal of the President. Any
expenditure incurred from this fund requires a
subsequent approval from Parliament and the amount
withdrawn is returned to the fund from the consolidated
fund.
Public Account : This fund is to account for flows for
those transactions where the government is merely
acting as a banker. For instance, provident funds, small
savings and so on. These funds do not belong to the
government. They have to be paid back at some time to
their rightful owners. Because of this nature of the fund,
expenditure from it are not required to be approved by
the Parliament.
For each of these funds the government has to present a
statement of receipts and expenditure. It is important to
note that all money flowing into these funds is called
receipts, the funds received, and not revenue. Revenue
in budget context has a specific meaning.
The Constitution requires that the budget has to
distinguish between receipts and expenditure on revenue
account from other expenditure. So all receipts in, say
consolidated fund, are split into Revenue Budget (revenue
account) and Capital Budget (capital account), which
includes non-revenue receipts and expenditure. For
understanding these budgets - Revenue and Capital - it
is important to understand revenue receipts, revenue
expenditure, capital receipts and capital expenditure.
Revenue receipt/Expenditure : All receipts and
expenditure that in general do not entail sale or creation
of assets are included under the revenue account. On
the receipts side, taxes would be the most important
revenue receipt. On the expenditure side, anything that
does not result in creation of assets is treated as revenue
expenditure. Salaries, subsidies and interest payments
are good examples of revenue expenditure.
Capital receipt/Expenditure : All receipts and expenditure
that liquidate or create an asset would in general be
under capital account. For instance, if the government
sells shares (disinvests) in public sector companies,
like it did in the case of Maruti, it is in effect selling an
asset. The receipts from the sale would go under capital
account. On the other hand, if the government gives
someone a loan from which it expects to receive interest,
that expenditure would go under the capital account.
In respect of all the funds the government has to prepare
a revenue budget (detailing revenue receipts and revenue
expenditure) and a capital budget (capital receipts and
capital expenditure). Contingency fund is clearly not that
important. Public account is important in that it gives a
view of select savings and how they are being used, but
not that relevant from a budget perspective. The
consolidated fund is the key to the budget.
Corporation Tax: Tax on profits of companies. : Taxes on
Income other than corporation tax: Income tax paid by
non-corporate assesses, individuals, for instance.
Fringe benefit tax (FBT): The taxation of perquisites - or
fringe benefits - provided by an employer to his
employees, in addition to the cash salary or wages paid,
is fringe benefit tax. It was introduced in Budget 2005-
06. The government felt many companies were disguising
perquisites such as club facilities as ordinary business
expenses, which escaped taxation altogether. Employers
have to now pay FBT on a percentage of the expense
incurred on such perquisites.
Securities transaction tax (STT): Sale of any asset (shares,
property) results in loss or profit. Depending on the time
the asset is held, such profits and losses are categorised
as long-term or short-term capital gain/loss. In Budget
2004-05, the government abolished long-term capital
gains tax on shares (tax on profits made on sale of shares
held for more than a year) and replaced it with STT. It is
a kind of turnover tax where the investor has to pay a
small tax on the total consideration paid / received in a
share transaction.
Banking cash transaction tax (BCTT): Introduced in Budget
2005-06, BCTT is a small tax on cash withdrawal from
bank exceeding a particular amount in a single day. The
basic idea is to curb the black economy and generate a
record of big cash transactions.
Customs: Taxes imposed on imports. While revenue is
an important consideration, Customs duties may also
be levied to protect the domestic industry or sector
(agriculture, for one), in retaliation against measures
by other countries.
Union Excise Duty: Duties imposed on goods made in
India.
Service Tax: It is a tax on services rendered. Telephone
bill, for instance, attracts a service tax. While on taxes,
let us take a look at an important classification: direct
tax and indirect tax.
BUDGET GLOSSARY TERMS
Direct Tax : Traditionally, these are taxes where the burden
of tax falls on the person on whom it is levied. These are
largely taxes on income or wealth. Income tax (on
corporates and individuals), FBT, STT and BCTT are direct
taxes.
Indirect Tax : In case of indirect taxes, the incidence of
tax is usually not on the person who pays the tax. These
are largely taxes on expenditure and include Customs,
excise and service tax. Indirect taxes are considered
regressive, the burden on the rich and the poor is alike.
That is why governments strive to raise a higher
proportion of taxes through direct taxes. Moving on, we
come to the next important receipt item in the revenue
account, non-tax revenue.
Non-tax revenue : The most important receipts under
this head are interest payments (received on loans given
by the government to states, railways and others) and
dividends and profits received from public sector
companies.
Various services provided by the government - police
and defence, social and community services such as
medical services, and economic services such as power
and railways - also yield revenue for the government.
Though Railways are a separate department, all its
receipts and expenditure are routed through the
consolidated fund.
Grants-in-aid and contributions : The third receipt item
in the revenue account is relatively small grants-in-aid
and contributions. These are in the nature of pure
transfers to the government without any repayment
obligation.
Revenue Deficit : The excess of disbursements over
receipts on revenue account is called revenue deficit.
This is an important control indicator. All expenditure
on revenue account should ideally be met from receipts
on revenue account; the revenue deficit should be zero.
When revenue disbursement exceeds receipts, the
government would have to borrow. Such borrowing is
considered regressive as it is for consumption and not
for creating assets. It results in a greater proportion of
revenue receipts going towards interest payment and
eventually, a debt trap. The FRBM Act, which we will take
up later, requires the government to reduce fiscal deficit
to zero by 2008-09.
Receipts in the capital account of the consolidated fund
are grouped under three broad heads - public debt,
recoveries of loans and advances, and miscellaneous
receipts.
Public debt: Public debt receipts and public debt
disbursals are borrowings and repayments during the
year, respectively. The difference is the net accretion to
the public debt. Public debt can be split into internal
(money borrowed within the country) and external (funds
borrowed from non-Indian sources). Internal debt
comprises treasury bills, market stabilisation schemes,
ways and means advance, and securities against small
savings.
Treasury bills (T-bills): These are bonds (debt securities)
with maturity of less than a year. These are issued to
meet short-term mismatches in receipts and expenditure.
Bonds of longer maturity are called dated securities.
Market stabilisation scheme: The scheme was launched
in April 2004 to strengthen RBI's ability to conduct
exchange rate and monetary management. These
securities are issued not to meet the government's
expenditure but to provide RBI with a stock of securities
with which it can intervene in the market for managing
liquidity.
Ways and means advance (WMA): One of RBI's roles is
to serve as banker to both central and state governments.
In this capacity, RBI provides temporary support to tide
over mismatches in their receipts and payments in the
form of ways and means advances.
Securities against small savings: The government meets a
small part of its loan requirement by appropriating small
savings collection by issuing securities to the fund.
Miscellaneous receipts: These are receipts from
disinvestment in public sector undertakings. Capital
account receipts of the consolidated fund - public debt,
recoveries of loans and advances, and miscellaneous
receipts and revenue receipts are receipts of the
consolidated fund.
The consolidated fund has certain disbursements
'charged' to the fund. These are obligations that have to
be met in any case and, therefore, do not have to be
voted by the Lok Sabha. These include interest payments
and certain expenditure such as emoluments of the
President, salary and allowances of speaker, deputy
chairman of the Rajya Sabha, and allowances and
pensions of Supreme Court judges, Parliament and so
on.
Budget at a glance : This is a snap shot of the budget for
easy understanding. Nonetheless, it introduces some new
concepts. While receipts are broken down into revenue
and capital, unlike the consolidated fund, it shows the
centre's net tax revenues. This is because a decent part
of the gross tax revenue, as decided by the relevant
Finance Commission, flows to the state governments.
Budget at a glance also segments expenditure into plan
and non-plan expenditure, instead of splitting into
revenue and capital. Each of these is then split into
revenue account and capital account. Before discussing
plan and non-plan expenditure it is important to discuss
the concept of the central plan.
Central plan: Central or annual plans are essentially
Five Year Plans broken down into annual instalments.
Through these plans, the government achieves the
objectives of the Five Year Plans. The central plan's
funding is split almost evenly between government
support (from the budget) and internal and extra
budgetary resources of public enterprises. The
government's support to the central plan is called budget
support. We will take up plan and non-plan expenditure
in the next part.
Plan expenditure: This is essentially the budget support
to the central plan and the central assistance to state
and union territory plans. Like all budget heads, this is
also split into revenue and capital components.
Non-plan expenditure: This is largely the revenue
expenditure of the government. The biggest items of
expenditure are interest payments, subsidies, salaries,
defence and pension. The capital component of the non-
plan expenditure is relatively small with the largest
allocation going to defence. Defence expenditure is non-
plan expenditure.
Fiscal Deficit: When the government's non-borrowed
receipts fall short of its entire expenditure, it has to
borrow money from the public to meet the shortfall. The
excess of total expenditure over total non-borrowed
receipts is called the fiscal deficit.
Primary deficit: The revenue expenditure includes interest
payments on government's earlier borrowings. The
primary deficit is the fiscal deficit less interest payments
A shrinking primary deficit indicates progress towards
fiscal health. The Budget document also mentions deficit
as a percentage of GDP. This is to facilitate comparison
and also get a proper perspective. Prudent fiscal
management requires that government does not borrow
to consume in the normal course.
FRBM Act: Enacted in 2003, Fiscal Responsibility and
Budget Management Act require the elimination of
revenue deficit by 2008-09. Hence, from 2008-09, the
government will have to meet all its revenue expenditure
from its revenue receipts. Any borrowing would only be
to meet capital expenditure. The Act mandates a 3% limit
on the fiscal deficit after 2008-09.
Resources transferred to the states: A part of the Centre's
gross tax collection goes to state governments. In the
Budget 2007-08, the states were to receive nearly 27% of
the gross tax collections. The Centre also transfers funds
to states by way of support to their plans. It also gives
large grants to manage centrally-sponsored schemes.
The government counts small savings transfers to state
governments, which are in the nature of borrowings, as
resources transferred to states.
Before March 31, 1999, the Centre used to borrow net
accretions to small savings and lend them to the states.
From April 1, 1999, states started receiving 75% of net
small savings directly; the balance was invested in
special government securities during 1999-2000 to
2001-2002. The sums received in the NSS fund on
redemption of special securities are being reinvested in
special G-secs. From April 2002, the entire net collection
under small saving schemes in each state and UT are
advanced to the to the concerned state/UT government
as investment in its special securities. The expenditure
and receipts Budget take up the respective heads in
greater detail.
Value-Added Tax (VAT) and GST: VAT helps avoid cascading
of taxes as a product passes through different stages of
production/value addition. The tax is based on the
difference between the value of the output and inputs
used to produce it. The aim is to tax a firm only for the
value added by it to the inputs it is using for
manufacturing its output and not the entire input cost.
VAT brings in transparency to commodity taxation.
In this concluding part we take a look at some of the
important terms that figure in the Budget
CESS:
This is an additional levy on the basic tax liability.
Governments resort to cess for meeting specific
expenditure. For instance, both corporate and individual
income is at present subject to an education cess of 2%.
In the last Budget, the government had imposed another
1% cess - secondary and higher education cess on
income tax - to finance secondary and higher education.
COUNTERVAILING DUTIES (CVD): Countervailing duty is
a tax imposed on imports, over and above the basic
import duty. CVD is at par with the excise duty paid by
the domestic manufacturers of similar goods. This
ensures a levelplaying field between imported goods
and locally-produced ones. An exemption from CVD
places the domestic industry at disadvantage and over
long run discourages investments in affected sectors.
EXPORT DUTY: This is a tax levied on exports. In most
instances, the object is not revenue , but to discourage
exports of certain items. In the last Budget, for instance
, the government imposed an export duty of Rs 300 per
metric tonne on export of iron ores and concentrates
and Rs 2,000 per metric tonne on export of chrome ores
and concentrates.
FINANCE BILL: The proposals of government for levy of
new taxes, modification of the existing tax structure or
continuance of the existing tax structure beyond the
period approved by Parliament are submitted to
Parliament through this bill. It is the key document as
far as taxes are concerned.
FINANCIAL INCLUSION: Financial inclusion is
universalising access to basic financial services (to have
a bank account , timely and adequate credit) at an
affordable cost. Exclusion from financial services
imposes costs on those excluded ; these are typically
the disadvantaged and low-income group. Exclusion
forces them into informal arrangements such as
borrowing from local money lenders at high rates.
Financial inclusion remains a serious issue in India.
The government has proposed a no-frills account to
provide cheap banking.
MINIMUM ALTERNATE TAX (MAT): This tax on corporate
profits was introduced in 1996-97 and has been modified
since. If the tax payable by a company is less than 10%
of its book profits, after availing of all eligible deductions
, then 10% of book profits is the minimum tax payable.
Book profits are profits calculated as per the Companies
Act, while profits as per the Income-Tax Act could be
significantly lower, thanks to various exemptions and
depreciation.
PASS-THROUGH STATUS: A pass-through status helps
avoid double taxation. Mutual funds, for instance , enjoy
pass-through status. The income earned by the funds is
tax free. Since mutual funds' income is distributed to
unitholders, who are in turn taxed on their income from
such investments, any taxation of mutual funds would
amount to double taxation.
Essentially , it means the income is merely passing
through the mutual funds and, therefore, should not be
taxed. The government allows venture funds in some
sectors pass-through status to encourage investments
in start-ups .
SUBVENTION: The term subvention finds a mention in
almost every Budget. It refers to a grant of money in aid
or support, mostly by the government. In the Indian
context, for instance, the government sometimes asks
institutions to provide loans to farmers at below market
rates. The loss is usually made good through subventions.
SURCHARGE: As the name suggests, this is an additional
charge or tax. A surcharge of 10% on a tax rate of 30%
effectively raises the combined tax burden to 33%. In the
case of individuals earning a taxable salary of more
than Rs 10 lakh a surcharge of 10% is levied on income
in excess of Rs 10 lakh. Corporate income is levied a flat
surcharge of 10% in the case of domestic companies
and 2.5% for foreign companies. Companies with revenue
less than Rs 1 crore do not have to pay this surcharge.

T
here is no set way to define types, though the
following types of budgets are used
commonly, however, these cannot be classified as
the only types of budget used to make the Union Budget.
Balanced Budget: The receipts are equal to the current
expenditure. This implies that taxes on income and
expenditure etc are sufficient to meet payments for goods
and services. However, balanced budget is not an ideal
type of budget as argued by economist John Maynard
Keynes.
Revenue Budget: This consists of revenue receipts of
government (revenues from tax and other sources) and
the expenditure met from these revenues. The other
receipts primarily consist of interest and dividend on
investments made by the government, fees, and other
receipts for services rendered by the government.
Performance Budget: This is prepared by all the
ministers who deal with development activities of the
nation. Special in respect of certain major Central Sector
Projects/ Programs are also provided in this report. It
also includes the performance of each public sector.
Zero-Base Budget: This was adopted by India in 1986
as a technique for determining expenditure budgets.
The Ministry of Finance made it mandatory for all the
administrative ministries to review their respective
programs and activities in order to prepare
TYPES OF BUDGET
expenditure budget estimates based on the principles
of zero-base budgeting.
Capital Budget: Consists of capital receipts and capital
payments. The capital receipts are loans raised by
Government from public, called market loans,
borrowings by Government from Reserve Bank and other
parties through sale of Treasury Bills, loans received
from foreign Governments and bodies, disinvestment
receipts and recoveries of loans from State and
Union Territory Governments and other parties. Capital
payments consist of capital expenditure on acquisition
of assets like land, buildings, machinery, equipment,
as also investments in shares, etc and loans and
advances granted by Central Government to State and
Union Territory Governments, Government companies,
Corporations and other parties.
Receipts Budget: Estimates of receipts included in the
Annual Financial Statement are further analysed in the
document Receipts Budget. The document provides
details of tax and non-tax revenue receipts and capital
receipts and explains the estimates. It also provides
the arrears of tax revenues and non-tax revenues, as
mandated under the Fiscal Responsi bi lity and
Budget Management Rules, 2004.

BUDGET AT A GLANCE
Direct Taxes
Income upto Rs. 2.5 lakh Nil
Income above Rs. 2.5 lakh upto Rs.5 lakh
10%
Income above Rs.5 lakh upto Rs. 10 lakh20%
Income above Rs. 10 lakh 30%
Vision for Future
India poised to be third largest economy along with
US and China, to play a leading an important role
in global economy.
10 Tasks as part of the road map ahead include :
Fiscal consolidation: Fiscal deficit of 3 per cent of
GDP by 2016-17 must be achieved and remain
below that level always.
Current Account Deficit: CAD will be inevitable for
some more years which can be financed only by
foreign investment. Hence, there is no room for any
aversion to foreign investment.
Price Stability and Growth: In a developing economy,
a high growth target entails a moderate level of
inflation. RBI must strike a balance between price
stability and growth while formulating the
monetary policy.
Financial Sector reforms to be completed as laid
down by Financial Sector Legislative Reforms
Commission.
Massive investment in infrastructure: to be
mobilized through the Public Private Partnership.
Manufacturing sector to be the base of Indias
development: All taxes, Central and State that go
into an exported product should be waived or
rebated. There should be a minimum tariff
protection to incentivize domestic manufacturing.
Subsidies, which are absolutely necessary should
be chosen and targeted only to the absolutely
deserving.
Urbanisation to be managed to make cities
governable and liveable.
Skill development must be given priority at par with
secondary and university education, sanitation and
universal health care.
States to partner in development so as to enable
the Centre to focus on Defence, Railways, National
Highways and Telecommunication.
Changes in Tax Rates
Following changes in some indirect tax rates are
proposed:
BUDGET - DIRECT TAXES
The Excise Duty on all goods falling under Chapter
84 & 85 of the Schedule to the Central Excise Tariff
Act is reduced from 12 per cent to 10 per cent for
the period upto 30.06.2014. The rates can be
reviewed at the time of regular Budget.
To give relief to the Automobile Industry, which is
registering unprecended negative growth, the excise
duty is reduced for the period up to 30.06.2014 as
follows:
Small Cars, Motorcycle,
Scooters and Commercial
Vehicles from 12 % to 8%
SUVs from 30% to 24%
Large and Mid-segment Cars from 27/24% to
24/20%
It is also proposed to make appropriate reductions
in the excise duties on chassis and trailers - The
rates can be reviewed at the time of regular Budget
To encourage domestic production of mobi le
handsets, the excise duties for all categories of
mobile handsets is restructured. The rates will be 6
per cent with CENVAT credit or 1 per cent without
CENVAT credit.
To encourage domestic production of soaps and
oleo chemicals, the custom duty structure on non-
edible grade industrial oils and its fractions, fatty
acids and fatty alcohols is rationalized at 7.5 per
cent.
To encourage domestic production of specified road
construction machinery, the exemption from CVD
on similar imported machinery is withdrawn,
A concessional custom duty 5 per cent on capital
goods imported by the Bank Note Paper Mill India
Private Limited is provided to encourage domestic
production of security paper for printing currency
notes.
The loading and un-loading, packing, storage and
warehousing of rice is exempted from Service Tax.
The services provided by cord blood banks is
exempted from Service Tax.
Budget Estimates
The current financial year will end on a satisfactory
note with the fiscal deficit at 4.6 per cent (below
the red line of 4.8 per cent) and the revenue deficit
at 3.3 percent.
Fiscal Deficit in 2014-15 estimated to be 4.1 per
cent which will be below the target set by new Fiscal
Consolidation Path and Revenue Deficit is estimated
at 3.0 per cent.
The estimate of Plan Expenditure is Rs. 555,322
crore. Non Plan expenditure is estimated at Rs. 12,
07,892 crore.
Deficit and Inflation
The fiscal deficit for 2013-14 contained at 4.6 per
cent.
The current account deficit projected to be at USD
45 billion in 2013-14 down from USD 88 billion in
2012-13.
Foreign exchange reserve to grow by USD 15 billion
in this Financial Year
Fiscal stability at the top of the agenda.
Food inflation down to 6.2 per cent from a high of
13.8 per cent
Agriculture
Agricultural sector has performed remarkably well.
Food grain production estimated for 2013-14 is
263 million tonnes compared to 255.36 million
tonnes in 2012-13.
Agriculture export likely to cross USD 45 billion
higher from USD 41 billion in 2012-13.
Agricultural credit to exceed the target of Rs.7 lakh
crore.
Agricultural GDP growth for 2013-14 estimated at
4.6 per cent compared to 4.0 per cent in the last
four years.
Investment
Savings rate was at 30.1 per cent and investment
rate was at 34.8 per cent in 2012-13.
Government set up a Cabinet Committee on
investment and the Project Monitoring Group to
boost investment. By end of January 2014, 296
projects estimated cost of Rs. 660,000 crore cleared.
Manufacturing
The sluggish import is a matter of concern for
manufacturing and domestic trade sector.
Due to deceleration in investment, the
manufacturing sector has witnessed a sluggish
growth.
8 National Investment and Manufacturing Zones
(NIMZ) along the Delhi Mumbai Industrial Corridor
(DMIC) have been announced. 9 projects had been
approved by the DMIC trust.
3 more Industrial Corridors connecting Chennai
and Bengaluru, Bengaluru and Mumbai & Amritsar
and Kolkata are under different stages of
preparatory works.
Notification of a public procurement policy,
establishing technology and common facility
centres, and launching the Khadi Mark are steps
taken to promote Micro, Small and Medium
Enterprises.
Infrastructure
In 2012-13 and in nine months of the current
financial year, 29,350 MW power capacity, 3,928
Km National Highways, 39,144 Km Rural Roads,
3,343 Km New Railway track and 217.5 million
tonnes capacity per annum in our ports have been
created to give a big boost to infrastructure
industries.
19 Oil and Gas blocks were given out for exploration
and 7 new Air ports are under construction.
Non Plan Expenditure
Non Plan expenditure is estimated at Rs.12, 07,892
crore
The expenditure on subsidies for food, fertilizer &
fuel will be Rs. 246,472 crore slightly higher than
the revised estimates of Rs. 245,453 crore in 2013-
14.
Rs. 115,000 crore has been allocated for food
subsidies taking in to account, Governments firm
and irrevocable commitment to implement the
National Food Security Act throughout the country.
Defence
10 per cent hike in Defence allocation has been
given in comparison to BE 2013-14.
Government has accepted the principle of one rank
one pension for the Defence Forces which will be
implemented prospectively from the FY 2014-15. A
sum of Rs. 500 crore is proposed to be transferred
to the Defence Pension Account in the current
Financial Year itself.
Central Armed Police Forces
A modernization Plan at a cost of Rs. 11,009 crore
has been approved to strengthen the capacity of
Central Armed Police Forces and to provide them
the state-of-art, equipment and technology.
Financial Sector
All the announcements concerning the financial
sector made in the Budget Speech of February 2013
have been implemented.
Rs. 11,300 crore is proposed to be provided for
Capital infusion in Public Sector Banks.
5,207 new branches have been opened against the
target of 8,023.
Bhartia Manila Bank has been established.
Rs. 6,000 crore and Rs. 2,000 crore have been
provided to Rural and Urban Housing Funds
respectively.
The target of Rs. 700,000 crore of Agricultural Credit
is likely to be exceeded by the Banks. The target for
2014-15 is Rs. 800,000 Crore.
Rs. 23,924 crore has been released under the
Interest Subvention Scheme on farm loans, with
effective rate of interest on farm loans at 4 per cent
including subvention of 2 per cent and incentive of
3 per cent for prompt payment.
Financial Markets
Steps envisaged to deepen the Indian Financial
Market:
ADR/GDR Scheme revamp, an enlargement of the
scope of depository receipt
Liberalization of rupee denominated corporate
bond market.
Currency Derivatives Market to be deepened and
strengthened to enable Indian companies to fully
hedge against foriegn currency risk.
To create one record for all financial assets of every
individual.
To enable smoother clearing and settlement for
international investors ooking to invest in Indian
bonds.
Commodity Derivatives Markets
Swift action taken to sequester National Spot
Exchange Limited (NSEL) after the payment crisis in
the NSEL, this prevented spill over of the crisis to
the other regulated segment of the financial
markets.
Proposal to amend the Forward Contracts
(Regulation) Act.
Key Pending Bills
The Insurance Laws (Amendment) Bill and the
Securities Laws (Amendment) Bill have not been
passed by Parliament for reasons that have nothing
to do with the merits of the Bills.
Public Debt Mangement Agency
Public Debt Management Agency Bill is ready with
the Government. It is proposed to establish a non
statutory PDMA that can begin work in 2014-15.
GST and DTC
Government appeals to all political parties to
resolve to pass the GST Laws and the Direct Tax
Code in 2014-15.
Funding Scientific Research
It is proposed to set up a Research Funding
Orgnaisation that will fund Research Projects
selected through a competitive process.
Contribution to that organisation will be eligible
for tax benefits. The required legislative changes
can be introduced at the time of regular Budget.
Off-shore Accounts
The Government has succeeded in obtaining
information on illegal off-shore accounts held by
Indians in 67 cases and action is under way.
Prosecution for willful tax evasion has also been
launched in 17 other cases. More enquiries have
been initiated into accounts reportedly held by
Indian entities in no tax or low tax jurisdictions.
A. Direct Tax
PERSONAL INCOME TAX RATES
Income (Rs.) Rate
0-2,50,000 Nil
2,50,001 to 5,00,000 10%
5,00,001 to 10,00,000 20%
10,00,001 and above 30%
In case of Senior Citizens
(Age of Sixty Years or more but less than eighty years)
Income (Rs.) Rate
0-3,00,000 Nil
3,00,001 to 5,00,000 10%
5,00,001 to 10,00,000 20%
10,00,001 and above 30%
In case of Very Senior Citizens
(Age of Eighty Years or more)
Income (Rs.) Rate
0-5,00,000 Nil
5,00,001 to 10,00,000 20%
10,00,001 and above 30%
In case of co-operative Society
0-10,000 10% of the total income
10001-20000 Rs.1,000 plus 20 % of the amount
by which the total income
exceeds Rs.10,000
20001 and above Rs. 3,000 plus 30% of the
amount by which the total
income exceeds Rs. 20,000
Surcharge on Income Tax
The amount of income-tax computed in accordance
with the preceding provisions of this Paragraph, or in
section 111A or section 112, shall, in the case of every
co-operative society, having a total income exceeding
one crore rupees, be increased by a surcharge for the
purposes of the Union calculated at the rate of ten per
cent, of such income-tax:
Provided that in the case of every co-operative
society mentioned above having total income exceeding
one crore rupees, the total amount payable as income-
tax and surcharge on such income shall not exceed the
total amount payable as income-tax on a total income
of one crore rupees by more than the amount of income
that exceeds one crore rupees.
Firm
In the case of every firm - 30 per cent. On the whole
of the total income
firm, having a total income exceeding one crore rupees,
be increased by a surcharge for the purposes of the
Union calculated at the rate of ten per cent, of such
income-tax:
Provided that in the case of every firm mentioned
above having total income exceeding one crore rupees,
the total amount payable as income-tax and surcharge
on such income shall not exceed the total amount
payable as income-tax on a total income of one crore
rupees by more than the amount of income that exceeds
one crore rupees.
Local authority
In the case of every local authority - 30 per cent on
the whole of the total income
local authority, having a total income exceeding one
crore rupees, be increased by a surcharge for the
purposes of the Union calculated at the rate of ten per
cent, of such income-tax:
Provided that in the case of every local authority
mentioned above having total income exceeding one
crore rupees, the total amount payable as income-tax
and surcharge on such income shall not exceed the total
amount payable as income-tax on a total income of one
crore rupees by more than the amount of income that
exceeds one crore rupees.
Companies
In the case of a company, -
I. In the case of a domestic company- 30 per cent, of
the total income
II. In the case of a company other than a domestic
company-
(i) on so much of the total income as consists of,-
(a) royalties received from Government or an
Indian concern in pursuance of an agreement
made by it with the Government or the Indian
concern after the 31st day of March, 1961 but
before the 1st day of April, 1976; or
(b) fees for rendering technical services received
from Government or an Indian concern in
pursuance of an agreement made by it with the
Government or the Indian concern after the 29th
day of February, 1964 but before the 1 st day of
April, 1976, and where such agreement has, in
either case, been approved by the Central
Government- 50 per cent;
(ii) on the balance, if any, of the total income-
40 per cent
company, be increased by a surcharge for the purposes
of the Union calculated,-(i) in the case of every domestic
company-
(a) having a total income exceeding one crore rupees,
but not exceeding ten crore rupees, at the rate of
five per cent Of such income-tax; and (b) having a
total income exceeding ten crore rupees, at the rate
of ten per cent, of such income-tax; (ii) in the case
of every company other than a domestic company-
(a) having a total income exceeding one crore rupees
but not exceeding ten crore rupees, at the rate of
two per cent of such income-tax; and
(b) having a total income exceeding ten crore rupees,
at the rate of five per cent, of such income-tax:
Provided that in the case of every company having
a total income exceeding one crore rupees but not
exceeding ten crore rupees, the total amount payable
as income-tax and surcharge on such income shall not
exceed the total amount payable as income-tax on a
total income of one crore rupees by more than the
amount of income that exceeds one crore rupees:
Provided further that in the case of every company
having a total income exceeding ten crore rupees, the
total amount payable as income-tax and surcharge on
such income shall not exceed the total amount payable
as income-tax and surcharge on a total income often
crore rupees by more than the amount of income that
exceeds ten crore rupees.

BUDGET - INDIRECT TAXES
Customs Duties
A. General
1) Baggage Rules are being amended to,-
(i) raise the free baggage allowance from Rs.35,000
to Rs.45,000. (ii) reduce the duty free allowance of
cigarettes from 200 to 100, of cigars from 50 to 25
and of tobacco from 250 gms to125 gms.
B. Proposals involving changes in rates
of duty: Agriculture/Agro
Processing/Plantation Sector
1) Description of the product sun dried dark seedless
raisins in notification No. 12/2012-Customs, dated
17.03.2012,which attracts concessional Basic
Customs Duty of 30% is being changed to dark
seedless raisins.
2) Full exemption from customs duty is being granted
to de-oiled soya extract, groundnut oil cake/oil
cake meal, sunfloweroil cake/oil cake meal, canola
oil cake/oil cake meal, mustard oil cake/oil cake
meal, rice bran/rice bran oil cake and palm kernel
cake, up to 31.12.2014.
II. Chemicals and Petrochemicals
1) Basic Customs duty on reformate is being reduced
from 10% to 2.5%. Basic Customs duty on propane,
ethane, ethylene, propylene, butadiene is being
reduced from 5% to 2.5%.
2) Basic Customs Duty on ortho-xylene is being
3) Basic Customs Duty on denatured ethyl alcohol
and methyl alcohol is being reduced from 7.5% to
5%.
4) Basic Customs Duty on crude naphthalene is being
reduced from 10% to 5%.
5) Basic Customs Duty on fatty acids, crude palm
stearin, RBD and other palm stearin and specified
industrial grade crudeoils is being reduced from
7.5% to Nil for manufacture of soaps and
oleochemicals subject to actual user
condition.Basic Customs Duty is also being
reduced on crude glycerine from 12.5% to 7.5% in
general and from 12.5% to Nil for manufacture of
soaps subject to actual user condition.
III. Energy Sector
1) The duty structure on non-agglomerated coal of
various types is being rationalized at 2.5% BCD and
2% CVD.Accordingly, the BCD on Coking coal is being
increased from NILto 2.5% and on steam coal and
bituminous coal from 2% to 2.5%. The BCD on
anthracite coal and other coal is being reduced
from 5% to 2.5%. The CVD on Anthracite coal, Coking
coal and other Coal is being reduced from 6% to
2%.
2) Basic Customs Duty on metallurgical coke is being
increased from Nil to 2.5%.
3) Exemption from Basic Customs Duty is being
granted on re-gasified LNG for supply to Pakistan.
4) Liquefied Propane and Butane mixture, Liquefied
Propane, Liquefied Butane and Liquefied Petroleum
Gases (LPG) imported by the Indian Oil Corporation
Limited, Hindustan Petroleum Corporation Limited
or Bharat Petroleum Corporation Limited, for supply
to Non-Domestic Exempted Category (NDEC)
customers is being fully exempted retrospectively
w.e.f. 08.02.2013.
IV. Textiles
1) The duty free entitlement for import of trimmings &
embellishments used by the readymade textile
garment sector for manufacture of garments for
export is being increased from 3% to 5%.
2) Non-fusible embroidery motifs or prints are being
included in the list of items eligible to be imported
duty free for manufacture of garments for export.
3) The list of specified gdoofe required by handicraft
manufacturer-exporters is being expanded by
including wire rolls so as to provide Customs Duty
exemption on import by handicraft manufacturer-
exporters.
4) Fusible embroidery motifs or prints, anti-theft
devices, pin bullets for packing, plastic tag bullets,
metal tabs, bows,ring and slider hand rings are
being included in the list of items eligible to be
imported duty free for manufacture of handloom
made ups or cotton made ups or manmade made
ups for export.
5) Specified goods imported for use in the manufacture
of textile garments for export are fully exempt from
BCD and CVD subject to the condition that the
manufacturer produces an entitlement certificate
from the Apparel Export Promotion Council. In
addition, Indian Silk Export Promotion Council
(ISEPC) is being authorised to issue entitlement
certificate.
6) Basic Customs Duty on raw materials for
manufacture of spandex yarn viz.
Polytetramethylene ether glycol (PT MEG) and
Diphenylmethane 4,4 di-isocyanate (MDI) is being
reduced from 5% to Nil.
V. Metals
1) Basic Customs Duty on stainless steel flat products
(CTH 7219 and 7220) is being increased from 5% to
7.5%
2) The BCD on ships imported for breaking up is being
3) Export duty on bauxite is being increased from 10%
to 20%.
4) Basic Customs Duty on coal tar pitch is being
5) Basic Customs Duty on battery waste and battery
scrap is being reduced from 10% to 5%.
6) Basic Customs Duty on steel grade limestone and
steel grade dolomite is being reduced from 5% to
2.5%.
VI. Precious Metals
1) Basic Customs Duty on half-cut or broken diamonds
is being increased from NIL to 2.5% and on cut &
polished diamonds and colored gemstones from
2% to 2.5%.
2) Full exemption from Basic Customs Duty is being
granted to pre-forms of precious and semi-precious
stones.
3) The variation level and the parameter of
measurement in respect of re-import of cut and
polished diamonds after certification/grading from
a foreign laboratory/agency are being increased
as a trade facilitation measure.
VII. Electronics/Hardware
1) Basic Customs Duty on LCD and LED TV panels of
below 19 inches is being reduced from 10% to NIL
2) Basic Customs Duty is being exempted on specified
parts of LCD and LED panels for TVs.
3) Basic Customs Duty on colour picture tubes for
manufacture of cathode ray TVs is being reduced
from 10% to NIL.
4) Basic Customs Duty on specified
telecommunication products not covered under the
ITA (Information TechnologyAgreement) is being
increased from NIL to 10%.
5) Special Additional Duty (SAD) on all inputs/
components used in the manufacture of Personal
Computers (laptops/desktops) and tablet
computers is being exempted, subject to actual user
condition.
6) Education cess and Secondary and Higher
Education (SHE) cess is being levied on imported
electronic products.
7) Full exemption from Special Additional Duty (SAD)
is being provided on specified inputs (PVC sheet &
Ribbon) used in the manufacture of smart cards.
8) Basic Customs Duty is being reduced from 7.5% to
NIL on E-Book readers.
9) CVD exemption on portable X-ray machine / system
is being withdrawn.
VIII. Renewable Energy
1) Basic Customs Duty is being reduced from 10% to
5% on forged steel rings used in the manufacture of
bearings of wind operated electricity generators.
2) Full exemption from Special Additional Duty is being
provided on parts and components required for
the manufacture of wind operated electricity
generators.
3) Basic customs duty on machinery, equipments, etc.
required for setting up of solar energy production
projects is being reduced to 5%.
provided on specified raw materials used in the
manufacture of solar backsheet and EVA sheet.
provided on flat copper wire used in the
manufacture of PV ribbons (tinned copper
interconnect) for solar PV cells/modules.
6) Concessional customs duty of 5% is being provided
on machinery, equipments, etc. required for setting
up of compressed biogas plant (Bio-CNG).
IX. Capital Goods/Infrastructure
1) It is being clarified that road construction
machinery imported duty free can be sold within 5
years of importation subject to payment of customs
duty on depreciated value and that individual
constituents of the consortium whose names
appear in the contract can import goods without
payment of duty.
2) State Governments concerned are being notified as
sponsoring authority for Metro Rail Projects covered
under the Project Import Regulations, 1986.
3) Plants & Equipment imported prior to 2008 for use
in projects financed by the UN or an international
organization, which hitherto could not be
transferred / sold / re-exported out of the project
site, are now being allowed to be transferred / sold/
re-exported from the project site.
4) The requirement of certification by Ministry of Road
Transport (or NHAI) for availing of customs duty
exemption on specified goods required for
construction of roads is being done away with.
5) Director (Electrical) is being authorized to issue
the requisite certificate to enable Delhi Metro Rail
Corporation to avail of Nil BCD and Nil CVD benefits
in respect of their Phase-1 and Phase-2 projects
instead of Director (Rolling Stock, Electrical &
Signalling) at present.
X. Health
1) Full exemption from customs duty is being provided
for HIV/AIDS drugs and diagnostic kits imported
under National AIDS Control Programme (NACP)
funded by the Global Fund to Fight AIDS, TB and
Malaria (GFATM).
XI. Security and Strategic Purposes
1) Full exemption from Basic customs Duty is being
provided to goods imported by National Technical
Research Organisation (NTRO).
2) Full exemption of customs duty is being provided
on security fibre, security threads and M-feature
imported by Bank Note Paper Mill India Private
Limited (BNPMIPL), Mysore. Full exemption from
BCD and CVD is also being provided for raw
materials required for manufacture of security
threads and security fibre subject to actual user
condition.
3) The scope of exemption notification No.39/96-
Customs dated 23.07.1996 [S.No.7] granting full
exemption from BCDand CVD on goods imported
for use in the manufacture of aircrafts for the
Ministry of Defence is being clarified to the effect
that the exemption is available to all materials in
any form and articles thereof, subject to the overall
condition that they conform to aeronautical
specification accompanied with certificate of
conformance/release note/airworthiness
certificate for development.
XII. Aircrafts & Ships
1) It is being clarified that aircraft engines and parts
thereof are eligible for duty exemption when
imported for servicing, repair or maintenance of
aircrafts used for scheduled operations.
XIII. Miscellaneous
1) Tariff item 3903 19 90 is being deleted from
notification No.10/2008 Customs, [India-Singapore
ComprehensiveEconomic Co-operation Agreement
(CECA)]. As a result, Basic Customs Duty on
Polystyrene (other than moulding powder) is being
increased from 1.15% to 7.5%
2) Basic Customs Duty is being reduced from 5% to
2.5% on electrolysers and their parts/spares
required by caustic soda or caustic potash units
and membranes and their parts/spares required
by industrial plants based on membrane cell
technology. The BCD on other spares (other than
membranes and parts thereof) is also being reduced
from 7.5% to 2.5%.
3) A provision is being made for refund of Customs
duty paid at the time of import of scientific and
technical instruments, apparatus, etc. by public
funded and other research institutions, subject to
submission of a certificate of registration from the
Department of Scientific & Industrial Research
(DSIR).
4) Section 8B of the Customs Tariff Act, 1975 is being
amended so as to provide for levy of safeguard
duty on inputs/rawmaterials imported by an EOU
and cleared into DTA as such or are used in the
manufacture of final products & cleared into DTA.
Central Excise Duty
A. Proposals involving changes in rates
of duty
I. Agriculture/Agro Processing/
Plantation Sector
1) Excise duty on machinery for the preparation of
meat, poultry, fruits, nuts or vegetables, and on
presses, crushers and similar machinery used in
the manufacture of wine, cider, fruit juices or similar
beverages and on packaging machineryis being
II. Automobiles
1) Excise duty is being exempted on parts of tractors
removed from one or more factories of a tractor
manufacturer to another factory of the same
manufacturer for manufacture of tractors.
III. Metals
1) Excise duty on winding wires of copper is being
increased from 10% to 12%.
IV. Precious Metals
1) Un-branded articles of precious metals are being
exempted from excise duty for the period
01.03.2011 to 16.03.2012.
V. Textiles
1) Excise duty on Polyester Staple Fiber (PSF) and
Polyester Filament Yarn (PFY) manufactured from
plastic waste or scrapor plastic waste including
waste polyethylene terephthalate (PET) bottles
(which is already exempt w.e.f. 08.05.2012) is being
exempted retrospectively w.e.f. 29.06.2010 to
07.05.2012 and intermediate product Tow arising
during thecourse of manufacture of such PSF/PFY
is being exempted retrospectively w.e.f. 29.06.2010
toi10.07.2Q14,
2) Excise duty at the rate of 2% (without CENVAT) or 6%
(with CENVAT) is being imposed on Polyester Staple
Fiber and Polyester Filament Yarn manufactured
from plastic waste or scrap or plastic waste
including waste polyethyleneterephthalate (PET)
bottles w.e.f. 11th July, 2014.
VI. Health
1) Full exemption from excise duty is being provided
to DOT manufactured by Hindustan Insecticides
Limited for supply to the National Vector Borne
Diseases Control Programme (NVBDCP) of the
Ministry of Health & Family Welfare.
for HIV/AIDS drugs and diagnostic kits supplied
under National AIDSControl Programme (NACP)
funded by the Global Fund to Fight AIDS, TB and
Malaria (GFATM).
3) Excise duty on cigarettes is being increased by 72%
for cigarettes of length not exceeding 65 mm and by
11 % to 21 % for cigarettes of other lengths. Similar
increases are proposed on cigars, cheroots and
cigarillos.
4) Basic excise duty is being increased from 12% to
16% on pan masala, from 50% to 55% on
unmanufactured tobaccoand from 60% to 70% on
jarda scented tobacco, gutkha and chewing
tobacco.
VII. Electronics/Hardware
1) Excise duty on recorded smart cards is being
increased from 2% without CENVAT and 6% with
CENVAT to a uniform rate of 12%.
2) Full exemption from Excise Duty is being provided
to reverse osmosis (RO) membrane element used in
water filtration or purification equipment (other
than household type filter). Excise duty on RO
membrane element used in household type filters
is being reduced from 12%/10% to 6%.
3) Excise duty on Metal Core PCB and LED driver for
use in the manufacture of LED lights and fixtures
and LED lamps, is being reduced from 12%/10% to
6%.
VIII. Renewable Energy
1) Excise duty is being reduced from 12% to Nil on
forged steel rings used in the manufacture of
bearings of wind operated electricity generators.
for solar tempered glass used in the manufacture
of solar photovoltaic cells/modules, solar power
generating equipment/system, and flat plate solar
collectors.
3) Full exemption from excise duty is being granted in
respect of machinery, equipments, etc. required for
setting up of solar energy production projects.
to backsheet and EVA sheet used in the manufacture
of photovoltaic cells/modules and specified raw
materials used in their manufacture.
to parts consumed within the factory of production
for the manufacture of non-conventional energy
devices [SI.No.332 of notification No.12/2012-CE,
dated 17.03.2012].
on flat copper wire used in the manufacture of PV
ribbons (tinnedcopper interconnect) for use in the
manufacture of solar cells/modules.
on machinery, equipments, etc. required for setting
up of compressed biogas plant (Bio-CNG).
IX. Consumer Goods
1) The scope of the phrase not mixed with any other
ingredient in the context of excise duty exemption
on heena powder or paste, not mixed with any
other ingredient is being clarified so as to provide
that the exemption is available to heena powder
mixed with a liquid, so far that the liquid is a
medium to change the form of heena powder into
paste but excludes products like heena dye and
such other products which are cosmetics and have
no ceremonial or traditional value.
2) Excise duty is being reduced from 12% to 6% on
footwear of retail price exceeding Rs.500 per pair
but not exceeding Rs. 1,000 per pair. Footwear of
retail price upto Rs.500 per pair will continue to
remain exempted.
3) Excise duty on hand operated sewing machine (2%
without CENVAT / 6% with CENVAT) is being
rationalized by levying concessional excise duty
on sewing machines other than those operated with
electric motors (whether in-built or attachable to
the body)
4) Semi-mechanized units manufacturing safety
matches, which attract concessional excise duty of
6%, are being allowed to carry out the processes of
Pasting of labels and Packing with the aid of
power.
5) Concessional excise duty of 2% without CENVAT
credit and 6% with CENVAT credit is being extended
to gloves specially designed for use in sports.
6) An additional duty of excise is being levied at the
rate of 5% ad valorem on aerated waters containing
added sugar.
X. Energy Sector
1) Central Excise duty on Branded Petrol is being
reduced from Rs.7.50 per litre to Rs. 2.35 per litre.
2) Full exemption from Central Excise duty is being
provided to Liquefied Propane and Butane mixture,
Liquefied Propane, Liquefied Butane and Liquefied
Petroleum Gases (LPG) for supply to Non-Domestic
Exempted Category (NDEC) customers by the Indian
Oil Corporation Limited, Hindustan Petroleum
Corporation Limited or Bharat Petroleum
Corporation Limited retrospectively from
08.02.2013.
3) The rate of Clean Energy Cess levied on coal, lignite
and peat is being increased from Rs.50 per tonne to
Rs. 100 per tonne.
XI. Security and Strategic Purposes
to goods supplied to National Technical Research
Organisation (NTRO).
for security threads and security fibre supplied to
Security Paper Mill Corporation of India Limited
(SPMCIL) and Bank Note Paper Mill India Private
Limited (BNPMIPL).
XII. Miscellaneous
1) Optional excise duty of 2% (without CENVAT)/6%
(with CENVAT) on writing and printing paper for
printing of educational textbooks is being
withdrawn and instead a uniform excise duty of 6%
with CENVAT is being levied.
2) Intermediate goods manufactured and consumed
captively for further manufacture of matches is
being fully exempted.
3) The scope of the Excise Duty exemption to all goods
supplied against International Competitive
Bidding is being clarified to the effect that the said
exemption is also available to sub-contractors for
manufacture and supply of goods to the main
contractor (who has won the bid for the project
through ICB) for execution of the said project.
4) Full exemption from Excise duty is being provided
on plastic materials reprocessed out of the scrap
or waste and cleared into the DTA by an EOU.
5) Education cess and secondary & higher education
cess (customs component) is being exempted on
goods cleared by an EOU into the DTA.
6) A clarification is being issued that the exemption
from education cess and secondary & higher
education cess under notifications No.28/2010-CE
and N0.29/2010-CE, both dated 22.06,2010 is
applicable only in respect of the clean energy cess
leviable on coal and not in respect of excise duty
leviable on coal.
7) It is being clarified that all goods falling under
headings 8601 to 8606 (except 8604) attract 6%
excise duty with CENVAT benefit.
B. Service Tax on Taxable Portion in
Respect of Transportation Service
by Vessels:
Taxable portion in respect of transport of goods by
vessel to be reduced from 50% to 40%. Effective
service tax will decrease from the present 6.18% to
4.944%. This will come into force from 1st October
2014.
C. New Exemptions
Life micro-insurance schemes for the poor,
approved by IRDA, where sum assured does not -
exceed Rupees Fifty Thousand to be exempted from
service tax.
Transport of organic manure by vessel, rail or road
(by GTA) is being exempted.
Loading, unloading, packing, storage or
warehousing, transport by vessel, rail or road (GTA),
of cotton, ginned or Baled, is being exempted.
Services provided by common bio-medical waste
treatment facility operators to clinical
establishments are being exempted.
Specialized financial services received by RBI from
global financial institutions in the course of
management of foreign exchange reserves, e.g.,
external asset management, custodial services,
securities lending services, etc.are being exempted.
Services provided by Indian tour operators to
foreign tourists in relation to a tour wholly
conducted outside India are being exempted. New
exemptions will come into effect immediately,
i.e.11.7.2014
D. Retrospective Exemption:
Service provided by Employees State Insurance
Corporation (ESIC) during the period prior to
1.7.2012 to be exempted from service tax.
E. Compliance enhancement
Simple interest rates per annum payable under
section 75, to vary on the basis of extent of delay in
payment of service tax. This will come into force on
1st October 2014.
Extent of delay Simple interest rate
per annum
Up to six months 18%
From 6 months and upto 1 year 24%
More than one year 30%
F. Service Tax Rules [changes to have immediate
effect]
Service provided by a Director to a body corporate
to be brought under the reverse charge mechanism;
service receiver, who is a body corporate will be
the person liable to pay service tax.
Services provided by Recovery Agents to Banks,
Financial Institutions and NBFC to be brought under
the reverse charge mechanism; service receiver will
be the person liable to pay service tax.
G. Cenvat Credit
Service tax paid under full reverse charge: the
condition to pay invoice value to the service
provider for availing credit of tax paid, to be omitted
[change to have immediate effect].
Re-credit of Cenvat credit reversed on account of
non-receipt of export proceeds within the specified
period, to be allowed, if such export proceeds are
received within one year from the specified period
on the basis of documentary evidence of receipt of
payment [change to have immediate effect].
Rent-a-cab operator and tour operator: service tax
paid by sub-contractor in the same line of business
would be allowed as eligible credit to the main
service provider to avoid double taxation, subject
to certain conditions [with effect from 1st October
2014]. Refer amendment in Notification N0.26/2012-
ST.
GTA service: service receiver may avail abatement,
without having to obtain non-availment of Cenvat
Credit certificate from service provider [change to
have immediate effect]. Refer amendment in
Notification No.26/2012-ST.
Time limit for taking credit on input and input
services: credit shall be taken within six months
from the date of the invoice or challans or other
documents specified [change to have effect from
1st September, 2014].
H. Place of Provision of Services Rules
Provision for prescribing conditions for
determination of place of provision of repair
service carried out on temporarily imported goods,
to be omitted.
Intermediary of goods to be given the same treatment
as is given to intermediary of services.
Vessels (excluding yachts) and aircraft to be
excluded from Rule 9(d); hiring of vessels or
aircrafts, irrespective of whether short term or long
term, will be covered by the general rule, which is
place of location of the service receiver.
[The above changes to have effect from 1st October 2014]
I. Point of Taxation Rules
In case of reverse charge services, to bring certainty
in the determination of point of taxation, it is
proposed to provide that point of taxation will be
the payment date or first day after three months
from the date of invoice, whichever is earlier. The
amended point of taxation will apply to invoices
issued after 1st October 2014. A transition rule is
proposed to be prescribed [change to have effect
from 1st October, 2014].
J. Simplification of partial reverse
charge mechanism
In renting of motor vehicle, portion of service tax
payable by service provider and service receiver
will be 50% each. This will come into effect from
1st of October 2014.
K. SEZ - procedural simplification
[changes to have immediate effect].
To be provided that the Central Excise Officer would
issue Form A-2, within fifteen days from the date of
receipt of Form A-1. Exemption would be available
from the date when list of service on which SEZ is
entitled to upfront exemption is endorsed by the
authorised officer of SEZ in Form A-1, provided Form
A-1 is furnished to the jurisdictional Central Excise
Officer within fifteen days of its verification. If
furnished later, exemption would be available from
the date on which Form A-1 is so furnished.
Pending issuance of Form A-2, exemption will be
available subject to condition that authorization
issued by the Central Excise officer will be furnished
to service provider within a period of three months
from provision of service.
As regards services covered under reverse charge,
the requirement of furnishing service tax
registration number of service provider shall be
dispensed with.
A service shall be treated as exclusively used for
SEZ operations if the recipient of service is a SEZ
unit or developer, invoice is in the name of such
unit/developer and the service is used exclusively
for furtherance of authorized operations in the SEZ.
CENTRAL GOVERNMENT DEFICIT TRENDS
Fiscal indicators - Rolling Targets as % of GDP
(at current market Prices)
Revised Est. Budget Est. Target for
2013-14 2014-15 2015-16 2016-17
Effective Revenue Deficit 2 1.6 0 0
Revenue Deficit 3.3 2.9 2.2 1.6
Fiscal Deficit 4.6 4.1 3.6 3.0
Gross Tax Revenue 10.2 10.6 10.9 11.2
Total outstanding liabilities
at the end of the year 46.0 45.4 43.6 41.5
Source: Ministry of finance, Govt. of India
Notes: 1. GDP is the Gross Domestic Product at current market prices as per new series from 2004-05. 2. Total
outstanding liabilities include external public debt at current exchange rates. For projections, constant exchange
rates have been assumed. Liabilities do not include part of NSSF and total MSS liabilities which are not used for
Central Government deficit.
Highlights of Central Plan Outlay 2013-14
(In Rs. Crore)
2011-12 Budget Revised Budget
Est. Est. Est.
2012-13 2012-13 2013-14
Agriculture and Allied Activities 17030 18781 17557 11531
Rural Development* 44448 56438 50646 3082
Irrigation & Flood Control 439 1200 464 1797
Energy 132146 158287 178776 166275
Industry and Minerals 33202 48010 36167 40209
Transport** 90518 133488 109029 116202
Communications 6289 12380 9333 13009
Science Technology & Environment 12048 17587 13575 18792
General Economic Services 20217 31602 26878 26318
Social Services*** 136436 193043 164393 79411
General Services 5702 9307 7316 7906
GRAND TOTAL 498476 680123 614134 484532
Source: Union Budget 2014-15
* Includes the provision for rural housing but excludes provision for rural roads.
** Includes the provision for rural roads.
FISCAL INDICATORS
Financial Performance of Railways in
2013-14
Goods Earnings were short by Rs. 94 crore.
Passenger Earnings were short by Rs. 968 crore
over revised target.
Gross Traffic Receipts grew by 12.8% to reach Rs.
1,39,558 crore. However, it falls short of revised
target by Rs. 942 crore.
Ordinary Working Expenses stood at Rs. 97,571
crore, which was in excess by Rs. 511 crore.
Operating Ratio deteriorated by 2.7% over revised
target to touch 93.5% by end of 2013-14 fiscal.
As far the Plan Expenditure for ,2013-14 is
concerned, it fell short of Revised target of Rs.
59,359 crore mainly due to non-materialization of
PPP targets
Annual Plan 2014-15
Plan outlay under budgetary sources: Rs. 47,650 cr
Additional Budgetary Support as Capital: Rs. 1,100
cr
Railway share from diesel cess for important Road
Safety works: Rs. 273 cr
Internal Resources: Rs. 11790 cr
Budget Estimates for FY 2014-15
Total receipts of Rs. 1,64,374 crore and total
expenditure at Rs. 1,49,176 crore.
Earnings from Freight Traffic Rs. 1,05,770 crore and
from Passenger Traffic Rs. 44,645 crore
Ordinary working expenses have been proposed at
Rs. 1,12,649 crore, which is Rs. 15,078
cforeJiigherthan 2013-14. This has been
necessitated by fuel price hike and increase in staff
costs. Pension outgo in 2013-14 had grown by about
16%.
Resource Mobilisation for Railways
Leveraging Railway PSU Resources: Railway PSUs
are financially sound. It is proposed to launch a
scheme to bring in investible surplus funds of
Railway PSUs in infrastructure projects of Railways,
which can generate attractive returns for PSUs.
Private investment in Rail Infrastructure through
KEY PROPOSALS OF
THE RAILWAY BUDGET 2014-15
Domestic and Foreign Direct Investment (FDI):
Growth of Railways depends heavily on availability
of funds for investment in rail infrastructure.
Internal revenue sources and government funding
are insufficient to meet the requirement. Hence,
Ministry of Railways would seek Cabinet approval
to allow FDI in Rail Sector.
Public Private Partnership: Railways being a capital
intensive sector has not been successful so far in
raising substantial resource through PPP route.
Bulk of the future projects will be financed through
PPP mode, including the high-speed rail which
requires huge investments. There is also a need to
strategically manage railway planning and
administration suitably.
Passenger Amenities & Station
Management Amenities at Stations
It is envisaged to provide foot-over bridges,
escalators and lifts at all major stations including
through PPP route.
To make earnest attempt to provide sufficient water
supply, platform shelters and toilets at the Railway
Stations.
Passenger Amenities through private
entity
Indian Railways propose to extend service of
Battery-operated Carts to facilitate differently-
abled and senior citizens to reach any platform
comfortably at all major stations.
Reputed and willing NGOs, charitable institutions
and Corporate Houses will be encouraged to adopt
and maintain stations for better cleanliness and
upkeep.
Other Key Proposals
Railway will explore the possibility of building of
boundary walls around stations through PPP route.
Diamond Quadrilateral Network of High Speed Rail,
connecting major Metros and growth centers of the
country is proposed. A provision of Rs. 100 crore
has been made in this Budget for high Speed project
to RVNL / HSRC (High Speed Rail Corridor) for taking
further steps.
An effort will be made to increase the speed of trains
to 160-200 kmph in select sectors so as to
significantly reduce travel time between major
cities.
It is proposed to set up an Innovations Incubation
Center. This Center will harness the ideas generated
from the staff of Indian Railways and convert them
into practical solutions to increase efficiency of
the system. Such innovations which result in cost
saving as well as revenue generation will be
suitably rewarded in the form of incentive.
With a large backlog of sanctioned projects, funding
continues to be the biggest challenge for the
Railways. The Govt. will interact with industry and
take further steps to attract investment under PPP
through BOT and Annuity route and 8 to 10 capacity
augmentation projects on congested routes will be
identified for this purpose. Zonal Railways will be
suitably empowered to finalize and execute such
projects.
Indian Railways has taken up port connectivity on
a priority through PPP mode of funding in tandem
with Sagar Mala Project of Port Development.
Railways will facilitate connectivity to the new and
upcoming ports through private participation. So
far, in principle approval has been granted for
building rail connectivity to the Ports of Jaigarh,
Dighi, Rewas, Hazira, Tuna, Dholera and Astranga
under Participative Model Policy of Indian
Railways, amounting to a total of over Rs. 4,000
crore.
Coal Connectivity: Railways will speed up
construction of critical coal connectivity lines in
Tori-Shivpur-Kathautia Area, Jharsuguda-Barpalli-
Sardega and Bhupdeopur- Raigarh-Mand Area. This
will bring nearly 100 Million Tonnes of incremental
traffic to railways and will also facilitate faster
transportation of coal to Power Houses.
Private Investment in Railway Logistics: It is
proposed to modernize logistics operations by
setting up Logistic Parks that provide for
warehousing, packaging, labeling, distribution,
door-to-door delivery and consignment tracking.
In order to achieve better efficiency, mechanization
of loading and unloading will be given top priority.
In the existing pattern of traffic movement of Indian
Railways, more than 33% of freight trains over the
system run empty since return traffic at existing
freight rates is not forthcoming. In order to garner
additional revenue by a suitable pricing
mechanism, it is proposed to launch a pilot project
whereby automatic rebate from the computerized
FOIS system will become available to customers
offering traffic over the present expected levels of
loaded movement. This would help reduce the
empty flows on the Indian Railway System apart
from garnering additional revenue.
A scheme for private participation in parcel
movement will be launched shortly whereby
procurement of parcel vans or parcel rakes by
private parties shall be facilitated.
Private Freight Terminals (PFT): To develop network
of freight terminals, policy of Private Freight
Terminals on PPP model is being further refined.
Movement of Agri-Products: It is proposed to give
a boost to rail movement of fruits and vegetables
in partnership with the Central Railside
Warehousing Corporation (CRWC) by providing
requisite facilities of temperature controlled
storages at 10 locations viz Vatva, Vishakhapatna,
Badagara, Cheriyanad, Bhivandi Road, Azara,
Navlur, Kalamboli and Sanand on Indian Railways
in the first phase. The aggregation and distribution
from Railway terminal points shall be organized
by the CRWC. Apart from avoiding national wastage
of these products, this would help producers of
fruits and vegetable in different parts of the country
in getting better prices for their produce.
Indian Railways propose to facilitate
transportation of milk through rail by providing
special milk tanker trains in association with
National Dairy Development Board and Amul.
It is proposed to harness solar energy by utilizing
roof top spaces of Railway Stations, other Railway
buildings and land, including through the PPP
mode.
Transparency in administration, execution of
projects and procurement will be given top priority.
E-procurement will be made compulsory for
procurements worth Rs.25 lakhs and above.
Expansion of railways in Hill States & Northeast
regions: There are 23 projects underway in the
Northeast, of which 11 are National Projects. It is
proposed to allocate substantially higher funds for
these projects compared to previous years. In 2014-
15, an outlay of Rs. 5,116 crore is earmarked for
projects of North-East. This means a 54% jump over
allocations in the previous year. With higher
allocations and by close monitoring of works in
this region, it is hoped that Dudhnoi-Mendipathar
New Line; Lumding-Badarpur-Silchar Gauge
Conversion; Harmuti-Murkongselek and Balipara-
Bhalukpong sections will soon get commissioned.
These measures will also give a boost to the State
capital connectivity projects in the region.
Online Wagon Demand registration: Online
registration of demand for wagons will be launched
in the next 2 months. This will facilitate online
payment of Wagon Registration fee as well as
registering demand for wagons. Further a process
for ERR (Electronic Railway Receipt) will also be
initiated during the year.
Indian Railway will tie up with technical
institutions for introducing railway oriented
subject for graduation and skill development.
Possibility of setting up a Railway University is
being contemplated. Short duration courses of
technical and non-technical nature for staff is
proposed.

Economic Survey reviews the developments in the Indian economy over the previous 12 months and highlights
the policy initiatives of the government and the prospects of the economy in the short to medium term. The
highlights of Economic Survey 2013-14 are as follows:
Table: Key Performance Indicators
Date Categories Unit 2011-12 2012-13 2013-14
GDP and Related Indicators
GDP (Curr. Mkt.Prices) Rs.Cr. 9009722
A
10113281* 11355073
Growth Rate % 15.7 12.2 12.3
GDP (factor cost 2004-05 prices) Rs. Crore 5247530
A
5482111# 5741791
Growth Rate % 6.7 4.5 4.7
Per Capita Net National Income
(factor cost at current prices) Rs. 61855 67839 74380
Production
Food grains Million Tonnes 259 257 264.4
a
Index of Industrial Production (growth) % 2.9 1.1 -0.1
Electricity Generation (growth) % 8.2 4.0 6.1
Prices
Inflation (WPI) (average) % 8.9 7.4 6.0
Inflation CPI (IW) (average) % 8.4 10.4 9.7
External Sector
Export (in US$ terms) % change 21.8 -1.8 4.1
Import (in US$ terms) % change 32.3 03 -8.3
Current Account Balance (CAB/GDP) % -4.2 -4.7 -1.7
Foreign Exchange Reserves US$ 294.4 292.0 304.2
Average Exchange Rate
d
Rs. /US$ 47.92 54.41 60.5
Money and Credit
Broad Money (M3) (annual) % change 13.2 13.6 13.3
Scheduled Commercial Bank Credit % change 17 14.1 13.9
Source: Economic Survey 2013-14
Note: no: not available. #: 1st Revised Estimates,
A
: 2nd Revised Estimates, @: Provisional Estimates, a: Third
advance estimates, b: The Index of Industrial Production has been revised since 2005-06 on base (2004-
05=100)., c: At end March, d: Average exchange rate (RBIs reference rate)
Growth Outlook 2014-15
The GDP at factor cost at constant prices is expected to grow in the range of 5.4 - 5.9 per cent in 2014-15. Growth
in 2014-15 is expected to remain more on the lower side of the range given above, for the following reasons:
(i) steps undertaken to restart the investment cycle (including project clearances and incentives given to industry)
are perceived to be playing out only gradually;
ECONOMIC PERFORMANCE, PROSPECTS
AND REFORMS
(ii) the benign growth outlook in some Asian economies,
particularly China;
(iii) still elevated levels of inflation that limit the scope
of the RBI to reduce policy rates; and
(iv) expectation of below-normal monsoons. Downside
risk also emerges from prolonging of the geo-
political tensions. On the upside, such factors as
institutional reform to quicken implementation of
large projects and a stronger-than-expected
recovery in major advanced economies would help
the Indian economy clock a higher rate of growth.
The Proposed Reform Agenda
The defining challenge in India today is that of
generating employment and growth. Jobs are created by
firms when firms invest and grow. Hence it is important
to create an environment that is conducive for firms to
invest. Reviving investment is therefore, on top of the
governments priorities.
Investments are made on tfie basis of long-term
growth prospects. Reforms are needed on three fronts:
creating a framework for sustained low and stable
inflation, setting public finances on a sustainable path
by tax and expenditure reform, and creating the legal
and regulatory framework for a well-functioning market
economy.
First, the government has to work towards a low
and stable inflation rate through fiscal consolidation,
moving towards establishing a monetary policy
framework, and creating a conducive environment for a
competitive national market for food. Initiation of
reforms on these fronts will reduce inflation uncertainty
and restore a stable business environment. Further,
lower inflationary expectations would increase
domestic household financial savings and make
resources available for investment.
Second, public finances need to be put on a
sustainable path. India needs a sharp fiscal correction,
a new Fiscal Responsibility and Budget Management
(FRBM) Act with teeth, better accounting practices, and
improved budgetary management. Improvements on
both tax and expenditure are needed to obtain high
quality fiscal adjustment. The tax regime must be simple,
predictable, and stable. This requires a single-rate
goods and services tax (GST), a simple direct tax code
(DTC), and a transformation of tax administration.
Government expenditure reform involves three
elements: shifting subsidy programmes away from price
distortions to income support, a change in the focus of
government spending towards provision of public goods,
and a system of accountability through a focus on
outcomes.
Fiscal responsibi lity and tax and expenditure
reform is a medium-term agenda and likely to take two
to three years to implement. The positive effects, however,
are likely to become visible as soon as the government
makes a commitment to some of these reforms.
Third, the government faces the task of putting in
place the legal foundations of a well-functioning market
economy for India. This must be a carefully executed
project as it involves legislative, regulatory, and
administrative changes. It involves building state
capacity to allow businesses to operate in a stable
environment. It involves setting up regulators with clear
objectives, powers, flexibility, and accountability.
Theoretically, there are fundamental differences
between the legal and regulatory framework of a
command-and-control economy and a market economy.
In the former, economic activity is restricted to those
activities that are permitted by the state. In a market
economy, the economy thrives because the state
interferes only when there is market failure, i.e.
monopoly power, asymmetric information or
externalities. As a consequence, laws permit all
activities, unless the state specifically restricts them in
the context of market failure. The restrictions need to
be part of a known and predictable regulatory regime
unlike now where a lot of restrictions-well intentioned
as they are -are not part of a stable framework.
The global economic downturn and structural
weaknesses in the domestic economy has had an adverse
impact on investment. Issues such as getting
permissions for land use, raw materials, power, water,
and other inputs, and also issues such as obtaining
long term finance, as the financial sector is still not
deep and developed needs attention. The inflexibility of
labour markets have prevented high job creation. The
interventions existing in food markets also contribute
to higher food inflation.
The liberalisation of 1991 focused on the industrial
sector. While industry was liberalised and allowed to
buy from, and sell to, anyone in the world, Indian
farmers in many states, are still required to buy and
sell only in the government-designated Agricultural
Produce and Marketing Committees (APMC) to licensed
entities. Farmers are not allowed to sell their produce
directly to the consumers. A national market for food is
yet to develop.
This reform agenda has three elements: short-term
stroke of- the-pen reforms, medium-term reforms that
can be undertaken through executive decisions or the
Finance Bill, and long-term reforms for institutional
change. Long-term reforms involve the challenging task
of building capacity and institutions that provide the
foundations of a market economy. This, for example,
includes changes in the legal and regulatory
environment for factor markets, businesses, financial-
sector regulation, capital flows, and food markets.
Similar reform projects are required in many areas.
The path to sustainable job creation and income
generation is to move on all of the above. Improving
Indias long-term growth prospects will also feed back
into the present and raise investment in the short run.

Table 1: Ratio of Savings and Investment to GDP
Industry 2008-09 2009-10 2010-11 2011-12 2012-13
Gross Domestic Saving 32.0 33.7 33.7 31.3 30.1
Public sector 1.0 0.2 2.6 1.2 1.2
Private sector 31.1 33.5 31.1 30.1 28.9
Household sector 23.6 25.2 23.1 22.8 21.9
Financial saving 10.1 12.0 9.9 7.0 7.1
Saving in physical assets 13.5 13.2 13.2 15.8 14.8
Private Corporate sector 7.4 8.4 8.0 7.3 7.1
Gross Capital Formation (Investment) 34.3 36.5 36.5 35.5 34.8
Public sector 9.4 9.2 8.4 7.7 8.1
Private sector 24.8 25.4 26.0 25.9 23.9
Corporate sector 11.3 12.1 12.8 10.1 9.2
Household sector 13.5 13.2 13.2 15.8 14.8
Gross Fixed Capital Formation 32.3 31.7 30.9 31.8 30.4
Stocks 1.9 2.8 3.5 1.9 1.7
Valuables 1.3 1.8 2.1 2.7 2.6
Saving-investment Gap -2.3 -2.8 -2.8 -4.2 -4.7
Source: Office of Economic Advisor
A
: third revised estimate, @: second revised estimate,
*: first revised estimate
Table 2: Sources of Tax Revenue
Industry 2012-13 2013-14 2013-14 2014-15
Actual Budget Revised Budget
Est. Est. Est.
Corporation Tax 356326 419520 393677 451005
Taxes-on Income 201487 247639 241691 284266
Wealth Tax 846 950 950 950
Customs 165346 187308 175056 201819
Union Excise Duties 176535 197554 179538 207110
Service Tax 132601 180141 164927 215973
Taxes on Union Territories 3094 2758 3067 3401
Gross Tax Revenue 1036235 1235870 1158906 1364524
STATISTICAL APPENDIX
Table 3: Sources of Non-Tax Revenue
Industry 2012-13 2013-14 2013-14 2014-15
Actual Budget Revised Budget
Est. Est. Est.
Interest receipts 20761 17764 21018 19751
Dividend and Profits 53761 73866 88188 90229
External Grants 2311 1456 3135 2405
Other Non Tax Revenue 59405 78000 79788 99009
Receipts of Union Territories 1117 1166 1097 1111
Total Non Tax Revenue 137355 172252 193226 212505
Table 4: Budget Estimates for Expenditure 2014-15
(In Rs. Crore)
Revised Estimates Budget Estimates Variation Dec.(-)/
2013-14 2014-15 Excess(+)
Non-Plan Expenditure
Int. Payments and Prepayment Premium 380066 427011 46945
Defence Services 203672 224000 20328
Fertiliser Subsidy 67972 72970 4999
Food Subsidy 92000 115000 23000
Petroleum Subsidy 85480 63427 -22053
Interest Subsidies 8175 8313 138
Other Subsidies 1890 947 -942
Grants to State and U.T. Governments 61617 69436 7819
Pensions 74076 80983 6907
Police 43148 46427 3279
Postal Deficit 5880 6908 1028
Capital Expenditure (Excluding Defence) 8342 10523 2181
Other Non-Plan Expenditure 82585 81946 -638
Total Non-Plan Expenditure 1114902 1207892 92990
Plan Expenditure
Central Plan 356493 216759 -139734
Central Assistance for State
and UT Plans 119039 338562 219523
Total (Plan) Expenditure 475532 555322 79790
Total Expenditure
(Plan + Non Plan) 1590434 1763214 172780
Table 5: Balance of Payments: Summary
(US$ billion)
2008-09 2009-10 2010-11 2011-11 2012-13 2013-14
Merchandise Exp. 189.0 182.4 256.2 309,8 306.6 318.6
Merchandise Imp. 308.5 300.6 383.5 499.5 502.2 466.2
Merchandise Trade Balance -119.5 -118.2 -127.3 -189.8 -195.7 -147.6
Trade Balance as % of GDP -9,8 -8.7 -7.5 -10.1 -10.5 -7,9
Net Invisibles 91.6 80.0 79.3 111.6 107.5 115.2
Invisible as % of GDP 7.5 5.9 4.7 5.9 5.8 6.1
Current Account Balance -27.9 -38.2 -48.1 -78.2 -88.2 -32.4
CAB as % of GDP -2.3 -2.8 -2.8 -4.2 -4.8 -1.7
Foreign Investment 8.3 50.4 42.1 39.2 46.7 26.4
Capital Account Balance 7.4 51.6 63.7 67.8 89.3 48.8
CAB as % of GDP 0.6 3.8 3.8 3.6 4.8 2.6
Errors & Omissions 0.4 0.0 -2.6 -2.4 2.7 -0.9
Overall Balance -20.1 13.4 13.1 -12.8 3.8 15.5
BOP as % GDP -1.5 1.0 0.8 -0.7 0.2 0.8
Source: RBI
COMMODITY INDEX
Commodities Dayss Index Prev. Index Week Ago Month Ago
Index 2536.7 2534.2 2535.6 2522.2
Bullion 4926.5 4909.6 4981.6 4899.9
Cement 1838.1 1838.1 1858.5 1901.4
Chemicals 1987.6 1987.6 1987.6 1987.6
Edible Oil 1465.3 1463.1 1483.9 1420.3
Foodgrains 2157.1 2153.9 2144.6 2123.0
Fuel 2505.7 2505.7 2505.7 2473.4
Indl Metals 1800.1 1800.1 1817.1 1829.8
Other Agricom 2011.4 2011.4 2011.4 1981.5
Plastics 2421.8 2421.8 2316.3 2270.4
Source: ETIG Database dated 21st July 2014
STATE OF THE ECONOMY AND PROSPECTS
Economy to grow in the range of 5.4 5.9 per cent
in 2014-15 overcoming sub-5 percent growth.
Growth slowdown was broad based, affecting in
particular the industry sector.
Aided by favourable monsoons, agricultural and
allied sector registered a growth of 4.7 per cent in
2013-14.
Industry and Service sectors also witnessed
slowdown.
ISSUES AND PRIORITIES
Reforms needed for long term-growth prospects
on 3 fronts- low and stable inflation regime, tax
and expenditure reform and regulatory framework.
Survey suggests removal of restriction on farmers
to buy, sell and store their produce to customers
across the country and the world.
Rationalisation of subsidies on inputs such as
fertilizer and food is essential.
Government needs to eventually move towards
income support for farmers and poor households.
PUBLIC FINANCE
The fiscal policy for 2013-14 was calibrated with
two-fold objectives; first, to aid growth revival; and
second, to reach the FD level targeted for 2013-14.
The Budget for 2013-14 followed the policy of
revenue augmentation and expenditure
rationalization to contain government spending
within sustainable limits.
The fiscal outcome of the central government in
2013-14 was achieved despite the macroeconomic
challenges of growth slowdown, elevated levels of
global crude oil prices, and slow growth of
investment.
PRICES AND MONETARY MANAGEMENT
High inflation, particularly food inflation, was the
result of structural as well as seasonal factors.
IMF projects most global commodity prices are
expected to remain flat during 2014-15.
HIGHLIGHTS OF ECONOMIC SURVEY 2013-14
The RBI with a view to restoring stability to the
foreign exchange market, hiked short term interest
rate in July and compressed domestic money
market liquidity.
FINANCIAL INTERMEDIATION
RBI has indentified five sectors -- infrastructure,
iron and steel, textiles, aviation and mining as the
stressed sectors.
Public sector banks (PSBs) have high exposures to
the industry sector in general and to such
stressed sectors in particular.
The New Pension System (NPS), now National
Pension System, introduced for the new recruits
who join government service on or after January
2004, represents a major reform of Indian pension
arrangements.
The next wave of infrastructure financing will
require a capable bond market.
BALANCE OF PAYMENTS
The Indias balance-of-payments position
improved dramatically in 2013-14 with current
account deficit at US $ 32.4 billion as against US$
88.2 billion in 2012-13.
Indias foreign exchange reserves increased from
US$ 292.0 billion at end March 2013 to US$ 304.2
billion at end march 2014.
Indias external debt has remained within
manageable limits due to the external debt
management policy with prudential restrictions
on debt varieties of capital inflows.
INTERNATIONAL TRADE
World trade
World trade volume which decelerated to 2.8 per
cent in 2012 has shown signs of recovery in 2013,
albeit slow with a 3.0 per cent growth.
The sharp fall in imports and moderate export
growth in 2013-14 resulted in a sharp fall in India's
trade deficit by 27.8 per cent.
In April-May 2014, trade deficit declined by 42.4
per cent.
AGRICULTURE AND FOOD MANAGEMENT
Record food grains and oilseeds production of
264.4 million tonnes (mt) and 32.4 mt is estimated
in 2013-14.
Horticulture production estimated at 265 mt in
2012-13 has exceeded the production of foodgrains
and oilseeds for the first time.
Due to higher procurement, stocks of foodgrains
in the Central Pool have increased to 69.84 million
tonnes as on June 1, 2014.
The net availability of foodgrains increased to
229.1 million tonnes and that of edible oils to 12.7
kg per year in 2013.
INDUSTRIAL PERFORMANCE
The latest gross domestic product (GDP) estimates
show that industry grew by just 1.0 per cent in
2012-13 and slowed further in 2013-14, posting a
modest increase of 0.4 per cent.
SERVICES SECTOR
India ranked 12th in terms of services GDP in 2012
among the worlds top 15 countries in terms of
GDP (at current prices).
India has the second fastest growing services
sector with its CAGR at 9.0 per cent, just below
Chinas 10.9 per cent, during 2001 to 2012.
In 2013-14, FDI inflows to the services sector (top
five sectors including construction) declined
sharply by 37.6 per cent to US$ 6.4 billion
compared to an overall growth in FDI inflows at
6.1 per cent resulting in the share of the top five
services in total FDI falling to nearly one-sixth.
ENERGY, INFRASTRUCTURE AND COMMUNICATIONS
Major sector-wise performance of core industries
and infrastructure services during 2013-14 shows
a mixed trend. While the growth in production of
power and fertilizers was comparatively higher
than in 2012-13, coal, steel, cement, and refinery
production posted comparatively lower growth.
Crude oil and natural gas production declined
during 2013-14.
The performance of the coal sector in the first two
years of the Twelfth Plan has been subdued with
domestic production at 556 MT in 2012-13 and
566 MT in 2013-14.
A total length of 21,787 km of national highways
has been completed till March 2014 under various
phases of the NHDP. In spite of several constraints
due to the economic downturn, the NHAI
constructed 2844 km length in 2012-13, its highest
ever annual achievement. During 2013-14 a total
of 1901 km of road construction was completed.
From the infrastructure development perspective,
while important issues like delays in regulatory
approvals, problems in land acquisition &
rehabilitation, environmental clearances, etc. need
immediate attention, time overruns in the
implementation of projects continue to be one of
the main reasons for underachievement in many
of the infrastructure sectors.
SUSTAINABLE DEVELOPMENT & CLIMATE CHANGE
Human- induced Greenhouse gas (GHG) emissions
are growing and are chiefly responsible for climate
change.
The world is not on track for limiting increase in
global average temperature to below 2?C, above
pre-industrial levels. GHG emissions grew on
average 2.2 per cent per year between 2000 and
2010, compared to 1.3 per cent per year between
1970 and 2000.
There is immense pressure on governments to act
through two new agreements on climate change
and sustainable development, both of which will
be global frameworks for action to be finalized
next year.
The cumulative costs of Indias low carbon
strategies have been estimated at around USD 834
billion at 2011 prices, between 2010 and 2030.
HUMAN DEVELOPMENT
Indias Human Development Rank and performance
According to HDR 2013, India has slipped down in
HDI with its overall global ranking at 136 (out of
the 186 countries) as against 134 (out of 187
countries) as per HDR 2012. It is still in the medium
human development category.
The poverty ratio (based on the MPCE of ` 816 for
rural areas and `1000 for urban areas in 2011-12
at all India level), has declined from 37.2 per cent
in 2004-05 to 21.9 per cent in 2011-12.
In absolute terms, the number of poor declined
from 407.1 million in 2004-05 to 269.3 million in
2011-12 with an average annual decline of 2.2
percentage points during 2004-05 to 2011-12.
During 2004-05 to 2011-12, employment growth
[CAGR] was on.

There are many things in the budget that will revive
manufacturing and growth and also investments, says
finance secretary Arvind Mayaram, defending the budget
that many say lacks big ideas. Excerpts from an interview
with ET.
The general view about the budget is that it is positive but
lacks big ideas and sufficient details on things like
subsidies.....
T
here is no idea on subsidies. We have said we are
setting up an expenditure management
commission. That's a detail. This panel will give
its first report within this financial year. They are going
to look at what kind of expenditure the government does,
what can be deemed as productive expenditure and what
cannot be. Then you will decide how to deal with each
one of those. Subsidies will also form part of this
commission's terms of reference. We must remember
that there is no country in the world that does not give
subsidies. The US gives subsidies in the form of social
security. Some countries give food stamps. The
government will have to continue to spend money on
people who are vulnerable and who require support. So
what is the best way of doing it - that's the question. One
way could be direct benefit transfer. There can be many
ways of doing it. How do you reduce subsidy burden-- it
would have to be over a period of time.
There are a lot of small things in the budget to revive
manufacturing and growth. Is that the big idea in this
budget?
There's huge amount of detail in the budget on reviving
growth -- look at the provision for MSME (micro, small
and medium enterprises), start-ups, rural entrepreneurs.
These are all to give incentive to people who do small
businesses. The backbone of Indian industry is MSME, it
is not the large industry. Even the export sector has large
number of SMEs. If you look at part Bof the budget,
particularly with regard to customs duty, we have
addressed duty inversion. Inverted duty structure was
counterproductive for manufacturing in India. So, now
when we have reduced the duty on components lower
than the finished goods, there is incentive to produce
here. This will all contribute to manufacturing.
Do you think there has been something done specifically
in the budget to trigger investments, apart from larger
allocations to road and bigger capital expenditure?
REITs (real estate investment trusts) and infra trusts will
essentially pool investments. Look at the entire measures
taken on the capital markets. Liberalisation of ADR/DR
regime is only for investments. Allowing international
settlements for Indian debt securities means the country
will be able to pull a huge amount of foreign funds
through this process. Bharat Depository Receipt will also
bring investments. The clarification on fund managers
of foreign fund will encourage them to relocate back to
India. The uniform KYC (know your client norms), the
inter-usability of KYC records will make it easier for
people to invest. There is a lot to spur investments in
this budget.
When will the international clearing be operational for
domestic debt?
The notification should come out in another two-three
weeks.
The Economic Survey talked about a new Fiscal
Responsibility and Budget Management (FRBM) law with
teeth. Is it on the agenda?
You make these changes and put these restrictions when
you are on an upswing and not when in trough. I don't
think we have reached that stage to put such kind of
impositions. There is also huge global uncertainty. If
other countries continue to play around with their
monetary policies in an unconventional manner, how
we need to respond to them down the line in two years
cannot be predicted today. We need to have enough
elbow room and flexibility. So, I do not think the time is
right.
On FDI, we have two initiatives. Are there more coming?
In FDI or in any other area, you never declare victory as
it is a continuous process. I am quite sure there may be
other reforms going forward. It's very difficult for me to
predict now in which sector it would happen, to what
extent it would happen and when it would happen.
Source : Economic Times
BUDGET 2014 OFFERS LOTS TO REVIVE

GROWTH, SPUR INVESTMENTS
ARVIND MAYARAM
FINANCE SECRETARY
BUDGET 2014: INFRASTRUCTURE GROWTH
CAN BE KEY FOR ECONOMIC REVIVAL
SASWAT PANIGRAHI
I
nfrastructure sector has got a huge facelift in the Union
Budget 2014. It is the same sector, which was neglected
for the last 10 years under the Congress-led UPA rule.
The NDA Government-led by Atal Bihari Vajpayee had
emphasised on the infrastructural development of the
country. It was the Vajpayee Government that had
launched two ambitious infrastructural projects: Golden
Quadrilateral project and Pradhan Mantri Gram Sadak
Yojana. But the infrastructural growth has come to a
grinding halt in the last ten years, thanks to the Congress-
led UPA. Even the UPA Government had by default
admitted in an affidavit to the Supreme Court that while
the NDA regime had constructed 11 kilometres of roads
per day, it came down to 3 kilometres during its tenure.
It was the BJP manifesto which mentioned the word
infrastructure as many as 30 times in the 41-page-long
document and promised to give the sector a required
boost. After taking the reins of the country, the Narendra
Modi Government has kept its poll promise and has
lived up to peoples expectations.
Infrastructure sector plays a very significant role in
economic development. The growth of this sector is
necessary to create employment opportunities, mobilise
resources, generate revenue, which will help reviving
the economy.
On infrastructural front, the Railway Budget 2014 has
proposed to set up a Diamond Quadrilateral rail network
connecting major metros apart from announcing a bullet
train. The Rail Budget has also proposed to attract private
domestic investment and FDI in infrastructure.
Carrying forward Narendra Modis development mantra
of Ek Bharat, Shreshtha Bharat, Finance Minister Arun
Jaitley while presenting his maiden Budget announced a
series of measures to push the infrastructure sector.
The Finance Minister has announced the launch of
Syama Prasad Mookerjee Rurban Mission for rural
development. The project, which aims at urbanisation
of rural areas, will create civic infrastructure and
associate services. This unique model will certainly help
generating employment apart from creating skilled
development in villages.
To ensure 247 uninterrupted power supplies in rural
areas, Union Budget 2014 has announced Deendayal
Upadhyaya Gram Jyoti Yojana and earmarked Rs 500
crore for the scheme. In addition, the Budget allocates
Rs 14,389 crore for Pradhan Mantri Gram Sadak Yojna
(PMGSY).
To create infrastructure in agriculture sector, the Union
Budget has proposed to raise the corpus of Rural
Infrastructure Development Fund (RIDF) by an additional
Rs 5,000 crore. In addition, an amount of Rs 100 crores
has been set aside for the Agri-tech infrastructural funds.
To strengthen and modernise the boarder infrastructure,
the Budget has earmarked Rs 2250 crore. For scientific
warehousing infrastructure, the Budget has allocated
Rs 5,000 crore.
In his Budget speech, the Finance Minister emphasised
on strengthening and revival of the Special Economic
Zone (SEZ). Such a move will not only revive the investors
interest to develop better infrastructure, but also makes
the SEZs effective instruments for employment
generation, industrial production and export promotion.
This will in turn contribute to the economic growth of
the country.
In a bid to attract large-scale investments in
infrastructural sector, the Union Budget has proposed
to provide a conductive tax regime for the investors by
setting up Infrastructural Investment Trusts (InvITs) and
Real Estate Investments (REITs) in accordance with the
regulations of the Securities and Exchange Board of India
(SEBI).
With as many as 900 projects are in various stages of
development, India has emerged as the largest PPP
(Public Private Partnership) market. But the PPP has its
grey areas. To streamline the PPP models, the Union
Budget has proposed an institution called 3P and
earmarks Rs 500 crore.
Real Estate Investment Trusts (REITS) are being used as
an instruments to pull investment in several countries.
The Union Budget has announced creation of
Infrastructural Investment Trusts (InvITs), a modified
REITS-type structure. This will have a similar tax pass
through status for PPP and other infrastructure projects.
There is no doubt that the series of measures for
infrastructural development, as presented in the Union
Budget 2014, will raise adequate resources for the
economic development of the country. This will certainly
help reviving the ailing economy.
Source : www.niticentral.com

O
nce a service is brought into the service tax net
the provisions of the service tax and rules are to
be complied with. In order to comply with the
same the entity may issue circulars to their personnel
indicating the procedure to be followed. Railway is
not an exception to this. Railway Board has also issued
circulars from time to time for compliance of the
provisions which may be discussed in this article.
Instructions : Vide No. TCII/2910/2012/Service Tax, dated
25.06.2012 instructions were issued for the compliance
of provisions as detailed below:
Service tax would be levied on the fare of passenger
services on the following classes-
o A/C First class;
o Executive class;
o AC 2 tier class;
o AC 3 tier class;
o AC Chair car class;
o AC economy class;
o First class.
Since an abatement of 70% has been permitted
on passenger services, vide Notification No.
13/2012-ST, dated 17.03.2012 service tax will
be charged on 30% of total fare including
reservation charge, development charge, super
fast surcharge etc., which should be calculated
as follows:
Service tax of 12% will be charged on 30% of
fare (equivalent to 3.6% on the total fare);
Education cess of 2% on ST will be added
(equivalent to 0.072% on total fare); and
Higher Education Cess of 1% of ST will also be
added (equivalent to 0.036% on total fare);
Total service tax implication will be 3.708% on
the total fare.
No service tax will be levied for duty pass, privilege
pass, any other complimentary passes etc., where
no MONEY transaction is involved;
On concessional value of tickets/PTO tickets
service tax will be levied on 30% of the total fare
actually collected from the passenger;
In case of cancellation of tickets by the passengers
service tax will not be refunded by Railways;
The service tax will also apply to tickets issued in
advance for journeys to commence on or after date
RAILWAY CIRCULARS ON SERVICE TAX
MR. M. GOVINDARAJAN
VICE CHAIRMAN MADURAI CHAPTER OF COST ACCOUNTANTS
of implementation of ST. In the case of tickets
already issued excluding service tax, it should be
ensured that the ST on total fare is recovered either
by TTEs in the train or by the booking offices before
the commencement of the journey by the
passengers;
Zonal Railways are to register themselves with the
Department;
ST should be collected at the time of issuing the
ticket itself;
It may be ensured that proper arrangement be made
for up-keep of record from the initial stage itself
for subsequent auditing by Service tax authorities;
Instructions may be communicated to the staff at
all levels regarding the relevant provisions of
service tax and they may be made conversant with
the various provisions for effective and efficient
implementation of the same.
In case of refund of passenger fare, if any, refund of
service shall be claimed by the passenger from the
concerned service tax authority. No refund shall
be made by the Railways on this account. For the
purpose of claiming refund, CCM office shall issue
a certificate to passenger detailing the amount of
refunds to be signed by an officer authorized by
CCM, which shall be countersigned by Dy.CAO or
officer authorized for this purpose. The said
instruction has been amended by Commercial
Circular No. 59/2012, dated 28.09.2012 indicating
that in case of cancellation of tickets booked by the
passengers on or after 01.10.2012, ST can be
refunded by Railways except for the portion of ST
on the amount of cancellation charges retained by
the Railways.
Implementation : Vide their commercial circular No
58/2012, dated 26.09.2012 it was advised that the
service tax on transportation of passed by rail would
be levied with effect from 1.10.2012.
Service Tax on auxiliary services : Vide No. 2004/TG-IV/
39/24/Service Tax pt iii, dated 26.09.2012 it has been
informed that the following auxiliary services have been
exempted from the levy of service tax with effect from
01.07.2012:
Selling of space or time slots for advertisements
other than advertisements broadcast by radio or
television;
Services by way of motor vehicle parking to general
public excluding leasing of space to an entity for
providing such parking facility, as per Notification
No. 25/2012-ST, dated 20.06.2012, para 24;
Services by way of public conveniences such as
provision of facilities of bathroom, washrooms,
lavatories urinal or toilets, as per Notification
No.25/2012-ST, dated 20.06.2012, para 38;
Services by way of renting of a hotel, inn, guest
house, club, campsite or other commercial places
meant for residential or lodging purposes, having
declared tariff of a unit OF ACCOMMODATION
below 1,000/- per day or equivalent, as
per Notification No. 25/2012-ST, dated 20.06.2012,
para 18;
Procedure for refund of service tax : Vide Circular No.
60/2012, dated 29.09.2012 the procedure for refund of
service tax has been enumerated.
Service tax will be leviable only on the cancellation/
clerkage charges retained by the Railways at the
rate of 3.708% on the charges retained. The
remaining portion of ST collected at the time of
booking shall be refunded along with the
refundable fare portion;
This will be applicable only to cancellation of AC
Class/First Class tickets booked by passengers on
or after 01.10.2012;
In case of cancellation of AC class and First class
tickets booked on or after 01.10.2012, service tax
to be refunded would be done manually by Railways
at the booking counters. In order to facilitate the
refund process, the amount to be refunded would
be displayed through PRS on the cancellation form
itself of the PRS terminal;
The accountal of the amount of service tax refunded
manually shall be maintained in a separate register.
The details of service tax refunded shall also be
endorsed on the cancellation ticket by the booking
clerk.
For cancellation of e-tickets including dropped
waitlisted e-tickets, IRCTC will refund the service
tax to passengers from the e-ticketing front-end
application and account for the same with
Railways. The details of the amount of service tax
to be refunded on the cancelled e-tickets would be
sent by PRS to IRCTC while cancelling the tickets
and service tax should be refunded in the same
manner as refunds done for other cancelled tickets.
Service tax on additional categories : Vide circular No.
62/2012, dated 10.10.2012 instructions were issued for
the levy of service tax for the following category of
services:
Special train/coaches on FTR (for AC classes and
first class);
Special trains for film shooting (For AC classes and
first class);
Season ticket (first class);
Circular journey tickets (for AC classes and first
class);
Excess Fare ticket for extension of journey, traveling
without ticket, un booked/excess luggage of
passengers, lost ticket/mutilated ticket, up
gradation of tickets in AC or first class etc.,
It was further advised that the service tax @ 3.708%
will be levied on the total charges of special train/
coaches which include the full Security deposit also.
At the time of refund of security amount, the
proportionate amount of service tax would also be
refunded.
Service tax on verification of journey details : Vide
Circular No. 25/2012, dated 11.06.2014 issued
clarification as to whether service tax should be levied
on charges being realized for LTC verification. It was
clarified that any service not falling within
the negative list and exempt list circulated by Ministry
of Finance would be taxable. Since the charges realized
for verification of LTC details do not fall in the negative
list and exempt list circulated by Ministry of Finance,
Zonal Railways should realize service tax on these
charges. These circulars may also be useful to the
passengers traveling in trains.
Source : Tax Management in India.com
CUSTOM EXCHANGE RATES

CUSTOM EXCHANGE RATES (All rates per unit)
w.e.f. 21st July, 2014
CURRENCY IMPORT EXPORT
Australian Dollar 57.05 55.70
Bahraini Dinar 164.30 155.25
Canadian Dollar 56.75 55.40
Danish Kroner 11.10 10.75
EURO 82.40 80.45
Hong Kong Dollar 7.85 7.70
Kuwaiti Dinar 219.80 207.20
Newzealand Dollar 52.95 51.65
Norwegian Kroner 9.85 9.55
Pound Sterling 104.40 102.10
Singapore Dollar 49.05 47.95
South African Rand 5.80 5.50
South Arabian Riyal 16.50 15.60
Swedish Kroner 8.95 8.70
Swiss Franc 68.00 66.15
UAE Dirham 16.85 15.95
US Dollar 60.70 59.70
Japanese Yen 60.05 58.55
Kenya Shilling 70.70 66.60
Source : www.dailyshippingtimes.com/custom-exchange-rates.php
Reinstate the benefits applicable to SEZs and strengthen
the SEZ Acts power to overrise clashing legislations.
W
ithin a month of taking charge, the new
government has sent out strong signals of its
commitment to easing the rules for FDI.
Significant announcements on lowering the entry
barriers in hitherto protected sectors such as defence,
high speed railways and e-commerce have been made.
However, the experience so far indicates that mere
liberalisation of FDI rules may not really help. Despite
significant reforms in the FDI regime since 1990, India's
share in FDI stood at only 1% in 2012, as per UNCTAD
data. While the country ranked third in GDP (purchasing
power parity), its position was 15th in terms of FDI
inflows (14 in 2011). In contrast, China, which has
widespread formal restrictions on inward FDI, has been
the top recipient of FDI inflows. It has FDI restrictions in
a long list of sectors deemed critical to its economy.
Beijing regularly publishes lists of sectors where foreign
investment is either encouraged, restricted or prohibited.
In addition to outright limitations on foreign equity
ownership, there are extensive investment conditions
on technology transfer, domestic procurement and joint
ventures, and limitations on the employment of
foreigners as key personnel. But FDI flows remain
extremely high. Between 2001 and 2012, the average
annual inward FDI flow into China, as a portion of its
GDP, was 11.4 %, whereas in India, it was just 4%.
Lower entry barriers are unlikely to push up India's FDI
inflows significantly. Rather, good quality infrastructure,
low administrative costs of setting up and running
businesses, and predictable macro-economic policy
could be important factors. India, in the World Bank's
Ease of Doing Business list for 2013, ranked 132 out of
185 countries. The cost of doing business is so high that
even local entrepreneurs are shifting their manufacturing
bases to overseas. It is evident from the fact that the
outward investment has been growing faster than FDI
inflows.
FOR HIGHER FDI, REVIVE SEZS
ARADHNA AGGARWAL,
DIRECTOR, WADHWANI FOUNDATION POLICY RESEARCH CENTRE
According to UNCTAD data, between 2000 and 2012,
inward FDI stock increased 14 times from $16 billion to
$226 billion while outward investment multiplied 68
times from a mere $1.7 billion to over $118 billion. The
accompanying chart shows aggregate FDI inflows
(including equity, reinvested earnings and loans) and
outflows (inclusive of equity, loans and guarantees) over
the past decade, as per RBI data. Evidently, in some years,
the amount of overseas direct investment by Indian
companies even exceeded FDI inflows into the country.
Domestic industry seems to simply opt for foreign
locations to avoid rigidities in the policy regime here.
This is striking for a developing country such as India
and calls for prompt action to address the numerous
problems that make India rank so low on the World
Bank's ease-of-doing-business surveys. While this
requires a long-term strategy, there are indeed low-
hanging fruits that can be plucked.
One immediate step would be to revive SEZs. It must be
understood that SEZs are not the trade-based enclaves
that are the second-best solution. They need to be viewed
as geographically concentrated agglomerations of
internationally competitive enterprises that offer
favourable business environment including efficient
infrastructure and quality services, few regulatory
restrictions and a minimum of red tape.
Since 1991, a large number of industrial parks/zones
offering attractive incentives, grants and concessions
have emerged in India. These include industrial parks,
growth centres and export promotion industrial parks
(set up by the Department of Industrial Policy and
Promotion); food and mega food parks (by the food
ministry); integrated textile parks (textile ministry); bio-
parks (Department of Biotechnology); electronics
hardware parks (Department of Electronics); and special
economic zones (commerce ministry). None of them,
except SEZs, could trigger a significant flow of investment
and employment creation in the economy. SEZs have
attracted investment worth R2,88,477 crore and created
almost 11 lakh direct jobs. Major policy reversals and
global slowdown in recent years have, however, dealt a
heavy blow to them. Of the 389 notified zones, only 185
are exporting. Considering the fact that even the
operational zones are not fully occupied, there is a large
chunk of industrial land available there. A major
corrective measure would be to restore investor
confidence in them by:
Reinstating the original benefits offered to them,
Invoking section 51 of the SEZ Act which allows the
provisions of the Act to override the provisions of
any other Act and,
Ensuring that the ministry of commerce, which
fathers the scheme, alone can propose changes in
the Act/rules.
Another important step will be to integrate them with
the rest of the economy through backward and forward
linkages to spur investment and employment in the rest
of the country. The present policy completely discourages
forward linkages by allowing domestic sales only after
paying all tariffs and in some states even VAT. Duty-free
imports affect backward linkages (the use of local inputs)
also. Many successful countries including China, Korea
and the US have adopted an innovative policy of allowing
100% domestic sales from SEZs after paying duty only
on the value of the foreign non-duty-paid content. If there
is no imported component in the product, domestic sales
are completely duty-free. This strengthens not only
forward but also backward linkages. China permits
domestic sales from SEZs also if the SEZ product is
manufactured using new and sophisticated technology
(as defined by the law). There is thus a compelling need
for strategising SEZs. They can be instrumental in
attracting both local and foreign investment, and
stimulating and updating economic activities in the
domestic economy through both backward and forward
linkages.
WELL ADOPT POLICIES TO MAKE

PROCUREMENT TRANSPARENT
SADANANDA GOWDA
RAILWAY MINISTER
B
ar certain operations, India wants private
participation in all areas of railways, says rail
minister Sadananda Gowda. At a press briefing
after the budget, the minister spoke on FDI in the sector,
improving services and on the budgets criticism from
political quarters. Excerpts
Will you allow FDI in projects such as bullet and high-
speed trains, which require a huge financial outgo?
We need huge investments to run bullet trains. FDI is not
allowed in railways at the moment. We have asked the
commerce ministry to prepare a cabinet note proposing
FDI in railway projects with a focus on the infrastructure
sector, not on operations. Except operations, we want
private sector participation in all areas. The cabinet
will take call on allowing FDI in the sector.
What are your priorities in terms of improving services?
We have given more importance to security and
cleanliness in this budget. While financial allocation
for cleanliness has been raised by 40% over the previous
budget, the allocation for passenger amenities and safety
has been increased by 25% and 12%, respectively. We
can't create a new railway the railway has to be taken
in a new direction. We will work towards a tamper-proof
ticketing system. Catering services will also be improved.
What kind of pricing policy will you follow?
The railways would continue with the fuel adjustment
cost (FAC) formula, under which there will be periodic
adjustments in fares and freight rates once in six months.
What are your thoughts on transparency in project
execution and private sector participation?
Transparency in administration, execution of projects
and procurement will be given top priority. Strategic
procurement policies will be adopted to make the
procurement process transparent and more efficient.
About 10 stations will be developed to international
standards through the PPP model.
After getting responses from the private sector, we will
disclose the names of the stations to be upgraded.
Its our target that the bulk of future projects
are financed through the PPP mode,
including high-speed rail, which requires
huge investments.
ALLOCATION FOR CLEANLINESS HAS BEEN
RAISED BY 40% WHILE THAT FOR
PASSENGER AMENITIES FOR SAFETY HAS
BEEN INCREASED BY 25% AND 12%. WE
CANT CREATE A NEW RAILWAY - THE
RAILWAY HAS TO BE TAKEN IN A NEW
DIRECTION.
Any comments on the criticism from political parties that
many states have been ignored in this budget?
We will be completing all the projects announced in
previous budgets. No project announced in earlier
budgets has been stopped.
Parties that have been protesting against my rail budget
must understand that during the tenure of previous
ministers, these states got the maximum numbe rof
projects.
Source : The Financial Express

process that has been underway for some time in
many areas of the world, but which is advancing at
different rates and has achieved different degrees
of penetration.
2. In Japan, the movement towards privatization began
in 1987. The country now has twenty-two private
companies offering high-speed services. Other
countries have yet to begin initiatives for
deregulating their government-controlled networks.
3. In the European Union, deregulation of
transnational passenger transport began in
January of 2010. The most deregulated markets in
Europe are the UK, Germany, Sweden and the
Netherlands. These markets offer the best
conditions for new entrants. In 2012, the European
Union will report on the progress of deregulation.
4. Based on the conclusions of the report, it will decide
on whether to extend deregulation to national
passenger transport.
5. Regardless of the conclusions of that report, Europe
is open to an increase in competition within
traditional domestic markets. The greatest
beneficiary of deregulation: the passenger. Service
levels will likely rise while prices will fall while
traditional companies and newcomers to the
industry will have to sharpen their strategies as
much as possible to ensure survival and maintain
dwindling market share.
V. Gaining Traction Around The Globe
Thousands of kilometers of high-speed line are currently
planned or under construction throughout the world
and are forecast to quadruple by 2020 in a process
that will require a staggering 500 to 600 billion Euros
in estimated investment. HSR is gaining progressively
more traction around the globe as nations attempt to
address looming challenges related to congestion,
infrastructure and the environment.
The greatest business opportunities are found in Asia,
where there are plans for greater development of rail
infrastructure in both China and India, the two markets
that cover the greatest distance of track and have the
greatest potential growth. Despite being a relative
newcomer to high speed (the first network dates from
2003), China has experienced the greatest level of line
construction of any Asian country in recent years.
Historically, Japan was the driving force behind High
Speed Rail and father of the most advanced technologies
in this field, with its bullet train and high speed magnetic
levitation units. And, Japan is not far behind China in
HSR, with plans for a further 3,600 kilometers.
The Middle East and the Arab Gulf States form another
region with great potential for rail development.
Governments in these countries are increasingly turning
to rail as the ideal means of transport for connecting
cities in the area and relieving road and air traffic
congestion. The region currently has little in the way of
rail infrastructure, and therefore, high speed is one of
the options (though not the only one) being considered
for future rail development.
The U.S. has only recently become energized about the
possibilities of HSR. After the initial investment in the
Acela program in the Northeast Corridor between
Washington and Boston, very little other than research
and planning has taken place. The current
administration has earmarked $8.8 billion USD and
identified eight high-speed corridors for future
development. Most experts concede this will be a multi-
100s of billions of dollars to completely build a
meaningful network.
In Europe, there is a conscious effort to develop an
integrated borderless rail area which is pushing the
region towards greater deregulation.
Europe has planned the construction of thousands of
kilometers of highspeed line, with more than 3,000
kilometers in current operation and about 9,000
planned.
VI. New financing formulas
Rail infrastructure takes years to build, with long-term
return on investment and high demand needed to meet
costs, the economic funding has to date from
government. Given the global economic recession, public
support is becoming increasingly unsustainable.
As a result, the industry is looking for new sources of
financing that allow the necessary infrastructure to be
developed, while at the same time minimizing financial
costs and investment. In this context, public private
collaborations such as Public Private Partnership (PPP)
models and project finance, are among the most
promising and advantageous alternatives for funding.
In PPP models, the private partner is usually a
consortium consisting of a builder, an operator, a
financial institution and a local partner who take on
the risks of ownership of the assets, allowing the
government to achieve greater budgetary stability.
The only high-speed project in the world developed
under this model to date is the Figueras-Perpignan line.
(Spain-France) Another principal financial challenge
lies in the management of the rolling stock. In order to
ensure optimum investment for managing and acquiring
rolling stock, some countries, like the UK and Sweden
have decided to set up a process of deregulation and
privatization of their fleets, handing them over to other
companies which subsequently rent or lease them out
to third-party operators.
This leasing operation has allowed substantial
improvements in the economic performance of the rail
operator, which is no longer obligated to make
substantial investments. It also favors the entry of new
operators that do not need to invest in rolling stock to
operate networks.
VII. Challenges
A. Despite the many benefits of High Speed Rail (HSR),
a number of core challenges remainones that
most countries are grappling with: infrastructure,
demographics and energy.
B. All countries have infrastructure needs that have
been made more acute by the economic downturn.
C. The available resources are not sufficient to meet
current demand, let alone predicted developmental
requirements. And where the necessary
infrastructure exists, most of it requires significant
repair.
D. To tackle the impending problem of urban
congestion, which will only worsen as the
population expands, new alternative investment
and means of transport need to be studied.
E. A proper intermodal strategy has to be developed
in order to prioritize spending and ensure that
development of HSR-related technology is
accompanied by excellentdoorto-doorservice
for the passenger.
F. Another issue that still remains to be resolved:
Which economic model is best and will deliver the
healthiest return on investment?
G. High Speed Rail will be one of the answers we turn
to as we look for new ways to transport people and
freight, reducing consumption of our limited energy
resources and working for a greener, cleaner planet.
VIII. Major Challenges Facing The Industry
A. Operating efficiency and simplifying internal
processes.
B. E-Ticketing allows rail firms to cut fraud, increase
business margins, save on distribution, customer
services and maintenance and improve asset
utilisation. End users enjoy a more dynamic service
without having to queue, and can choose the most
suitable form of payment, thus improving their
perception of the service on offer.
C. For these initiatives to be successful, companies
need to design an evolutionary strategy, the first
phase of which consists of ensuring central transit
of a market, based on a flexible platform capable
of supporting future services.
D. New information systems that favour greater
control of business activities need to be developed
to support e-Ticketing initiatives. Harmonization
of the processes and technological platforms will
favour an improvement in internal management and
will give the organizations the right architecture to
undertake actions faster and at a lower cost.
E. All of this will be achieved by companies that decide
to introduce an internal innovation process that
involves the organization as a whole, from company
strategy and administration, through to the
organization.
IX. Fare Management Solution for Electronic Ticketing
provides a comprehensive set of functions for multi-
operator schemes and multiple service channels to
enhance customer convenience, as well as the tools
and architectures for future expansion. The solution
offers customer convenience via multiple, automated
payment means and multiple service channels, including
Web portals, interactive voice response and short message
service. Open standards, a service-oriented open
architecture and extensive use of Web services extend
the solutions functionality.
A comprehensive reporting suite enables detailed
analysis of all critical data. An asset management
function allows service providers to purchase and
maintain an inventory of all items bought from external
suppliers, and fraud management functions minimize
revenue loss.
X. Customer orientation: beyond punctuality
In order to increase their market share and capture the
greatest possible number of customers, organizations
in the industry will have to focus entirely on passengers,
offering the best possible experience in the services
provided. An important factor in achieving this objective
is the customers perception of the quality and value of
the service, which to date has varied from region to
region.
In Germany, service is generally considered inefficient
and overpriced; in Switzerland and Spain it is seen as
high-quality and more affordable. Customers demands
for convenience, speed and safety in travelling are not
tied to any one form of transport, but instead involve
the possibility of door-to-door transport, regardless of
who provides it. This intermodality is emerging as an
opportunity that more and more operators will explore.
XI. Case Study on Railway Budget 2014-15, Rs. 60k Cr
Mumbai-Ahmedabad Bullet Train.
In a move befitting the citys stature as the financial
capital of the country, Railway Minister D V Sadananda
Gowda announced in the Railway Budget yesterday that
Indias first bullet train will begin from Mumbai. Heres
all you need to know about the contraption that will
have you zipping from BKC to Ahmedabad in less than
four hours.
The Route
Mumbai (BKC) : Indias first high-speed bullet train
corridor is expected to begin from Bandra-Kurla
Complex (BKC), which is close to local train stations on
the Central and Western lines, the Metro corridor and
the Eastern and Western Express Highways. People
using the bullet train can switch over to another mode
of transport here, said a railway official.
Thane : The next stop for the corridor, most of which
will be elevated, will be somewhere in the Thane-Diva
zone, for the benefit of those living in the central suburbs
and Navi Mumbai. While land surveys are underway in
the zone, officials said the stop here will be connected
to the Thane-Panvel Trans-Harbour line and will be close
to an as yet unidentified Central line station.
Virar : The train will then travel west and halt somewhere
near Virar.
Palghar : A further halt is being contemplated somewhere
between Boisar and Palgha
Vapi : Another halt will be at Vapi, an industrial hub and
home/workplace to many merchants and businessmen.
Valsad : Valsad is expected to be the trains penultimate
stop
Ahmedabad : The corridor will terminate near
Sabarmati in Ahmedabad.
Mumbai to Ahmedabad
1. 520km: Approximate distance the train will cover
2. 350kmph: The expected operating speed of the train
3. 3-4 hours: The time it will take to reach Ahmedabad
using the bullet train
4. 8 hours: The time it takes from Mumbai to ahmedabad
in a train currently
5. 50-100km: The distance between each station on the
line
6. 7: Number of stations on this high-speed corridor
7. Numbers game Rs. 60,000cr:
The approximate cost of the project
a. Rs. 100cr: The amount budgeted to initiate the
project Worth its length in gold
b. Rs. 15cr: The cost for laying a kilometre of tracks
for the current railway network
c. Rs. 125cr: The cost per kilometre for the high-speed
corridor
Show me the money : The project is being funded by
Japanese International Cooperation Agency (JICA),
which is also studying its technical and financial
aspects. Studies and surveys for the Mumbai-
Ahmedabad high-speed corridor are underway. We will
submit the report to the Indian Railways by June 2015,
said a JICA official.
Ticket cost : A ticket for the bullet train will cost close to
the price of a first-class AC coach in an ordinary train.
Competing with the fastest train, Shanghai : Maglev:
Shanghai Maglev tops the list with its maximum
operational speed of 430 kmph and average speed of
251 kmph. The Maglev started commercial operations
in April 2004.
Harmony CRH 380A : With a maximum operational
speed of 380 kmph, it is currently the second fastest
operational train in the world. The CRH 380A began
operations in October 2010 and runs from Beijing to
Shanghai.
AGV Italo: It is the first train in the Italian AGV series
and began services in April 2012. It has a maximum
operational speed of 360 kmph. The train broke the 574
kmph record in April 2007. It operates on the Napoli-
Roma-Firenze-Bologna-Milano corridor.
Heavy demand : 15,000: The number of passengers that
travel on the Mum-Ahd route every day, at present25:
No of trains on the Mum-Ahd route
High-tech : The coaches used in the train will be
aerodynamic and sourced from Linke Hofmann Busch
in Germany. While there is no clarity on the number of
coaches per rake, the figure currently doing the rounds
is 12, which will be able to carry 800 passengers.
Amenities :
1. The coaches will have wi-fi services for passengers
2. Passengers can book their food beforehand, through
email or SMS. The food will be provided by reputed
chains, which will have a tie-up with the railways.
3. The seating arrangement will be a chair- car setup
to accommodate more people.
Travellers give a thumbs-up : People who have travelled
on bullet trains before said its an experience of a
lifetime.
XII. Conclusion : A detailed comparison of World wide
Railways has been presented in this paper. India has
gained first position as far as travelled passengers per
km is concerned but is far behind in the field of latest
technology used by other countries.
Vision 2020 proposed by Ministry of Railways, India
focuses only on the adoption of technology and HST,
but we still lack behind in the Research and Development
in Infrastructure. Thus we are dealing with other
countries and importing their products. Vision 2020
has proposed a good methodology for implementing
and expanding the Railways Network.
Industrial sectors share as a percentage of GDP will
also grow in line with increasing global integration,
rising prosperity and sophistication of the Indian
industry. As per Government of Indias trade policy,
Indias share in international trade is targeted to rise
from the present level 1.5% to 5% by 2020. Quality of
infrastructure will be a key determinant in the
realization of these projections.
Therefore, investment on infrastructure is likely to
witness a major step-up. All these macro-economic
developments would have a positive impact on the
growth of travel and transport in general and railway
transport in particular.
XIII. Reference
1. High-Speed Rail:Helping Solve Next-
GenerationTransportation Challenges, 2011
Accenture-2011 report, www.accenture.com.
2. INDIAN RAILWAYS -VISION 2020, Government of India
Ministry of Railways (Railway Board) December,
2009.
3. Sunil Kumar Sharma1* and Anil Kumar2,ISSN 2278
0149 www.ijmerr.com Special Issue, Vol. 1, No. 1,
January 2014, National Conference on Recent
Advances in Mechanical, Engineering RAME 2013.

Sale of space or time for advertisements on
segments such as internet websites, out-of-home
media, on film screen in theatres, bill boards,
conveyances, buildings,cell phones, Automated
Teller Machines, tickets, commercial publications,
aerial advertising, etc., will not qualify under
negative list of services and hence, will be taxable.
Radio taxis or Radio cabs (whether AC or Non AC)
will be taxable and abatement as given to rent-a-
cab has been allowed to radio taxis.
Exemption extended to air-conditioned contract
carriages is being withdrawn and abatement of
60% allowed.
Exemption extended to services provided
by clinical research organizations on human
participants is being withdrawn.
Exemption in respect of services provided to
Government or local authority or governmental
authority, will be limited to services by way of
water supply, public health, sanitation
conservancy, solid waste management or slum
improvement and upgradation.
Only specified services received by educational
institutions to be exempt from tax.
Exemption from service tax is only available TO
HOTEL, inn, guest house, club or campsite and will
not include any commercial places.
approved by IRDA, where sum assured does not
exceed Rupees Fifty Thousand to be exempted from
service tax.
(by GTA) is being exempted.
warehousing, transport by vessel, rail or road
(GTA), of cotton, ginned or baled, is being exempted.
establishments are being exempted.
Specialized FINANCIAL services received by RBI
from global financial institutions in the course of
management of foreign exchange reserves, e.g.,
external asset management, custodial services,
securities lending services, etc. are being
exempted.
LIST OF CHANGES IN SERVICE
TAX-BUDGET 2014-15
conducted outside India are being exempted.
Retrospective exemption from service tax has been
granted to service provided by Employees State
Insurance Corporation (ESIC) during the period
prior to 01.07.2012
Reverse charge services point of taxation will be
the payment date or first day after three months from
the date of invoice, whichever is earlier (changes to
take place on invoices issued after 01.10.2014)
However, where invoice was issued prior to 01.10.2014,
but payment has not been made, in that case, point of
taxation shall be:
If payment is made within six months of the date
of invoice, the date of payment.
If payment is not made within six months, be
determined as per the provisions of rule 7.
Partial reverse charge renting of motor vehicle
service recipient and service provider to pay 50% each
(changes wef 01.10.2014)
Special Economic Zone (SEZ) simplification of the
procedures prescribed
In Rule 2A of the Service Tax Valuation Rules, service
portion in relation to works contract other than
execution of original works shall be 70%, thereby
increasing the service portion for repair, maintenance
or reconditioning or restoration or servicing from 60%
to 70%.
Changes in abatement Notification No. 26/2012-ST
Abatement in respect of transport of goods by vessel to
be increased from 50% to 60%.
Changes in Interest rate in late payment of service tax
Extent of delay Simple interest rate per annum
For the period up to six months 18%
For the period from six months and
upto one year 24%
For the period after one year 30%
Changes in Place of Provision of Service Rules
Provision for prescribing conditions for determination
of place of provision of repair services carried out on
temporarily imported goods is being omitted. Exclusion
does not apply to goods that arrive in the taxable
territory in the usual course of business and are subject
to repair while such goods remain in the taxable
territory.
The definition of intermediary is being amended to
include the intermediary of goods in its scope. An
intermediary of goods, such as a commission agent or
consignment agent shall be covered under rule 9(c) of
the Place of Supply of Services Rules.
Hiring of vessels or aircrafts, irrespective of whether
short term or long term, will be covered by the general
rule, which is place of location of the service receiver
[Amendment to rule 9(d)].
CENVAT CREDIT
Time limit for taking credit on input and input
services introduced - Credit shall now be taken
within six months from the date of the invoice or
challans or other documents specified (changes
wef 01.09.2014)
Service tax paid under full reverse charge The
condition to pay invoice value to the service
provider for availing credit of tax paid, to be
omitted
CENVAT credit reversed on account of non-receipt
of export proceeds within the specified period, to
be allowed as re-credit, if such export proceeds
are received within one year from the specified
period on the basis of documentary evidence of
receipt of payment.
Rent-a-cab operator and tour operator Service
tax paid by sub-contractor in the same line of
business would be allowed as eligible credit to
the main service provider to avoid double taxation,
subject to certain conditions (changes wef
01.10.2014)
GTA service Service receiver may avail abatement,
without having to obtain non-availment of CENVAT
Credit certificate from service provider.
GENERAL PROVISIONS
Tri bunal may refuse admission of appeal by
exercising its discretionary powers - limit raised
from the existing Rs. 50,000/- to Rs.2 lakh
Pre-Deposits in Appeal (First Stage) - Mandatory
fixed pre-deposit of 7.5% of the duty demanded or
penalty imposed or both for filing appeal before
the Commissioner (Appeals) & Tribunal It would
also mean that, no stay application would be filed
henceforth.
Pre-Deposits in Appeal (Second Stage) - Mandatory
fixed pre-deposit of 10% of the duty demanded or
the Tribunal It would also mean that, no stay
application would be filed henceforth.
Ceiling for mandatory pre-deposit fixed at Rs. 10
Crores
Source : Finance Bill 2014-15.

TAXATION PROPOSED CHANGES
UNION BUDGET 2014-15 - A NEW BEGINNING
AKSHAY GARG
Proposals
Economic Overview
Key Regulatory Proposals
Direct Tax Tax Rates
Personal Tax Proposals
Other Proposals
Indirect Tax - Rates
Indirect Tax Proposals
Customs Duty
Central Excise Duty
Service Tax
CENVAT Credit
General Provisions
Annexure 1
Annexure 2
Economic Overview
Budget aims to achieve 7-8 per cent economic
growth rate in next 3-4 years
Fiscal deficit target for this year retained at 4.1%
Key Regulatory Proposals
Assurance on no retrospective amendments to tax
structures, a big assurance to Non Resident
Investors.
Increased FDI rate to 49% in Insurance and defense
sectors.
Uniform KYC norms for entire FINANCIAL sector
One single DEMAT account for all financial
transactions
Corporate tax rates remains unchanged
Direct Taxes
Period of holding for Equity Mutual fund units has
increased from 12 months to 36 months for capital
gain purpose and Tax raised from 10% to 20%.
Introduced Range concept in Transfer Pricing
Tax Holiday for power sector companies extended
to 10 years
New definition for MSME to enhance the scope of
incentives
Income from portfolio INVESTMENT is considered
as capital gains
30% disallowance if no taxes are deducted for
payments made to residents
Investment allowance @ 15% to manufacturing
companies on investment in plant or machinery of
more than Rs.25 Crores from 1/04/2013 to 31/03/
2017
Foreign Dividend Tax to remain at 15%
Dividend income from shares/Mutual fund reduced
to 30% from 100% exemption
Personal Tax Proposals
Personal Income Tax exemption limit increased
from Rs. 2 lakhs to Rs. 2.5 lakhs for individuals
below 60 years
For senior citizens Basic exemption limit increased
from Rs.2.5 lakhs to Rs. 3 lakhs
Deduction for interest on housing loan for self
occupied property increased from Rs.1.5 lakhs to
Rs. 2 lakhs
Public provident Fund contribution limit enhanced
from Rs.1 lakhs to Rs.1.5 lakhs
Deductions under sec. 80C increased from Rs.1 lakh
to Rs. 1.5 lakhs
Other Proposals
From FY 2016-17 New Accounting standards made
compulsory, voluntary from FY 2015-16
Indirect Tax Rates
No change in the standard rate of Basic Customs
Duty (BCD), Additional Duty of Customs (CVD) and
Special Additional Duty of Customs (SAD).
No changes in the standard rate of Central Excise
Duty
No changes in Service tax rate
Changes in rates of effective customs duty are
attached as Annexure 1.
Changes in rates of effective excise duty are
attached as Annexure 2.
Indirect Tax Proposals
CUSTOMS DUTY
Customs duties on mineral oils including petroleum
and natural gas extracted or produced in the
continental shelf of India or the exclusive economic
zone of India shall not be recovered for the period
prior to 07.02.2002. However, if paid earlier, no
refund would be granted.
Bill of Entry can be filed prior to the filing of Import
Report on import through land route.
In case of import by land (vehicle), if bill of entry is
filed before arrival of vehicle then rate of duty will
be date of arrival
Application to Settlement Commission can be
made in case of import through post and courier.
Commissioner (Appeal) to take into consideration
that a particular order being cited as a precedent
decision on the issue has not been appealed against
for reasons of low amount.
Safeguard Duty provision created in Customs Tariff
Act, 1975 to provide for levy of duty on inputs/ raw
materials imported by Export Oriented Units (EOU)
and cleared into Domestic Tariff Area (DTA) as such
or used in manufacture of final products and cleared
into DTA.
Baggage Rules
free baggage allowance limit raised from Rs. 35,000/
- to 45,000/-
duty free allowance of cigarettes reduced from 200
to 100
duty free allowance of cigars reduced from 50 to
25
duty free allowance of tobacco reduced from 250
gms to 125 gms
Duty Free entitlement for importing certain goods
used in the manufacture of readymade garment for
export is increased from 3% to 5%
Plant and equipment imported prior to 2008 for
project finance by UN or international organization
are now allowed to transfer/sold/re-export subject
to certain conditions.
CENTRAL EXCISE DUTY
Valuation rules amended to overcome SC decision
in case of FIAT
Mandatory electronic payment of excise duty for
all assesses
Scope of Settlement Commission enlarged by making
provision for allowing applications of settlement
for non-filing of returns after recording reasons
Resident Private Limited Company would be
eligible for determination by Advance Ruling.
The Third Schedule to the Central Excise Act,
1944 has been amended to include other parts
of chapter heading 8421 (filtering or purifying
machinery).
1% penalty in case of default of payment beyond 30
days. CENVAT benefit to continue.
SERVICE TAX
Exemptions
Exemption to sale of space or time for
advertisements other than print media withdrawn.
Radio taxis or radio cabs (whether AC or Non AC)
will be taxable and abatement @ 60% allowed.
Exemption extended to air-conditioned contract
carriages withdrawn and abatement of 60%
allowed.
Exemption extended to services provided by clinical
research organizations on human participants
withdrawn.
Scope of exemption for services provided to
Government or local authority or governmental
authority curtailed.
Only specified services received by educational
institutions exempted from tax.
Exemption from service tax is only available TO
HOTEL, inn, guest house, club or campsite and will
not include any commercial places.
approved by IRDA, where sum assured does not
exceed Rupees Fifty Thousand exempted from
service tax.
(by GTA) exempted.
warehousing, transport by vessel, rail or road (GTA),
of cotton, ginned or baled, exempted.
establishments exempted.
Services received by RBI from outside India in
relation to management of foreign exchange
reserves.
conducted outside India exempted.
Retrospective exemption from service tax has been
granted to service provided by Employees State
Insurance Corporation (ESIC) during the period
prior to 01.07.2012.
Reverse charge services point of taxation will be
the payment date or first day after three months
from the date of invoice, whichever is earlier
(changes to take place on invoices issued after
01.10.2014).However, where invoice was issued
prior to 01.10.2014, but payment has not been
made, in that case, point of taxation shall be:
If payment is made within six months of the date of
invoice, the date of payment.
If payment is not made within six months, be
determined as per the provisions of rule 7.
Partial reverse charge renting of motor vehicle
service recipient and service provider to pay 50%
each (changes wef 01.10.2014)
Special Economic Zone (SEZ) simplification of the
procedures prescribed
Works contract services - Service portion in repair,
maintenance or reconditioning or restoration or
servicing activities increased from 60% to 70%.
Abatement Abatement in respect of transport of
goods by vessel to be increased from 50% to 60%.
Changes in Interest rate on late payment of
Service tax
Extent of delay Simple interest
rate per annum
For the period up to six months 18%
For the period from six months
and upto one year 24%
For the period after one year 30%
Changes in Place of Provision of Service Rules
Provision for prescribing conditions for
determination of place of provision of repair
services carried out on temporarily imported goods
is being omitted.
The definition of intermediary is being amended to
include the intermediary of goods in its scope.
Hiring of vessels or aircrafts, irrespective of
whether short term or long term, will be covered by
the general rule, which is place of location of the
service receiver.
CENVAT CREDIT
Credit can now be taken within six months from the
date of the invoice or challans or other documents
specified (changes wef 01.09.2014)
CENVAT credit available when Service tax paid under
full reverse charge without waiting for the payment
of invoice value to the service provider
CENVAT credit reversed on account of non-receipt
of export proceeds within the specified period, to
be allowed as re-credit, if export proceeds are
received within one year from the specified period
on the basis of documentary evidence of receipt of
payment.
Rent-a-cab operator and tour operator Service
tax paid by sub-contractor in the same line of
business would be allowed as eligible credit to the
main service provider to avoid double taxation,
subject to certain conditions (changes wef
01.10.2014)
GTA service Service receiver may avail abatement,
without having to obtain non-availment of CENVAT
Credit certificate from service provider.
GENERAL PROVISIONS (As applicable to Customs, Central
Excise and Service Tax)
Pre-Deposits in Appeal (First Stage) - Mandatory
fixed pre-deposit of 7.5% of the duty demanded or
the Commissioner (Appeals) and Tribunal It would
also mean that, no stay application would be filed
henceforth.
Pre-Deposits in Appeal (Second Stage) - Mandatory
fixed pre-deposit of 10% of the duty demanded or
the Tribunal It would also mean that, no stay
application would be filed henceforth.
Ceiling for mandatory pre-deposit fixed at Rs.10
Crores
Discretionary power of Tribunal to refuse the
admission of appeal is increased from Rs. 50,000
to Rs. 200,000.
Annexure 1 Changes in the effective rates of Customs Duties
Products Duty Type Existing Effective Proposed
Rate Rate
Fatty Acids used in manufacturing of soaps and
oelochemicals as actual user BCD 7.5% Nil
Crude Palm Sterian BCD 7.5% Nil
RBD Palm Sterian BCD 7.5% Nil
Other Palm Sterian BCD 7.5% Nil
Specified Industrial grade crude oils BCD 7.5% Nil
Denatured ethyl Alcohol BCD 7.5% 5%
De-oiled soya extract, BCD 7.5% Exempt
Oil cake/ Oil Cake meal BCD 7.5% Exempt
Sunflower Oil cake/ Oil Cake meal BCD 7.5% Exempt
Canola Oil cake/ Oil Cake meal BCD 7.5% Exempt
Mustard or rice Oil cake/ Oil Cake meal BCD 7.5% Exempt
Cigarettes of length exceeding 75 mm 12% or 1738 per
thousand,
whichever is
higher
Steel grade dolomite and steel grade limestone BCD 5% 2.5%
Bauxite Export Duty 10% 20%
Non-agglomerated coal BCD 2.5%
Non-agglomerated coal CVD 2%
Coaking Coal BCD Nil 2.5%
Coaking Coal CVD 6% 2%
Steam coal and bituminous coal BCD 2% 2.5%
Anthracite coal and other coal BCD 5% 2.5%
Metallurgical coke BCD Nil 2.5%
Crude naphthalene BCD 10% 5%
Reformate and other goods under
sub-heading 2707 50 00 BCD 10% 2.5%
Coal tar pitch BCD 10% 5%
Re-gasified LNG for supply to Pakistan BCD and CVD Exempt
Liquefied Propane and Butane mixture,
Liquefied Propane, Liquefied Butane and
Liquefied Petroleum Gas (LPG) imported by
IOCL, HPCL, BPCL for supply to NDEC All Customs duty Exempt
Propane BCD 5% 2.5%
Ethane and other goods under sub heading
2901 10 00, ethylene, propylene and butadiene BCD 5% 2.5%
Ortho-xyleneBCD5%2.5%Methyl alcohol BCD 7.5% 5%
Raw materials for manufacture of spandex yarn viz.
Diphenyl methane 4,4di-isocyanate (MDI) and
Polytetramethylene ether glycol (PT MEG) BCD 5% Nil
Raw materials used in the manufacture of
solar backsheet and EVA sheet used in manufacture
of solar PV cells or modules as per actual
user condition BCD Exempt
Security fibre, security threads and M-feature
imported by Bank Note Paper Mill India
Private Limited All Customs duty Exempt
Raw materials required for manufacture of
security threads and security fiber BCD and CVD Nil
Polystyrene (other than moulding powder) BCD 1.15% 7.5%
Wire rolls required by handicraft exporters
(inclusion in list of specified goods) Custom Duty Exempt
Non-fusible embroidery motifs or prints imported
by manufacturer of garments for export
(inclusion in list of specified goods) Custom Duty Exempt
Specified goods imported for use in the manufacture
of textile garments for export BCD and CVD Exempt
Pre-forms of precious and semi-precious stones BCD Exempt
Half-cut or broken diamonds BCD Nil 2.5%
Cut and polished diamonds including lab-grown
diamonds and colored gemstones BCD 2% 2.5%
Stainless steel flat products (CTH 7219 and 7220) BCD 5% 7.5%
Forged steel rings used in the manufacture of
bearings of wind operated electricity generators BCD 10% 5%
Flat copper wire used in the manufacture of PV
ribbons (tinned copper interconnect) for solar
PV cells or modules BCD Exempt
Machinery, equipments, etc. required for initial
setting up of compressed biogas plant (Bio-CNG). BCD 5%
Machinery, equipments, etc. required for initial
setting up of solar energy production projects BCD and CVD 5%
Parts and raw materials used in the manufacture
of wind operated electricity generators SAD Exempt
Electrolysers and their parts/spares required by
caustic soda or caustic potash units and membranes BCD 5% 2.5%
Other parts (other than membranes and parts thereof) BCD 7.5% 2.5%
LCD and LED TV panels (below 19 inches) BCD 10% Nil
Color picture tubes used in manufacturing of
Cathod Ray TVs BCD 10% Nil
Specified parts of LCD and LED panels for TVs BCD Exempt
E-Book readers BCD 7.5% Nil
Battery waste and battery scrap BCD 10% 5%
Specified telecommunication products not covered
under the ITA (Information Technology Agreement) BCD Nil 10%
Inputs/Components of Personal Computers SAD Exempt
Certain Electronic goods Cess and SHEC Exemption
Leviable on CVD Withdrawn
Specified Inputs (PVC sheet and Ribbon) used in
manufacturing of smart cards SAD Exempt
Ships imported for breaking up BCD 5% 2.5%
Portable X-ray machine / system CVD Exemption
Withdrawn
Specified HIV/AIDS drugs and diagnostic kits
imported under National AIDS Control Programme
(NACP) funded by the Global Fund to Fight AIDS,
TB and Malaria (GFATM) Custom Duty Exempt
Goods imported by National Technical Research
Organization (NTRO) BCD Exempt
Annexure 2 Changes in the effective rates of Central Excise Duties
Products Duty Type Existing Effective Proposed
Rate Rate
Waters including aerated waters, containing
added sugar Add. Duty 12% 17%
Cigars, cheroots, cigarollos and cigarattes, of
tobacco or of tobaco substitutes
Description BED Rs. per 1000 Rs. per 1000
(length in mm) sticks sticks
Non filter not exceeding 65 669 1150
Non-filter exceeding 65 but not exceeding 70 2027 2250
Filter not exceeding 65 669 1150
Filter exceeding 65 but not exceeding 70 1409 1650
Filter exceeding 70 but not exceeding 75 2027 2250
Filter exceeding 75 but not exceeding 85 2725 Tariff Item omitted
Other 3290 3290
Pan Masala BED 12% 16%
Unmanufactured Tobacco BED 50% 55%
Jarda Scented Tobacco, Guthka and Chewing tobacco BED 60% 70%
Branded Petrol BED 7.5 per litre 2.35 per litre
Goods for use in manufacture of EVA sheets or
backsheet for manufacture of solar photovoltaic
cells or modules namely EVA resin, EVA
masterbatch, PEL film, PVF, PVD adhesive resin
and hardner BED 12% Nil
Matches, in or in relation to the manufacture of
which, any or all processes of pasting of labels
on match boxes, venners or cardboards, and
packaging are carried out with aid of power BED 12% 6%
DDT manufactured by Hindustan Insecticides
Limited for supply to the NVBDCP BED 12% Nil
Plastic material reprocessed in India out by the
scrap or the goods falling within Chapters
39,54,56,59,64,84,85,86,87,90,91,92,93,94,95
and 96 by Export Oriented Unit . BED 12% Nil
EVA sheets or backsheet for use in the manufacture
of solar photovoltaic cells or modules BED 12% Nil
Gloves specially designed for use in sports
( no CENVAT credit of input or input services allowed) BED 12% 2%
Gloves specially designed for use in sports
(CENVAT credit allowed) BED 12% 6%
Polyster staple fibre and polyster fillamanet yarn
manufactured from plastic scrap or plastic waste
including waste BED 12% 2%
Footwear of retail price exceeding 500 per pair
but not exceeding 1000 BED 12% 6%
Solar tempered glass for use in the manufacture of
solar photovoltaic cells or modules, solar power
generating equipments or systems and flat plate
solar collectors BED 12% Nil
Forged steel rings for manufacture of special
bearings for use in wind operated electricity
generators BED 12% Nil
Flat copper wire used in the manufacture of
PV ribbons (tinned copper interconnect) for use
in the manufacture of solar cells or modules BED 12% Nil
Winding wires of copper BED 10% 12%
The following goods used in the processing and
packaging of agricultural, apiary, horticulture,
diary, aquatic and marine produce and meat,
namely:(i) machiney for cleaning or drying
bottles or other containers;(ii) machinery for
filling, closing, sealing or labelling bottles, cans,
boxes , bags or other containers;(iii) other packing or
wrapping machinery;(iv) parts of machinery at
(i) to (iii) BED 10% 6%
Presses, crushers and similar machinery used
in the manufacture of wine, cider, fruit juices or
similar beveragesBED 6%(i) machinery for the
preparation of meat or poultry;(ii) machinery for
preparation of fruits, nuts or vegetables;(iii)parts
of machinery at (i) or (ii) BED 10% 6%
Sewing machines with attachable electric motors BED 2% 12%
LED driver and MCPCB for use in the manufacture of
LED lights and fixtures or LED lamps BED 12%/10% 6%
Parts consumed within the factory of production
for the manufacture of non-conventional energy
devices, and when such use in elsewhere than in
the factory of production BED Exempt
Smart Cards BED 2%/6% 12%
RO membrane element used in household type filters BED 12%/10% 6%
Reverse osmosis (RO) membrane element for water
filtration or purification equipment (other than
household type filter) BED ExemptS
pecified HIV/AIDS drugs and diagnostic kits
supplied under National AIDS Control Programme
(NACP) funded by the Global Fund to Fight AIDS,
TB and Malaria (GFATM) BED Exempt
Goods supplied to National Technical Research
Organisation (NTRO). BED Exempt
Intermediate goods manufactured and consumed
captively for further manufacture of matches BED Exempt
Goods cleared by an EOU into the DTAEC and SHEC
(Customs Component) Exempt
Excise duty on Polyester Staple Fiber (PSF) and
Polyester Filament Yarn (PFY) ( including intermediate
products manufactured in the production of PSF and
PFY) manufactured from plastic waste or scrap
now being exempted retrospectively w.e.f 29.06.2010 BED Exempt
Un-branded articles of precious metals are being
exempted from excise duty retrospectively for the
period 01.03.2011 to 16.03.2012 BED Exempt
Full exemption from excise duty is being granted in
respect of machinery, equipments, etc. required for
initial setting up of solar energy production projects BED Exempt
Full exemption from excise duty is being provided
on machinery, equipments, etc. required for initial
setting up of compressed biogas plant (Bio-CNG). BED Exempt
Excise duty is being exempted on parts of tractors
removed from one or more factories of a tractor
manufacturer to another factory of the same
manufacturer for manufacture of tractors BED Exempt
Source : Tax Management in India.com

A
sserting that lack of infrastructure will not be
allowed to hit growth, government today
announced a slew of steps to fast-track projects
mostly in public-private-partnerships, which finds
renewed focus in Finance Minister Arun Jaitleys maiden
Budget. The country is in no mood to suffer. Lack of
infrastructure and apathetic governance. The task
before me today is very challenging because we need to
revive growth, particularly in manufacturing and
infrastructure to raise adequate resources for our
developmental needs, Jaitley said.
Tabling his maiden Budget in Parliament, he said, An
institution to provide support to mainstreaming PPPs
(public-private-partnerships) called 3P India will be
set up with a corpus of Rs 500 crores. He said India
has emerged as the largest PPP MARKET in the world
with over 900 projects in various stages of development.
PPPs have delivered some of the iconic infrastructure
like airports, ports and highways which are seen as
models for development globally, he added.
But we have also seen the weaknesses of PPP framework,
the rigidities in contractual arrangements, the need to
develop more nuanced and sophisticated models of
contracting and develop quick dispute redressal
mechanism, he said.
The Finance Ministers concerns come at a time when
delays in 110 central infra projects due to regulatory
hurdle issues have resulted in over Rs 1.57 lakh crore
cost overruns. He said his government was committed
to improving infrastructure in all sectors including
roads, port, airports, railways, urban, rural and
industrial infrastructure besides ensuring adequate
flow of FUNDS nd financing of projects. As an
innovation, a modified Real Estate INVESTMENT Trusts
type structure for infrastructure projects is also being
announced as Infrastructure INVESTMENT Trusts
(InvITs), which would have a similar tax efficient pass
through status, for PPP and other infrastructure
projects, he said.
These structures would reduce the pressure on
the banking system while also making available fresh
equity, he said adding, I am confident these two
instruments would attract long term finance from
foreign and domestic sources including the NRIs. Also,
he announced enhancing present corpus of pooled
municipal debt obligation facility with participation of
several banks to finance infra projects in urban areas
on shared risk basis to Rs 50,000 crore.
Present corpus of this facility is Rs 5,000 crores. This
Government has a major focus of providing good
infrastructure, including public transport, solidwaste
disposal, sewerage treatment and drinking water in the
urban areas. In keeping with the Prime Ministers vision
for urban areas it is proposed to enlarge it to Rs 50,000
Crores with extension of the facility by five years to
March 31, 2019, he said. Also, Jaitley announced the
government will raise the corpus of Rural
Infrastructure Debt FUND by an additional Rs 5,000
BUDGET 2014-15: PPP IS THE NEW MANTRA FOR
INFRASTRUCTURE
crores from the target given in the Interim Budget to Rs
25,000 crores in the current FINANCIAL year to
facilitate faster growth of rural infrastructure.
I propose an allocation of Rs 5,000 crore for
the FUND for the year 2014-15 for Warehousing
Infrastructure Fund, Jaitely and also announced setting
up of Long Term Rural Credit Fund in NABARD for the
purpose of providing refinance support to Cooperative
Banks and Regional Rural Banks with an initial corpus
of Rs 5,000 crore.
On strengthening road infrastructure, he said,The sector
again needs huge amount of INVESTMENT along with
de-bottlenecking from maze of clearances, an
announced Rs 37,880 crore investment in National
Highways Authority of India and State Roads. He also
announced governments intention to start work on
select expressways in parallel to the development of
the Industrial Corridors and for project preparation
NHAI will set aside Rs 500 crore.
Aiming to replicate Gujarats model of 24x7 power
supply by segregating infrastructure for agriculture and
non-agriculture consumers the government announced
Rs 500 crore support for the proposed scheme. To
augment shipping infrastructure, the government
announced to award sixteen new port projects this year
besides Rs 11,635 crore will be allocated for the
development of Outer Harbour Project in Tuticorin for
phase I. Also, SEZs will also be developed in Kandla and
JNPT.
To strengthen inland infra, a project on the river Ganga
called Jal Marg Vikas (National Waterways-I) will be
developed between Allahabad and Haldia to cover a
distance of 1620 kms, which will enable commercial
navigation of at least 1500 tonne vessels. The project
will be completed over a period of six years at an
estimated cost of Rs 4,200 crore
Noting that despite increase in air connectivity air
travel is still out of reach of a large number of
aspirational Indians, the government said a scheme for
development of new airports in Tier I and Tier II will be
launched for implementation through Airport Authority
of India or PPPs. For Coal, it said the present standoff
would be resolved and extensive measures to augment
domestic output and strict mechanism to control the
fuel quality will be put in place.
For mining, Jaitely said, It is my Governments intention
to encourage INVESTMENT in mining sector and promote
sustainable mining practices to adequately meet
requirements of industry without sacrificing
environmental concerns. The current impasse in mining
sector, including, iron ore mining, will be resolved
expeditiously. In a major relief to domestic stainless
steel industry, reeling under severe under-utilisation of
capacity, government increased import duty on flat-
rolled products from 5 per cent to 7.5 per cent.
Source : Outlook.

BRANCH NEWS
AURANGABAD BRANCH
AHMEDABAD BRANCH
CHANDIGARH BRANCH
MUMBAI BRANCH
PUNE BRANCH
THIRUVANANTHAPURAM BRANCH
AURANGABAD BRANCH
IIMM Aurangabad have conducted evening training
program on, Approach to optimize supply chain cost
on Thursday, 19 th June 2014 at Hotel Atithi, Aurangabad.
Faculty was Mr. Pinak Kulkarni who has extensive and
global experience in Manufacturing Industry, Supply
Chain and Technology, Consulting and Training and is
founder of M/s Spark , Pune.
Approach to optimize Supply Chain Cost Program - At
the Time of Lamp Lighting Mr. Pinak Kulkarni. From
Right - Mr. Sudhir Patil, Mr. Santush Pande EC Members,
Mr. R.D. Jaulkar - Treasurer, Mr. Jitesh Gupta - Chairman,
Mr. Narendra Joshi - Vice Chairman, Mr. Anant
Kembhavi - Past Chairman, Pune Branch, Mr. P.P.Reddy
- NC Member, Mr. Rajesh Mishra, Mr. K. Srihari -
Executive Committee Members.
He presented the factors which has more impact on
supply chain cost and techniques of optimizing the same
and made session very interactive. Program Chief Guest
was Mr. Anant Kembahvi, Pune, past V.P. West of IIMM,
who also shared importance of this cost optimization.
Chairmen Mr. Jitesh Gupta has briefed about the branch
activities and focus areas of IIMM. Proceedings have
been done by Mr. K. Srihari. Participation was around
60 ; who attended this program. The participants were
from various industries like Endurance Group, Morgan
Advance Materials, Aurangabad Electricals, Greaves
Cotton, Skoda Auto, International Conveyors etc.
Alongwith Chiarmen , Vice-Chairman Dr. Narendra Joshi,
Mr. P.P. Reddy , Mr. S.J. Sanghai , Mr. Sushant Patare, Mr.
Santosh Pande, Mr. K. Srihari, Mr. R D Jaulkar, Mr. Rajesh
Mishra, Mr Sudhir Patil took efforts to make this event
successful.
Mr. Pinak Kulkarni dailuge with audience on Topic
Approach to Optimize Supply Chain Cost
Mr. P.P.Reddy, National Council Member was also
felicitated for being inducted as a Board of Studies of
IIMM. This is first time in the history of Aurangabad
and is very prestigious for IIMM Aurangabad. Life
membership kit for newly inducted life member was
awarded during the program. Program was concluded
by national Anthem.
--------------------------------------------------------------------------
AHMEDABAD BRANCH
Report on 5
th
July 2014 : Ahmedabad Branch organized
a talk on Lean Store & Storage by Mr. Jayanth Murthy
Founder Partner & Director Kaizen Institute an
International Expertise on Materials Management in
lecture hall of Ahmedabad Management Association
on 5
th
of July 2014.
More than 50 senior Professionals from industries in
and around Ahmedabad participated in the programme.
Branch Chairman Mr. H.K.Gupta welcoming Audience.
Members enjoying the talk.
Mr Pramod Singh a Senior Member presenting
Memento to Mr. Pavitra Patro.
Mr. D K Goswamy Convener Programme Committee
Introducing Speaker and the Subject.
Mr. Gupta Branch Chairman giving Vote of Thanks.
Branch Chairman Mr. H K Gupta mentioned in his
inaugural remarks that todays Lecture is in Backdrop
of successful lecture on Supply Chain Management for
Global Competitiveness by Prof (Dr) Jitesh Thakkar from
IIT Kharagpur.
Todays lecture is part of our Monthly knowledge
augmenting series.
He mentioned that Indian Institute of Materials
Management is doing revolutionary work in field of
Materials Management and is publishing its Members
Directory which besides Data of Members, Invited
Articles will have Messages from Eminent Personalities.
Print order of this directory will be 1000 and it will be
widely distributed to key Personnel in Industries around
the country. We have already sent communication to
all our members and we again invite all of you to make
your own contribution in any form i.e. Articles,
Advertisements in this noble Social Professional Project.
Mr. Harshal Sarda Director, Synergy Agrotech and Life
Member presenting a memento to Speaker.
Mr. Jayant Murthy Speaker of the evening
stressing a point.
Ms Neetusingh Rajput Member seeking clarification on
a point.
He informed audience that IIMM has 66 branches spread
across the country with 11000 Active members.
We in Ahmedabad Branch contribute 300 members and
are striving to take this strength to 350 by 31
st
July 2014
which will facilitate us in inviting two more members
to our Executive Committee. Addition of two more EC
Members will fortify it further and make it broad based.
Those of you, who are still not member, may kindly take
Membership and Directory form from Registration Desk
and acquire Membership quickly so that your details
become part of this Important Materials Management
Publication. He then read out following Mission
Statement of institution.
To promote professional excellence in materials
management towards national Prosperity through
sustainable development.
Mr. Sudhir Shah Distinguished Member & Membership
Coordinator appraised members of his grand strategy
to take membership to 350 by 31
st
July 2014.
Mr. Anil Pati l convener of Education Committee
appraised audience of various courses being conducted
by IIMM.
Mr. D K Goswamy Programme coordinator introduced
the speaker and the subject.
Abstracts of Mr. Goswamys submission are as follows.
28
th
April, 2014 Mr. Murthy made a presentation for
our members on Inventories Hides all It was one of
the best and memorable talkWe would get the same
magic spells today also.
Mr. Murthy holds a degree in Industrial Engineering and
is recipient of the Japanese AOTS scholarship Osaka
and is a Fulbright Fellow from Carnegie Mellon
University, USA
Presently he is focused on growing and managing the
Kaizen Institutes operations across India, Africa and
Middle East.
He has been instrumental in the design and development
of a specific model to drive Kaizen within the Public
sector and Governments and has been actively engaged
with the Government of Gujarat (India), The African
Union, Government of UAE, Government of Tanzania,
Botswana and Mauritius.
He has presented / coached / consulted in the Kaizen /
Lean / Operational Excellence domain across 34
countries covering America, Europe, Asia, Africa, Russia
and CIS and the Middle East.
He is the founding partner and director of the Kaizen
Institute (Africa business unit) and partner and director
of the India Business unit.
Today he would talk on What is Lean Store & Storage?...
As we need Gym to remain lean and fit we need experts
like Mr. Murthy to keep our organizations lean and fit
Inventories means expenses in the form of Interest on
Working Capital, Warehousing rentals & salaries,
Insurance, goods becoming obsolete
The paradox is that high inventories co-exist with two
universal problems overstocking & stock-outs!
Let us learn from Mr. Murthy as to How the Lean ensures
improved cash-flow & profits without any adverse
impact on customer service.
Mr. Jayant Murthy speaker of the evening made a very
enlighting talk. Audience was spell bound by clarity of
his thoughts and the lively question answer handled by
him and Branch Chairman.
Synopsis of his talk is as follows.
Materials Velocity
Little law- Time has a relation with inventory
Reduce time of materials flow for reducing
inventory.
Job of materials man is to create flow.
Lean Warehouse
No unnecessary Transportations
No Waiting
No Process Inventory
Golden Rule of Lean Ware House
Search Free
Count Free
Air Free
Bend Free
Climb Free
Dust Free
First in First Out
Rodent Free (Bird Free)
Moisture Free
Lean Storage
Size
Frequency
Passage Way
Lean Process in Ware House
Mr. Pramod Kumar Singh a Senior Member of Institute
felicitated and presented a memento on behalf of
institute to Mr. Pavitra Patro EC Member for his
Successful Completion of India Nano Golden
Quadrilateral Tour in June 2014.
Mr. Patro is one of our very decorated member who has
successfully climbed various mountains in world
besides feats where endurance of normal human beings
will just fail. IIMM is proud of Pavitras association.
Mr. Harshal Sarda Director Synergy Agrotech Pvt. Ltd.
and Life Member of the Institute presented a memento
on behalf of the institute to the learned speaker.
Mr. H K Gupta summarized the evening and thanked
members and speaker profusely in his wrapping up
remarks.
Members dispersed with fond hope that they will have
many more opportunity in near future of exposure to
another important professional personality.
--------------------------------------------------------------------------
CHANDIGARH BRANCH
Indian Institute of Materials Management Chandigarh
Branch organized a programme at Hotel Chandigarh
Beckons, Sector-42, Chandigarh. Mr. Dharm Bir Singh
Longia Branch Chairman welcome the members &
apprised them about branch activities. Mr. O.P. Longia
Sr. Vice President highlighted the main activities at NHQ
Level.
Mr. S.K. Sharma Former National President motivated
the members to come forward & extend full Co-
operation for the success of Prestigious national event
NATCOM 2014 to be held at Chandigarh on 28th &
29th November, 2014 at Hotel Shivalik View, Sector 17,
Chandigarh. Afterwards a talk was organized on Mind
Your Mind An effort towards understanding the
working of the human mind. The talk was delivered by
Mr. Om Prakash, a motivational speaker and also an
Executive member of the Chandigarh Branch.
The subject had aroused much interest among the
members as is seen in a new light by modern day high
life executives. The input gave a peep into the working
of our mind at the conscious, subconscious and other
levels. The subject was aptly dealt with as a Root Cause
Analysis and Remedial Approach to Relationship
Building and De-Stressing. The audience was highly
receptive and they expressed that the understanding
thus obtained shall help them in organizing their lives
better and obtaining better results in professional as
well as personal lives. Mr. V.S. Maniam Vice-Chairman
of the Chandigarh Branch purposed the vote of thanks
& invited members for dinner. About 40 members
attended the function.
--------------------------------------------------------------------------
MUMBAI BRANCH
Forthcoming Events : The following events are planned
during the coming months;
CPO Roundtable and Branch Awards Function : CPO
Roundtable is an initiative of the CPO Forum of IIMM
Mumbai Branch. The convener is Mr. B V Iyer, past
national president of IIMM and past chairman of
Mumbai Branch and present NC Member is the convener
of CPO Forum. The conference is normally attended by
top CPOs from various organisations. The deliberations
are generally of a high level. This will be the fifth edition
of CPO Roundtable. A Panel discussion will also be held
on the theme of the conference.
Mumbai Branch Awards Function wherein Mumbai
Branch honors Achievers both Individual and
Corporate will also be held along with the CPO
Roundtable,
Both these events will be held on 25
th
July 2014 at Hotel
Leela, Mumbai
MATQUIZ 2014 : The national semi-finals and final of
Matquiz 2014 will be held on 26
th
July, 2014, at Hotel
Residence, Powai, Mumbai. More than 20 teams from
various branches are expected to participate in the
semi-final from which the qualifying teams will compete
in the final
MDP on Supply Chain Risk Management in Turbulent
Times : This program is being held on 9
th
August 2014
at Hotel Sahara, Mumbai. All arrangements for
conducting the program are in progress
AGM 2014 : This will be held 9
th
August, 2014, at Hotel
Avion, Mumbai. Notices have already been issued to
members along with the meeting agenda
In-house Training Program at Nuclear Power Corporation
of India Ltd (NPCIL) : A two-day in-house training
program will be held at NPCIL on 17
th
& 18
th
July, 2014,
at their Learning Center. The topic for the program is
Strategic Purchase Management/ Recent Trends in
Purchasing the program is meant for senior level
management personnel.
--------------------------------------------------------------------------
PUNE BRANCH
Value Engineering Work Shop held on 28th June 2014 :
IIMM Pune Branch organized a full day Workshop on
Effective Materials Management using Value Analysis
& Value Engineering - A Dynamic Tool for Cost Reduction
at Deccan Gymkhana Club, Pune.
Supply Chain Management is a crucial function which
is interface for realizing the product through involving
cost and time. Any attempt to improve Supply chain
would result in Value Improvement of throughput time
in an organization.
For this to happen, the attitude getting more at less
cost without sacrificing Quality for Value Improvement
needs to be developed in working professionals. Use of
their individual and collective potential for creativity
& Innovation are integral components of Value
Management. A powerful technique and a proven
philosophy to address this immediate and long term
concern is the methodology of VALUE ANALYSIS & VALUE
ENGINEERING, undoubtedly an effective tool/technique
in cost improvement of products, processes and
services, which has stood the test of time for over six
decades.
Mr. Nitin S. Gawhane, Head Learning & Development
of Thyssenkrupp Industries India Pvt. Ltd., was the
learned faculty for this programme. He possess M.Tech
with Distinction in Industrial Engineering, MBA in
Operations and Marketing Management, DBA in
Marketing Mgt - Services Management & CRM of AIMA
and holds ISTD Diploma in Training & Development.
He has a rich blend of 27 years work experience in
Academics as well Industry and has guided over 30
projects and executed practical case/problems in
consulting in manufacturing companies and
organizations, mainly in the area of VA,VE / Cost
management and Methods improvement, has given
substantial cost savings to them.
This programme was inaugurated by Mr.Mohan Nair
Chairman, IIMM Pune. Mr.Terrence Fernandes Vice
Chairman introduced the Expert faculty.
The programme had a record attendance of 55
participants from various reputed organizations to
name a few, Kirloskar Group, Behr-Hella Thermocontrol,
Carraro India, KSB Pumps Ltd., John Deere, Force Motors,
Reliance Industries Ltd., Flash Point Equipments, Active
Chromewell Exhaust Pvt. Ltd., Serum Institute, TVS,
Talbros Automotive, Tata Autocomp Systems, Venkys
(India) Ltd., and so on.
The Branch Executive Committee demonstrated the
potential for IIMM programmes, with the help of
Mr.S.K.Murthy and his team Mr.M.G.Ayyer and Mr.Nitin
W. Participants achieved an Outcome Based Learning
to :
* Understand philosophy and methodology of Value
Analysis and Value Engineering
* Use the technique for optimization of resources
using creativity and innovation.
The workshop was delivered well using live case studies
and success stories. Participation Certificates were
distributed in the hands of Mr.Mohan Nair Chairman,
Mr.Nitin Gawhane The Faculty, Mr.TerrenceFernandes
Vice Chairman, Mr.Sujit Edlabadkar Hon. Secretary,
Mr.N.P.Wagh, E.C. Member and Mr.S.K.Murthy, Director -
Education & Programmes. Mr.Sujit Edlabadkar, Hon.
Secretary thanked all the participants and the Faculty,
who made this programme a great success!
Visit to Kirloskar Oil Engines Ltd, Kolhapur : Mr. Mohan
Nair Chairman, Mr. Terrence Fernandes - Vice-
Chairman, Mr. Sujit Edlabadkar - Hon. Secretary along
with four E.C. Members & two office bearers visited
Kirloskar Oil Engines Ltd (KOEL), Kagal Plant, Kolhapur
on 19th July 2014 which was the part of the visit
Programme organized by IIMM Pune Branch to study
the various new concepts implemented by KOEL. The
plant is one of the best in our country. It was a great
experience for all the members. No wonder Mr.
Deshpande won the BEST CEO award during IIMM Vision
2015 Programme
Kolhapur Chapter Visit : IIMM Pune Branch Members
also visited Kolhapur Chapter members who are inactive
for last few years. Mr. Terrence Fernandes - Vice-
Chairman took the initiative and organized few members
with the help of Mr. Sohan Shirgaokar, Joint Managing
Director of S. B. Reshellers Pvt. Ltd. The meeting was
arranged for 15 prospective members.
Mr. Sohan Shirgaokar was chosen as the Convener of
the Chapter unanimously. Reactivation of the Chapter
will be in the month of August 2014. We thank Kirloskar
Oil Engines Ltd. and S. B. Reshellers Pvt.
THIRUVANANTHAPURAM BRANCH
As per the directives given by the National Headquarters,
IIMM and as a policy of our Institute,
Thiruvananthapuram Branch stood in front for
conducting programmes jointly with other professional
Institutions in and around Thiruvananthapuram. This
time a programme was conducted for felicitating
Padmabhooshan Dr. K Radhakrishnan, Chairman, ISRO/
Secretary, Department of Space. Padmasree MC Dathan,
Director, Liquid Propulsion Systems Centre; Dr. K Sivan,
Project Director, GSLV and Shri P Kunhikrishnan, Project
Director, PSLV also were felicitated in the function for
their outstanding contributions in developing
indigenous technologies in rocketry and satellites.
The programme was conducted jointly by Institution of
Engineers; IEEE Kerala Chapter; Aeronautical Society of
India; Systems Society of India; IETE,
Thiruvananthapuram Centre; Project Management
Institute; Society of Aerospace Manufacturing Engineers
and IIMM on May 12, 2014 at the Institution of
Engineers Hall Visvesvaraya Bhavan, Trivandrum.
Dignitaries from various disciplines were invited to
attend the function.
Chief Guest of the programme was Mr. K Muraleedharan,
M.L.A. The function started at 6 30 pm. Chief Guest
presented mementoes to the distinguished
personalities. In his Presidential address, Mr.
Muraleedharan touched various activities undertaken
by the ISRO Scientists for the prosperity of the Nation.
He expressed his gratitude to the whole scientific
community present.
Mr. K.G. Nair, Chairman, IIMM Thiruvananthapuram
Branch, in his felicitation address, narrated the role of
the scientific community for building a prosperous India.
Mr. Nair explained the difficulties faced by the scientists,
from his personal experience, for fulfilling the
programmes during the course of their duties. He
bestowed all his blessings for achieving new heights in
space technology. Representatives from other
management institutions also felicitated in a befitting
manner.
Dr. K Radhakrishnan briefly explained the vision and
mission of ISRO for achieving the organizational goal
to build-up a better India. He narrated the various
critical experiments and tests carried out during the
recent years and presented the status of the recent
mangalyan project.
Mr. S.R. Vijayamohanakumar, Chairman, IEI Kerala State
Centre welcomed and Mr. V Vijayakumar, Hon. Secretary,
IEI proposed vote of thanks.
Mr. K.G.Nair, Chairman, IIMM Thiruvananthapuram
Branch welcoming Padmabhooshan Dr. K
Radhakrishnan, Chairman, ISRO/Secretary, DOS.
Mr. M Janardhanan, Secretary receiving
Dr. Radhakrishnan
IIMM team interacting with Dr. K. Radhakrishnan. L to
R: M.P. Ramachandran, Co-ordinator; Mr. M
Janardhanan, Secretary; Mr. K.R. Prasad, Treasurer; Mr.
D Sreenivasan, NC Member; Mr. K.G. Nair, Chairman; Mr.
S.R. Vijayamohanakumar, Chairman, IEI; Padmashree
M.C. Dathan, Director/LPSC.
Mr. K Muraleedharan, MLA presenting a memento to
Dr. K Radhakrishnan. Dr. K Sivan, PD/GSLV and Mr. P
Kunhikrishnan, PD/PSLV are also seen.
Mr. K.G. Nair felicitating the dignitaries.
Dr. K Radhakrishnan in his reply
August gathering

T
oday we all are living very fast & stressful life.
From the birth to death we remain constant under
the stress of the performances in every facets of
life whether it is nursery rhyming in front of the parents
friends in childhood to peer pressure during the
education or the better performance in active early
carrier in life, even after retirement we have to manage
so many social duties to please the surroundings.
So at the end of the day we do not care our health & end
up with functionally compromised life. To prevent this
situation we have to act timely and your time starts
now. Being an orthopedic surgeon I see everyday many
patients in my outdoor from all walks of life. But
surprisingly everybody is not aware of their bone &
joint functioning and importantly DOS & DONTS in day
to day life style. Since bone & joint day is coming up on
4
th
august 2014, let me inform you few facts of your
bone & joints.
Bone is a dynamic tissue & it keeps on changing at
cellular level. It is a live tissue like any other tissue
which has capability of regeneration. It completes cycle
in two years i.e. bone is replaced by new bone in two
years. we have to divide human life in three phase to
know its functioning.
Bone & joint grows in first two decades of life where
bone forming activities is always more than bone
resorptive activities.
3
rd
decades to 5
th
decades it remains almost equal in
both activities 5
th
decade onward is important to address
our bone to prevent osteoporosis in men & one decade
early for woman to prevent osteoporosis.
After 5
th
decade for any given time our bone resorptive
activities are always more than bone forming activities.
So to prevent osteoporosis we must have to do light
exercises & sports activities from 3
rd
decade onwards
to rest of our lives. Those who are living sedentary life
also have to go to walking exercises on daily basis to
EXECUTIVE HEALTH
Healthy Bone Healthy Nation
Dr Hasmukh Nagwadia
MS Orthopaedics, Orthopedic Trauma Surgeon, Shalby Hospitasls,
Ahmedabad, Secretary Gujarat Orthopedic Association
drnagwadia@gmail.com
improve bone forming activities in our bone to fight
against the osteoporosis.
Calcium rich diet is also important to provide calcium
to the bones to get deposited. Going under the Sun in
early morning is also important to have Vit. D production
in our body which is a must component for bone forming
activities.
Our Second issue is age related arthritis is called
osteoarthritis.
Our body starts aging the moment body stops growing,
that means 3
rd
decade onwards everybody will start
degenerating their bodies. So we must have to take care
of our joints which gets degenerative changes fast.
Commonest is weight bearing joints, knee is first, 2
nd
is
shoulder, 3rd is hip, 4th is ankle, 5th is wrist and so
on
To prevent osteoarthritis of the joints we have to take
few measures or alteration in life style.
Sitting on a floor is to be avoided.
Cross leg sitting is to be avoided.
Frequent change in posture is necessary to prevent
joint damage.
Walking is a good exercise for bone & joints both.
Dont start unusual exercises at late age which can
harm your body than help.
Calcium rich diet & supplement of vitamins alone
may not improve your quality of bones.
Diet & walking together will help your bone & joints.
So act now we are never late to start good activities
Help your bone & joints improve your working abilities
to help the Nation.
Healthy bones Healthy Nation

August 2014 New 1

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