BUDGET 2010 IN SMALL SCALE

INDUSTRIES
Submitted by,
Anto Roy Milton.J

Adhithiyan.T.R

Anbarasu

Arul Mani

Ahmed

Aslan

Annamalai.R

Ayshwarya.S

Balasubramanian.D

Deepa.S

Dinesh Babu

Deepak

Dhivya.N

Deepan charavathy.C

Elumalai.R

Fazal Mehmood .G

Ganesh.N

Gavin

Saumya Pillai
 CHANGES IN CENVAT CREDIT (2010-2011)
In Central Excise, partial roll back of the rate of duties and enhancement of
standard rate on all non petroleum products from 8 percent to 10 percent ad
valorem is on expected lines. However, hike in duties on petroleum and diesel will
add to already high inflation and this would have been avoided, given the global
crude petroleum prices.

The rates of duty on cement have also been revised upwards which will make
housing costlier. The cost of construction will shoot up owing to the fact that 40-50
percent of cost comprises of material ie, cement and steel. A new cess called 'clean
energy cess' is being levied on coal, lignite and peat and this cess will be levied and
collected as an excise duty from coal mines. For imported coal, cess will be
charged as CVD. The duties in respect of gold and silver jewellery have also been
hiked.

So far as SSI sector is concerned, there is some relief as payment of duties will
now be on a quarterly basis as against monthly deposit. Secondly, full credit of
cenvat on capital goods will be allowed in one installment in the year of receipt of
capital goods in the factory as against present 50 percent. These changes would be
effective from 1 April 2010.

Other welcome measures include no penalty on voluntary payment of duty u/s 11

A (2 B), liberalization of settlement of cases through Settlement Commission by
removing restrictions, benefit of allowing cenvat credit to be reversed on
proportionate basis with retrospective effect for pending cases etc.

SSI sector given relief in the form of allowing 100% CENVAT credit for capital
goods in first
installment and allowing them to make the payment of duty on quarterly basis
CLEAN ENEGRY CESS: Clean Energy Cess is being imposed on coal, lignite
and peat produced
in India. This cess would be levied and collected as a duty of excise with effect
from a date to be
notified after the enactment of the Finance Bill, 2010.
MSME/SMALL SCALE SECTOR: Relevant Changes are being made to provide
certain facilities to Small Scale Industrial (SSI) units eligible for availing benefit
under Notification No. 8/2003-CE as under:
(A) full Cenvat credit on capital goods in one installment in the year of receipt of
such goods.
(B) facility of payment of excise duty on quarterly basis.

The above changes come into effect from 1st April, 2010 and will be applicable
even if an eligible
unit opts not to avail of the SSI exemption.
 While retaining the system of filing quarterly returns, the due date for
filing of Central Excise returns by SSI units is being advanced to the 10th of
the month following the quarter.
 The relaxation from brand name restriction under the general SSI
exemption scheme is being extended to plastic bottles and plastic containers
used as packing material.
BUDGET 2010-11 RESOLVES FOR FRANCHISE
INDUSTRY!
With most of the market signals remaining positive with Union Budget 2010-11,
consumer is happy being at the center stage of consumption story and is in a better
position than a year ago. However, challenges remain. Read on to know what is in
platter for the SMEs and franchise industry… Franchise industry has been looking
forward several regulatory as well as policy reforms to facilitates its growth. A
positive GST outlook by government and rise in threshold for tax compliances has
been seen as a very positive move by the franchise industry. However the long
impending demand of abolishing dual taxation on the franchise services has been
clearly ignored by the policy makers. Presently both service tax and VAT are
imposed upon the franchise services, which distort the franchise model completely.
Moreover, service tax on rental proceed further makes deters the profitable
feasibility. In all it has been the budget has been moderately favorable for the
franchise industry.

According to D P S Kohli, Chairman, Koutons Retail India Ltd, ‘Overall, it has

been a mixed budget for us. New tax slabs and rates have been introduced which
would offer 60 per cent relief to the tax payers providing them with greater
disposable income. This would provide the necessary boost to consumer’s
spending a pre-requisite to unleash the true growth momentum of the retail sector.
In addition, reduction of surcharge on domestic companies that the finance
minister has announced is sure to accelerate the expansion plans for the retail
players at home. However, industry status continues to delude the retail sector.
This is a disappointment since this is the first step towards reforming the sector and
organizing the highly unorganized sector. The hike in the excise duty is also not
favorable for us since this might directly affect the quality of production.’

According to Mr. Gaurav Marya, Managing Director, Francorp, `The budget

2010-11 brings a reasonable assortment for small retailers as well as franchisors.
While increased income tax exemption limits will certainly boost consumption,
imposing service tax on rental property distorts retail business models by making
the accessibility of retail spaces precipitously expensive, hence making it unviable
to sustain profitably.’

Badrinath, Director, Accretive Global stated the budget has both the shades of gray
and white for the franchise industry he further explains detail implications.
ADVANTAGES OF BUDGET IN 2010-2011(SSI)
• No change in service tax rates and the same continues at 10.3 per cent. The
FM in his budget speech states that this proposal is “to maintain the growth
momentum and also to bring about a convergence in the rates of tax on
goods and services.”
• Small businesses stand benefited on account of lower direct tax compliance
costs. The threshold for having the accounts audited for tax has been
increased from 40 lacs to 60 lacs. Further, small businesses with
turnover/receipts lower than 60 lacs can also choose to be covered by the
presumptive tax system. The threshold earlier was only 40 lacs.
• The frequency of remittance of central excise is extended to quarterly basis
from the current scheme of monthly payments for units operating under the
SSI Scheme.
• As a welcome step, exemption from 4 per cent special additional duty of
customs is granted to mobile phones, watches and garments imported in pre-
packed condition for retail sale.

LIMITATIONS OF BUDGET IN (2010-2011)

• The FM has retrospectively amended the provisions relating to levy of
service tax on renting of immovable property. The judgment of the Delhi
High Court in the case of Home Solutions Retail is negated by making mere
renting of immovable property liable to service tax.
• Further, much against the industry expectations, the FM has retained the
CST at 2 percent and the base rate of excise is increased from 8 per cent to
10 per cent.
• The FM has extended service-tax on health check-up services provided to
employees of a business-entity or persons covered under health-insurance-
schemes if such payment is made by the business entity or insurance
company. This is likely to increase the cost of healthcare services. However,
if carefully managed, the franchisees in this sector could claim credits of
service tax paid on various input services such as renting of immovable
property and franchisee fee which is currently adding to the cost of the
operations. This could reduce the net price impact for the end consumer.
MSME/ SMALL SCALE SECTOR
 Changes are being made in the relevant provisions to provide certain
facilities to Small
Scale Industrial (SSI) units eligible for availing benefit under Notification
No. 8/2003-
as under:
 full Cenvat credit on capital goods in one instalment in the year
of receipt of such goods.
 facility of payment of excise duty on quarterly basis.
 The above changes come into effect from 1st April, 2010 and will be
applicable even an eligible unit opts not to avail of the SSI exemption.
o While retaining the system of filing quarterly returns, the due date for
filing of Central
 Excise returns by SSI units is being advanced to the 10th month of the
following
quarter.
o The relaxation from brand name restriction under the general SSI
exemption scheme
 being extended to plastic bottles and plastic containers used as packing
material.

Micro, small and medium enterprises / small scale sector

 Exemption from duty presently available to 20 specified equipments for
to apiary, horticultural, dairy, poultry, aquatic and marine produce and meat
as well as processing thereof.
 Exemption from duty has been extended to self-loading/self-unloading
trailers and semi trailers for agricultural purposes (tariff item 8716 20 00).
 Structural changes have been made in the duty on cigarettes, cigars and
cigarillos with increase in rates.
 Duty on all non-smoking tobacco such as scented tobacco, snuff, chewing
tobacco etc. has been increased.
 Duty will be levied on chewing tobacco and branded unmanufactured
 tobacco packed in pouches with the aid of packing machines based on
capacity of production under Section 3A of the Central Excise Act, 1944
 Small Scale Industrial (‘SSI’) units eligible for availing benefits under
 Notification No. 8/2003-CE have been given additional facilities of:
 Full Cenvat credit on capital goods in one installment in the year of
 receipt of such goods.
 Facility of payment of excise duty on quarterly basis.
 The above changes will come into effect from 1 April 2010 and will be
applicable even if an eligible unit opts not to avail of the SSI exemption.
 The relaxation from brand name restriction under the general SSI exemption
scheme has been extended to plastic bottles and plastic containers used as
packing material.