Union Budget 2016-17 – Highlights
No. CLE-HO/POL/BUDGET/15-16
Feb. 29, 2016
Members of the Council
Sub : Union Budget 2016-17 – Highlights
Dear Member
With regard to the above, please find below the highlights.
a) The major announcement for the leather industry is the enhancement of abatement rate on footwear from 25% to 30%, as notified by Central Excise Notification No. 12/2016 (Non- Tariff) dated 1st March 2016 (copy enclosed).On account of this enhancement of abatement, the following will be the net duty rates.
| Type of footwear | Existing duty | Changes made in Union Budget 2016-17 |
|---|---|---|
| Footwear of MRP not exceeding Rs.500/- per pair | Nil | No change |
| Footwear with MRP above Rs.500/- and upto Rs.1000/- | 6% Central Excise duty with 25% abatement | 6% Central Excise duty with 30% abatement |
| Footwear with uppers of leather with MRP above Rs.1000/- (under 6403 and 6405) | 6% Central Excise duty with 25% abatement | 6% Central Excise duty with 30% abatement |
| All other footwear | 12.5% Central Excise duty with 25% abatement | 12.5% Central Excise duty with 30% abatement |
Typical examples of net duty reduction on account of enhancement of abatement are given below
| (value in Rs.) | |||
|---|---|---|---|
| Details | Prior to budget | Now | Duty Reduction |
| Price(leather and non-leather footwear) | 600 | 600 | |
| Abatement | 25% | 30% | |
| Taxable Amount | 450 | 420 | |
| Excise Duty (6%) | 27 | 25.2 | |
| Net Tax Rate after abatement | 4.50% | 4.20% | 0.30% |
| Details | Prior to budget | Now | Duty Reduction |
|---|---|---|---|
| Price (non-leather footwear) | 1200 | 1200 | |
| Abatement | 25% | 30% | |
| Taxable Amount | 900 | 840 | |
| Excise Duty (12.5%) | 112.5 | 105 | |
| Net Tax Rate after abatement | 9.38% | 8.75% | 0.63% |
b) Krishi Kalyan Cess, @ 0.5% on all taxable services, w.e.f. 1 June 2016. Proceeds would be exclusively used for financing initiatives for improvement of agriculture and welfare of farmers. Input tax credit of this cess will be available for payment of this cess. This means that the Service Tax Rate will go up from 14.5% to 15% w.e.f. 1st June 2016.
c) There are no changes in Peak Rate of Customs Duty (which will remain at 10%) and Peak Rate of Central Excise Duty (which will remain at 12.5%)
d) New manufacturing companies incorporated on or after 1.3.2016 to be given an option to be taxed at 25% + surcharge and cess provided they do not claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation. Corporate tax rate of 29% plus surcharge and cess will be applied for the next financial year for relatively small enterprises i.e companies with turnover not exceeding Rs. 5 crore (in the financial year ending March 2015), to 100% deduction of profits for 3 out of 5 years for startups setup during April, 2016 to March, 2019. MAT will apply in such cases.
Thanks and regards
R. Ramesh Kumar
Executive Director