Telecom
Flash on Union Budget March 2013
Tax rates
Corporate tax rates remains unchanged. Surcharge increased - Effective rate as follows:
Surcharge of 10% on the total tax liability introduced in case of individuals having a taxable total income exceeding INR 10 million
Corporate Tax proposals
• Concessional tax rate of 15% on dividends received by domestic company from its overseas subsidiary extended for one more year
• Additional income-tax at 20% payable on income distributed by company for buy back of unlisted shares applicable with effect from 1 June 2013 - Shareholders exempt from tax on such income
• Concessional withholding tax of 5% applicable for rupee denominated long term infrastructure bonds issued by an Indian company to non- residents
• General Anti Avoidance Rules ('GAAR') has been deferred by 2 years and will be effective from 1 April, 2015
Category of assessee
Existing effective rate
Proposed effective
rate On domestic companies having
• Income less than INR 10 Million
• Income more than INR 10 Million but less than INR 100 Million
• Income more than INR 100 Million
30.9%
32.445%
32.445%
30.9%
32.445%
33.99%
On foreign company
• Income less than INR 10 Million
• Income more than INR 10 Million but less than INR 100 Million
• Income more than INR 100 Million
41.2%
42.024%
42.024%
41.2%
42.024%
43.26%
Indirect taxes
• No change in the standard customs duty, excise duty and service tax rates
• Ambit of Advance Ruling expanded to cover new line of business and resident public limited companies
• Service Tax Voluntary Compliance Encouragement scheme introduced with waiver of interest, penalty and prosecution
Proposals impacting Telecos
• Royalties and Fees for Technical Services paid to foreign vendors - Domestic tax rate increase from 10% to 25%. This, would adversely
impact transactions with non-treaty countries like Hong Kong. Also, treaties where tax rate is more than 10% i.e. USA, UK etc lower domestic rate of 10% would no longer be available.
- No relief in the retrospective amendments regarding Royalty / Fess for Technical Services made in last budget. FM defends retro
amendments in post budget meeting. However mentions that waiver of penalty in such cases is under consideration.
• Eligibility for tax treaty benefit
- Tax Residency Certificate ('TRC') would be necessary, but not be sufficient for claiming tax treaty benefits on grounds of residency and beneficial ownership. Would require companies to exercise greater caution while granting treaty benefit on foreign payments.
• Excise duty on mobile phones having MRP of more than Rs. 2,000 has been increased from 1% to 6%
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