KEY TAKEAWAYS FROM THE BUDGET 2015 FOR TRANSPORT AND LOGISTICS SECTOR
Expectations for the Union Budget 2015 have been running high. Particularly for the logistics, warehousing and supply chain sectors. Since the growth of these sectors is pivotal to the economic transformation of the country. The budget did not disappoint and met the government’s vision with veracity.
The key takeaways from the budget for the transport and logistics sector are:
1. Exemption to transportation of ‘food stuff’ by rail, or vessels or road will be limited to transportation of food grains including rice and pulses, flours, milk and salt only. Transportation of agricultural produce is separately exempt which would continue.
2. Exemption to construction, erection, commissioning or installation of original works pertaining to an airport or port is being withdrawn.
3. Attracting Investment to create Jobs: Increased FDI caps in defence, Insurance and Railway Infrastructure; rationalised the conditions for FDI in construction and medical devices sectors.
4. There are several stand-alone proposals relating to taxation. These include conversion of existing excise duty on petrol and diesel to the extent of `4 per litre into Road Cess to fund investment in roads and other infrastructure. An additional sum of ` 40,000 crore will be made available through this measure for these sectors. In service tax, exemption is being extended to certain pre cold storage services in relation to fruits and vegetables so as to27 incentivise value addition in this crucial sector. The Negative List under service tax is being slightly pruned and certain other exemptions are being withdrawn to widen the tax base.
5. A uniform abatement is being prescribed for transport by rail, road and vessel to bring parity in these sectors. Service Tax shall be payable on 30 percent of the value of such service 46 subject to a uniform condition of non-availment of Cenvat Credit on inputs, capital goods and input services. Presently, tax is payable on 30 percent of the value in case of rail transport, 25 percent in case of road transport and 40 percent in case of transport by vessels.
6. The abatement for executive (business/first class) air travel, wherein the service element is higher, is being reduced from 60 percent to 40 percent. Consequently, service tax would be payable on 60 percent of the value of fare for business class.
7. Introduction of GST is eagerly awaited by Trade and Industry. To facilitate a smooth transition to levy of tax on services by both the Centre and the States, it is proposed to increase the present rate of service tax plus education cesses from 12.36 percent to a consolidated rate of 14 percent.