Having increased the haulage charges by end of 2014 and freight rates in recent railway budget the government the Union Budget 2015-16 has proposed to increase the service tax.
Service tax is increased from current 12.36% (12% + Education cess) to 14%. The education cess and secondary and higher education cess shall be subsumed in the revised rate of service tax. Further a Swachh Bharat Cess on all/any of the taxable services at a rate of 2% of the value of such taxable services. The new service tax and Swachh Bharat Cess will come into effect from a date notified.
Transport of goods for export by road from the factory to a land customs station (LCS) is being exempted from service tax.
Exemption to transportation of food stuff by rail, or vessels or road will be limited to food grains including rice and pulses, flour, milk and salt. Transportation of agricultural produce is separately exempt, and this exemption would continue.
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% of the value of such service subject to a uniform condition of non-availment of Cenvat Credit on inputs, capital goods and input services. Presently, tax is payable on 30% of the value in case of rail transport, 25% in case of road transport and 40% in case of transport by vessels.
The effective rates of Additional Duty of Customs [commonly known as Road Cess] levied on imported Petrol [Motor Spirit] and High Speed Diesel Oil are being increased from Rs 2 per litre to Rs 6 per litre only with the Scheduled rates of Additional Duty of Customs [commonly known as Road Cess] levied on imported Petrol (Motor Spirit) and High Speed Diesel Oil are being increased from Rs 2 per litre to Rs 8 per litre.
The effective rate of additional duty of excise (commonly known as Road Cess) levied on Petrol and High speed Diesel Oil is being increased from Rs 2 per litre to Rs 6 per litre with the scheduled rate of additional duty of excised on Petrol and High speed Diesel Oil increased from Rs 2 per litre to Rs 8 per litre. However with the educational, higher secondary and higher education cess on Petrol and Diesel are being exempted and rates of duty of excise (CENVAT) on petrol and diesel being revised the various duties of excise on Petrol and diesel remains unchanged.
The work on DMIC corridors are progressing well. The Ahmedabad-Dhaulera Investment Region in Gujarat, and the Shendra–Bidkin Industrial Park near Aurangabad, in Maharashtra, are now in a position to start work on basic infrastructure. For 2015-16 an initial sum of Rs 1200 crore is earmarked and as the pace of expenditure picks up additional funds will be made available.
Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables is being exempted. The move is aimed at promoting food processing sector and checking price rise of perishable items. Service tax exemption to transportation of 'food stuff' by rail, vessels or road, will be limited to foodgrains including rice and pulses, flours, milk and salt. The budget added that transportation of agricultural produce is separately exempted, which would be continued.
Stocks to watch
Container Corporation, Snowman Logistics and Transport Corporation of India
Proposal to increase the service tax to 14% (from 12.36%) is not good for the sector that is already faced with surplus capacity and intense competition between various modes of transportation for volume with discounts. Thus the impact of profitability depends on ability to pass on the same to customers.
While the uniform abatement prescribed in the union budget 2015-16 though bring parity amongst various modes of transport i.e. rail, road and vessel, it is negative for some mode and gain for some mode. Currently service tax is payable on 30% of the value in case of rail transport, 25% in case of road transport and 40% in case of transport by vessels the uniform rate of 30% is neutral for rail, bad for road and good for shipping especially coastal shipping.
However no change in total incidence of excise duty on diesel and extension of service tax exemption to transport of goods for export by road from the factory to a land customs station (LCS) is good for road transport logistics. But all the goods are hurt by proposed increase in service tax.