Service tax exemptions and valuation changes alter tax incidence and compliance for SEZs, transport, works contracts and cross border services.
Notifications implement exemptions for services to SEZs and specified cross-border or external services, exempt certain works contracts and insurance services, prescribe effective rates and valuation for transport and telecom-related services, amend Point of Taxation and Service Tax procedural rules, increase interest on late payment, and restrict cenvat credit under the works contract composition scheme.

GST rollout and service tax restructuring to align indirect tax framework, with expanded e filing and compliance measures.
Budget modernises governance and tax administration by accepting TAGUP recommendations, expanding a Performance Monitoring and Evaluation System (PMES), advancing IT initiatives for simplified forms, e filing, e payment and refund tracking, funding mission mode projects to align States with GST roll out, and accelerating UID (Aadhaar) enrolment; it also restructures service tax coverage and announces excise/customs concessions while increasing allocations for social sectors, infrastructure and financial sector reforms.

Customs duty changes revise effective rates, rate structure and relief measures affecting aircraft, software and postal imports.
Budget 2011 2012 prescribes an effective rate of duty and revises the rate structure, with targeted provisions for aircraft, IT software and postal imports, includes relief measures to adjust tariff burdens and administrative treatment for specified imports, and proposes legislative amendments to the Customs Tariff Act, 1975 to implement revised rates, classifications and administrative measures.

Effective rate of duty changes implemented, amending exemptions and customs procedural rules with immediate provisional effect where specified.
Prescribes revised customs tariff measures and related non-tariff actions, implementing changes to effective rates of export and import duties, exemptions, and procedural rules. The release amends exemption schedules and duty assessments for items including export goods, artworks for public exhibition, certain software, copper concentrates, mobile handset components, SEZ goods, and inputs for manufacture, and fixes interest rates, prohibits specified imports except for designated manufacturing uses, and amends anti-dumping rules. A provisional collection declaration gives immediate effect to specified Finance Bill clauses while most changes await enactment.

Customs duty consolidation narrows multiple lower duty rates into a single uniform lower rate while preserving the peak rate.
Consolidation of the basic customs duty merges existing lower-tier rates into a single lower-tier rate while the existing peak basic customs duty remains unchanged, resulting in reclassification of all goods previously chargeable under the lower-tier rates to the new single rate and simplifying the tariff banding for lower-rate imports.

Customs duty on aircraft: basic customs duty imposed while CVDs retained and education cesses exemption withdrawn.
Budget changes withdraw the exemption from basic customs duty on aircraft imported by non-scheduled operators and impose a basic duty while retaining exemptions from countervailing duty and special countervailing duty; usage rules are amended to allow interchangeability between passenger and charter services under Civil Aviation Requirements. The exemption from education cess and secondary and higher education cess on such aircraft imports is withdrawn, making those cesses applicable.

CVD valuation exempts packaged imported software without RSP from duty on license component, taxing only media, freight and insurance.
Imports of packaged software not required to bear retail sale price are exempted from the portion of additional customs duty corresponding to the consideration for transfer of the right to use the software, so that CVD is payable only on the value of the physical medium together with freight and insurance, subject to specified conditions; a parallel central excise exemption applies to domestically manufactured IT software.

Customs tariff on postal imports revised, reduced effective rate retained; export duties adjusted for iron ore and rice bran cake.
Amendment to Heading 9804 revises the First Schedule to cover all dutiable items imported by post or air for personal use, prescribing a tariff label while maintaining a reduced effective duty via notification for items not prohibited under the Foreign Trade (Development and Regulation) Act, thereby avoiding merit assessment. The Second Schedule is recast to align with the Harmonized System and add de-oiled rice bran cake; export duties are adjusted-iron ore lumps and fines moved to a uniform higher rate, pellets exempt, and de-oiled rice bran cake newly subject to export duty.

Customs exemptions expanded for public access art exhibitions and Project Import security requirements eased for trade facilitation.
Full exemption from import duty for works of art is extended to exhibitions in private galleries open to the public, subject to conditions. Clarificatory amendments define coking coal specifications (exempt) versus non coking coal (dutiable) and narrow the definition of a Completely Knocked Down (CKD) unit to exclude pre assembled engines, gearboxes or transmissions. Water supply projects are confirmed to include pumping and storage facilities. Project Import Regulations' security requirements have been reduced and may be met by bank guarantee, which need not be renewed if finalisation is not completed within six months of documentation submission.

Self-assessment in customs expands importer/exporter responsibility while preserving officer verification, audit and electronic filing norms.
Introduction of self-assessment in the Customs Act replaces officer-led assessment, with section 17 recast to allow importer/exporter determinations subject to customs verification, examination, reassessment with speaking orders, and audits. Electronic filing is made the norm with exceptions, and provisional assessment provisions are aligned. Amendments also unify refund and demand periods, clarify interest computation, empower adjudicating authorities and supervisory approval for show cause notices, create a first charge for recovery of customs dues, address auction sale proceeds, validate retrospective tariff measures and safeguard duties for specified commodities, and restrict certain imports to defined uses.

Central excise duty changes introduce new exemptions, altered effective rates and provisional commencement of specified Finance Bill measures.
A suite of Central Excise notifications revises effective duty rates, amends exemptions across numerous chapters, and introduces an option to pay duty at a higher rate with entitlement to cenvat credit while a lower single-digit rate applies without cenvat credit. SSI exemptions, job-worker registration for ready-made garments, and brand-name exemption withdrawals are addressed. Non-tariff amendments fix tariff values and interest rates and modify Central Excise and CENVAT Credit Rules. Most changes take effect from midnight of 28 February/1 March 2011, with certain Finance Bill provisions provisionally effective under the Provisional Collection of Taxes Act, 1931.

Excise duty revision: standard and merit rates adjusted and mixed and branded-goods levies reshape manufacturing compliance.
Central excise rates were revised: the standard rate was maintained and the merit (CENVAT) rate was raised. Cement duties were restructured to mixed ad valorem plus specific rates and valuation for ad valorem components shifted from retail sale price to transaction value; bulk cement was unified under an ad valorem levy and clinker duty combined ad valorem with a specific component. Branded ready-made garments and made-up articles are taxed at a fixed duty, processes affixing brands are treated as manufacture, merchant manufacturers bear liability for job-worker production, and Cenvat credit and SSI relief mechanisms were adjusted. Concessions and duty rationalisations were made for certain vehicles, precious metals, and mega-power project supplies.

Excise duty exemptions withdrawn; concessional duty now levied with prohibition on input credit for affected goods.
A broad withdrawal of Central Excise exemptions imposes a nominal levy on specified formerly exempt goods with a prohibition on claiming Cenvat credit; formerly nil-tariff items are assigned statutory rates but an alternate concessional rate is prescribed to allow manufacturers to elect Cenvat credit. Amendments to the Cenvat Credit Rules extend the definition of exempted goods, require reversal of attributable credit for shared inputs and input services, bar credit for manufacturers and purchasers of goods under the nominal levy, and prevent discharge of duty using existing Cenvat credit. Specific exemptions for paper, looms, and certain electronic components are withdrawn into the concessional bracket.

Excise exemptions expanded for cold chain, repacked retail goods and specified inputs with procedural valuation conditions for manufacturers.
Full exemption from central excise duty is provided for specified goods used in cold chain infrastructure, conveyors for food storage, inputs for power project expansion, certain machine parts and materials. Concessional duty at one percent is extended to sanitary products and specified water filters. Excise duty reductions and Chapter Notes declare repacking, ore concentration, gold dore refining, and galvanisation as processes amounting to manufacture. Amendments update the CETA First Schedule to HSN and retrospectively include certain vehicle parts in the Third Schedule; sugar and textiles are removed from the Additional Duties Schedule to allow State VAT. A conditional exemption for retail repacking of traditional perfumes requires manufacturer valuation and compliance with Commissioner procedures.

Recovery of excise duty: revised penalty and interest regimes streamline extended limitation and first charge provisions.
Redrafted recovery provisions distinguish extended limitation cases, allowing a mandatory 50% of duty penalty where transactions are recorded in specified books and permitting remission to that level; compounding relief is limited to this category with reduced penalties for pre-notice or early payment. Interest provisions are consolidated to run from the month after duty fell due or from the date of erroneous refund. A first charge on a defaulter's property is created for excise dues, subject to creditor-priority statutes, while search powers, customs machinery borrowing for compounded levies, Board instructions on appeal thresholds, and legal metrology cross-references are amended.

Cenvat credit rules broaden input definitions and limit credit for ship breaking imports to curb misuse.
Amendments broaden input to cover most goods used in the factory including accessories, warranty items and goods for captive power, while excluding construction and personal use goods; input service exclusions are aligned with goods exclusions. Capital goods credit is largely unchanged but permitted for capital goods used outside the factory to generate captive power within the factory. Cenvat credit on additional customs duty for imported ships and floating structures used for breaking is restricted to prevent misuse, and Rule 5B requires repayment of credit where inputs or capital goods are partially written off before use.

Service tax amendments broaden taxable scope and tighten compliance, introducing new services and rule-level credit and refund changes.
Service Tax amendments in Budget 2011 add new taxable services, expand the scope of existing services, and revise valuation and compliance frameworks. Key rule updates include changes to point of taxation procedures, export of services rules, taxation of services provided from outside India and received domestically, determination of value, works contract composition schemes, and Cenvat credit mechanisms. The package also provides exemptions and procedural relief for the small scale sector and clarifies SEZ refund mechanisms.

Service tax on SEZ services: wholly consumed services exempt at source; pro rata refunds for partial consumption.
Notification No. 17/2011-ST defines wholly consumed services for SEZs using Export of Services Rules criteria and treats services received by entities operating solely in SEZs as wholly consumed. Such wholly consumed services are not subject to upfront service tax, including services normally covered by reverse charge. Services not wholly consumed qualify for refunds on a pro rata basis (SEZ turnover to total turnover). The Cenvat Credit Rules, 2004 have been amended to waive rule 6 requirements where services are supplied to SEZ units for authorized operations without payment of tax.

Cenvat credit reform aligns input and input service definitions, narrows eligible credits, and revises allocation and sectoral charges.
Amendments align the definitions of input and input service, expressly excluding certain goods and related services (e.g., petroleum, construction goods except subcontractor cases, employee personal consumption goods, and goods unrelated to manufacture) from qualifying as inputs or input services. The rules revise allocation and valuation mechanics for exempted and partially exempted outputs, reduce the amount payable for services under rule 6 from six to five percent, define valuation for trading and composition schemes, require banking and financial entities to pay 50% (and life insurance/ULIP 20%) of credit availed, allow SEZ authorized operations to receive services without reversal of credit, and add service tax under section 66A to eligible credits retrospectively.

Taxability of services received in India extended to services performed abroad when the recipient is located in India, with targeted exemptions.
Amendments to rule 3 of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 treat certain services as taxable where the recipient is located in India even if performed abroad. Exemptions carve out transportation of goods by air, road or rail for persons located in India when goods move from outside India to outside India, and exempt air freight to the extent it is included in the customs value, preventing double taxation.