KDF3A INDIRECT TAXATION UNIT I -V

Transcription

1 KDF3A INDIRECT TAXATION UNIT I -V

2 Unit I : Syllabus Taxation Objectives of Taxation Canon of taxation Classification of Tax Difference between Direct & Indirect Tax. KDF3A-INDIRECT TAXATION 2

3 OVER VIEW OF TAX SYSTEM IN INDIA aupwg6yyp24 BPZ4D,BPW4C BUSINESS TAXATION 3

4 TAXATION TM Source of revenue for the government. Its an act of levying taxes. It s a compulsory charge or fees imposed on individual or corporate. It is imposed on the income and wealth of a person or corporations. Rate of tax may vary. KDF3A-INDIRECT TAXATION 4

5 OBJECTIVES OF TAXATION Raising revenue Regulation of consumption and production. Encouraging domestic industries. Stimulating investments. Reducing income inequalities. Promoting economic growth. Development of backward regions. Ensuring price stability. KDF3A-INDIRECT TAXATION 5

6 CANONS OF TAXATION A Good tax system based on certain principles. Adam Smith formulated four important principles of taxation. Canon of Equality Canon of Certainty Canon of Convenience Canon of Economy KDF3A-INDIRECT TAXATION 6

7 Canon of Equality: The person should be taxed according to their ability to pay. It implies a progressive tax system Canon of Certainty: Tax paid by individual should be certain and not arbitrary. The time, manner and amount to be paid should be clear to tax payer. KDF3A-INDIRECT TAXATION 7

8 Canon of Convenience: The mode and timings of tax payment should be convenient to tax payer. The principle also known as pay as you earn method Canon of Economy: The cost of tax collection should be minimum. KDF3A-INDIRECT TAXATION 8

9 Other Canons by Western Economist and Dr.Raja Chelliah Canon of Productivity: The tax should yield a satisfactory amount for the requirements of a government. It should not obstruct or discourage production & productive efficiency. Canon of Elasticity: Structure of taxation should be elastic in character and capable of expansion and contraction in times of change. KDF3A-INDIRECT TAXATION 9

10 Canon of Diversity: Modern economists emphasize upon a Multiple policy with diverse character. There should be a combination of Direct and Indirect taxes so that all the citizens of the country are involved and contribute. Canon of Simplicity: The taxation rules and regulations should be simple, intelligible, and easily understandable. KDF3A-INDIRECT TAXATION 10

11 Canon of Expediency: Expediency means convenience. A tax may be desirable and it may have most of the characteristics of a good tax. Canon of Co-ordination: Taxes are imposed by central, state and local governments, hence there must be coordination between different taxes imposed by the tax authorities. KDF3A-INDIRECT TAXATION 11

12 CLASSIFICATION OF TAX DIRECT TAX Income tax Property Tax Gift Tax Wealth Tax INDIRECT TAX Specific Duty & Ad-valorem Duty Single & Multiple tax Central Excise Central Sales Tax Customs Duty VAT Based on quality & Value of goods One or several types of tax KDF3A-INDIRECT TAXATION 12

13 Difference between Direct & Indirect Tax Incidence and Impact Burden Viability of payment Administrative viability Below link gives the difference between in detail KDF3A-INDIRECT TAXATION 13

14 BPZ4D,BPW4C BUSINESS TAXATION 14

15 Heading: font size 32 content: font size 20 KDF3A-INDIRECT TAXATION 15

16 Unit II : Syllabus Central Excise Act Liability for Central Excise Duty Types of Excise Duty Basic Conditions for levying Excise duty Persons liable to pay excise duty Clearance of Goods and Types of clearance Levy and Collection of duty Exemptions from Excise duty Excise and Exports Refund, Offences, Penalties and Appeals KDF3A-INDIRECT TAXATION 16

17 CENTRAL EXCISE ACT The law of central excise duties is governed by : Central Excise Act Central Excise Tariff Act Central Excise Rules Below link gives you an idea about central excise duty KDF3A-INDIRECT TAXATION 17

18 Liability for Central Excise Duty The duty is on goods. The goods must be excisable. The goods must be manufactured or produced. Such manufacture or production must take place in India. KDF3A-INDIRECT TAXATION 18

19 Types of Excise Duty Basic Excise Duty National Calamity Contingent Duty Excise Duty Special Excise Duty Cess Additiona l Excise Duty KDF3A-INDIRECT TAXATION 19

20 Method of levying Excise Duty A rate on Value of Goods found by applying various provisions of the Act or rules made there under (Advalorem rate of duty) (or) The tariff value declared by the Tariff Act (specific rate of duty) KDF3A-INDIRECT TAXATION 20

21 Basic Conditions for levying Excise Duty There should be manufacture or production. Result should be goods which are movable and marketable. Goods should appear in the first schedule to the central excise tariff act. Manufacture or production should take place in India. Special Economic Zone is not India for the purpose of Excise. Collection is as per the rules made under the Act. KDF3A-INDIRECT TAXATION 21

22 Persons liable to pay Excise Duty Manufacturer/ producer Private warehouse owner Authorised agent of the above. KDF3A-INDIRECT TAXATION 22

23 Clearance of Goods Clearance Removal of Excisable goods from the factory. For the convenience of the assessee, the excise law permits the postponement of payment of duty to a point of time when the goods are actually removed from the place of manufacture KDF3A-INDIRECT TAXATION 23

24 Types of Clearance of Goods Clearance under physical control Excise officers are posted at the factory or warehouse of the assessee to supervise. Clearance under compound levy scheme - In case of unorganized sector, the assessees are allowed to pay duty on the basis of specific period as well as the productive capacity of the factory Clearance under self removal procedure - The assessee can bring into factory raw materials and other requirements, convert them into finished product and effect clearance of the same without physical control or prior permission of the central excise authorities KDF3A-INDIRECT TAXATION 24

25 Levy and collection of Tax Levy - imposition of tax and assessment of tax. Imposition of tax is done by the parliament. Tax is assessed by the Government. Assessment is quantification of excise duty amount. Collection collection of excise duty gives meaning to levy and assessment. The excise duty is assessed and collected by excise duty officer. KDF3A-INDIRECT TAXATION 25

26 Exemptions from excise duty Sec 5(A) The exemption is given by the central government by notification in the official Gazette. Exemption may be given either absolutely or subject to fulfillment of conditions. KDF3A-INDIRECT TAXATION 26

27 Excise and Exports Any excisable goods may be exported without payment of duty. The exemption of excise duty on goods made for export is of two types: Materials used in goods Manufactured for exports Conditions for exemptions: Conditions and procedures notified by the central excise board Bond in form B1 Export of goods within 6 months Packing of goods Invoice KDF3A-INDIRECT TAXATION 27

28 REFUND OF DUTY Sec (11B) Application for refund of excise duty in a prescribed form is to be made to assistant commissioner of central excise or Deputy commissioner of central excise within one year from the relevant date The application has to be enclosed with documentary proof including sale invoice referred to in section 12-A On satisfaction of the documentary proof, whole or any part of the excise duty paid by the application is refundable. KDF3A-INDIRECT TAXATION 28

29 OFFENCES & PENALTIES Where a person commits offence in the form of. (a) Possession of any goods (b) Evades payment (c) Removal of goods (d) Possession of goods liable to confiscation (e) Contravenes any provision or rules (f) Supply of false information. Convicted of an offence for 2nd time Offence by companies (sec 9AA) KDF3A-INDIRECT TAXATION 29

30 APPEALS Every person aggrieved by any order passed by the central excise officers/ Department may appeals to the commissioner of central excise (appeals) The procedure for appeals are: 1. Appeal within sixty days 2. Extension of time for appeal 3. Appeal to be in prescribed form 4. Procedure in appeal Appeals to the Appellate Tribunal Appeal by the committee of commissioners of Central Excise Time for appeal Appeal to be made in the prescribed form Orders of Appellate Tribunal KDF3A-INDIRECT TAXATION 30

31 Unit 3: Service Tax: Genesis First Principles of Taxable Service, Negative list, Exemption list, Taxable area, non-taxable area, point of taxation and valuation - Procedure for assessment and payment of Service Tax Philosophy of Cenvat Registration KDF3A-INDIRECT TAXATION 31

32 Service Tax Meaning According to Sec 65(95) of Finance Act,1994 Service tax means tax leviable under provisions of Chapter V of Finance Act KDF3A-INDIRECT TAXATION 32

33 Exempted Services No Service tax on services provided on Sub-contract. No service tax on export of services. No service tax on payment received in India in foreign exchange. No service tax on services provided to united nations organizations. KDF3A-INDIRECT TAXATION 33

34 Exempted Services No Services tax is payable for reimbursement of expenses incurred on behalf of client. No service tax on service rendered if service is provided free. Small service providers are exempt from service tax. Units in EOU/ SEZ / BTP KDF3A-INDIRECT TAXATION 34

35 Rate of Service Tax Service tax rate from 1st June, 2016 is 15% with krishi kalyan cess. Service tax is replaced by GST from 1st July, 2017 BPZ4D,BPW4C BUSINESS TAXATION 35

36 Unit IV : Syllabus Customs Duty Objectives of Customs Act Custom Tariff Act Levy and Collection of Custom Duty Taxable Event & Assessment of Duty Import & Export Procedure Officers, Functions & Power of Custom duties Types of Custom duties & Exemptions Drawback of custom duty KDF3A-INDIRECT TAXATION 36

37 CUSTOMS DUTY Duty or tax, which is levied by central govt. Collected from the importer or exporter of goods. Duties are usually ad valorem rates Ad valorem rates Duty as a percentage of the value of goods. KDF3A-INDIRECT TAXATION 37

38 Objectives of Customs Act Safeguarding domestic trade Reducing Imports Revenue resources Protection of Indian Industry Prevention smuggling activities To prevent dumping of goods KDF3A-INDIRECT TAXATION 38

39 Customs Tariff Act 1975 The act contains 2 schedules Schedule 1 gives classification and rate of duties for imports. Schedule 2 give classification and rate of duty for exports Makes provisions for duties like additional duty (CVD) preferential duty, anti dumping duty protective duties etc Below link gives you the details about customs act KDF3A-INDIRECT TAXATION 39

40 Levy and Collection of customs duty The levy of duties of customs is regulated by the customs Act 1962 while the rates of duties are fixed by the customs Tariff Act The customs enforce control over the movement of goods and persons across the boarders of our country by restricting the points of entry and exit at which alone the movement of cargo and persons can take place. for levy and collection of customs duty. Sec 12 to 28 of the customs act provide KDF3A-INDIRECT TAXATION 40

41 Taxable event Taxable event for import Duty it is the day of crossing of customs barrier and not on the date when goods landed in india or had entered territorial waters. Taxable event for export duty export commences when goods cross customs barrier, but export is complete when it crosses territorial waters. KDF3A-INDIRECT TAXATION 41

42 Assessment of Duty Examining and testing of goods Submission of documents Methods of assessment of duty. KDF3A-INDIRECT TAXATION 42

43 Import Procedure Arrival at customs port/airport only Import manifest/report Grant of entry inward by customs officer Unloading of Reported goods only. Filing of import bills of entry Assessment of goods Approval of assessment Customs clearance from view point of import policy Payment of Duty Disposal if goods are not cleared in 30 days KDF3A-INDIRECT TAXATION 43

44 Initial steps to be taken by the exporter Shipping bill to be submitted by exporter Declaration of exporter Export duty if payable Entry of goods for exportation Clearance of goods for exportation Check in customs Examination of goods before export Let export order by customs authorities Goods not to be loaded on vessel until entry outward granted section 39 & 40 Conveyance to leave on written order Notice of Short Supply Export Procedure KDF3A-INDIRECT TAXATION 44

45 Officers of Customs Chief commissioners of customs Commissioners of customs Commissioners of customs(appeals) Joint commissioners of customs Deputy commissioners of customs Assistant commissioners of customs Such other class of officers of customs as may be appointed for the purpose of the customs Act KDF3A-INDIRECT TAXATION 45

46 Functions of Customs Officers Enforcement of various provisions Discharge of various agency functions Prevention of smuggling Collection of duty Functions of Custom officers International passenger processing KDF3A-INDIRECT TAXATION 46

47 Powers of Custom Authorities Customs ports and airports Appointment of customs ports, airports,etc. Inland container depots Land customs stations Routes Coastal ports Approval of landing places and specifying limits of customs area Powers to declare places to be warehousing stations Appointments of boarding stations KDF3A-INDIRECT TAXATION 47

48 Types of Custom Duties Basic customs duty National calamity contingent duty Special additional duty of customs Additional customs duty Protective duties Countervailing duty on subsidized goods Anti-Dumping duty on dumped articles KDF3A-INDIRECT TAXATION 48

49 Types of Exemptions By notification By special order on Adhock basis Exemptions General exemptions Exemptions to ONGC/OIL Other exemptions KDF3A-INDIRECT TAXATION 49

50 Customs Duty Drawback Drawback in relations to any goods manufactured in India and exported means- (a) Rebate of duty chargeable (b) Rebate of duty of excise (c) Draw back is equal to (i) Customs duty paid on imported inputs and (ii) Excise duty paid on indigenous inputs Below link gives an idea about how does customs work: KDF3A-INDIRECT TAXATION 50

51 Unit V : Syllabus Value Added Tax Objectives of VAT Advantages & disadvantages of VAT Procedure for assessment and payment of VAT Philosophy of Input Tax Credit Glimpses of CST KDF3A-INDIRECT TAXATION 51

52 Value Added Tax (VAT) A value-added tax (VAT) is a consumption tax levied on products at every point of sale where value has been added, starting from raw materials and going all the way to final retail purchase by a consumer.... Every seller in the production chain charges a VAT tax to the buyer, which it then remits to the government. For goods like liquor, cigarettes etc. many governments charge high VAT rates of 12.5% or 14-15%. Also, many state governments follow a general rate of VAT for goods which cannot be categorized to suit the above classification. Such goods are taxed at 12%, 13% or even 15% in different states. KDF3A-INDIRECT TAXATION 52

53 Objectives of VAT TM Easy Compliance Prevents Distortion Easy Computatio n of Tax Equitable Distribution Harmonization Avoids Double Taxation Credits on Inputs KDF3A-INDIRECT TAXATION 53

54 content: font size 20 KDF3A-INDIRECT TAXATION 54

55 Heading: font size 32 content: font size 20 KDF3A-INDIRECT TAXATION 55

56 Difference Between Sales TM Tax & VAT Sales Tax VAT Nature Single Point Multi Point Tax Evation Can be Possible Cascading Effect - Yes Levied on Total Value Calculation Simple & Easy Cannot be Possible No Value Added Comprehensive & Complex KDF3A-INDIRECT TAXATION 56

57 Advantages of VAT Exports Taxing consumption Minimum interference Audit trail KDF3A-INDIRECT TAXATION 57

58 Limitations of VAT Numerous details to be prepared VAT results in inflation Refund of tax Functional problems Inter-state purchases KDF3A-INDIRECT TAXATION 58

59 BASIS OF LEVYING VAT Origin Principle Destination Principle Gross product type Net Income type KDF3A-INDIRECT TAXATION 59

60 PROCEDURES FOR IMPLIMENTATION OF VAT 1.Registration 2 Mandatory issue of invoice, cash memo 3. Tax payers identification number 4. Return to be filed 5Coverage of goods under VAT 6. Self assessment of vat liability 7 Audit 8. Declaration form KDF3A-INDIRECT TAXATION 60

61 Heading: font size 32 content: font size 20 KDF3A-INDIRECT TAXATION 61

62 Heading: font size 32 content: font size 20 KDF3A-INDIRECT TAXATION 62

63 CENTRAL SALES TAX It is a tax on sales of goods levied by the Central Government of India when there is inter state sales. Interstate sale is when a sale or purchase constitutes movement of goods from one state to another. KDF3A-INDIRECT TAXATION 63

64 FEATURES OF CENTRAL SALES TAX LAW Applicability. Registration by dealer Dealer to pay sales tax Definition of terms Single and multiple rates of central sales tax Central sales tax to be on turnover Central sales tax to be payable from state of sale of goods. Central sales tax to be collected by the states. Adoption of rules by state government KDF3A-INDIRECT TAXATION 64

65 OBJECTIVES OF CENTRAL SALES TAX ACT Determining principles for levy of tax when a sale or purchase of goods takes place Framing rules for Declaration of goods to be of special importance (U/S 14 & 15) Collection of tax from company in liquidation (U/S 16 and 18) Inter-state trade or commerce (U/S 5) or Levy of tax (U/S 9(1)) Outside a state (U/S 4) Collection of tax (U/S 9(1) and 9(2)) Import or export from India (U/S 5) Distribution of tax (U/S 9(3) KDF3A-INDIRECT TAXATION 65

66 Inter-state sales-tax The registered dealer, making an Inter state sale of goods is liable to pay central sales tax. A dealer is liable to pay central tax on the Inter state sale done by him, even if no tax is leviable under the state sales laws. KDF3A-INDIRECT TAXATION 66

67 Registration of Dealers Sec (7) Every dealers who is liable to pay central sales tax shall apply for registration and get himself registered. Types of Registration Compulsory Registration Sec 7 (1) Voluntary Registration Sec 7 (2) KDF3A-INDIRECT TAXATION 67

68 Procedure for Registration Sec 7(3) and rule 3 Application for Registration Application to Authority Signing of Application Form Time limit for applying Quantum of Security Security No Exemption limit on turnover Fees for application Certificate of Registration Refusal of Registration Amendment of certificate of Registration KDF3A-INDIRECT TAXATION 68

69 Exemption of transactions from Central Sales Tax Sale to a foreign diplomatic mission Subsequent sale by transfer of Documents Exemption Exemption of sale from general sales tax of the state Sale to units located in special Economic Zone Sale in the course of import or export Exemption by Notification KDF3A-INDIRECT TAXATION 69

70 Sales Tax Rates Declared and undeclared goods. Sale to Government. Sale to unregistered dealer or other purchaser. Sale to unregistered dealer. KDF3A-INDIRECT TAXATION 70

71 Central Sales Tax Rates Types of goods Sale to government (state or central government) Sale to registered dealer Sale to an unregistered dealer or other purchaser 1. Declared goods 4% or state sales-tax rate which ever is lower on submission of D form. 4% or state sales tax rate, which ever is lower on submission of C form provided purchase of goods is covered in the registration certificate of the dealer. Central Sales tax will be charged at Twice the general sales tax rate of the state. Since the state sales tax rate can not exceed 4% the maximum rate will be 8% KDF3A-INDIRECT TAXATION 71

72 Types of goods Sale to government (state or central government) Sale to registered dealer Sale to an unregistered dealer or other purchaser 2.Undeclared or other goods 4% on submission of D form, but if the general sales tax rate of appropriate government is less than 4% then it will be charged at such lower rate (i) Same as above (ii) If general sales tax rate is nil, it will be charged at nil rate. (i) 10% or salestax rate of appropriate state government, which ever is less. (ii) If general sales tax rate of the state is nil the tax rate chargeable is nil. KDF3A-INDIRECT TAXATION 72

73 Penalties and prosecution for contravening the provisions of central sales tax Act are provided in section 10 and 10A of Central Sales Tax Act. Types of Penalties Penalties and Prosecutions Penalties in the form of prosecution / finance or both Sec 10 Penalties in lieu of prosecution Sec 10A Persons Liable for penalties are Seller & Buyer. KDF3A-INDIRECT TAXATION 73

74 Heading: font size 32 content: font size 20 KDF3A-INDIRECT TAXATION 74