BASICS OF INDIRECT TAX & CENTRAL EXCISE

Transcription

1 PAGE About the authors I-5 Preface I-7 How to study and revise this book I-9 DIVISION ONE BASICS OF INDIRECT TAX & CENTRAL EXCISE 1 BASIC CONCEPTS OF INDIRECT TAXES 1.1 Taxation system - Direct and Indirect taxes Tax - Meaning, concept and need Direct and indirect taxes - Concept and difference Features of indirect taxes Constitutional provisions Types of indirect taxes - Entries in Union and State Lists as to Indirect Tax Laws Administration of indirect taxes 7 2 BASIC CONCEPTS IN CENTRAL EXCISE 2.1 Excise duty - Meaning & constitutional provisions Sources of Central Excise Law Extent and applicability of Central Excise Laws Charge of excise duty - Section 3 of CEA, I-11 I-11

2 2.5 Levy v. Collection - Concept & difference Factory [Section 2(e)] Basis for levy and measurement of excise duty - Rate structure Exceptions to levy Types of excise duties Goods - Meaning, movability and marketability Movability - Concept, scope and examples Marketability or vendibility criterion - Concept and scope Excisable goods - Meaning & related concepts Manufacture, production & deemed manufacture Examples of manufacture and deemed manufacture Some special aspects - Processing, assembly, labelling/re-labelling, waste/scrap Dutiability of intermediate products & captive consumption Excise duty and site related activities Manufacturer - Concept & scope Taxable event, manner of collection & rate of duty and tariff valuation applicable Dutiability of pre-budget stock, or, levy of duty in case of change in rate of duty between date of manufacture & date of removal 26 3 CLASSIFICATION OF EXCISABLE GOODS 3.1 Classification of Goods - Meaning and need Central Excise Tariff - Introduction and linkage with Central Excise Act Classification - Guidance and burden Generally accepted principles of classification of goods, or, manner of classification of goods Power of Central Government to charge excise duty on the basis of capacity of production in respect of notified goods [Section 3A] Special procedure for payment of duty, or, compounded levy scheme [Rule 15 of the Central Excise Rules, 2002] Duty based on ACP u/s 3A & compounded levy scheme - Difference Tariff value - Concept, fixation and valuation [Section 3(2) & 3(3)] Valuation of excisable goods based on retail sale price, or, RSP-based excise duty, or, MRP-based excise duty [Section 4A] Transaction value - Applicability and concept [Section 4] Transaction value - Meaning of [Section 4(3)(d)] Time and place of removal - Concept and significance Related person - Meaning and concept [Section 4(3)(b)] Price-cum-duty - Concept of [Explanation to section 4(1)] Inclusions in transaction value Exclusions from transaction value Central Excise Valuation Rules, I-12

3 4 SSI EXEMPTION PAGE 4.1 Small scale industry exemption - Concept of [Not. No. 8/2003-CE] Availment or utilization of Cenvat credit - Provisions Branded goods - Eligibility for exemption 51 5 BASIC PROCEDURES UNDER CENTRAL EXCISE 5.1 Assessment, physical control & self-assessment Manner of payment - Due date, mode, etc. [Rule 8] Persons required to take & persons exempted from registration Goods to be removed on invoice [Rule 11] Filing of return [Rule 12] 57 DIVISION TWO CENVAT CREDIT 6 CENVAT CREDIT - BASICS 6.1 Value Added Tax (VAT) & Central Value Added Tax (CENVAT) - Concept, need and differences Basics of Cenvat credit scheme Capital goods - Definition [Rule 2(a) of Cenvat Credit Rules, 2004] Input - Definition [Rule 2(k) of Cenvat Credit Rules, 2004] Input service - Definition [Rule 2(l) of Cenvat Credit Rules, 2004] Final product and output service - Definition of [Rule 2(h) and 2(p) of Cenvat Credit Rules, 2004] 70 7 CENVAT CREDIT - AVAILMENT AND UTILIZATION 7.1 Cenvat credit - Availment and utilization - Difference between Duties/taxes of which Cenvat credit may be taken [Rule 3(1) of Cenvat Credit Rules, 2004] Availment of credit on input, input service and capital goods [Rule 4 of the Cenvat Credit Rules, 2004] Utilization of Cenvat credit [Rule 3(4) of the CENVAT Credit Rules, 2004] Duty/tax-wise restrictions on utilization of credit [Rule 3(4) and Rule 3(7)(b) of the Cenvat Credit Rules, 2004] Special provisions in respect of goods manufactured by units availing areabased exemptions [3rd proviso to Rule 3(4) and Rule 5A] Removal of cenvated input/capital goods by manufacturer or service provider - Quantum of reversal required [Rule 3(5), 3(5A) & 3(6)] 80 I-13

4 7.8 Write-off of input/capital goods - Credit reversal [Rule 3(5B)] Reversal of credit of input or input service used in final product on which duty is remitted under rule 21 of CER, 2002 [Rule 3(5C)] Job work - Meaning and scheme of Cenvat credit [Rules 2(n), 3(1), 4(5) and 4(6) of the CENVAT Credit Rules, 2004] Documents on strength of which an assessee is permitted to avail Cenvat credit [Rule 9(1) and Rule 9(2)] 85 8 CENVAT CREDIT - EXEMPTED GOODS & SERVICES 8.1 Exempted goods and exempted services [Rule 2(d) and 2(e) of CENVAT Credit Rules, 2004] General bar on availment of credit in respect of exempted goods and services - Obligation of a manufacturer or producer of final products and a provider of output service [Rule 6(1), 6(2) & 6(4)] Option not to maintain separate accounts for input/input services - Percentage payment or proportionate reversal [Rule 6(3) of the Cenvat Credit Rules, 2004] Exempted goods/services becoming taxable/dutiable - Treatment under Cenvat [Rule 3(2) and 3(3)] 93 9 CENVAT CREDIT - PROCEDURES 9.1 Refund of Cenvat credit in case of exporters exporting goods or services without payment of duty/tax [Rule 5] Refund of Cenvat Credit to Service Providers providing services under Partial Reverse Charge [Rule 5B] Storage of input outside the factory of manufacturer [Rule 8] Cenvat records to be maintained, and, returns to be submitted by manufacturer or service provider [Rule 9(5), 9(6), 9(7), 9(9) and 9(11)] Dealers under central excise - First stage and second stage dealers - Position under Cenvat Credit Rules Input Service Distributor (ISD) - Provisions Distribution of credit on inputs/capital goods by the office or any other premises of output service provider [Rule 7A] 101 DIVISION THREE CUSTOMS 10 CUSTOMS BASICS AND CHARGE OF DUTY 10.1 Concept of customs duty & sources of law Extent of levy - Territorial scope Charge of customs duty, or, dutiable goods [Section 12 of Customs Act, 1962] 107 I-14

5 10.4 Some concepts relating to charge [Section 2] Date for determination of rate of duty and tariff valuation [Sections 15 and 16 of the Customs Act, 1962] Determination of duty where goods consist of articles liable to different rates of duty [Section 19] Re-importation of goods [Section 20] Goods derelict, wreck, etc. - Liable to duty [Section 21] Remission of duty on pilfered goods [Section 13] Remission of duty on lost, destroyed or abandoned goods [Section 23] Remission of duty - Pilferage v. Lost/destroyed goods - Difference Abatement of duty on damaged or deteriorated goods [Section 22] Denaturing or mutilation of imported goods [Section 24] Power to grant exemption from duty [Section 25] CUSTOMS VALUATION OF GOODS 11.1 Valuation of imported/export goods - Transaction value [Section 14(1) of Customs Act, 1962] Tariff value [Section 14(2)] Introduction to Customs Imported Goods Valuation Rules, Transaction value Inclusions in Transaction value [Rule 10(1)] Value under all rules to include cost of transport, insurance & handling, etc. [Rule 10(2)] Valuation of export goods - transaction value [rule 2(b)] CUSTOMS CLASSIFICATION AND VARIOUS TYPES OF DUTIES 12.1 Classification of goods List of duties levied on imports Levy of additional duty equal to excise duty [CVD] [Section 3(1) & 3(2)] Levy of additional duty equal to excise duty, sales tax, local taxes and other charges [Special CVD] [Section 3(5) and 3(6)] Safeguard duties [Sections 8B and 8C] Countervailing duty on subsidized articles [Section 9] Anti-dumping duty on dumped articles [Section 9A] IMPORT AND EXPORT PROCEDURES 13.1 Import procedures - Procedure in short Arrival of vessels and aircrafts in India [Section 29] Delivery of import manifest or import report [Section 30] 134 I-15

6 13.4 Provisions relating to unloading, etc. [Sections 31 to 38] Restrictions on custody and removal of imported goods [Section 45] Entry of goods on importation or provisions relating to bill of entry [Section 46] Assessment [Sections 17 & 18] Clearance of goods for home consumption [Section 47] Procedure for disposal of goods not cleared within a specified period [Sections 48 and 49] Transit and transhipment of certain goods without payment of duty [Sections 53 and 54] Export procedures Entry of goods for exportation, or, filing of shipping bill or bill of export [Section 50] Clearance of goods for exportation [Section 51] Export goods not to be loaded on vessel until entry-outwards granted [Section 39] Export goods not to be loaded unless duly passed by proper officer [Section 40] Delivery of export manifest or export report [Section 41] Conveyance cannot leave without order [Section 42] 142 DIVISION FOUR SERVICE TAX 14 CHARGE OF SERVICE TAX & PERSON 14.1 Concept of service and service tax Sources of service tax law Extent and application [Section 64] Charge of service tax [Section 66B] Person and deemed separate persons SERVICE 15.1 Service - Concept of [Section 65B(44)] Role of consideration [Department Guidance Note] Service includes declared services [Section 66E] Activity of transfer of title of goods/immovable properties - Not service [Section 65B(44)(a)(i) and 65B(44)(a)(ii)] Transactions only in money or actionable claims - Not service [Section 65B(44)(a)(iii)] Provision of service by an employee to employer - Not service [Section 65B(44)(b)] Negative list - Sec. 66D 163 I-16

7 16 RELEVANT DATE FOR TAXATION [POINT OF TAXATION] 16.1 Date of determination of rate of tax, value of taxable service and rate of exchange [Section 67A] Point of Taxation (POT) - Deemed date of provision of services - General provisions [Point of Taxation Rules, 2011] Point of taxation (POT) - General - Rule POT in case of change in effective rate of tax [Rule 4] Payment of tax in case of new services [Rule 5] POT in certain other cases [Rules 7, 8 and 8A] VALUATION OF SERVICES, INTERPRETATION AND BUNDLED SERVICES 17.1 Valuation of taxable services for charging service tax [Section 67] Manner of determination of value when consideration not ascertainable [Rule 3, applicable in case of section 67(1)(iii)] Inclusion in or exclusion from value of certain expenditure or costs [Rule 5] Cases in which the commission, costs, etc., will be included or excluded - Items specifically includible/excludible [Rule 6] Principles of interpretation of specified descriptions of services [Section 66F(1) and 66F(2)] Bundled services [Section 66F(3)] SERVICES USED FOR EXPORT AND SEZS 18.1 Rebate of service tax paid on taxable services received by an exporter of goods and used for export of goods [Notification No. 41/2012-ST, dated ] Exemption to taxable services received by exporter of goods and used for export of goods [Not. No. 31/2012 & Not. No. 42/2012-ST] Exemption to services provided to exporters against debit to FMS/FPS/ VKGUY duty credit scrips [Not. Nos. 6/2013, 7/2013 & 8/2013-ST, dated ] Exemption to services provided by SEZ for use in SEZ [Section 26 of SEZ Act] Exemption on services received by SEZ unit/developer for authorised operations in SEZ [Notification No. 12/2013-ST, dated ] EXEMPTION TO SMALL SERVICE PROVIDERS, CHARITIES & UN 19.1 Power to grant exemption from service tax [Section 93] Threshold exemption to small service providers upto aggregate value of ` 10 lakhs [Notification No. 33/2012-ST, dated ] 198 I-17

8 19.3 Exemption to charitable activities [Entry 4 of Notification No. 25/2012-ST] Services provided to united nations, or, a specified international organization [Entry 1 of Notification No. 25/2012-ST] TAXABILITY OF SERVICES (NEGATIVE LIST, EXEMPTIONS AND ABATEMENTS) 20.1 Services provided by Government/local authority [Section 66D(a)] Municipal functions by Governmental authority - Exempt [Entry 39 of Not. No. 25/2012-ST] Services provided for assistance in municipal functions - Exempt [Entry 25 of Notification No. 25/2012-ST] Services by RBI - Not taxable [Section 66D(b)] Agriculture related services - Not taxable [Section 66D(d) and entry 40 of Not. No. 25/2012-ST] Trading of goods - Not taxable [Section 66D(e)] Process of manufacture or production of goods - Not taxable [Section 66D(f)] Selling of space or time slots for advertisement - Not taxable [Section 66D(g)] Toll charges - Not taxable [Section 66D(h)] Betting, gambling or lottery [Section 66D(i)] Entertainment/amusement - Admission/access to - Not taxable [Section 66D(j)] Transmission or distribution of electricity by specified persons - Not taxable [Section 66D(k)] Education, training and coaching - Coverage of [Section 66D(l) & Entry 8, 9 & 9A of Not. No. 25/2012-ST] Deceased Related Services [Section 66D(q)] Services to, or by, foreign diplomatic mission - Not liable to service tax [Section 66D(c) & Not. No. 27/2012-ST] Transport of passengers and related services [Section 66D(o)] Services by way of transportation of goods [Section 66D(p)] Transport of goods - Goods transport agency [Section 66D(p)] Banking/financial services & money changing services [Section 66D(n) read with section 65B(44)] Renting of immovable property & residential dwelling [Section 66E(a) read with section 66D(m)] Hiring, leasing, licensing, etc. of goods without transfer of right to use [Section 66E(f)] Intellectual property right related services [Section 66E(c)] Religious services [Entry 5 of Notification No. 25/2012-ST] Medical and health care services [Entry 2, 2A & 3 of Not. No. 25/2012-ST] Legal services - Exemption [Entry 6 of Not. No. 25/2012] Classical or folk artists except brand ambassadors - Exempt [Entry 16 of Notification No. 25/2012-ST] 244 I-18

9 20.27 Exemption to unincorporated body/npo providing services to members [Entry 28 of Not. No. 25/2012-ST] Exemption to transfer of a going concern [Entry 37 of Not. No. 25/2012-ST] Exemption to services provided to a recognized sports body [Entry No. 10 of Notification No. 25/2012-ST] Exemption to sponsorship of certain sport events [Entry 11 of Not. No. 25/2012-ST] Exemption to technical testing or analysis of newly developed drugs [Entry 7 of Not. No. 25/2012-ST] Exemption to certain general insurance, life insurance & ESI schemes [Entry 26, 26A and 36 of Not. No. 25/2012-ST] Exemption to public/free telephone [Entry 32 of Not. No. 25/2012-ST] Exemption to news collection/provision, public libraries, public conveniences and slaughtering of animals [Entry 17, 33, 35 and 38 of Not. No. 25/2012-ST] Exemption to organization of business exhibition outside India [Entry 31 of Not. No. 25/2012-ST] Exemption to services received from provider of service located in non-taxable territory [Entry 34 of Not. No. 25/2012-ST] Exemption to certain intermediary services [Entry No. 29 of Not. No. 25/2012-ST] Exemption to services provided by TBI/STEP (incubator) [Notification No. 32/2012-ST, dated ] Exemption to services provided by incubatee upto ` 50 lakh for 3 years [Entry 27 of Not. No. 25/2012-ST] Tour operator services - Abatement [Entry 11 of Not. No. 26/2012-ST] Optional composition schemes for payment of service tax - Air travel agent and life insurance companies [Rule 6(7) and 6(7A) of the Service Tax Rules, 1994] PROCEDURES UNDER SERVICE TAX 21.1 Payment of service tax [Section 68] Person liable to pay service tax in respect of notified Services or Reverse Charge Mechanism (RCM) [Rule 2(1)(d) of the Service Tax Rules, 1994 read with Notification No. 30/2012-ST] Manner of payment of service tax [Rule 6 of Service Tax Rules, 1994] Excess payment of service tax and adjustment thereof against liability of subsequent period Credit of service tax when service not provided or amount of invoice re-negotiated [Rule 6(3)] Interest for delay in payment of service tax [Section 75] Registration - Persons liable to take registration and time-limit [Section 69 read with rule 4 of the Service Tax Rules, 1994 and Service Tax (Registration of Special Category of Persons) Rules, 2005] Registration - More than premises - Centralized registration or separate registration [Rule 4(2), rule 4(3) and rule 4(3a)] 288 I-19

10 21.9 Registration - Procedures [Rule 4(1A) and rule 4(4) to 4(8)] Self-assessment & provisional assessment [Section 70 & rule 6(4)] Returns by an assessee - Submission, revision and fees for delayed submission [Rules 7, 7B and 7C of the Service Tax Rules, 1994] Returns by persons other than assessee Scheme for submission of returns through service tax return preparers [Section 71] Easiest, STC & ACES [e-payment and e-filing/e-governance] Taxable service to be provided or credit to be distributed on invoice, bill or challan [Rule 4A of the Service Tax Rules, 1994] Records & list to be furnished with first return [Rule 5] Amount collected in name of service tax to be deposited with Government & interest thereon [Sections 73A & 73B] 299 DIVISION FIVE VALUE ADDED TAX (VAT) 22 VALUE ADDED TAX (VAT) - BASICS AND TAXONOMY 22.1 Sales-tax - Concept and scope of Sales-tax, VAT and Central Sales Tax (CST) Concept of VAT Operation of VAT VAT - Scope - Goods covered/not covered and rates Variants of VAT - Extent of credit on inputs/capital goods Methods of computation of VAT Merits of VAT Demerits, or, deficiencies of VAT system in India VALUE ADDED TAX (VAT) - INPUT CREDIT AND SCHEME FOR SMALL DEALERS 23.1 Concept of input tax and output tax Input Tax Credit (ITC) - Eligible/ineligible purchases & exceptions to ITC Reversal of credit in case of common goods used for taxable goods and tax-free goods Branch transfer or stock transfers Input Tax Credit on Capital Goods Utilization of Input Credit and Treatment of Balance of Credit Refund to exporters, UNO, Embassies, etc Exemption or Refund to SEZ and EOU Units 322 I-20

11 23.9 Computation of VAT Liability Small dealers - Meaning and treatment Eligibility for Composition Scheme - Persons Eligible & Ineligible Composition Scheme - Conditions & manner for exercising option and effect of exercise of option Composition Scheme - Features, advantages and disadvantages VAT chain under composition scheme PROCEDURES UNDER VALUE ADDED TAX (VAT) 24.1 Incentives under VAT - Need, merits and demerits Incentives under VAT - Different incentive schemes Registration - Dealers required to get registered TIN - Tax payer s identification number VAT invoice - Meaning and mandatory provisions VAT invoice - Meaning and contents of VAT invoice - Importance of VAT records VAT returns & self-assessment with cross-checking VAT audit VAT IN SPECIAL TRANSACTIONS 25.1 Works contract - Concept and treatment of Works contract - Guidelines to ascertain works contract Taxable turnover for works contract Works contract - Tax rates and computation of tax liability Lease - Meaning and conditions for recognition of Transfer of right to use goods - Impact of VAT on lease transactions Hire purchase - Meaning and treatment Scope of taxability under article 366(29A)(c) Provisions in relation to determination of tax liability VAT & restaurant/catering transactions 360 DIVISION SIX CENTRAL SALES TAX (CST) 26 CENTRAL SALES TAX - BASIC CONCEPTS AND DEFINITIONS 26.1 Central sales tax - Basics 363 I-21

12 26.2 Objectives of Central Sales Tax Act, History, genesis and need of Central Sales Tax Act, Concept of deemed sale and consignment tax [Constitution (Forty-sixth Amendment) Act, 1982] Appropriate state, place of business - Definition & importance [Section 2(A) & 2(DD)] Business - Definition & scope [Section 2(AA)] Dealer & registered dealer - Definition [Section 2(B) & 2(F)] Analysis and examples of business and dealer Goods - Definition and examples [Section 2(D)] Sale and deemed sale [Section 2(G)] Sales tax law & general sales tax law [Section 2(I)] CENTRAL SALES TAX - CHARGE OF 27.1 Inter-State sale, or, when is a sale or purchase of goods said to take place in the course of inter-state trade or commerce [Section 3] Inter-State sale - Various examples Sale/purchase outside a State, or, sale/purchase inside a State [Section 4] Examples of inside State / intra-state sale or purchase, or, outside State sale or purchase Sale or purchase in the course of import [Sections 5(2) & 2(AB)] Sale or purchase in course of export & deemed export / penultimate sale prior to export [Section 5(1), 5(3), 5(4) and 5(5)] Sale in course of export/deemed export - Examples Declared goods - Meaning of [Section 2(c) read with section 14] Restrictions and conditions in regard to tax on sale or purchase of declared goods within a state [Section 15] Liability to pay tax on inter-state sale, or, liability to pay central sales tax, or, charging section for CST [Section 6(1) and 6(1A)] Exemption to subsequent inter-state sale in course of inter-state movement of goods [Section 6(2)] Levy of CST by Centre and retention of CST by State Government [Section 9] Exemption in respect of sales to foreign diplomatic mission/consulate or United Nations, etc. [Section 6(3) & 6(4)] Power of State Government to exempt inter-state sale - Full or partial exemption [Section 8(5)] Sale of goods for use in SEZ or for development of SEZ [Section 8(6), 8(7) and 8(8)] Sales not liable to CST, or, sales exempt from CST Burden of proof, etc., in case of transfer of goods claimed - Otherwise than by way of sale, or, stock transfer, or, branch transfer, or consignment transfer [Section 6A] 391 I-22

13 28 CENTRAL SALES TAX - RATES & TURNOVER PAGE 28.1 Rates of CST & collection of CST by dealer & rounding off, etc. [Sections 8(1) to 8(4), 9A and 9B] Various forms under CST Act/rules [Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957] Sale price - Definition, inclusions and exclusions [Section 2(h)] Works contract & sale price in case of works contract [Section 2(g), 2(h) and 2(ja)] Turnover - Meaning and determination [Sections 2(j) & 8A] 400 I-23