pgcidt vat

7/29/2019 PgcIDT Vat

1/86

Indirect Tax Law Regime in India

Central Sales Tax

(CST) &

Value Added Tax

(VAT)

Service Tax

Central Excise

Tariff

Foreign Trade

Policy (FTP)

Custom Duty


2/86

2

Central Sales Tax (CST) &Value Added Tax (VAT)


3/86

Central Sales Tax (CST) & Value Added Tax (VAT)

Constitutional Framework

The power to levy tax has been constitutionally divided between the Parliament and theState Legislatures. (Financial Relations between the Union and the States)

Schedule VII, List I ( Union List) lays down the law making domain for the Parliament.

Schedule VII, List II ( State List) lays down the law making domain for the State Legislature.

3

Domain of Applicability of CST & VAT

Central Sales Tax (CST) Value Added Tax (VAT)

Levied on inter-State sale or purchaseof goods.

Power to Levy with CentralGovernment. ( Entry 92A, Union List,VIIth Schedule)

Levied on local sale or purchase ofgoods.

Power to levy with State Governments.( Entry 54, State List, VIIth Schedule)


4/86

Central Sales Tax (CST)

Legal Framework of CST

I. Central Sales Tax Act, 1956II. Central Sales Tax (Registration and Turnover) Rules, 1957

III.CST Rules drafted by separate State Governments

CST Act (Important Provisions at a glance)

4

Section Provisions

Section 2 Definition of sale, goods, declared goods, turnover etc

Section 3 When a sale/purchase amounts to an inter-State sale/purchase

Section 4 When a sale/purchase is said to have taken place outside a State

Section 5 When a sale/purchase is said to have taken place in the courseof import/export & high seas sale

Section 6 In-transit sales

Section 8 Rates of tax, State specific exemptions

Section 8A Determination of turnover


5/86

Central Sales Tax (CST)

Sale under the Act should be effected by transfer of documents or title of goods during the

movement from one State to another.

Thus the levy of Tax, in India, depends on the movement of goods

In case the goods remain in the same State after the sale where they were before the said

sale, then VAT Act of the concerned State shall be applicable.

CST is a Central levy however the administration and the revenue from CST goes to

Appropriate State.

Appropriate State is the State which is competent to charge and collect tax. Generally, it

is the State from which the goods move into another State.

Under CST tax liability lies on the dealer who sells goods in the course of its business.

The tax liability commences from the very first sale.

5


6/86

Value-Added Tax (VAT)

VAT is a multi-point destination based system of taxation, with tax being levied on value

addition at each stage of transaction in the production/ distribution chain.

The term 'value addition' implies the increase in value of goods and services at each stage

of production or transfer of goods and services.

Illustration:

Assuming that tax rate is 10% if:

i. Purchase Value of goods is Rs. 1,00,000 &

ii. Sale Price of the goods after manufacturing is Rs. 3,00,000

The VAT payable is 10% of Rs. 3,00,000 (Sale Price) which is Rs. 30,000

VAT Credits ( Tax already paid on purchases) is 10% of Rs. 1,00,000 which is Rs. 10,000

Hence, net VAT Payable is Rs. (30,000-10,000) = Rs. 20,000.

6


7/86


The VAT rate in Andhra Pradesh is:

General Rate is 5% ( For goods mentioned in Schedule IV of the AP VAT Act, 2005

Residuary Rate is 14.5% ( For goods not mentioned in Schedules I, III, IV & VI)

For goods like bullion, specie, platinum, VAT Rate is 1% ( Schedule III of the Act)

Input Tax Credit (ITC)

Its is a credit of VAT paid on local procurement of goods.

The benefits of ITC are available in cases of resale, manufacture of goods for sale etc.

ITC is not available in cases where it involves manufacture of exempted goods.

One of the advantages of ITC is that it can be used to offset the output tax liability i.e.

both CST & VAT.

The latter is primarily to remove the cascading effect of taxation.

7


8/86


Composition Scheme for Small Dealers

In order to relieve small dealers of the need to keep detailed records, the law provides

provision for a simpler method of accounting for VAT known as composition scheme. This

schemes make calculation of tax very easy.

Small dealers whose turnover does not exceed Rs. 50 lakhs in the last financial year may optfor composition tax scheme.

Advantages: saves labour in tax computation, simplified calculation of tax liability.

Disadvantages: compliance with certain conditions to avail the scheme

Conditions for Composition Scheme

Conditions have to be complied with to avail such composition scheme. Example, inter-

State sale cannot be effected, no imports or exports, sale or purchase through commission

agent.

8


9/86

Case Study- Taxable Turnover

Bharat makes sale of both taxable and exempt items. He sells locally as well as makes inter

State sales and exports. His total turnover for the tax period is Rs. 10,00,000. The break up

is as follows:

Sales within Hyderabad Rs. 2,00,000

Sales to Bangalore Rs. 5,00,000 Exports to UK Rs. 3,00,000

The dealer in Hyderabad returned goods worth Rs. 20,000 while Rs. 50,000 worth of sale

within Hyderabad was of exempt items.

At the time of local sales (liable to tax) to dealers in Hyderabad, Bharat allowed a cash

discount of 5% on the local sales liable to tax.

Assuming VAT rate on Bharats products to be 10%, compute Bharats taxable

turnover and the tax for the period under VAT

9


10/86

Case Study- Solution

Particulars Amount

Total Turnover 10,00,000

Less:

Export Sales 3,00,000

Inter-State Sales 5,00,000Exempt Sales 50,000

Sales Returns 20,000

Local Sales liable to tax 1,30,000

Less:Cash discount @ 5% on the above 6,500

Taxable Turnover 1,23,500

VAT @10% 12,350

10


11/86

11

Central Excise


12/86

Basic Concepts

Excise Duty

The power to levy Excise Duty lies with the Central Government under Entry 84, Union

List, VIIth Schedule of the Constitution of India.

Excise Duty is a duty on goods produced or manufactured in India.

Manufacture or production of excisablegoods in India is the taxable event.

Under the Central Excise Tariff Act, 1985 (CETA) excise duty shall be levied on all goods

prescribed under Schedule I and II.

Excise Duty liability is generally on the manufacturer.

Excisable Goods- Specified in First and Second Schedule of CETA.

Basic Conditions- Conditions for levy of excise duty as mentioned in Section 3 of Central

Excise Act, 1944.

12


13/86

Basic Concepts

Manufacture

Section 2(f) of Central Excise Act, defines and lays down the scope ofmanufacture.

It means any process which is:

Incidental or ancillary to the completion of a manufactured product.

Specified in relation to goods in any section or Chapter notes of The Central

Excise Act, 1944 as amounting to manufacture.

With respect to any goods mentioned in the Third Schedule, packing, repacking,

labelling, re-labelling, declaration or alteration of retail sale price on it, adoption of

any other treatment which makes the product marketable to the consumer.

13


14/86

Basic Concepts

As laid down by The Honble Supreme Court in a case, the test to determine what goods

amount to manufactured goods is to see if the new substance has emerged as a distinct

name, character and use.

Activities Amounting to Manufacture

Making a chair out a planks of wood

Oil produced from oil seeds

Activities not amounting to Manufacture

Repairing of goods

Cutting of hot, cold rolled coils into sheets and strips

14


15/86

Basic Concepts

Steps in Classification

1. Reference can be made to the sections, chapters and HSN classification by an assessee to

ascertain the goods for which the Excise duty rates are to be determined.

2. After determination of goods from the relevant chapter, an assesse has to next find out the

rate of duty for the relevant product.3. Reference has to be made to the tariff heading, sub-heading of the Schedules and along

with the corresponding Section and Chapter Notes.

4. In the absence of any ambiguity or confusion the classification is final.

5. In case of confusion, reference has to be made to the Rules for interpretation of tariff.

6. To determine classification there are about 6 Rules which need to be borne in mind.

7. In case doubts persists, then reference may be made to funtional utility, design etc.

15


16/86

Valuation

The valuation rules under excise are known as Central Excise Valuation (Determination of

Price of excisable Goods) Rules, 2000 notified pursuant to section 4(1)(b) of Central Excise

Act, 1944.

Excise Duty is payable on the basis of the Transaction Value if the following conditions are

satisfied

Goods are sold at the time and place of removal

Assessee and buyer are not related

The consideration for the transaction of sale should be more than just the price.

The valuation Rules will be applicable when any of the conditions mentioned above are not

satisfied.

16


17/86

Valuation

Certain Key Rules

Rule 4- When goods are not sold at the time of removal

Rule 5- Goods sold at different place

Rule 6- Valuation when price is not the sole consideration

Rule 7- Sale through depot/consignment agent

Rule 8- Valuation in case of captive consumption

Rule 9- Sale to/through a related person other than an ICU

Rule 10- Sale to/through Inter connected undertakings (ICU)

Rule 10A- Valuation in the case of job work

Rule 11- Best Judgment assessment

17


18/86

Export Procedure

Exports are free from taxes and duties.

Goods can be exported without payment of excise duty under bond under rule 19 or under

claim of rebate of duty under rule 18.

Container containing export goods should be sealed by excise officer. Self-sealing is

permissible. Excisable Goods should be exported under cover of Invoice and ARE-1 form. Export

should be within 6 months from date of clearance from factory.

Merchant exporter has to execute a bond and issue CT-1 so that goods can be cleared

without payment of duty. Manufacturer has to issue Letter of Undertaking.

Rebate under rule 18 can be either of duty paid on final products or duty paid on inputs

but not both.

EOU has to issue CT-3 certificate for obtaining inputs without payment of excise duty

18


19/86

Refund & Bonds

Ideally an assessee can claim refund in the following instances:

Due to mistakes there is an excess payment of duty

When export is made under a claim of rebate

Refund of unutilised CENVAT credit if final product is exported.

Provisional assessment is finalized

When during the process of an appeal there has been deposit made as a pre-

condition to hear an appeal and the appeal is decided in favour of the assessee

Bonds

Assessee is required to execute bond for various purposes like obtaining goods without

payment of duty, clearance of seized goods etc. B-1 bond is for exporting without

payment of duty, B-17 bond is for EOU.

19


20/86

Small Scale Industries (SSI)

Under the Central Excise Act, 1944, an SSI unit is defined as any unit whose turnover is

less than 4 crores in the last financial year and the turnover in any financial year must not

exceed Rs. 150 Lakhs.

If SSI unit avails CENVAT Credit on inputs then it has to pay normal duty on all

clearances and no SSI exemption is available.

SSI units eligible for SSI concession are required to pay duty on quarterly basis and file

quarterly return even if they do not avail the SSI exemption

Clubbing of Turnover:When goods are cleared from one or more factories by the same

manufacturer then the turnover may be clubbed together to calculate the exemption limit.

Where the specified goods are cleared by one or more manufacturers from the same

factory, the exemption shall apply to the aggregate value of clearances of all the

manufacturers from that factory.

20


21/86

Adjudication

Under the Central Excise Act, 1944 where any confiscation is legally provided for or any

penalty is to be imposed, such confiscation or penalty can be imposed by the Commissioner

of Central Excise.

Procedure- The Adjudicating Authority has to give the party an opportunity to be heard if

the party so desires.

The Adjudicating Authority has the power to adjourn proceedings if sufficient cause is

shown.

The Adjudicating Authority cannot adjourn the proceedings for more than 3 times.

When confiscation is adjudged, the adjudicating authority has the obligation to offer the

owner an option to pay fine of such amount which he thinks fit.

Confiscation or penalty in one proceeding cannot interfere with any other parallel

proceeding under the same Act.

21


22/86

Appeals

Under the Central Excise Act, 1944 appeal is allowed against orders passed by the Excise

authorities i.e. Superintendent, Assistant Commissioner, Deputy Commissioner, Joint

Commissioner, Additional Commissioner and Commissioner of Central Excise.

Such appeal will lie to the Customs, Excise and Service Tax Appellate Tribunal (CESTAT)

Against order passed by Superintendent, Assistant Commissioner, Deputy Commissioner,Joint Commissioner, Additional Commissioner of Central Excise:

First Appeal lies with Commissioner

Second Appeal lies with CESTAT

CESTAT is the final fact finding authority and such orders passed by it are final & binding.

In cases of substantial questions of law, appeals can be made to either the High Court or

the Supreme Court of India.

For classification/valuation of goods, appeal can be filed before the Supreme Court.

22


23/86

Authority for Advanced Ruling (AAR)

Definition of Authority for Advanced Ruling (AAR) as defined under The Customs Act,

1962 is extended for the purposes of Central Excise Act, 1944.

Any non-resident of India, resident setting up a joint venture in collaboration with a non-

resident, any joint venture for India or any wholly owned subsidiary of a parent foreign

company can apply to AAR for determination of any question of law.

AAR can be approached on questions pertaining to any classification of any goods,

applicability of any notification or principles to be noted for the purposes of determination

of any value of the goods under the Act etc.

The order passed by the AAR is binding only on the applicant and the Commissioner of

Central Excise only to the extent that there is no change in the facts on the basis of which

AAR gave a ruling.

23


24/86

Basic Concepts

First Stage Dealer-dealer who directly purchases goods

Second Stage Dealer-dealer who purchases goods from a first stage dealer

CENVAT ( Central Value Added Tax) Credit

CENVAT Scheme allows the credit of duty paid on inputs and capital goods and service

tax paid on input service. One of the aims of introducing CENVAT is to reduce the cascading effect of taxation

and therefore the duty paid on inputs can be adjusted against the payment of excise duty

on the final products or service tax on output service.

Under CENVAT set-off is allowed only in cases of excise duty paid on inputs and capital

goodsAND service tax paid on input service against the duty of excise and NOT for all

taxes and duties.

24


25/86

Basic Concepts

Salient Feature of CENVAT Credit Rules

Under Rule 3(1) of the CENVAT Credit Rules, all the taxes and duties mentioned therein

are very significant for purposes of availing the credit rule benefits.

Maintainance of separate accounts is required under Rule 3.

For Inputs, they are Receipts, Consumption & Inventory For Input Service, they are Receipt & Use

CENVAT Credit Scheme benefits do not extend to final products which are exempt.

CENVAT credit advantage cab be availed in case of input services only post payment of

service tax.

One-to-one relation is not required under CENVAT.

25


26/86

Basic Concepts

Budget 2012 Proposals

Due to increase in general excise duty rate from 10% to 12%, the merit rate of 5%

increased to 6%.

Rule 3(5) & 3(5A) amended which pertains to amount payable after credit has been taken

and cleared after use.

26


27/86

27

Customs Duty


28/86

Basic Concepts

Background

The power to levy customs duty lies with the Central Government (Entry 83, Union

List, VIIth Schedule)

Customs duty is generally levied on all the goods imported to India and very few goods

exported from India.

Reasons for such Levy:

Protection of domestic industry in India

Regulations of imports and exports

Collection of revenue

Legal Framework

1. The Customs Act, 1962 2. The Customs Tariff Act, 1975 3. Customs Valuation

( Determination of Price of imported Goods) Rules, 2007 etc.

28


29/86

Basic Concepts

The Customs Act, 1962 provides for three kinds of provisions:

a. Provisions concerning levy of duty

b. Provisions concerning various procedures

c. Provisions which are regulatory in nature

d. Miscellaneous Provisions

29

Types of Duties

Basic

Customs

Duty

SpecialAdditional

Duty

SafeguardDuty

Anti-Dumping

Duty


30/86

Import & Export of Goods

Import or Export of goods can take place only through the notified CustomsStation

Import Procedure:

Importer has to submit a Bill of Entry (BoE) divulging the details of goods, value etc.

Importer has to submit other documents like invoices, contracts, product literature etc so that

the Customs Officer can assess the imported goods under clearance. Importer to pay duty if the clearance is for home consumption.

Importer may also be required to execute a bond, if clearance is for warehousing.

Export Procedure

For the purposes of export Shipping Bill has to be submitted to the Customs officials which

may also include invoice, packing lists etc.

When applicable export duty has to be paid.

Export will depend on whether the export is prohibited or restricted.

30


31/86

Valuation

The Legal Frameworkfor Valuation are as follows:

The Customs Act, 1962; Provisions for valuation for export and

import of goods.

Customs Valuation ( Determination of Price of Imported

Goods) Rules, 2007 ('The Import Valuation Rules')

Customs Valuation ( Determination of Price of Exported

Goods) Rules, 2007 ('The Export Valuation Rules)

31


32/86

Valuation

32

Step I

Step II

Step III

Step IV

Under Rule 4 & 5, the price at which such goods

are sold to unrelated buyers in India are taken intoaccount.

Under Rule 7, the price given to unrelated buyers

is taken into account as the base price including

deductions such as profit margins, general

expenses, freight &insurance duties etc.

Under Rule 8, the profit margin earned by the

seller over the total cost of the export goods has to

be justified.

Under Rule 9, the Customs Value is arrived at

based on the information available along with the

best judgment of the SVB


33/86

Valuation

33

Export Valuation Rules

The Export Valuation Rules was introduced under Section 14 (1) of The Customs Act,

1962

The rationale behind introduction of such rules is to prevent deliberate over-valuation

of goods to claim higher export incentives

In cases of related party transactions, the given set of Rules need to be applied.

Key Rules of The Export Valuation Rules

Rule 3: Determination of the method of valuation

Rule 4: Export value by comparison

Rule 5: Computed value Method


34/86

Valuation

Rule 6: Residual Method

Rule 7: Declaration to be filed by the exporter

Rule 8: Rejection of declared value

Classification

Section

Chapters & Sub Chapters

Headings & Sub-Headings

34


35/86

Miscellaneous Provisions (Section 141-158)

Miscellaneous provision from Section 141-158, inter alia, deals with the following:

i. Recovery of sums due to Government

ii. Liability under Act to be first charge

iii. Duty deferment

iv. Power to take samples

v. Liability of principal and agent

vi. Amendment of documents

vii. Liability of agents appointed by the person in charge of the conveyance.

viii. Correction of clerical orders

ix. Publication of information respecting persons in certain cases

x. Rounding off of duty

35


36/86

Advance Ruling

The idea behind introducing Advance Ruling is to give findings on the question of law or

fact regarding the specified provisions of The Customs Act, 1962 pertaining to any activity

which is proposed to be undertaken by the importer/exporter.

Any non-resident of India, resident setting up a joint venture in collaboration with a non-

resident, any joint venture for India or any wholly owned subsidiary of a parent foreign

company can apply to AAR for determination of any question of law.

AAR can be approached on questions pertaining to any classification of any goods,

applicability of any notification or principles to be noted for the purposes of determination

of any value of the goods under the Act etc. The order passed by the AAR is binding only on the applicant and the Commissioner of

Central Excise only to the extent that there is no change in the facts on the basis of which

AAR gave a ruling.

36


37/86

Advance Ruling

Advance Ruling can be sought in respect of the following:

Classification of goods under the Act, applicability of exemption issued under S. 25(1)

Principles of valuation of goods under the Act, applicability of notifications issued in

respect of duties under the Act, determination of origin of goods in terms of the Rules

under the Tariff.

37


38/86

Settlement Commission

Central Government has constituted Settlement Commission for the purposes of settlement

of cases

Pre-Conditions for making application:

Firstly a show cause notice has to be issued to the applicant regarding import or export of

certain goods and the relevant Bill of Entry (BoE) or the shipping Bill for such import or

export must be filed with the application.

The additional amount of duty accepted by the applicant exceeds three lakh rupees.

The applicant has paid the additional amount of Customs duty.

There must not be a parallel proceding pending with any other Tribunal or any Court

Application cannot involve issues regarding classification of goods

Applicant is not permitted to withdraw the application.

38


39/86

Settlement Commission

Commission is empowered to grant immunity from prosecution, penalty, fine and interest.

(wholly or in part)

Immunity may bewithdrawn when:

Applicant fails to pay any sum due within prescribed time.

Commission is conviniced that the applicant has concealed any material fact or providedfalse evidence.

Commission in exercise of its discretionary power may send the case back to the Adjudicating

Officer.

39


40/86

40

Service Tax


41/86

Basic Concepts

41

Legal Framework

Governing Legislation

1. Chapter V of The FinanceAct, 1994

Regulatory Rules

1. Service Tax (Determination of Value)Rules, 2006

2. Service Tax Rules, 1994

3. Place of Provision of Service Rules, 2012

4. Point of Taxation Rules, 2011


42/86

Service Tax Compliance

42

Service Tax Compliance

Procedure/Steps

Registration Payment

Invoicing Records

Returns

Audit


43/86

Valuation

Valuation of taxable services for charging service tax is mentioned in Section 67 of Chapter

V of The Finance Act, 1994.

The value of taxable service (on which service tax is applicable) is the gross amount

charged by the service provider for the service provided.

When service is inclusive of service tax, service tax is calculated as if gross amount

includes such service tax.

The Service Tax (Determination of Value) Rules, 2006 (ValuationRules) provide for the

methodology to determine the value of services where the consideration is not received in

money. The method prescribed are as follows:

Where the value is unascertainable, then value is the equivalent consideration in money

which should not be cost of provision of service.

The value will be equivalent to the gross amount charged for provision of similar

service to another person in the ordinary course of trade.43


44/86

Valuation

Valuation Rules also prescribe that the computation of tax shall also include any cost or

expenditure incurred to provide a taxable service.

But cost or expenditure incurred as pure agent on behalf of the service recipient shall be

excluded on certain conditions.

Such conditions pertain to:

How and in what manner such service is to be provided

What qualifies as a pureagent

44


45/86

45

Negative List of Services


46/86

Introduction of a Negative List based Taxation

46

0

20000

40000

60000

80000

100000

120000

140000

Revenue in Crores

Service Tax collections have shown a steady increase in revenue from inception

Under the negative list regime, collections are budgeted to be Rs.124000 crores


47/86

Possibility of significant jump in tax revenues as services hitherto

not taxed come under tax net47

Positive List 119 specified categories of

services

Unspecified services were not

liable to tax

Neither beneficial from tax

administration nor complianceperspective

Various disputes.

Possible of overlap amongst

categories.

Negative List

Any service other than thosementioned in negative list shall be

subject matter of taxation.

Independent appraisal of servicesector prior to introduction of

GST

Smooth transition of GST

Clarity to reduce quantum of tax

controversy

Negative List of ServicesObjective in Indian Scenario


48/86

Essentials of service Definition of Service

Service means any activity carried out by a person for another for consideration,

and includes a declared services.

Key Factors of the above definition

Two or more parties

Services provided to two distinct entities.

Establishments located in a taxable territory and non taxable territory

belonging to the same entity.

Activity

Could be active, passive, and would include forbearance from an act.

Consideration

Includes both monetary and non monetary consideration

48


49/86

Essentials of service Negative List of Services

Consideration

Non Monetary Consideration

- Supply of goods and / or servicesin return

- Refraining / forbearing / tolerating/

performance of an Act

Monetary Consideration

- Consideration Received in theform of money

- Money defined under Section65B of the Finance Act includescash, cheque promissory note,bill of exchange, letter of credit,draft, pay order, postal orelectronic remittance

49


50/86

Declared Services

The definition ofservice under Section 65B includes DeclaredServices

The term DeclaredService has been defined under Section 66E as,

an activity carried out by a person for another for consideration and

specified in Section 66E of theAct

9 Declared Services

50


51/86

Selected Declared Services and its implications

Declared Service Comments

Renting Services Renting of residential dwellings coveredunder Negative List

No exemptions granted for non

commercial uses like private schools,

hospitals etc.,

Intellectual Property Rights Service Temporary transfer of patents registeredoutside India would also be covered

Information Technology Software Services May obviate issues pertaining to double

taxation

Hospitality Services Service portion in any activity where

goods being articles of human

consumption or any alcoholic drinks areconsumed.

Service Portion in the execution of a Works

Contract

Definition of Works Contract

51


52/86

Negative List of Services Section 66DA Birds eye view

52

Services provided bythe Government or

local authority

Services relating to

agriculture

Trading of Goods

PSUs/autonomous institutions set up by special Acts are

not covered. Those services where Government competes with private

players also not covered eg., life insurance, security

services.

Services provided by RBI not taxable

Process which does not alter the essential character of theagricultural produce, included in the negative list.

Services provided by APMC or commission agents for sale

or purchase of agricultural produce covered.

Handling, storage and warehousing of agricultural produce

covered

Leasing of vacant land for agricultural purpose covered

Services auxiliary for trading of goods like activities of a

commission agent or a clearing and forwarding agent who

sells goods on behalf of another for a commission, would

attract service tax, since, only the trading of goods has

been included in the negative list.

f S S


53/86


53

Services provided bya foreign diplomatic

mission

Transportation of

passengers

Transportation of

goods specified

services

Does not cover services provided by an international

organization

Transport of passengers in public transport, metered taxis,

metro, monorail covered.

Charter vessels, cruises not covered.

Service provided by a vessel in inland waterways covered

Services provided by railways, air, GTA, coastal waterways

transport not covered.

Goods and value specific exemptions also available

N ti Li t f S i S ti 66D


54/86


54

Process amountingto manufacture or

production of goods

Selling of space or

time slots for

advertisement

Toll charges

Process amounting to manufacture, even where exempted,

under the Central Excise Law, would not attract service tax.

Non taxable sale of space for advertisement in bill

boards, public places, buildings, conveyances, cell phones,

automated teller machines, internet, aerial advertising, sale

of space for advertisement in print media.

Taxable Sale of space or time for advertisement to be

broadcast on radio or television

National highways and State highways are covered.

Collection charges or service charges paid to any toll

collecting agency, not covered in negative list.



55/86


55

Betting, gambling,

lottery

Entry toentertainment events

and access to

amusement facilities

Transmission or

distribution of

electricity

Auxiliary services that are used for organizing or promoting

betting or gambling events are not covered in the negative

list.

Membership of club not covered in amusement facility.

Event manager organizing an entertainment event not

covered in this entry.

Only Government utilities / licenses covered

Services provided by way of installation of gensets or

similar equipment by private contractors for distribution of

electricity not covered in this entry.

Charges collected by developers/housing society not

covered



56/86


56

Specified servicesrelating to education

Renting of residential

dwelling for use as

residence

Financial Sector

Services by international schools giving internationalcertifications covered in this entry.

Private tuitions, placement services not covered in

negative list.

Education auxiliary services separately exempted

Normal trade parlance guest house, hotel, motel, inn,

campsite, lodge, house boat, not included.

Mixed usage of dwellings to be tested on a case to

case basis.

Services in relation to loans, advances or deposits

consideration represented by interest/discount covered.

Any service charges or administrative charges or entry

charges, recovered in addition to interest on loan not

covered in negative list.

N ti Li t O ll I t


57/86

Negative List Overall Impact

No categorization of Services

Single code for payment of service tax(old codes continue to be valid for thepurpose of statistical analysis)

Exemptions to education and healthservices.

Service Tax applicability on a reverse

charge mechanism Wider tax coverage

Issues pertaining to double taxation stillprevail

57


58/86

58

Place of Provision of Services

(POPOS) Rules, 2012

Pl f i i f S i R l 2012


59/86

Place of provision of Service Rules, 2012

Introduced to determine Place of Supply of services

Purpose is to determine the jurisdiction for taxability of the services

Replaces the Export of Service Rules, 2005 and Taxability of Services (Provided

from outside India and received in India) Rules, 2006

59

Place of pro ision of Ser ice R les 2012


60/86


General or Basic Rule (Rule 3)

Place of provision is the location of the recipient

Location of the recipient:

Place of centralized registration

Else

Location of business establishment (or)

Location of use of the Service (or)

Where used at multiple locations, place most directly concerned with such use

- The usual place of residence, i.e., place of incorporation

60

Place of provision of Service Rules 2012


61/86


Performance based services (Rule 4)

Physical Work on Goods : Place of performance

Electronic Work on Goods : situation of goods

Not applicable to temporary imports into India for repair / reconditioning / re-

engineering for purpose of re-export.

Services provided to an individual which requires presence of recipient : place of

performance.

61



62/86


Services related to immovable property (Rule 5)

Location of immovable property

Includes services of real estate agents, advisors, accommodation,

constructions, architects, interior decoration.

Services relating to events (Rule 6)

Place where event is held.

62



63/86


Services provided at more than one location (Rule 7)

Place of provision of service is where the greatest proportion of the service is

provided.

No clarity as to whether the proportion is to be determined in terms of actual

work or value.

Rule 8 where service provider and recipient are both located in the taxableterritory, the place of provision of service is the taxable territory.

63



64/86


Specified Services (Rule 9)

Banking / Finance institution / NBFC Services to account holders : Service

provider

Online Information and data base services : Service provider.

Intermediary services : Service provider

Hiring of transport (upto 1 month) : Service provider

GTA Services (Rule 10) (excluding courier / mail) :

Place of provision is the location of person liable to pay tax.

64



65/86


Passenger related services (Rule 11)

Passenger Transport Embarkation point.

Related on board Services Scheduled place of departure

65


66/86

66

Bundled Services

Bundled Services


67/86

Bundled Services

Section 66F

Concept

Bundle of provision of various services wherein an element of provision of one

service is combined with an element or elements of provision of any other

service or services.

Determination of service category

Reference to a service not to include reference to a service used for providing

main service.

Specific description to be preferred over general description If various elements of service are naturally bundled in the ordinary course of

business service which gives the essential character.

If various elements of service are NOT naturally bundled in the ordinary course

of business service which gives the highest service tax liability.

67


68/86

68

ValuationWorks contracts

Valuation of Service Portion Works contract


69/86


Where actual value of goods transferred in the execution of works contract isavailable with the Company

Value of service is :

Gross amount charged for the works contract (excluding value added tax charged)

less

Actual value of property in goods transferred in the execution of the works contract.

69



70/86


Where actual value of goods transferred in the execution of works contract is notavailable with the Company

Value of service is :

Total Amount =Gross amount charged for the works contract + Fair market value of all goods

and services supplied in or relation to the execution of works contract amount charged for

such goods or services Value added tax or sales tax.

Original works means

i. all new constructions;

ii. All types of additions and alterations to abandoned or damaged structures on land that

are required to make them workable;

iii. Erection, commissioning or installation of plant, machinery or equipment or structures,

whether pre-fabricated or other wise;70

In the case of works contract entered intofor execution of original work

40$ of total amount charged forworks contract

In the case of works contract entered into for

maintenance or repair or reconditioning or

restoration or servicing of any goods

In the case of any other type of works contract

70% of total amount charged for works

contract

60% of total amount charged for works

contract


71/86

71

Domestic Reverse Charge

The new reverse charge mechanism


72/86


S.No. Nature of service Particulars Percentage ofservice tax

payable by thepersonprovidingservice

Percentage ofservice tax

payable by theperson receivingthe services

1. Works contract Individual, HUF, proprietary

firm, partnership firm

50% 50%

2. Any service Any person who is located in

a non-taxable territory

NIL 100%

3. Support Service* Government or local authority NIL 100%

4. Supply of manpower

for any purpose

including security

services

Individual, HUF, proprietary


25% 75%

5. Renting or hiring any

motor vehicle designed

to carry passenger



60% (on non

abated value)

40%(on non

abated value)

6. Renting or hiring any

motor vehicle designed

to carry passenger



NIL 40% on abated

value

72



73/86


S.No. Nature of service Particulars Percentage ofservice tax

payable by thepersonprovidingservice

Percentage ofservice tax

payable by theperson receivingthe services

7. Transportation by

Road

Goods transport agency NIL 100% on 25%

value

8. Legal Services Individual and Firm of

Advocates

NIL 100%

9. Directors Fees Services provided by Non

Executive Directors

NIL 100%

73

New Reverse Charge Mechanism


74/86

New Reverse Charge Mechanism

Important Aspects

Small scale benefit is available to the Service provider only.

Liabilities of both the Service provider and Service Receiver are independent of

each other.

Valuation of Service receiver and Service Provider may be on different principles

Registration, payment and return filings for service tax could be applicable to

entities only account of reverse charge

Payment of service tax under reverse charge only by way of cash and not byutilising Cenvat credit.

Payment of tax under reverse charge and Cenvat credit thereof are independent

of each other.

74


75/86

75

Foreign Trade Policy

Basic Concepts


76/86

Basic Concepts Legal Framework

The Foreign Trade Policy (FTP) issued by the Government of India is issued in

exercise of powers under Section 5 of The Foreign Trade (Development and

Regulation) Act, 1992 (FTDRA)

Objective of FTP are as follows:

Regulation of imports and exports through the Indian Trade Classification

Encouraging exports (goods & services)

To facilitate lower cost of production of mostly export goods

Earning and increasing foreign exchange reserve

Generating employment

IncreasingIndias impact and influence in the global market

With this aim, Government releases the Export Import Policy every 5 years. Current Policycovers 2009-2014

76

Basic Concepts


77/86

Basic Concepts

Basics of the Policy:

There are basically two types of benefits provided. They are:

Pre-Export Benefits: Includes schemes like Advance license, Export Promotion Capital Goods

Scheme (EPCG), Export Oriented Unit Scheme (EOU), Special Economic Zone Scheme

(SEZ).

Post-Export Benefits: Includes schemes like Duty Entitlement Pass Book (DEPB), Duty Free

Replenishment Certification Scheme (DFRC), Duty Drawback, Served from India Scheme,

Vishesh Krishi Udyog Yojana, refund of terminal excise duty for deemed exports.

IEC- All importers and exporters are required to obtain an Importer Exporter Code

which is a mandatory registration requirement.

RCMC- Registration with the export promotion council of the relevant industry is

mandatory in order to enjoy benefits of any of the schemes under FTP.

All benefits are implemented by a notification.

77

Export Promotion Schemes under FTP


78/86

Export Promotion Schemes under FTP

There are several Export Promotion Schemes under FTP. They are as follows:

i. Served from India Scheme (SFIC)

ii. Vishesh Krishi and Gram Udyog Yojana (VKGUY)

iii. Focus Market Scheme (FMS)

iv. Focus Product Scheme (FPS)

v. Duty Entitlement Pass Book (DEPB)

vi. Export Promotion Capital Goods Scheme (EPCG)

vii. Export Oriented Scheme (EOU)

78

Special Economic Zones (SEZ)


79/86


Background

Special Economic Zone (SEZ) as a Scheme has evolved from the existing concept of

the Export Processing Zones (EPZ) policy.

Back in 1960s the aim behind EPZ Scheme was to enhance foreign exchange earnings,

develop and foster the growth of export-oriented manufacturing industries and most

importantly generate employment opportunities across India.

Central Government however had proposed to convert the existing EPZ Scheme into a

Free Trade Zone (FTZ) which never saw the light of the day and finally in the year

2000 SEZ Scheme was introduced.

The SEZ Scheme has developed over the year with the introduction of a statute and

various Rules made under it.

79



80/86


Successful SEZ Scheme has lead to the following benefits:

Significant surge in investment by both foreign and domestic entities;

Rise in exports;

Developments happening a very large scale;

And very importantly it generated a lot of employment skilled and unskilled workforce.

Host of fiscal benefits were given to the business enterprises that included exemption

from customs duty, stamp duty, sales tax etc. thus adhering to the objectives of setting a

liberal economic zone fostering growth and development of the economy.

80

Key Highlights of FTP 2009-2014


81/86

Key Highlights of FTP 2009 2014

Gems & Jewellery Sector

To neutralize duty incidence on gold Jewellery exports, it has now been decided to allow

Duty Drawback on such exports.

A new facility to allow import on consignment basis of cut & polished diamonds for

the purpose of grading/ certification purposes has been introduced.

To promote export of Gems & Jewellery products, the 13 value limits of personal

carriage have been increased from $ 2 million to US$ 5 million in case of participation

in overseas exhibitions.

Special Bonus Benefit Scheme A new scheme has been introduced to provide special assistance to certain specified

sectors such as Engineering, Chemical & Pharmaceutical.

The rate of duty credit is 1% of FOB value of exports.

81

Key Highlights of FTP 2009-2014


82/86

Key Highlights of FTP 2009 2014

Apparel Sector

Based on the previous statistics of exports made to mostly US and EU and realizing

the higher level of potential to achieve significant increase in the export along with

more employment benefits, Market Linked Focus Product Scheme (MLFPS) has been

extended for exports made to US and EU under chapter 61 & 62.

Duty credit has been made available to exports made till March 2012 at 2% of FOB

value of exports.

Agriculture Sector

To reduce transaction and handling costs, a single window system to facilitate export ofperishable agricultural produce has been introduced. The system will involve creation

of multi-functional nodal agencies to be accredited by APEDA

82


83/86

83

Professional Opportunities



84/86

pp

1. Where there are large projects in government or commercial sphere by proper

tax planning.

2. Initial Registration

3. Initial Disclosures to department

4. Initial Procedures.

5. Monthly /Quarterly payment of Tax / duties.

6. Return Verification Filing of returns / filing of bill of entry

7. IDT or Customs / Excise / Service Tax Review and Quarterly Audit

8. Review just before departmental audit

9. Assistance during departmental IAP or CAG audit.

10. Opinions / Clarifications

11. Transaction structuring

12. Effect of budget/recent changes on activity13. Refunds of Service Tax and Central Excise

14. Past errors rectification

15. Departmental letter reply

16. Show Cause Notice Reply

84



85/86

pp

17. Representation before adjudicating authority

18. Reply / Representation at appellate forums

19. Assistance to advocate at High Court / Supreme Court

20. Outsourcing of the Function

21. Other Area

85


86/86

Thank You

pgcidt vat

Documents