Taxation Law-india

TAXATION LAWINDIA

SHARING BETWEEN THE CENTRE & STATE

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The central government get the taxes from Income Tax ( except on agriculture), excise (except alcoholic drinks ) and custom duty.

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The state government get their tax revenue from sales tax, excise on alcoholic drinks and on agricultural income.

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The municipalities get tax revenue from octroi and house property tax

CLASSIFICATION

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DIRECT TAXES  Personal Income Tax  Corporation Tax  Wealth Tax

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INDIRECT TAXES  Customs Duty  Excise Duty  Value Added Tax (VAT)  Service Tax

WHAT ARE GOODS ?

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Goods must be movable ; Goods must be marketable, unless the test of marketability is satisfied, the item will not become a good and thus would be beyond taxation; For an item to be marketable, an actual sale is not necessary, the article should be capable of being sold. The is to be levied even when goods are produced and consumed within the factory itself and are not sold.

WHAT CONSTITUTES MANUFACTURED GOODS ?

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Manufacture is a process which results in the production of a commercially different article or commodity from the raw material; The Identity of the original article should be lost and a new product should emerge; Excise duty is levied on items which are either manufactured or produced;

WHO IS A MANUFACTURER ?

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Those who personally manufacture the goods in question ;

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Those who gets the goods manufactured by employing hired labour ;

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Those who get the goods manufactured by other parties.

TYPES OF EXCISE DUTIES 

Specific Duty 

This duty is levied on the basis of a certain unit like weight, length, volume etc., ( Duty on cigarettes is paid on the basis of the length of the cigarette )

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Ad valorem Duty 

Duty is levied on the basis of value of goods. The assessable value is calculated on the basis of the normal wholesale price for independent buyers at the factory gates.

TYPES OF EXCISE DUTIES 

Fixed Assessed Value 

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MRP 

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For some commodities, the government has fixed the assessed value for the purposes of calculation of the tax. (Pan masala ) The declared retail price on a package is taken as the value of the goods. ( Cosmetics, paints, footwear etc., )

Production Capacity 

The central excise officials will estimate the annual production capacity and fix a rate

WHO COLLECTS EXCISE DUTY

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Excise duty is levied and collected by the central excise department under the authority of the Central Excise Act and Central Excise Rules, 1944 ;

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Article 246 of the constitution of India, empowers the central government to levy a duty on all articles produced and manufactured in India ( including tobacco), but excludes alcohol and opium.

REGISTRATION 

Every manufacturer has to register with the central excise authorities ;

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A separate registration is required for each factory of the manufacturer, in which duty paid goods are intended to be stored and cleared;

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Applicant has to give the factory layout, details of the machinery and the intended place of storage;

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The goods can be moved out from the store room only after CENVAT / MODVAT credit.

CENVAT 

Central Value Added Tax eliminates multiple taxation ;

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The tax is charged only on the value addition which has been done from the stages of raw material to the final product;

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In a VAT system the tax paid on all inputs can be deducted from the excise paid on the output;

EXCISE AND SSI 

The small scale Industries ( SSI ) with a turnover of less than Rs.3Crores are eligible for concessions ;

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Items such as pan masala, tobacco products, marble, watches etc., even though manufactured in SSI units are not eligible for concessions.

ORGANISATION STRUCTURE 

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The apex body which is in charge of the administration of the process of collection of both customs duties and central excise duties is the Central Board of Excise and Customs ( CBEC ), which was set up under the Central Board of Revenue Act, 1963. CBEC Consists of a Chairman and five members.

ORGANISATION STRUCTURE …       

CBEC Chief Commissioner Commissioner Additional / Joint Commissioner Assistant Commissioner ( Division ) Superintendent ( Ranges ) Field Officers ( Inspectors )

VALUE ADDED TAX

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VAT taxes every sale transactions however it levies tax only on the value created by seller ;

ILLUSTRATION

Sale of Computer component for Rs.80,000 X

Y

VAT Paid @ 4% is Rs.3,200

Assembles three computers and prices them at Rs.30,000 each

He would pay only Rs.400 as the tax @4%.

z

DEALER 

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Every One who is buying and selling in relation to business; Even a Casual trader has been included; A casual trader is a person who undertakes occasional transactions in the nature of business involving buying, selling, supply or distribution of goods or conducting any exhibition-cum-sale.

QUANTUM OF TAX 

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Bullion, gold, silver or precious metals or items and jewellery made out of them, precious stones and semiprecious stones are to be taxed at 1% of their turnover; For all other commodities there are three rates of taxation 4%, 12.50% and 20%. Items including drugs, medicines, agriculture, industrial inputs and capital goods are taxed in the lowest slab of 4% ; Petroleum products are charged in the highest slab of 20% All the other goods which are not listed are to be charged at the rate of 12.5%

WORKING OF VAT 

INPUT TAX: 

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Tax paid by the vendor / seller on the goods which he/she is selling to a buyer

OUTPUT TAX  

The Tax liability of seller for a period. This need to be worked out by taking account of each sale and the rate of taxation for the goods.

TAX CREDIT 

Tax credit for capital goods is to be claimed in equal proportion over three years beginning the year of purchase;

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Tax credit cannot be claimed in relation to production, sale or distribution of exempted products ( Ex: A person producing books may have paid input tax for printing ink. However, as books are exempted from taxation tax credit cannot be availed for printing ink )

WHEN TAX CREDIT CANNOT BE CLAIMED        

Central Sales Tax paid on inter-state purchases ; Central Excise duty and Service tax ; Local Sales Tax or VAT paid to other states ; Goods acquired for personal use ; Goods acquired from a non-registered dealer ; Goods acquired without tax invoice; Goods sent to other states as branch transfer Goods such as liquor, lottery tickets, petrol, diesel, aviation turbine fuel and other motor spirit since their prices are fully market determined.