Indirect Tax Program - 5th Sep 2008

8/2/2019 Indirect Tax Program - 5th Sep 2008

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PRSN / VVK / RAD

Indirect Taxes Dept. - HQ


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TAXES ONCITIZENS

Income Tax

Sales Tax /VAT

Service Tax

Registration Tax

(Stamp Act)

Professional

Tax

Custom Duty

Property Tax

Wealth Tax

Entry Tax /Octroi

Excise DutyIndirectDirect

In future...

... may ?

Water TaxAir Tax

(Breathing)Living Tax

Tax onanything

Death Tax


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3

CommercialDealings in

GOODS

Commercialdealings in

SERVICES

S A L E- S a l e s Ta x / VAT

DEEMED SALE- Wo r k s C o n t r a c t

T a x

MANUFACTURING E x c i s e D u t y

IMPORTS- C u s t o m s D u t y

PROVIDING SERVICE- S e r v i c e Ta x

+


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SERVICES

Service

Tax12.24%

GOODSVAT

12.5%

GOODS&SERVICE(GST TAX)12% to 16%In year2010

BUSINESSACTIVITY


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ELEMENTS OF SALE

S

L

E

-- GOODS i.e. MOVABLE

-- PARTIES-BUYER/SELLER

-- CONSIDERATION - PRICE

-- DELIVERY WITH TITLEINVOICE

A


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CLASSFICATION OF SALE

LOCAL SALE

INTER STATE SALE

IMPORT / EXPORTSALE

MISC. SALES of above all

S A L E


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INCIDENCE OF LEVY

Single Point Levy

Multi Point Levy

Double Point Levy


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DISTINCTION BETWEEN

SALE

DEEMED SALE

46 th CONSTITUTION AMENDMENT ACT


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You secure a Purchase Order for manufacture & supply ofBoiler accessories for agreed price,

-- Transaction construed as Sales

Instead secure a Work Order for manufacture, ransportation,loading / unloading, installation, commissioning & h andingover the job foragreed contract price.

-- Transaction construed as Works Contract


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TAXATION CONCEPT UNDER TRANSITIONTAXATION CONCEPT UNDER TRANSITION

LST / CST concept with single point taxation scheme.

TRANSITIONTRANSITIONTowards new concept VAT VAT VAT VAT VAT !- Service Tax , Service Tax Service Tax !

Inherently VAT provides for :

Tax levy on multi-point basis; With eligibility of tax set-off; Set-off conceptually is broad based


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VAT concept, however, provides an inbuilt

mechanism for tax set-off which paid at the previous stage, to be known as Input Tax Credit ITC.

ITC benefit under VAT concept covers input as well ascapital goods to be availed by traders or manufacturers.

ITC benefit can be availed only against local tax paid purchase document I.e., VAT vendor bill indicating taxcomponent.

ITC benefit under VAT concept covers closing stock of goods as on 31/03/2005, subject to conditions.

VAT CONCEPT


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ITC benefit in full to be allowed on making

local or Inter state sale.

ITC benefit to an exporter of goods is allowed by way of refund.

ITC benefit to a dealer effecting stock transfer will be allowed for an amount exceeding 4% of

ITC.

Under VAT concept the applicable rate of tax have been categorized in minimumnumbers i.e., 0%, 1% , 4%, 12.5%.

VAT CONCEPT


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Under VAT concept a consolidated rate is

prescribed and thus other levies to be abolished.e.g.,Surcharge, TOT etc., Under VAT concept, however, levy of entry taxwhile permissible same to be made vatable.

Presently CST Act 1956 dealing with Inter Statetransaction to remain undisturbed.

Existing sales tax registration under State Actwhile to be replaced by a TIN number, CST registrationwill be the same.

VAT CONCEPT


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WCT PAYMENTSSCHEME

ACTUAL BAISIS(ascertain Gross

construction materialvalue, supported by

Books of Accounts &Proof)

COMPOUNDINGBASIS

2% - 4% on Contract

Value, Subject tocertain conditions .


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LOCAL SALES IN TN eligible for 100% ITC benefit

INTER STATE SALES FROM TN eligible for 100% ITC benefit

EXPORT SALES FROM TN eligible for ITC full refund.

STOCK TRANSFER FROM TN eligible for ITC exceeding 4%

LOCAL MFG. GOODS FOR ABOVE DESPATCHES as above.

INPUT - LOCAL TAX PAID GOODS


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INPUT - CST PAID GOODS / IMPORTED

LOCAL SALES IN TN eligible for 100% ITC benefit

INTER STATE SALES FROM TN eligible for 100% ITC benefit

EXPORT SALES FROM TN eligible for ITC full refund.

STOCK TRANSFER FROM TN eligible for ITC exceeding 4%

LOCAL MFG. GOODS FOR ABOVE DESPATCHES as above.


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FINANCIAL BURDEN

TRADER Vs MANUFACTURER


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Sl.No Particulars

Pre-VAT

PostVAT Remarks

Rs. Rs.1 Sale by X & Co .111 11 .11111 Manufacturer 1 ST @ % / VAT @ . %11 111 .1111 .1111

1 Resale price by Y& Co . 111 11 .111 11 Wholeseller

1 ST @ Nil / VAT @ . %111 Nil .11 11

1 Gross sales price . 11111 .11111

1 VAT payable by Y&Co NA . 111 ( Rs. . - Rs. . )1111 1111

1 Re-sale price by K&Co . 111 11 .11111 Retailer 1 ST @ Nil / VAT @ . %111 ... .1111

1 Final price to consumers . 11111 .111111 VAT payable by K&Co NA . 111 (Rs. . - Rs. . )1111 1111

11 Gross Tax Element . 1111 .1111Tax Component higher by %111

TRADING ACTIVITYPRE & POST VAT REGIME

MANUFACTURING ACTIVITY


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Sl.No ParticularsPre-VAT

PostVAT

1 Procurement Costa) Inputs . 11111 .11111b) Consumables

1 Tax on Procurement * ( %)1.1111 ( . %)

111

.11111 Mfg. Charges + Profit . 11111 .111111 Mfg. Selling Price . 111111 .1111111 ST@ . %/ VAT@ . %111 111 .11111 .111 11

1 Invoice Price . 111111 .1111111 VAT Payble . 111 .11111 Gross Tax Element . 11111 .111111 Total Tax % % 11 %11

MANUFACTURING ACTIVITYPRE & POST VAT REGIME

Figure in Rs.


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LOCAL SALE INTER STATE SALE


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INTER STATE SALES - CONCEPT

Movement of goods

from one State to another

in pursuance of contract of sale


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CST APPLICABLE RATE

2% generally for sale to registered dealeragainst C-Form

VAT Rate of origin State will applicable if sale to unregistered dealers / without form

4% applicable to declared goods


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( under CST Act)

- Prohibition on State Act

- Changes w.e.f 11/5/02

b d l


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Prescribed Declaration - CST Act

FORM - A

FORM - J

T O


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FORM - C

ISSUE OF C-FORM - PURPOSE

Use in manufacture / processing of goods for sale

Use in mining

Use in generation / distribution of power

Packing of goods for sale / resale

Use in telecommunication

CLASSIFICATION OF INTER STATE SALE


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C SS C O O S S

Direct Inter State Sale Subsequent Inter State Sale

A & CoTamil Nadu

B & CoAndhra Pradesh

Purchase Order10 Nos. of Tractors

Rs. 10 Lacs each

A & CoTamil Nadu

B & CoAndhra Pradesh

Purchase Order 10 Nos. of TractorsRs. 10 Lacs each

C & CoKaranataka

Purchase Order10 Nos. of Tractors

Rs. 9 Lacs each

INTER STATE SALE DURING MOVEMENT OF GOODS


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L&T subsequent seller L&T subsequent seller

Effecting transit sale-endorsement of LR

INTER STATE SALE DURING MOVEMENT OF GOODS- CST ACT

Selling dealer ABB-Blore

(from outside TN)

NLC - clientNLC - client dealer receivinggoods

A - ABB Blore

B - Seller / Deemed Seller L&TC - Client NLC - TN

(A)

(B)

(C)

E - 1 C e r t i f i c a t e

C - F o r m

C - F o r m

NLC - PO

L&T - PO

M o v e m e n t o f c o n s i g n m e n t


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CONTRACT CONDITIONSELEMENTS


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Contractprice

Contractconditions

Directive of

clientContract

nature

BASKETOF

ELEMEN TS

Financialimplicati

on

Procurement policy

Legal option eligibility

Statutechanges

Statusof

client

ELEMENTS

CONTRACT CONDITIONS


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- Effect on Indirect Taxes

Contract natureStatus of clientDirective of clientContract conditionsContract pricePrice variation

Procurement policyLegal option eligibilityStatute - changes

ASKET OF ELEMENTS


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Clause 14.4

For the purpose of the contract it is agreed that thecontract price specified in Article 2 (Contract priceand Terms of Payments) of the contract agreement is

based on the taxes, duties and levies and charges prevailing at the date 7 days prior to the last date of bid submission . If any rates of tax are increased or decreased , a new tax is introduced an equitableadjustment of the contract price shall be made to fullytake into account any such change by addition to thecontract price -------------


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Bidding Requirement


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All Inclusive contracts

Statutory variations payable / not payable

Whether client issue any material If so, free issue or chargeable

Any specific BOQ for supply value and client is capable of issuing form C.

Whether any deemed export benefit is available for the project.

Whether any fabrication will be carried out at site.

Status of client viz. Non profit organization, SEZ.

Place of execution of work

Scope of work to carried out.


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PROCUREMENT STAGE

FROMLOCAL RD FROMINTER STATEFROM

OWN SOURCE

Used as suchTransferred after

ConversionAgainst our C - Form


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BOUGHT OUT GOODS

INTER STATE INTRA STATE

CONCESIONAL RATE@ 2% AGAINST OUR

C FORM

On value addition

CONDITION

For declared goods @ 4% ST only For others FULL Applicable Rate


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EXECUTION STAGE

Strategy will depend upon

The State VAT scheme

nature of job description of work

Involvement/usage of material etc.,

STRATEGIES


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STRATEGIES

Composition jobs (Rate 4 %) Vs Vat Payment on actual (12.5 %)

Ascertain the material content

Find out the proportion - 60 % or 30 %

Availability in execution state and related landed cost

Reduce CST Sale (from works & Transit sales) from purchases.

Take the VAT credit

Variations between 10% to 30 % -ideal to go for actual method


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SERVICE TAX - PROFILE


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INTRODUCED IN JULY 1994 FINANCE ACT 1994

APPLICABLE THORUGHT COUNTRY - EXCEPT J&K.

TAXABLE SERVICE BASE WIDENED - 114 SERVICES.

RATE OF TAX GRADUATED - 5% > 8% > 10% > 12%

OTHER LEVIES CESS 2% + 1% ( effective rate 12.36%)

BENEFIT OF CENVAT & ABATEMENT AVALIABLE.

COMPREHENSIVE LEGISLATION FOR SET-OFF CENVAT CREDIT RULE

2004. 10TH SEP 2004.Cont

SERVICE TAX - PROFILE


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ON RENDERING SERVICES TO OTHERS

ON DEEMED TAXABLE SERVICES EG., GTA

TAX PAYABLE ON RECEIPT OF PAYMENT

MAJOR CHANGES OR ADMINISTRATION ROUTED THROUGH

NOTIFICATIONS.

NO SPECIFIC STATUTE TO ADMINISTER SERVICE TAX

* * * *


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CENVAT CREDIT


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CENVAT CREDIT - DISTRIBUTION


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CENVAT distribution is restricted to tax component.Distribution of CENVAT can be effected by an office of

manufacturer or service provider.

Such distribution shall be in relation to taxable output

service of recepient unit.

Eligibility of distributed credit can be availed unless covered by

documents as recognised.

Cross distribution of credit is prohibited.Registration is mandatory for Service Tax distributor


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CENVAT CREDIT - RESTRICTIONS


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Benefit not available on LDO, HSD & Petrol.

Benefit not available for Motor vehicle in general.

Benefit of ED not available to service provider opting

benefit of specific notification.eg. 12/2003; 15/2004

Benefit eligibility is restricted to accumulated credit available

* * * * *


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Goods shall beGoods shall be marketablemarketable

Goods manufactured in IndiaGoods manufactured in India

Its description conforms an entryIts description conforms an entryin the CET Act 1985.in the CET Act 1985.

CH 73.08.90Steel structures


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MANUFACTURING


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- INCLUDES !

MANUFACTURING

PRODUCTIONFABRICATIONCONVERSION

REAPAIRING

ED T i V l


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ED Transaction Value

Negotiated priceCaptive consumption

Cost of Design & DrawingsFree issue materialsFreight


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Deemed Exports

DEEMED EXPORT BENEFITS

UNDER EXIM POLICY


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Sl.l.Noo

Category ofategory ofSuppliesupplies

Benefitsenefits Conditionsonditions

1 8.2 (d) Any Project8.2 (d) Any Project All three benefits are All three benefits areavailableavailable

Projects on ICB basis,Projects on ICB basis,Projects funded by such agenciesProjects funded by such agencies


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Deemed Exports

notified by Dept. of Economic Affairs,notified by Dept. of Economic Affairs,MOF ( Appex- 13)MOF ( Appex- 13)Tender evaluation as per the legalTender evaluation as per the legal

guidelines given by the funding agenciesguidelines given by the funding agenciesand also to be evaluated onand also to be evaluated on deliveredeliveredduty paid pricesuty paid prices for the goodsfor the goods

manufactured abroad.manufactured abroad.

2 8.2 (g)8.2 (g)Power Projects & Power Projects &

RefineriesRefineries

Benefits listed underBenefits listed under(a) and (b) only(a) and (b) only

availableavailable

ICB procedures have been followed atICB procedures have been followed atindependent power producer ( IPP) /independent power producer ( IPP) /

Engineering, Procurement Contracts (EPC)Engineering, Procurement Contracts (EPC)stagestage

For availing benefitFor availing benefitlisted under (c) ie.,listed under (c) ie.,TED.TED.

Mega power projects as listed in Customs Noti.Mega power projects as listed in Customs Noti.

21/2002.21/2002.

Inter State Power plantInter State Power plant

For Thermal Power Plant (1000 MW or more)For Thermal Power Plant (1000 MW or more)For Hydel Power plant ( 500 MW or More)For Hydel Power plant ( 500 MW or More)

Power purchase agreement is required, asPower purchase agreement is required, as

specified central electricity authority.specified central electricity authority.

Sl.l .Noo

Category ofategory ofSuppliesupplies

Benefitsenefits Conditionsonditions


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Deemed Exports

3 8.2 (j)8.2 (j)Nuclear projectsNuclear projects

All the 3 benefits are All the 3 benefits areavailableavailable

Procedure of competitive bidding has been followedProcedure of competitive bidding has been followed( not ICB).( not ICB).

Nuclear projects specified in list 43 at Sl.No. 401 of Nuclear projects specified in list 43 at Sl.No. 401 of Notification 21/2002 customs.Notification 21/2002 customs.Capacity of 440 MW or more certified by an officerCapacity of 440 MW or more certified by an officernot below the rank of Joint Secretary to the Govt.not below the rank of Joint Secretary to the Govt.of India in the Dept. of Atomic Energy.of India in the Dept. of Atomic Energy.

4 8.2 (f)8.2 (f)

Any Project Any Project All the 3 benefits are All the 3 benefits are

availableavailable Projects on ICB basisProjects on ICB basis ..

Zero customs duty benefit as accorded by customsZero customs duty benefit as accorded by customsnotification.notification.Similarly the same benefits are also available forSimilarly the same benefits are also available forclearing goods with Nil Excise duty.clearing goods with Nil Excise duty.This benefit is as per CEA 1944.This benefit is as per CEA 1944.


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Advance Authorization Scheme - at a glance


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Deemed Exports

An Advance authorization can also be availed by the subcontractor of the main contractor to suchproject provided the name of the subcontractors appears in the main contract.

Such Authorization can also be issued for supplies made to United Nations or other multilateral agencies and paid for

in free foreign exchange.

Advance Authorization is issued for duty free import of inputs are exempted from payment of basiccustoms duty, additional customs duty, education cess, anti dumping duty and safeguard duty if any.

However imports for supplies covered under 8.2 (i) & (j) will not be exempted from payment of applicable anti

dumping and safe guard duty if any.


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COMMERCIAL & INDUSTRIALCONSTRUCTION SERVICE

Sl.N Taxable Service Effective Comments

CATEGORY OF SERVICES IMPACT ON US


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o - our scope Date

1 Construction servicesexcluding:Road, Airport, Railway,Transport terminal, bridge,tunnel, long distancepipeline, dam

10 th Sep2004

Our sales prior to10 th Sep. 04 not liableto tax.

Sale turnover of listed jobs qualifies forfull exemption

2. Commercial & IndustrialConstruction servicesexcluding :Road, Airport, Railway,Transport Terminal, bridge,

tunnel, long distance pipeline dam. Further additionmade

16 th June2005

Scope modifiedFollowing addition made:Const. of pipeline orconduit, finishing servicesviz., glazing, plastering,painting, floor and walltiling, wall covering andwall papering etc.,

Cont..


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CONSTRUCTION ACTIVITY- SERVICE TAX


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Sl. No.

Service w.e.f

1 Commercial or Industrial Construction services 10/9/2004

2 Erection, Commissioning or Installation Services 1/7/2003

3 Construction of Complex services 18/4/2005

4 Site, Formation, Clearance, Excavation, Earthmoving andDemolition services.

16/6/2005

5 Works contract services. 1/6/2007

6 Goods Transport Agency service. 1/1/2005

C i l & I d i l C i i l di

COMMERCIAL OR INDUSTRIAL CONSTRUCTION SERVICE


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Commercial & Industrial Construction services excluding :Road, Airport, Railway, Transport Terminal, bridge, tunnel, long

distance pipe line dam. Port

Scope modifiedFollowing addition made: Const. of pipeline or conduit,finishing services viz., glazing, plastering, painting, floor andwall tiling, wall covering and wall papering etc.,


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Service

Tax E r e

c t i o n ,

I n s t a l l a t i o n ,

Commissioning.


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EXTRACT FROM SERVICE TAX NOTIFICATION 1/2006 DT. 1/3/2006

Sl.No Description of Taxable Service Conditions Percentage-


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5 (zzd) Erection, commissioning orinstallation, under a contract forsupplying a plant, machinery orequipment and erection, commissioningor installation of such plant, machineryor equipment. This exemption is optionalto the commissioning and installationagency.

Explanation.- The gross mountcharged from the customershall include the value of theplant, machinery, equipment,parts and any other materialsold by the commissioning andinstallation agency, during thecourse of providing erection,commissioning or installationservice.

33


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GOOD TRANSPORT AGENCY


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GOOD TRANSPORT AGENCY

SERVICE

GOODS TRANSPORT AGENCY SERVICE


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In general service tax is payable by the service provider except Goods transport agency

Service tax for GTA is payable by party conforming toconditions list

Service tax @ 12.24% on 25% of the Gross freight chargeswithout the benefit of CENVAT.

Eligible exemption Freight charges Rs. 1,500/- for fullconsignment and Rs. 750/- for part consignment.

Cont..

Sl.No Consignor Consignee Payment to goodstransport agency by

Taxable PersonService Tax Goods Transport Agency Taxable Person


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1 SpecifiedCategories

SpecifiedCategories

Consignor

Consignor


SpecifiedCategories

Consignee

Consignee


Individual Consignor

Consignor


Individual Individual

Goods transportagency

5 Individual Individual Made by any of the person ie., either

consignee or consignor

Goods transportagency

ied Categories : 1) Factory 2) Company 3) Corporation 4) Society5) Co-operative society 6) Dealer of excisable goods,

7) Any body corporate established, or a partnership firm registered


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Exclusions


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Works contract relating the following works arenot taxable :-

a) Roadsb) Airportsc) Railwaysd) Transport terminalse) Bridgesf) Tunnelsg) Dams &

h) Ports

Discharge of Service tax on Works Contract Services


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On Actual basis

On Composition basis

1) CONTRCT PRICE LESS SALE PRICE OF GOODS2) CONTRACT PRICE LISTED DEDUCTIONS

12.36% on 33%CONTRACT PRICE

CENVAT benefit - ST(with restriction)

12.36% ON FULLCONTRACT PRICE

CENVAT benefit - ED/ST(No restriction)

12.36% ONCONTRACT PRICELess SALE PRICEOF THE GOODS:

CENVAT benefit -

4..12 % ONCONTRACT PRICE

CENVAT benefit ST


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( ) CENVAT benefit ST(with restriction)

Commercial Construction

Construction of ComplexEre, Instln. or Commg.

ST

WORKS CONTRACTSERVICES wef. 1/6/07includes

Commercial ConstructionConstruction of Complex(including finishing services)Ere, Instln. or Commg.EPC Contract


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Renting of Immovable property w.e.f 01/06/2007

Renting of immovable property for use in the course orfurtherance of business or commerce

Renting of immovable property includes :-

renting; letting; leasing; licensing or other similararrangement.


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Immovable property includes : -


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Building and part of building, Land adjourning to the above buildings.

The common areas and other facilities

Building located in a complex or an industrial estate,


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ST exemption on following Immovable properties:-


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Land used for agriculture, aquaculture, farming, mining purposes

Land used for educational, sports, circus, entertainment and parking purposes

Building used exclusively for residential purposes.

Building used for purpose of accommodation, including hotels,

hostels, boarding house, holiday accommodation, tents,camping facility .

Partly used immovable property


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In case immovable property used for business orcommerce and partly for residential purposes

deemed to be immovable property usedfor business or commerce

It will attract Service tax on entire value


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By any person providing any service directly or indirectly

Service are provided or to be provided to a client

In relation to recruitment or supply of manpower, temporarily orotherwise

Scope includes :

Pre recruitment screening, verification of credential & antecedents of candidate and authenticity of the documents by the candidate.

Amendment An analysis

On 16/06/2005On 16/06/2005


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Man power recruitment or supply agency service.

Due to amendment supply of man power also comes in the fold of levy.

On 18/04/2006On 18/04/2006

Commercial concern becomes person

Due do this amendment any person rendering will have to pay service tax.

Service care

OUR OPERATIONS - implications


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Deputation of staff to JV / SPV

Transfer of employee to S&A companies

As per valuation rules any amount collected or booksadjustment / D/n or C/n will attract service tax for supply

of man power.


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Indirect Tax Program - 5th Sep 2008

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Transcript of Indirect Tax Program - 5th Sep 2008