Summer Internship Project Report

On

TAXATION
In

A Private Sector Enterprise

At

INDO ASIAN FUSEGEAR LTD.: Plot no.2 Sector 2

SIDCUL

HARIDWAR
(Submitted For the Partial Fulfillment of the Requirement for the Degree of
Master in Business Administration)

Project Guide: Submitted By:

Mr. Atul Mittal Pooja Kuckreja

Sr. Manager – Finance & Accounting, MBA. (2009-11)

INDO ASIAN FUSEGEAR LTD.

Uttrakhand Technical University

Dehradun
 ACKNOWLEDGEMENT
Any work is not complete and perfect without the sincere help and guidance from
various people who affect our life directly as well as indirectly. This training report
of mine would not have reached its fulfillment hadn’t it been for the guidance and
support given to me by various people whom I came across in the organization.
This report is the result of cooperation of the officials of the various departments
in the organization, without which this project wouldn’t have been completed. So
I would like to extend my sincere gratitude to all those people who have helped
me in completion of this report.

My sincere thanks to the Management of INDO ASIAN FUSEGEAR Ltd for

providing me the opportunity to complete my Summer Internship Project in their
esteemed organization. I wholeheartedly acknowledge the intellectual stimulation
of my esteem guide Mr. Atul Mittal for his continuous help and guidance
throughout the training duration in spite of his busy schedule.

I would also like to thank my faculty guide Mr. Ranit Kishore of College Of
Engineering Roorkee for his immense help in guiding me and preparing this
report.

Lastly I would like to thank College Of Engineering Roorkee for

providing me with a wonderful opportunity to expose myself to the corporate
world and learn the intricacies of running a business and letting the manager
within me to grow substantially.

Thank you.
 DECLARATION

I Pooja Kuckreja, a student of MBA of College Of Engineering Roorkee, under

Uttarakhand Technical University, Dehradun, uttarakhand, (2009 – 11) do hereby
declare that the Summer Project Report entitled “A study on Standard Costing” is
the outcome of my own work and the same has not been submitted to any
University/Institute for the award of any Degree/Diploma.

Under the guidance of: Prepared by:

Mr. Ranit Kishore Pooja Kuckreja

MBA (2009-2011)

Place: COER School of Management

 PREFACE

Practical work experience is the integral part of individual learning. An individual

who is learning management concept has to undergo this practical experience to
be a future executive.

Master of Business Administration (MBA) is two year program which inserts

management knowledge in an individual and to make individual completely
practical, so practical experience is must.

INDOASIAN FUSEGEAR Ltd offered me a project on “TAXATION” to understand

taxation concept of an individual & of the organization.
 CONTENTS
Page No.

Acknowledgement 2

Certificate 3

Preface 4

Declaration 5

Chapters

a) Company Profile
b) Process of a production company
c) Finance Department
d) Taxation
i) Income Tax
ii) Service Tax
iii) Sales Tax
e) Research Methodology
f) Bibliography
 Objectives
1. To compute the tax liability for the individual member of the company.
2. To find out the sales tax liability of the company for depositing it within the
time limit.
3. To find out the service tax liability of the company for depositing it within
the time limit.
4. To find out the excise tax liability of the company for depositing it within the
time limit.
 CHAPTER 1
COMPANY PROFILE
 COMPANY PROFILE

NAME OF THE COMPANY: INDO ASIAN FUSEGEAR LTD.

ADDRESS OF THE PLANT: Plot no.2 Sector 2

SIDCUL

HARIDWAR

Products manufactured by the Haridwar plant:

MCBs: Miniature circuit breakers

RCCBs: Residual current circuit breakers

MCCBs: Moulded Case Circuit Breakers

ACBs: Automatic Circuit Breaker

TOTAL UNITS OF THE PLANT:

UNIT1: Wire

UNIT2: Switchgear

UNIT3: EDGP

UNIT4: Trading
HEADOFFICE OF THE COMPANY: 51 K.M. G.T.Kamal Road, MURTHAL
Distt. Sonepat

Haryana, INDIA

CORPORATE OFFICE: B88, Sector 83, NOIDA

BOARD OF DIRECTORS:

Chairman-cum-Managing Director: V. P Mahendru

Non-Executive Director : R. C. Bansal
Non-Executive Director : Dr. Sal Ramachandran
Non-Executive Director : A. K. Ghosh
Joint Managing Director : P. K. Renade
Executive Director : Vinay Mahendru
AVP (Legal) & Company Secretary : Rakesh Dhody

Auditors
J. C. Bhalla & Co.
Noida

Bankers
State Bank of Patiala
State Bank of India
Standard Chartered BanK

Punjab national Bank

 COMPANY DETAILS
Plants Nine
Marketing Offices 30 across India, 8 warehouses
Total Manpower 3,000
Depots 12
Marketing Team 275
Channel Partners 500
Retail Outlets 15000
Customers 54 Countries
Educated to Class XII All (Minimum Qualification)
International ASTA, VDE, TUV, CB,ISO-9000
Certifications
National certifications BIS (ISI Mark), NABL,CPRI/ERDA
IT Backbone Dedicated Fiber Optics Connectivity With All Plants/
Offices/Branches. Using Online Order Booking
System &
Production Planning System
Test Facility Short Circuit Lab to IEC 17025 (15 kA)
Plant Locations:

Switchgear Plants:

1. 51 Kms. G.T. Karnal Road, Murthal, Distt. Sonepat, Haryana-131027

2. By-Lane, Nakodar Road, Jallandhar 144 003 ( Punjab).
3. B-200, Phase II, Noida, Distt. Gautam Budh Nagar, U.P. 201 305.
4. Plot No. 21-23 Sector No. 5, Parwanoo, Distt. Solan, Himachal Pradesh 173 220.
5. Plot No. 2, Sector 2, SIDCUL, Ranipur, Haridwar, Uttarakhand.

CFL Lighting Plants :

1. A-39, Hosiery Complex, Phase II Extension, Noida, Distt. Gautam Budh Nagar,
U.P. 201305.
2. Plot No. 10, Sector 4, SIDCUL, Ranipur, Haridwar, Uttarakhand.

Wires & Cables Plant:

1. Plot No. 2, Sector 2, SIDCUL, Ranipur, Haridwar, Uttarakhand.

LOCATION OF THE DIFFERENT PLANTS OF THE COMPANY
Haridwar Lighting Plant:
Plot No. 10,Sector-4,Integrated Industrial
Estate,Sidcul,Haridwar-249 402 (Uttaranchal)
Tel.: +91-1334-320862, 322107-08

Noida Lighting Plant:

A-39, Hosiery Complex,
Phase-II Extn., Noida-201 305(UP)
Tel: +91-120-3042222 Fax:+91-120-2563442
Email:sales@indoasian.com
See Route Direction
Haridwar Switchgear & Wire Plant:
Black-B,Ptot No.2,Sector-2,Integrated Industrial
Estate,Sidcul, Haridwar-249 402(Uttranchal)
Tel.: +91-1334-235464-65

Jalandhar Switchgear Plant

By Lane, Nakodar Road, Jalandhar-144 003
(Punjab) Tel: +91-181 -4639900
Fax: +91-181-4639925
Email:jalandhar@indoasian.com
Murthal Switchgear Plant:
51 Km., G.T. Karnal Road,
Murthal-131 027 (Haryana)
Tel.: +91-130-3058101,3058129 Fax:+91-130-
2482422
Noida Switchgear Plant:
B-200, Phase-II,Noida-201 305(UP)
Tel.: +91-120-3042222 Fax:+91-120-2563422
Email: sales@indoasian.com
See Route Direction

Indo Simon Plant Haridwar

Plot No. 26, Sector-4
SIDCUL Haridwar - 249 403 (Uttarakhand)
Tel: +91-1334-329801

Noida Corporate Office

B-88,Sector-83. Noida-201305,U.P
Tel.: +91 120 3042222,Fax: +91 120 3096800/
874, Email: sales@indoasian.com
See Route Direction
Segment Information

Information about Business segments Primary

Business Segments
The company has considered business segment as the primary segment for
disclosure. The products included in each of the reported business segments are
as follows :-

Switchgear includes MCBs, HRC Fuses, Feeder Pillars, RCCBs, Distribution Boards,
Switches etc.

Lighting includes Compact Fluorescent Lamps, Fluorescent TubeLights and

Luminaires etc.

Cable and Wires includes Wires and Cables etc.

The Cable & Wires segment has been identified as a reportable segment in the
current year.

Segment Revenue relating to each of the above business segments includes Other
Income, where applicable.

The above business segments have been identified considering:

a) The nature of products and services
b) The differing risks and returns
c) The organization structure, and
d) The internal financial reporting systems.
 MISSION
The mission has now expanded and evolved further to include exciting new
products, new markets. It also involves a far greater responsibility to mankind and
to our increasingly vulnerable planet.

VISION
Our Vision "enriching quality of life by ensuring safe, efficient and convenient use
of electricity" has been our guiding force for development of new and better
products. The culture of innovation and constant change has played a key role in
our success.
 PRODUCTS OF THE COMPANY

ACBs MCCBs Changeover Switches

Switch Disconnector Fuses HRC Fuses & Fuse Bases Rewirable Switches

Feeder Pillars MPCBs Contactors

 Certificates

• 1st BIS and DIN HRC Fuses in India.

• 1st Rewirable Switches in deep drawn enclosures in India.
• 1st MCB with 9kA breaking capacity. 1st to produce RCCMs in India.
• 1st Switchgears Company to receive ISO 9001.
• 1st to manufacture CFLs in India.
• 1st to offer B certified MCBs.
• 1st to get ISO 9001 for all plants under one certificate.
• 1st to get ISO 9001 for all plants under one certificate

Department of the company:

HR department

Accounts department

Production department

Store department

Purchase department

Quality department
INDO ASIAN FUSEGEAR’S SWITCHGEAR PLANT IS ACQUIRE BY
LEGRAND:

FRENCH electrical products maker legrand was acquired the switchgear business
of DELHI based INDO ASIAN FUSEGEAR for Rs.600 crore.

“Both companies will keep their current network. We intend to accelerate the
growth rate of both the companies by continuing sustained growth investments in
launching new products”, said by Yves Martinez Managing Director of LEGRAND
India.

INDO ASIAN FUSEGEAR shares ended 5% higher at Rs.108.75 on the Bombay Stock
Exchange on Friday 23, July 2010.

This is the second big acquisition of an Indian electrical products company’s

business by a global major. Japan’s Panasonic bought an 80% stake in the
privately – held Anchor electricals for Rs.2000 crore three years ago.
PROCESS OF A PRODUCTION COMPANY

PLANNING TO PRODUCE
ISSUE PURHASE ORDER
; DECISION TO
TO VENDOR
PURCHASE

RECEIVE THE RAW REQUIREMENT BY THE

MATERIAL IN STORE SHOP FLOOR

ISSUE TO SHOP FLOOR PRODUCTION

FINISHED GOODS
(BY MATERIAL ORDER RCEIVED
MOVEMENT
REQUIREMENT)

SALE
 TAXES:
A fee charged ("levied") by a government on a product, income, or activity.

TAXES are also imposed by many subnational entities. Taxes consist of direct tax
or indirect tax, and may be paid in money or as its labour equivalent (often but
not always unpaid labour). A tax may be defined as a "pecuniary burden laid upon
individuals or property owners to support the government, a payment exacted by
legislative authority." A tax "is not a voluntary payment or donation, but an
enforced contribution, exacted pursuant to legislative authority" and is "any
contribution imposed by government, whether under the name of toll, tribute,
tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name."

CHARACTERISTICS OF TAXES:
1. A charge or burden laid upon persons or property for the support of a
government.
2. A lesson to be learned; a task.
3. To charge; to accuse; also, to censure; -- often followed by with, rarely by of
before an indirect object; as, to tax a man with pride.
4. To assess, fix, or determine judicially, the amount of; as, to tax the cost of
an action in court.
5. Charge; censure.
6. A sum imposed or levied upon the members of a society to defray its
expenses.
7. A charge, especially a pecuniary burden which is imposed by authority.
8. To subject to the payment of a tax or taxes; to impose a tax upon; to lay a
burden upon; especially, to exact money from for the support of
government.
9. A task exacted from one who is under control; a contribution or service, the
rendering of which is imposed upon a subject.
10. Especially, the sum laid upon specific things, as upon polls, lands, houses,
income, etc.; as, a land tax; a window tax; a tax on carriages, and the like.

A charge levied by the government upon property, which is determined by its

financial worth.
 TYPES OF TAXES:
a) Direct taxes
b) Indirect taxes

DIRECT TAXES: The term direct tax generally means a tax paid directly
to the government by the persons on whom it is imposed.

Examples include some income taxes, wealth tax some corporate taxes and
transfer taxes such as estate (inheritance) tax and gift tax. In this sense, a direct
tax is contrasted with an indirect tax or "collected" tax (such as sales tax or value
added tax (VAT)); a "collected" tax is one which is collected by intermediaries who
turn over the proceeds to the government and file the related tax return.

INDIRECT TAXES: In the colloquial sense, an indirect tax (such as sales tax,
value added tax (VAT), or good and services tax (GST) is a tax collected by an
intermediary (such as a retail store) from the person who bears the ultimate
economic burden of the tax (such as the customer). The intermediary later files a
tax return and forwards the tax proceeds to government with the return. In this
sense, the term indirect tax is contrasted with a direct tax which is collected
directly by government from the persons (legal or natural) on which it is imposed.
Some commentators have argued that "a direct tax is one that cannot be shifted
by the taxpayer to someone else, whereas an indirect tax can be."

An indirect tax may increase the price of a good so that consumers are actually
paying the tax by paying more for the products. Examples would be fuel, liquor,
and cigarette taxes. An excise duty on motor cars is paid in the first instance by
the manufacturer of the cars; ultimately the manufacturer transfers the burden of
this duty to the buyer of the car in form of a higher price. Thus, an indirect tax is
such which can be shifted or passed on.
 INCOME TAX:
Income of previous year is chargeable to tax in the immediately following
assessment year. Tax incidence, however, depends upon residential status of a
taxpayer.

RESIDENT STATUS OF AN INDIVIDUAL:

a) Resident and ordinary resident [section 6(1), 6(6)(a)]

b) Resident but not ordinary resident
c) Non resident

Annual tax levied by the Federal government, most states, and some local
governments, on an individual's or corporation’s net profit.

Surcharge and Education Cess—

Levy of surcharge has been withdrawn for personal income tax payers . Earlier
surcharge was levied at 10% having total income exceeding Rs. 10,00,000/- on
such cases.

“Education Cess on Income-tax” and “Secondary and Higher Education Cess on

income-tax” shall continue to be levied at the rate of two per cent and one per
cent respectively of income-tax.
India Income tax slabs for assessment year 2010-2011 for Men
Income tax slab (in Rs.) Tax

Upto 1,60,000 No tax

1,60,001 to 3,00,000 10% of (Total income – 1,60,000)

3,00,001 to 5,00,000 14,000 + 20% of (Total income – 3,00,000)

Above 5,00,000 54,000 + 30% of (Total income – 5,00,000)

India Income tax slabs for assessment year 2010-2011 for women
Income tax slab(in Rs.) Tax

Upto 1,90,000 No tax

1,90,001 to 3,00,000 10% of (Total income – 1,90,000)

3,00,001 to 5,00,000 11000 + 20% of (Total income – 3,00,000)

Above 5,00,000 51,000 + 30% of (Total income – 5,00,000)

India Income tax slabs for assessment year 2010-2011 for Senior citizen
Income tax slab(in Rs.) Tax

0 to 2,40,000 No tax

2,40,001 to 3,00,000 10% of (Total income – 2,40,000)

3,00,001 to 5,00,000 6,000 + 20% of (Total income – 3,00,000)

Above 5,00,000 46,000 + 30% of (Total income – 5,00,000)

India Income tax slabs for assessment year2011-2012 for Men
Income tax slab (in Rs.) Tax

Upto 1,60,000 No tax

1,60,001 to 5,00,000 10% of (Total income – 1,60,000)

5,00,001 to 8,00,000 34,000 + 20% of (Total income – 5,00,000)

Above 8,00,000 94,000 + 30% of (Total income – 8,00,000)

India Income tax slabs for assessment year 2011-2012 for women
Income tax slab(in Rs.) Tax

Upto 1,90,000 No tax

1,90,001 to 5,00,000 10% of (Total income – 1,90,000)

5,00,001 to 8,00,000 31000 + 20% of (Total income – 5,00,000)

Above 8,00,000 91,000 + 30% of (Total income – 8,00,000)

India Income tax slabs for assessment year 2011-2012 for Senior citizen
Income tax slab(in Rs.) Tax

0 to 2,40,000 No tax

2,40,001 to 5,00,000 10% of (Total income – 2,40,000)

5,00,001 to 8,00,000 26,000 + 20% of (Total income – 5,00,000)

Above 8,00,000 86,000 + 30% of (Total income – 8,00,000)

Assessment year [Sec 2(9)]:
Assessment year means the period of 12 months commencing on first day of April
every year. Assessment year may be defined as a year in which the income of the
previous year is to be assessed. In some countries it is called “tax payer”.

Previous year [Sec 3]:

Income of the previous year is taxed in the immediately following assessment
year. In some countries it is called “income year”.
 TAX LIABILITY :- How to find out

Details Amount
1)find out gross total income -
2)less: deductions under sec 80C to 80U -
3) Find out net income (1 - 2) -
4)divide the net income into following
a) Income subject to special tax -
b) Remaining income subject to normal tax
5) find out income tax on net income
a) Tax on income according to the rate -
b) Tax on remaining income at normal rate
6) Add: Surcharge -
7) find total [(5) + (6)] -
8) Add: Education Cess (2%) -
9) Add: Secondary & higher education cess -
10) Find out total [(7) + (8) + (9)] -
11) Deduct: Rebate under section 86, 89, 90, 90A, or 91 -
12) Tax liability [(10) + (11)] -
13) Add: Interest/penalty etc. -
14) Less: Pre-Paid taxes (i.e. Advance tax; Self assessment -
tax; TDS; TCS)
15) Tax Payable [(12 + 13) – (14)] -
HEADS OF THE INCOMES [Sec 14] / GROSS TOTAL INCOME:
1. Salaries
2. Income from house property
3. Profits & gains of business or professions
4. Capital gains
5. Income from other sources

Total income = Gross total income – deductions u/s 80

{Sec 2(45)} {sec 80B(5)}

MEANING OF ‘SALARY’ [Sec 17(1)]:

The term ‘salary’ is included the following items:

a) Wages
b) Any annuity or pension;
c) Any gratuity
d) Any fees, commissions, perquisites or profits in lieu of or in addition to any
salary or wages;
e) Any advance of salary;
f) Any payment received by an employee in respect of any period of leave not
availed by him.
RELIEFS UNDER SECTION 89

If an individual receives any portion of his salary in arrears or in

advance, or receives profit in lieu of salary, in can claim in term of
section 89. The relief is also available in respect of family pension
received in arrears.

Computation of relief when salary or family pension has been received

in arrears or in advance [Rule 21A (2)]-

The relief on salary received in arrears or in advance (to be referred as

“the additional salary”) is computed in the manner laid down in rule
21A(2) as under:

1) Calculate the tax payable on the total income, including the

additional salary of the relevant previous year in which the same is
received.
2) Calculate the tax payable on the total income, excluding the
additional salary of the relevant previous year in which the same is
received.
3) Find out the difference between the tax at (1) and (2).
4) Compute the tax on the total income after excluding the
additional salary in the previous year to which such salary relates.
5) Compute the tax on the total income after including the additional
salary in the previous year to which such salary relates.
6) Find out the difference between the tax at (4) and (5).
7) The excess of tax computed at (3) over the tax computed at (6) is
the amount of relief admissible under section 89 (1). No relief is,
however, admissible if the tax computed at (3) is less than the tax
computed at (6). In such a case, the assessee – employee need not
apply for relief.
 DEDUCTIONS (Under SEC 80C to 80U)

DEDUCTIONS UNDER SECTION 80C:

a) Deduction is available to an individual or a HUF only.
b) The maximum amount under this section is Rs. 1,00,000.

Deduction under 80C = The whole of gross qualifying amount

(OR) Rs. 1,00,000 [whichever is less]

GROSS QUALIFYING AMOUNT:

a) Life Insurance Premium

Payment made by government employees to “central government
employees insurance schemes”

“Jeewan Mitra”, “Jeewan Balya” or “Jeewan Sathi” or other whole
life or endowment policies of LIC etc.
b) Contribution towards the following funds:

Statutory provident fund.

Recognized provident fund.

Public provident fund. (Rs.100 to Rs.70000 pa)
c) Payment towards the cost of the purchase or construction of a
residential house.,

Any sum paid as tuition fee.

Any sum deposited as 5 year time deposit in an account under the
post office time deposit rules, 1981.
DEDUCTIONS UNDER SECTION 80CCC:
Deduction in respect of contribution to certain pension funds.

DEDUCTIONS UNDER SECTION 80CCD:

Deduction in respect of contribution to pension scheme notified by central
government.

Deductible amount – The whole of such amount paid or deposited

(Or) 10% of his salary

(whichever is less)

DEDUCTIONS UNDER SECTION 80CCF:

Deductions in respect of subscription to long term infrastructure bonds (Sec
80CCF) – Section 80CCF has been introduced for the assessment year 2011-12.
Under this section, an individual or a HUF can claim a deduction of whole of the
amount paid or deposited during the previous year 2010-11 as subscription to
notified long-term infrastructure bonds. Deduction under this section will be
available only for the assessment year 2011-12 and the quantum of deduction
cannot exceed Rs.20000. this deduction will be over & above the existing overall
limit of deduction on savings of up to Rs. 1 lakh under sections 80C, 80CCC &
80CCD.
DEDUCTIONS UNDER SECTION 80D:
Deduction in respect of medical insurance premium:

Fixed – Rs.15000/Rs.20000 (In case of senior citizen)

The aforesaid premium can be paid by any mode other than cash.

DEDUCTIONS UNDER SECTION 80DDB:

Deduction in respect of medical treatment of specified diseases or aliments.

The amount of deduction is Rs. 40000 or the amount actually paid;

Whichever is less.

DEDUCTIONS UNDER SECTION 80DD:

Deduction in respect of maintenance including medical treatment of a
handicapped dependent who is a person with disability.

Fixed – Rs.50000/ Rs.75000

Rs.100000 (2010-11) : In case of disability of 80% or above

Deductions under sec 80E:
Deduction in respect of repayment of loan taken for higher education.

Loan for spouse/ or any child.

Tax payer is a legal guardian.

Such amount is paid out of his income chargeable to tax.

The amount deductible is:

The amount paid during the year by way of repayment of loan &/or interest
thereon.

Rs. 40000
Whichever is lower.

The deduction is available for a maximum 8 years or till the principal amount of
such loan together with interest is liquated, whichever is earlier.

Deductions under 80G:

Deduction in respect of donations to certain funds, charitable institutions etc.
 Return of income (SEC 139)
Return form:
ITR 1 – for individuals having income from salary & interest.
ITR 2 – for individuals & HUF’s not having business/professional
income.

ITR 3 – for individuals/ HUF’s being partners in firms & not carrying out
business or profession.

ITR 4 – for individuals & HUF’s having income from a properitary

business or profession.

ITR 5 – for firms, AOPs, & BOIs.

ITR 6 – for companies other than companies claiming exemption under
SEC 11.

ITR 7 – for persons including companies required to furnish return

under SEC 139 (4A)/ (4B)/ (4C) / (4D)

ITR 8 – return for Fringe Benefits.

 TIME OF FILLING RETURN OF INCOME [SEC 139(1)]

Different situation Due date of

submission of return
Where the assesse is a company September 30
In a case where accounts of the assesse are September 30
required to be audited under any law
Where the assesse is a “working partner” in a September 30
firm whose account are required to be audited
under any law
In any other cases July 31
 Service tax

SECTION 67 of FINANCE ACT, 1944 contains provisions for valuation of taxable

services for charging service tax.

Service tax is a form of indirect tax imposed on specified services called "taxable
services". Service tax cannot be levied on any service which is not included in the
list of taxable services. Over the past few years, Service tax been expanded to
cover new services. The objective behind levying Service tax is to reduce the
degree of intensity of taxation on manufacturing and trade without forcing the
government to compromise on the revenue needs. The intention of the
government is to gradually increase the list of taxable services until most services
fall within the scope of Service tax. For the purpose of levying Service tax, the
value of any taxable Service should be the gross amount charged by the Service
provider for the Service rendered by him.

Service tax was first brought into force with effect from 1 July 1994. All Service
providers in India, except those in the state of Jammu and Kashmir, are required
to pay a Service tax in India. Initially only three services were brought under the
net of Service tax and the tax rate was 5%. Gradually more services came under
the ambit of Service tax. The rate of tax was increased from 5% to 8% w.e.f 14
May 2003. From 10 September 2004 the rate of Service tax was enhanced to 10%
from 8%. Besides this 2% education cess on the amount of Service tax was also
introduced. In the Union Budget of India for the year 2006-2007, Service tax was
increased from 10% to 12%. On February 24, 2009 in order to give relief to the
industry reeling under the impact of economic recession, The rate of Service tax
was reduced from 12 per cent to 10 per cent.

Some of the major services that come under the ambit of Service tax are:

• Telephone
• Stockbroker
• General Insurance
• Advertising agencies
• Courier agencies
• Consulting engineers
• Custom house agents
• Steamer agents
• Clearing & forwarding agents
• Air travel agents
• Tour operators
• Rent-a-Cab Operators
• Manpower recruitment Agency
• Mandap Keepers
• Architects
• Interior Decorators
• Management Consultants
• Practicing Chartered Accountants
• Practicing Company Secretaries
• Practicing Cost Accountants
• Real Estates Agents/Consultants
• Credit Rating Agencies
• Private Security Agencies
• Market Research Agencies
• Underwriters Agencies
• Scientific and technical consultancy services
• Photography
• Convention
• Telegraph
• Telex
• Facsimile
• Online information and database access or retrieval
• Video-tape production
• Sound recording
• Broadcasting
• Insurance auxiliary activity
• Banking and other financial services
• Port
• Authorised Service Stations
• Leased circuits Services
• Auxiliary services to life insurance
• Cargo handling
• Storage and warehousing services
• Event Management
• Cable operators
• Beauty parlours
• Health and fitness centres
• Fashion designer
• Rail travel agents
• Dry cleaning services
• Maintenance & repair services
• Commission and Installation Services
• Internet café
• Franchise Services
• Outdoor Caterer’s service
• Airport Services
• Transport of Goods by Air Services
• Business Exhibition Services
• Intellectual Property Services
• Opinion Poll Services
• TV or Radio Programme Services
• Survey and Exploration of Minerals Services
• Travel Agent's Services other than Rail and Air travel agents
• Forward Contract Services
• Transport of goods through pipe line or other conduit service
• Site preparation & clearance Services
• Dredging Services
• Survey & Mapmaking Services
• Cleaning Services
• Membership of Clubs & Associations
• Packaging Services
• Mailing list compilation & Mailing Services

SMALL SERVICE PROVIDER: Small units whose turnover less than Rs. 10
lakh p.a. are exempt from service tax.
 SALES TAX
Sales Tax is one of the most important Indirect Tax for purpose of taxation by
State Governments. Revenue from CST goes to State from which movement of
goods commences.

Restrictions on powers of taxation

Restrictions on power of State Government on imposition of tax on sale or

purchase of goods are provided in Article 286 of Constitution of India, as follows :

State Government cannot impose tax on sale or purchase during imports or

exports; or tax on sale outside the State. [Art 286(1)]
Parliament is authorised to formulate principles for determining when a sale or
purchase takes place (a) outside the State (b) in the course of import and
export. [Article 286(2)]
Parliament can place restrictions on tax on sale or purchase of goods declared
as goods of special importance and State Government can tax such declared
goods only subject to these restrictions [Article 286(3)].

Under these powers, CST Act has defined the terms ‘sale outside a State’ and ‘sale
during export/import’. Provisions for ‘declared goods’ have also been made in the
CST Act.
Charging section of CST

As per the Constitution, tax on Inter State sale/purchase can be levied only by
Union Government. CST Act has been enacted for this purpose.

Section 6(1) of CST Act provides that subject to other provisions of the CST Act,
every dealer shall be liable to pay tax under this Act on all sale of goods (other
than electrical energy) effected by him in the course of Inter-State trade or
Commerce. Section 6(1) is called as ‘Charging Section’ as it imposes levy on sale of
goods on Inter-State sale.

IMPORTANT WORDS IN CHARGING SECTION -

(a) Levy is on sale of goods (i.e. levy is not on purchases). Levy: An amount of
money, such as tax, that you have to pay to the government or organization. They
imposed 5% levy on alcohol. A new tax levied on consumers of luxury goods.

(b) It is on sale as defined under section 2(g)

(c) Sale should be of goods as defined in section 2(d)

(d) There is no levy on electrical energy, though electrical energy is ‘goods’.

[Section 6(1)]

(e) Sale should be in course of inter-state Trade or commerce as defined in section

3.

LIABILITY SUBJECT TO OTHER PROVISIONS OF ACT - The levy is subject to other

provisions of Act, i.e. the liability is not absolute. e.g. section 8(1) prescribes lower
rate of taxes in certain cases, section 6(2) exempts subsequent sales by transfer of
documents during movement of goods etc. Proviso to section 6(1) exempts sale of
goods in the course of exports. Thus, the levy is subject to these and other
exemptions.
Meaning of ‘Inter State Sale’

Section 3 of CST Act defines Inter-State sale or purchase as follows: A sale or

purchase of goods shall be deemed to take place in the course of inter-State trade
or commerce if the sale or purchase

(a) Occasions the movement of goods from one State to another or

(b)It is affected by a transfer of documents of title to the goods during their

movement from one State to another. Thus, inter-state sale can be as per section
3(a) or section 3(b).

What is ‘Document of Title of Goods’ - When the goods are handed over to the
carrier, he hands over a receipt to the seller. The seller sends the receipt to buyer.
The buyer gets delivery of goods on submission of the receipt to the carrier at
other end. The receipt of carrier is ‘document of title of goods’. The words
‘document of title’ is defined under section 2(4) of Sale of Goods Act. Such
document is usually called

(a) Lorry Receipt - LR in case of transport by Road

(b) Railway Receipt - RR - in case of transport by rail

(c) Bill of Lading - BL - in case of transport by sea

(d) Air Way Bill - AWB - in case of transport by air. It is called ‘document of title’ as
one who submits the same is entitled to get delivery of goods, if document is in
his name or endorsed in his name.

Transfer of Document - .Transfer of Document is a symbolic delivery of goods to

the purchaser. It carries with it full ownership of goods. Delivery of ‘document of
title’ is equivalent to the delivery of goods themselves.
Stock Transfer/Branch Transfer

One of the basic and obvious conditions of Inter-State sale is that there should be
a sale. If a manufacturer sends goods to his branch in other State, it is not a ‘sale’
as you cannot sell to yourself. Similarly, if a dealer sends goods to his Agent in
other State who stocks goods on behalf of the dealer, it is not a sale. Such agent is
usually called ‘Consignment Agent’. Goods are despatched to another State on
consignment basis and the person despatching goods retains ownership of goods.
Since no sale is involved, there is no ‘Inter State Sale’.

In Goodyear India Ltd. v. State of Haryana - (1990) 76 STC 71 (SC) (at page 98), it
was held that mere consignment of goods by a manufacturer to his own branches
outside the State does not amount to sale or disposal as such; the consignment of
goods is neither sale nor a purchase.

This is called ‘stock transfer’ or ‘branch transfer’. Here, movement of goods takes
place from one State to another, but it is not an Inter State sales.

When Stock Transfer is treated as Inter-State sale - Goods are despatched to

branch/consignment agent in another State and then these are sold from the
branch, depot or place of consignment of agent. However, if the movement of
goods is occasioned on account of sale, the movement will be treated as inter-
State Sale. One illustration will make the distinction clear.

Let us assume that Tata Iron and Steel Co. Ltd. (TISCO), manufacturing Steel, has a
factory at Jamshedpur, Bihar. TISCO manufactures Steel of various standard
shapes and sizes. TISCO has a depot at Howrah in West Bengal. Steel plates, rods,
billets etc. are sent to its depot at Howrah. When the goods are sent from
Jamshedpur to Howrah, there is inter State movement, but the movement has
not occasioned on account of any covenant or contract for sale. Hence, it is not an
Inter-State sale but a stock transfer. Sale takes place when a customer
approaches TISCO depot at Howrah and takes delivery from Howrah. Here, the
sale by TISCO from its Howrah depot is an Intra-State sale within West Bengal.

However, assume that a buyer from Howrah wants Steel of a particular size and
specification, which is not a standard size and specification and hence is not
available in Howrah depot of TISCO. He approaches TISCO and TISCO
manufactures Steel in its Jamshedpur factory in Bihar as per the specific
requirements of the buyer. After manufacture, goods are sent to depot of TISCO
at Howrah and goods are sold to the buyer from Howrah depot of TISCO. In such
case, the movement of goods from Jamshedpur, Bihar to Howrah, West Bengal
has occasioned as a necessary incident of contract and hence it is an Inter State
sale, even if goods are supplied from depot of TISCO at Howrah and invoice is
raised from TISCO, Howrah.

Dealer will have to prove that it is not an Inter-State sale. For this purpose, he
must produce a declaration from agent/branch from other State in prescribed
form ‘F’. [Till 11-5-2002, production of ‘F’ form was not mandatory and other
proof could be produced to prove stock transfer
VAT:
VAT is Value Added Tax. It is tax charged by the registered dealer at the time of
sale of goods just like Sales Tax. A vat dealer can claim credit of vat on good
purchased by him just like excise duty.
While Excise is the tax on goods produced but charged at the time of its removal
i.e. at the time of sale.
Form C is issued by a reg. dealer (purchaser) to seller of goods in case of CST so as
to charge him sales tax at lesser rate whereas the form D isissued by the govt to
the seller of goods for the same reason.
Value Added Tax (VAT) is a general consumption tax assessed on the value added
to goods and services.

It is a general tax that applies, in principle, to all commercial activities involving

the production and distribution of goods and the provision of services. It is a
consumption tax because it is borne ultimately by the final consumer.

It is not a charge on companies. It is charged as a percentage of price, which

means that the actual tax burden is visible at each stage in the production and
distribution chain.

It is collected fractionally, via a system of deductions whereby taxable persons

can deduct from their VAT liability the amount of tax they have paid to other
taxable persons on purchases for their business activities. This mechanism
ensures that the tax is neutral regardless of how many transactions are involved.

In other words, it is a multi-stage tax, lavied only on value added at each stage in
the chain of production of goods and services with the provision of a set-off for
the tax paid at earlier stages in the chain. The objective is to avoid 'cascading',
which can have a snowballing effect on prices. It is assumed that due to cross-
checking in a multi-staged tax, tax evasion will be checked, resulting in higher
revenues to the government.

Over 130 countries worldwide have introduced VAT over the past three decades
and India is amongst the last few to introduce it.

India already has a system of sales tax collection wherein the tax is collected at
one point (first/last) from the transactions involving the sale of goods. VAT would,
however, be collected in stages (instalments) from one stage to another.

The much awaited Value Added Tax (VAT) has been introduced in Indian Taxation
System from April 1, 2005. Now India is a part of other 123 countries following
VAT which was leaded first time by UK in 1973. It is said that 4 years is very short
period in introducing VAT in the country as compared to 10 years on an average
by other countries.
 RATE OF TAX - SCHEDULE

In VAT charge SCHEDULE I contains those items which are exempt from the VAT.

For example:

Following articles of wood carving each valuing Rs.250 or below:-

(a) Agarbati stand carved

(b) Chakla belan of wood carving
(c) Flower pot carved
(d) Fruit tray carved
(e) Key hangers carved

Blankets and shawal manfactured on handloom & powerloom valueing upto

Rs.250

In VAT charge SCHEDULE II (A) contains those items on which 1% VAT has been
charged.

For example:

(a) Gold, silver, platinum & other precious metal

(b) Precious & semi precious stones
(c) Atta, maida, suji, besan & pulses

In VAT charge SCHEDULE II (B) contains those items on which 4% VAT has been
charged.

For example:
(a) Articles of packing including – boxes, cases, cartons, jerry cans, bags made
of paper, paper board.
(b) Laminated jute bags
(c) Bed sheets, pillow covers & other made – ups.
(d) Bicycles, tricycles, cycle rickshaws & parts, tyres, tubes thereof
(e) Computer stationery
(f) Writing instruments, geometry boxes, colour boxes, caryons, pencil
sharpeners and scientific, mathematical, survey.

Those products which are not covered under these schedules on those
12.5% VAT has been charged.
 Various form under CST:

When you purchase goods from central ag. form-c (cst @2%) you have issue
form-c quarter wise as below format
April- June 1 quater
July-Sep 2 quater
Oct-Dec 3 quater
Jan - Mar 4 quater

CST = Central Sales Tax

If customer issues the C-Form then 2% CST is applicable otherwise full tax is
applicable that means it saves tax.
After delivery of material we have to collect the C-Form from the party otherwise
it is a liability during sales tax assessment.

Form C is issued by the dealer for purchasing goods from the dealer out side the
state in which he resides the effect can be understood by looking at following
example

IF Mr A Registered Dealer in Hyderabad (AP) wants to purchase goods from Mr B

a registered dealer in Mumbai.Mr B who is selling the goods will charge VAT @ 4%
or 12.5% on the goods if Mr A issues him "C" Form then Mr B should Charge him
CST @ 2% so Mr A is SAving Tax.

Form D serves the same purpose but it has to be issued by Government.

Form F will be issued on monthly basis for stock transfer & for interstate job
work.
FORMS

Form 16: TDS Certificate for Salary

Form 16A: TDS Certificate for other cases

Form 24G: TDS / TCS Book adjustment statement (TDS Return)

Form 27D: Tax collection certificate u/s 206C (TCS Return)

ITR Form: Income tax return form

Return Form III: Periodical turnover return of sales/purchase

Form VI: Challan for payment of VAT/ commercial tax/ central sales tax

Form 11: VAT purchase

Form E1: Purchase by other plant but issue to other plant

RESEARCH METHODOLOGY

In this chapter review of few studies problem areas for the present study,
statement of the problem, objectives, instruments of data collection, sampling,
tools of analysis have been presented.

STATEMENT OF THE PROBLEM- “TO EVALUATE THE TAXATION PROCESS FOR

THE INDIVIDUAL & THE COMPANY AT INDO ASIAN FUSEGEAR LTD.”

SECONDARY
1. Annual Report
BIBLOGRAPHY

1. Direct Taxes Ready Reckoner – Dr. Vinod K Singhania

2. Taxindiaonline.com
3. www.cbec.gov.in
4. www.indoasian.com