INDIRECT TAX

BVIMSR MMS-A

Submitted By
Ravi kumar Sharma Raj Yadav MD Imran Ankit Dalvi Ganesh Saroj Rahul Raje Amit Madkar 51 58 29 10 48 43 25

Submitted To Mr. Vasudevan

Definition- A kind of tax that is not directly paid by a tax

payer to the govt.it must have an intermediary. an indirect tax such as Value added tax (VAT) goods 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

Types of Indirect Tax

 Service Tax  VAT(Value Added Tax)  Custom Duty  Excise duty  Goods & Services Tax

SERVICE TAX
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Introduction
Service Tax was introduced in 1994 under Finance Act, 1994 with 3 SERVICES namely, Brokerage charged by stockbroker, Telephone services & premium on General Insurance Services. Applicable to whole of India except Jammu & Kashmir.

Contd
What is Service Tax? It is a tax levied on the transaction of certain Specified Services, by the Central Government under the Finance Act, 1994. It is an Indirect Tax, which means that normally the service provider pays the tax and recovers the amount from the recipient of taxable service.

Who is liable to pay Service Tax?

Generally, the Person who provides the taxable service (on receipt of service charges) is responsible for paying the Service Tax to the Government (Sec.68 (1) of the Act), except the following: i.The recipient of services in India is liable to pay Service Tax, where taxable services are provided by Foreign Service providers with no establishment in India; ii.The Service Tax is to be paid by the Insurance Company for the services in relation to Insurance 8 Auxiliary Service by an Insurance Agent.

Assessee
Who is an Assessee in relation to Service Tax? Assessee means a person liable to pay Service Tax and includes his agent.

REGISTRATION REQUIREMENTS
As per Section 69, every person liable to pay service tax has to get themselves registered with service tax department. An Input Service Distributor and any provider of taxable services whose aggregate value of taxable service in a financial year exceeds Rs. 9 lacs, has to get themselves registered.

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Contd
Application for registration in Form ST-1 to be made to concerned Superintendent of Central Excise. The application for registration shall be made within 30 days, from the date on which the levy of service tax is brought into force in respect of the relevant services or of the commencement of business where services has already been levied.
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Contd
Registration Certificate is granted in Form ST-2 within 7 days from the date of receipt of intimation, if not, then deemed to be granted. In case the registration certificate is not issued within seven days, the registration applied for is deemed to have been granted. (Rule 4(5) of the STR, 1994) CBEC vide Circular no. 35/3/2003 has made it compulsory for every assessee to obtain the Service which is a 15 digit alphanumeric no. based on the PAN
Assessee providing more than one taxable service should mention in single application, all the taxable services provided by him. Rule 4(4), Service Tax Rule,1994
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Exemption Scheme for Small Service Providers

Central Government, provides the basic exemption to the service providers whose aggregate value of taxable services provided in last financial year is less than Rs. 10 Lacs. Assessee should not charge the Service Tax if he/she is claiming the benefit of exemption. If charged by mistake the same should be refunded to the service receiver.

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Other Exemptions
Services provided to United Nations & International Organizations. Services provided to developer of SEZs or units of SEZs Services provided to Diplomatic Missions. Services exported in terms of Export Service Rule 2005 Services provided by RBI
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Contd
Services provided by Incubators (used to maintain a constant temperature) are exempt from service tax. Services provided by digital cinema service provider to producer/ distributor in relation to delivery of content of Cinema in Digital Form are exempt from service tax. Value of goods and materials sold by service provider are exempt.
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Abatement
In case of certain services, the benefit of abatement (rebate) is allowed to the service provides. In such cases, the service providers charges tax from the client after taking into account the abatement available or on net amount (net of abatement). Example: if invoice for servicing is to be raised for Rs. 1000/- and abatement of 75% is available (as in case of Goods Transport Agency), then service tax will be imposed only on Rs. 250/[1000 75% of 1000].
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Service Tax Rate

Period From 1.7.1994 to 13.05.2003 From 14.5.2003 to 09.09.2004 From 10.9.2004 to 17.04.2006 From 18.4.2006 to 10.05.2007 From 11.05.2007 to 24.02.2009 From 25.02.2009 Rate 5% 8% 10% 12.24%* 12.24%* 12.36%* 12.36%* 10.3%* 10.3%*

*Inclusive of cess
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Failure to Pay Service Tax

Interest(sec. 75) :- Interest @13% p.a. is
payable on the short-fall or unpaid tax for delayed period.

Penalty(sec. 76) :Rs.200 for every day during which failure continues, or 2% of tax per month, whichever is higher.

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Service Tax Return

Form No. ST-3, Half-Yearly ST- HalfHalfHalf-Year April September October March Due Date 25th October 25th April

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How to file Service Tax Returns?

The details in respect of each month of the period for which the half-yearly return is filed, should be furnished in the Form ST-3, separately. The instructions for filing return are mentioned in the Form itself. It should be accompanied by copies of all the GAR-7 (TR-6) Challan for payment of Service Tax during the relevant period. Filing of return is compulsory, even if it may be a nil return, within the prescribed time limit, failing which penal action is attracted.
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Delay in Filing Return

Period Up to 15 days 16 to 30 days Beyond 30 days Fine/Penalty Rs.500/Rs.500/Rs.1000/Rs.1000/Rs1000/Rs1000/- plus Rs.100/- per Rs.100/day from the 30th day till date of furnishing return

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VAT
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Income Tax (Direct)

VAT (Indirect)

IT is levied and collected by Central Government.

VAT is levied and collected by state Government.

IT arises on receipt or accrual of income. IT is charged on taxable income.

VAT arises on sale of goods.

VAT is charged on taxable turnover.

IT may be charged on income arising in entire India or even outside India. Same income is not taxed twice. IT rates are the same all over India.

VAT is charged only on sales occurring within the State. VAT is levied on each sale/re-sale. VAT rate may differ in each State.

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Income earned during a previous year is taxed in the assessment year.

Sales made in a Financial year are taxed in the same year. There is no concept of previous year and Assessment year. Sales on a particular day, say 1-4-2010 will be taxed as per the law/rate applicable on 1-4-2010.

Income earned during, say year ending 31-3-2010 will be taxed as per law as on 1-4-2010. (i.e. the first day of the assessment year 2010-2011) IT is Levied on a person

VAT is levied on goods

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IT must be paid by the assessee; it cannot be recovered from any other person.

VAT is recovered from the ultimate consumer.

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A rich person pays more tax.

The same VAT is paid by the rich and the poor.

WHAT ARE THE BENEFIT OF VAT

It Is Simple, Transparent And Progressive Business Friendly System Of Taxation Reduction In The Number Of Tax Rates To Only Two Main Rates 4% And 12.5% Reduction In The Effective Tax Rate For Many Goods Elimination Of Tax On Tax Existing In The Sales Tax System Simplification Of Tax Forms And Procedures

HOW IS VAT CHARGED?

Vat Is Not A Cost To The Dealers

Vat As A Separate Amount On A Bill Or Cash Memorandum

WHAT ARE THE OBLIGATIONS OF DEALERS REGISTERED FOR VAT VAT? Dealers Who Are Required To Be Registered For Vat Must:
Change And Collect Vat On Their Sales Of Taxable Goods Issue Proper Tax Invoices Keep Proper Records And Books Of Account Calculate The Vat. File Vat Returns On A Regular Basis Declaring Their Vat Liability

Raw Material Producer

Sale Price Rs. 1,000 Vat Rs. 100

Manufacturer

Sales Price Rs.1,500 Total Vat Rs.150 Vat Payable 150-100=50

Consumer Wholesaler

Sales Price Rs.1,800 Total Vat Rs.180 Vat Payable 180-150=30

Retailer

Sales Price Rs. 2,000 Total Vat Rs.200 Vat Payable 200-180=20

GOODS AND SALES TAX (GST)

Introduction
GST is a broad based and a single comprehensive tax levied on goods and services consumed in an economy It is basically a tax on final consumption Devised by a German economist during the 18th century He envisioned a sales tax on goods that did not affect the cost of manufacture or distribution but was collected on the final price charged to the consumer

Benefits of GST
Eliminates cascading effect of taxes across all supply chain Eliminates multiplicity of taxes, rates, exemptions and exceptions Eliminates dual taxation of the same transaction Reduces cost of production Achieves, uniformity of taxes across the territory, regardless of place of manufacture or distribution

GST in India
Kelkar Task Force had suggested a comprehensive Goods and Services Tax (GST) based on VAT principle GST based on principle - liberal in assessment and ruthless in collection Why GST in India ?
GST is likely to rationalize multiplicity of taxes being collected through an inefficient and non transparent system Integration of various Central and State taxes into a GST system would make it possible to give full credit for inputs taxes collected

 uniformity of laws across the board, greater transparency, neutrality in tax rates on various products; credit availability on interstate purchases and reduction in compliance requirements Differences in tax bases of different States and the Central government greatly increase costs of doing business. The GST based tax reform provides a real policy opportunity to do something about this problem without waiting for prior and sweeping political economy changes

Components of GST
GST should have two components, a Central tax and a single uniform i. state tax across the country A tax over and above GST may be levied by the states ii. on tobacco, petroleum and liquor Petroleum products, including crude, highspeed diesel and petrol, may remain outside the ambit of GST Central cess like education and oil cess, octroi, purchase tax, stamp duty, toll tax may be kept outside the dual GST structure

GST IMPACT
Improve the quality of Indirect Tax system. India could gain as much as $15billion annually. GST will give more relief to industry, trade and agriculture.

IMPACT ON VARIOUS SECTORS

FOOD INDUSTRY Food is Exempt from CENVAT and many Food items attract State VAT at 4% GST would Lead to a Doubling of Tax Burden on Food.

Housing and Construction Industry

Construction and Housing Sector needs to be Included in GST tax base as it is a significant Contributor to the National Economy.

FMCG Sector
FMCG sector has reached a size of $25billion at Retail sales in 2008. Introduction of GST and Opening of FDI will fuel growth. Industry will grow by $47 Billion by 2013 and $95 billion by 2018 according to new FICCI-Technopak report. Implementation will have Uniform,Simplified and Single Point Taxation and reduce prices.

THANK YOU