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Overview on TAXES AND DUTIES

Taxes and Duties

SCOPE :

Introduction Classification of Taxes and duties Central Excise Duty Duties under Custom Law Sale Tax Service Tax Value Added Tax Goods and Service Tax Conclusion
Taxes and Duties

INTRODUCTION

India has one of highest range of tariff structure in Asia especially on imports. Taxes accounts for huge chunk of Govt. revenues. India's tax receipts crossed 5.88 trillion rupees during FY 2007/08.

Taxes and Duties

Customs Service tax

Corporation Tax

Taxes and Duties

Tax Rates Around The World


Country Corporate Argentina Brazil Belgium France U.S.A. U.K. Australia Japan India China Denmark Russia 35 34 33.99 33.33 15 to 35 30 30 30 30 to 40 25 24 24 Income Tax Individual 9 to 35 15 to 27.5 25 to 50 10 to 48.09 15 to 35 0 to 40 17 to 47 5 to 40 10 to 30 5 to 45 38 to 59 13 21 17 to 25 21 19.6 17.5 10 GST 5 12.5 17 25 18 Vat

Taxes and Duties

TAX
Direct Tax Interest Tax Wealth Tax Income Tax Indirect Tax
Taxes and Duties

INDIRECT TAX
CENTRAL EXCISE DUTY CUSTOM DUTY SALE TAX OCTROI / ENTRY TAX VALUE ADDED TAX SERVICE TAX
Taxes and Duties

Central Excise Duty

A duty on goods produced/manufactured in India and meant for home consumption. Levied on the Ex-Works price of goods at the place clearance. Paid by a manufacturer, who passes its incidence on to the customers.

Taxes and Duties

Duties under Central Excise Act

Basic Excise Duty

The present general rate is 14%.

Special Excise Duty

At present very few items are applicable under this duty.

Additional Duties Of Excise

This duty is levied on goods of special importance and specified textile articles.
Taxes and Duties

National Calamity Contingent Duty (NCCD)

This duty is imposed on pan masala, chewing tobacco, cigarettes, mobile phones etc. It varies from 1% to 45%.

Education Cess

Education cess (2%+1%) is duty on excise, to be calculated on aggregate of all duties of excise.

Taxes and Duties

Custom Duty

To prevent illegal imports and exports of goods. To give protection to indigenous industries The duty is levied on goods imported or exported from India at the rate specified under the Customs Tariff Act, 1975 as amended from time to time.

Taxes and Duties

Duties under Custom Law

Basic Custom Duty


This duty is levied as a percentage of Custom Value . The duty on project import is levied at the rate of 5 %.

Additional Duty (Countervailing Duty) (CVD)


It is equal to excise duty levied on a like product manufactured or produced in India. It is levied on the value of goods plus basic custom duty payable.

Taxes and Duties

Anti-Dumping Duty

To prevent dumping, duty equal to the margin of dumping on some articles are levied.

Additional CVD

4 % has been imposed on power generation projects (other than Mega status) in lieu of Sales tax/ VAT.

Taxes and Duties

Protective Duty

Central Government may levy protective anti-dumping duties on specified goods to protect the interests of Indian industry.

Duty on Bounty Fed Articles

This additional import duty equals to the amount of such subsidy or bounty gained by foreign exporter.

Taxes and Duties

Export Duty

Such duty is levied on export of goods. At present very few articles such as leather, fertilizer etc. are subject to this duty.

Education cess on customs duty

The cess will be 2% of the aggregate duty of customs.

Secondary and Higher Education Cess

A secondary and higher education cess of 1% of customs duty has been imposed.
Taxes and Duties

Sale Tax

Sale Tax is levied on the sale of movable goods in India at the rates specified. Sale tax is levied on the value of goods including excise duty.

Taxes and Duties

Types of Sale Tax

The Central Sale Tax, 1956 (CST Act) The CST Act deals with transactions in the nature inter-state sales. CST is levied at 2 % from 1 April 2008.

The State Sale Tax (SST Act) The SST Act deals exclusively with intra-state sales.

Taxes and Duties

Octroi

This tax is levied on the entry of goods into a municipal region for use, consumption or sale. Generally, octroi is borne by the purchaser. Goods in transit are exempted from octroi. Octroi rates for Mumbai is 4.75 % including octroi processing charges.

Taxes and Duties

Service tax

Service tax is a tax levied on services rendered viz. insurance, advertising, telephone services etc. Service tax is payable @ 12% of the gross amount' charged by the service provider for providing such taxable service. The Cess is payable @ 3% of the service tax payable.

Taxes and Duties

Value Added Tax


This is the tax levied by central Govt. on the value added to a good. This tax is introduced to avoid cascading tax burden on consumers. VAT levy will be administered by the Value Added Tax Act .

Taxes and Duties

ICB
Mega Non-Mega Mega

DCB
Non Mega Reduced Rates

CIVIL

Custom Duty Excise Duty Sale tax (CST/LST) Entry Tax/Octroi Service Tax Cess

X X

X X X X

Taxes and Duties

For Items supplied from Abroad

(Where Employer is the Importer) Custom Duty Excise Duty CST/LST Entry Tax/Octroi TOTAL (as may be Value applicable)

CIF Value ICB Mega 100 NIL

+ Ed. Cess NA

CST@ 2% NA

@ 4.75% 4.75 104.75

Non Mega

100

NIL

NA

NA

4.75

104.75

Taxes and Duties

For Items supplied from Abroad (Where Contractor is the Importer) CIF Value Custom Value of Excise CST/LST on Entry TOTAL Value Duty on Finished good Duty on finished goods Tax/Octroi import of finished raw goods material 14.42% ICB Mega 100 NIL (PAC to be issued) 200 nil CST@ 2% 4 @ 5% 10.2 214.2

Non Mega

100

NIL (PAC to be issued)

200

28.84

4.5768

11.67084

245.08764

DCB

Mega

100

NIL

200

28.84

4.5768

11.67084

245.08764

Non Mega

100

25.83

225.83

32.564686 5.16789372

13.178129 276.7407087

Taxes and Duties

Taxes on Supply Chain Structure


BASE MATERIAL SUPPLIER EXCISE DUTY ST / CST OCTROI / ENTRY TAX EXCISE DUTY JOB WORKER EXCISE DUTY SERVICE TAX

OCTROI / SERVICE TAX ON SERVICES EXCISE DUTY ENTRY TAX EXCISEST OCTROI/ SERVICE TAX ST DUTY / ENTRY TAX SERVICES / ON CS CS DOWNSTRE T T AM INPUT Factory DEPOT R VA SUPPLIER F.G. OC F. SE S T TR RV F. OCTROI OI G. IC ET G. BA CV AX SIC D CU RETAILER STO MD UT F.G. Y FOREIGN SUPPLIER
Taxes and Duties

INPUTS FOR INPUT

CONSUMER

Cascading Effect of Taxes


(Examples)
Sales-tax Sale @ 10% (Basic) Price Mfg I Input Conversion cost @ 10% Total Cost purchase price

100

Mfg II (Intermediate) 146 Mfg III (FG) With Cascading Basic material Conversion cost @ 10% at each stage * Tax @ 10%

10 121 15 37 100 37

110 12 161

11 133 16 40*

121 13 177

146

40

Total 177 Without Cascading effect (tax on value addition) [Basic input 100+10% conversion cost in 3 stage = 146 133+13 (VAT @ 10%)]
Taxes and Duties

Goods and Service Tax (GST) Future Tax Structure of India

1 April 2010 is proposed date for introduction of a national GST. Integrate taxes and duties on services and goods at both the state and the Central levels. The GST is a multi-stage consumption tax imposed on goods and services.

Taxes and Duties

Authority

Authority

Authority

Authority

Taxes and Duties

Conclusion

Import of goods - Customs Duty (Basic Duty + CVD) Manufacture of goods - Excise Duty Sale of goods - Sales Tax Entry of goods in the State / Territorial Limit - Entry Tax / Octroi Rendering of services - Service Tax
Cumulative burden of Indirect Taxes in India 28% to 44% (approx.)

Taxes and Duties

Taxes and Duties

Valuation for Customs Duty

Customs duty is payable as a percentage of Value often called Assessable Value or Customs Value' Section 14 (1) provide following criteria for deciding Value for purpose of Customs Duty : Price at which such or like goods are ordinarily sold or offered for sale. Price for delivery at the time and place of importation or exportation. Price should be in course of International Trade. Seller and buyer have no interest in the business of each other or one of them has no interest in the other. Price should be sole consideration for sale or offer for sale. Rate of exchange as on date of presentation of Bill of Entry as fixed by CBE&C (Board) by Notification should be considered.

Taxes and Duties

Calculation of Custom Duty Tax Rates

CIF Value landing Charges = 1% of CIF Value Assessable Value (AV) = CIF Value + Landing Charges @ 1% of CIF Value Basic Duty (BD) = (BD)XAV/100 CVD = ADX(AV+BD)/100 =14.42 X (101+ 5.05)/100 Aggregate = Basic Duty + CVD = 5.05 + 15.292 Education Cess (EC) = 3% on Aggregate of CD = 3 % of 20.342 Total Duty With EC 5 14.42 1

100 1 101 5.05 15.29241 20.34241 0.610272 20.95268

Spcl CVD( in case of Non Mega) Total Custom Duty with Spcl CVD

4.878107 25.83079

Taxes and Duties

Entertainment Tax

This is levied on different kinds of entertainment under the applicable state legislations. Entertainment tax is levied between 20-35% of charges collected by way subscription or installation or any other charge for entertainment. An additional surcharge of 10% is also levied.

Taxes and Duties

Income Tax

Personal income tax is levied on income of individuals by he Central Govt. and shared between Centre and the states. Under the present arrangement, Tenth Finance Commission directed that 77.5% of IT collection should go to states.

Taxes and Duties

Wealth Tax

Wealth tax, in India, is levied under Wealth-tax Act, 1957. This tax is levied on the benefits derived from ownership of property. This is imposed on accumulated wealth or property of every individual, Hindu Undivided Family (HUF), Closely held companies. The tax is to be paid year after year on the same property on its market value, whether or not such property yields any income. It is not levied on productive assets, hence investments in shares, debentures, UTI, mutual funds, etc are exempt from it.

Taxes and Duties

The assets chargeable to wealth tax are :

Guest house, residential house, commercial building Motor car Jewellery, bullion, utensils of gold, silver etc Yachts, boats and aircrafts Urban land

Cash in hand (in excess of 50,000), only for Individual & HUF (Hindu Undivided Family) Certain non productive assets Valued beyond Rs. 15 Lacs are taxable at 1% for the amount exceeding it.

Taxes and Duties

Expenditure Tax

This is levied at a flat rate of 10% on expenditure incurred by any person in a Hotel where the Room Charge is Rs. 1200 or more per day per individual.

Taxes and Duties

Stamp Duty

Transaction are required to be recorded on instruments containing stamps of a value as specified by the stamps act. The duty amounts to the value of stamps rather than determined by the value of transaction itself.

Taxes and Duties

Property Tax

This is levied on transactions involving immovable property such as leasing as executed by lease deed, mortgage, sale, registration of ownership.

Taxes and Duties

Gift Tax

No Tax is payable by a donor or a donee on any gift made on or after 01.10.1998 Gifts can be made in Indian Rupees from any person resident in India to another resident or non resident. Gifts through international remittances may be exchanged between blood relatives only.

Taxes and Duties

Corporation Tax

This tax is levied on profit of the company. This is reduced considerably in India to attract Foreign investment.

Taxes and Duties

Dividend Tax

Dividend is the amount of the distributed profit as a percentage of nominal value of share. This dividend is not taxable in hands of recipients. Dividend tax is levied on company on distributed dividends.

Taxes and Duties

Capital Gain Tax


A capital gain is the profit from the sale of capital asset (including investments e.g. shares & bonds). Under the IT act, capital gains are taxed even on transfer of a capital asset not merely a sale.

Taxes and Duties

Minimum Alternate Tax


Companies that have book profits but are not taxable on account of large deductions and concessions, must pay a minimum Alternate Tax (MAT). It applies to companies at a rate of 7.5% (and surcharge as applicable) of the book profits.

Taxes and Duties

Interest tax

Interest income from banks, credit unions, money market funds, bonds and tax-exempt bonds are reported on your taxes. Taxable interest is reported on Form 1040 Line 8a, and non-taxable interest is reported on Form 1040 Line 8b. If you earned more than $1,500 in interest, the interest should be detailed on Schedule B, with the total carried to Form 1040 lines 8a and 8b.
Taxes and Duties

February 2008 There are no significant changes in the Indian tax rates in 2008. Personal income tax rates are 10%-30% , before a 10% surcharge and a 3% education tax, CESS. India's corporate tax rate in 2008 is 30% for local companies and 40% for foreign companies, before a 10% surcharge, depending on the income sum and a 3% CESS. The standard VAT rate in 2008 is 12.5%.There are also reduced rates of 4% and 1% .

Taxes and Duties

V.a.t and Sales Tax There was no value added tax in India until April 1, 2005. Instead a sales tax was imposed on sales within the country and inter-state sales within India. From 1.2.2005 V.A.T replaced the sales tax. The standard rate of VAT is 12.5%. There are reduced rates of 4% and 1%. Service Tax

This tax is imposed on a defined group of services provided in India as follows: advertising services, consultancy services, banking, insurance and more. The tax imposed is 10% plus 2% cess. Wealth Tax

The tax is imposed in India on assets specified in the law such as houses, vehicles, plots of land. Individuals and companies are liable for the tax. The tax is not imposed on productive assets or income producing assets. The tax, at the rate of 1%, is imposed only on assets with a value in excess of INR 1.5m.

Taxes and Duties

India's tax receipts crossed 5.88 trillion rupees during 2007/08, Direct taxes grew by 38 percent to 3.09 trillion rupees in the last fiscal year, while indirect taxes were more than 2.79 trillion rupees. "We will be exceeding the target for this year also," he said, referring to a 3.65-trillion-rupee budget estimate for 2008/09. Direct taxes exceeded an upwardly revised target of 3.04 trillion rupees in 2007/08 with corporate tax receipts growing 33.4 percent to 1.89 trillion rupees while income tax was up 44 percent at 1.1 trillion rupees, he said. "Another 30 billion rupees is expected to come." India has set a target of 3.23 trillion rupees in indirect taxes which includes excise, customs and service tax.

Taxes and Duties