Professional Documents
Culture Documents
A summer project
Submitted in partial fulfilment of the
Requirement for the award of the
PROJECT SUBMITTED BY
PROJECT SUBMITTED TO
S.GOPI
(Reg.No. 10062)
PROJECT GUIDE
2014-16
A summer project
Submitted in partial fulfilment of the
Requirement for the award of the
PROJECT SUPERVISOR
DEAN
2014-2016
DECLARATION
I, S.GOPI (Reg.No. 10062) the undersigned, hereby declare that the summer
project report entitled AN ANALYSIS ON INDIRECT TAXATION IN SMARTTRAK
Pvt Ltd. Is my original work written and submitted by me in partial fulfilment of POST
GRADUATION DIPLOMA IN MANAGEMENT of VISHWA VISHWANI INSTITUTE
OF SYSTEMS AND MANAGEMENT. I also declare that this project has not been
submitted earlier in any other University or Institution.
S.GOPI
(Reg.No. 10062)
This is to certify that S.GOPI, Reg.No. 10062 has completed summer project
work on titled AN ANALYSIS ON INDIRECT TAXATION IN SMARTTRAK
Pvt Ltd.
ACKNOWLEDGEMENT
It was very good experience for me in working under the guideline of some
great personalities. Here, I express my sincere gratitude to few of them
I would like to express my gratitude to everyone who helped out me directly
and indirectly in completing this project work successfully.
I am indebted to my company guide, SURENDERA (CA) and Ms. DIVYA
(HR) for the valuable suggestions and encouragement right from the
conception of the idea to the completion of the project.
I express my sincere gratitude to Mr. BHAGAWAN Managing director of
Smarttrak Company, hand all the staff members of SMARTTRAK,
MADHAPUR for giving me their valuable time and for supporting me in
completing my project.
I express my sincere gratitude to Dr. SABYASACHI RATH, Dean for giving
me this wonderful opportunity in doing my Summer Training Project.
I express my sincere thanks to my project guide Dr. M. MADANA MOHAN,
Professor of Finance, VVISM for her valuable suggestions throughout this
project.
(S.GOPI)
(Reg no: 10062)
INDEX
CHAPTER NO
CONTENTS
PAGE NO
ABSTRACT
1
1.1 INTRODUCTION
11
13
13
13
3.4 TOPICS
13
49
57
5.2 SUGGESTIONS
58
5.3 CONCLUSION
59
BIBLOGRAPHY
60
ABSTRACT
CHAPTER 1
INTRODUCTION
Page
1.1 INTRODUCTION
Indirect Tax is a tax that is levied on goods & services unlike direct taxes
which are levied on individuals. It is called as Indirect Tax as payer who pays
tax to government, collects it from ultimate consumers on whom the burden of
tax is shifted. Thus, tax payer and tax bearer is not the same person. Various
indirect taxes levied by Government include Excise Duty, Custom duty,
Service Tax, Value Added Tax (VAT), Sales Tax etc. This tax is administered
by the Central Board of Excise and Custom (CBEC). Indirect Tax in India
constitutes a group of tax laws & regulations such as Central Excise Act
1944, Central Excise Rules 2002, CENVAT Credit Rules 2004, Customs Act
1962, Finance Act 1994, Service Tax Rules 1994 etc. These taxes are
enforced upon various activities including manufacturing, trading and imports
which influence almost all business lines in India.
In India, indirect taxes encompass every area of an Indian business.
Generally any transaction, whether in goods or services, attracts various
indirect taxes. Indirect taxes are usually borne by the final consumer.
Therefore if a business entity fails to anticipate the applicability of an indirect
tax and does not recover the same from the consumer it becomes a cost to
the entity and is a direct hit to the bottom line. Consequently indirect taxes
have a direct bearing on the costs, pricing policy, cash flow and profitability
and ultimately the competitiveness of an organisation. Hence it becomes
critical to evaluate the impact of various indirect taxes on any given
transaction.
1.2 NEED FOR THE STUDY
Claiming an exemption- Small scale [available upto Rs. 150 lakhs per
independent entity manufacturing unbranded/ own branded goods] or
Location based exemption which are now on the way out but available in
some places. Examining whether services are as per definition or excluded;
in negative list; or exempted fully or partially. Today locating outside India is
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also an option for reducing costs which large business houses have found
useful especially if they have global customers.
Claiming deduction from payment of tax – credits in the form of ITC
[ Input Tax Credit – VAT] or cenvat credit [ Manufacturer/ service
provider] Perhaps this is the area where maximum advantage could be
possible. Not availing ineligible credits is also a value adder as indirectly it
avoids cost of interest and penalty added to time and effort involved in
resolving the dispute. Invariably the reduction in cost of goods used is a
benefit of credit optimization exercise.
Claiming a deduction from value for payment of duty/ tax – Invariably
any deduction comes with conditions to claim the same. Here again the
comparison and whether the IDT can be passed on would be critical to the
decision. Decision to go under the regular scheme for those who account all
transactions would invariably be advisable to the composition scheme under
VAT.
1.3 SCOPE OF THE STUDY
In and other regulators, many businesses are now formally documenting their
indirect tax strategy and implementing formal processes to evaluate and
approve planning ideas and
To understand the basic plans by the management with wider concept of
taxation.
1.4 OBJECTIVES OF THE STUDY:
The present study is undertaken with the following objectives:
Page
Page
Page
Page
These items are exempt from VAT so are not taxable. You do not include
sales of exempt goods or services in your taxable turnover for VAT purposes.
And if you buy exempt items, there is no VAT to reclaim.
Exempt items are different from zero-rated supplies. In both cases VAT is not
added to the selling price, but zero-rated goods or services are taxable for
VAT - at 0%.
Exempt business
If you only sell or otherwise supply goods or services that are exempt from
VAT then yours is an exempt business and:
you cannot recover any VAT you incur on your purchases or expenses
Page
CHAPTER 2
ABOUT THE COMPANY
Page
Services
Address
Brief:
SMARTTRAK SOLAR SYSTEMS PRIVATE LIMITED is a private company
registered on 28/01/2011. The company has an authorized capital of Rs
1,00,00,000.00 and paid-up capital of Rs 88,00,000.00.
Its registered office is situated at 22/c Survey No.1/1, Kancha Imarat, Raviryal
(Village), Maheshwaram (mandal), Hyderabad, Telangana, India - 501359.
The status of company in the records of Registrar is active which means that
it is actively doing all its filing with the Registrar.
Company has currently 0 director and falls under the jurisdiction of Registrar
of Company-Hyderabad.
BASIC DETAILS
Incorporation Date
28/01/2011
Registration Number
072412
Page
Company Type
Private
Listing Type
Unlisted
Industry Category
Solar
Company Nature
Company limited by shares
Registering Authority
Registrar of Company-Hyderabad
CONTACT DETAILS
Address (manufacturing)
22/C Survey No.1/1, Kancha
Imarat, Raviryal ( Village),
Maheshwaram(Mandal)
City
HYDERABAD
State
Telangana
Country
INDIA
Pin
501359
Email Id
Bhagawan@smarttrak.in
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efficiently, helping to reduce the LCOE and make solar power generation a
more cost-effective alternative.
Rockwell Automation offers solar power generators a complete
automation solution with lower overall lifecycle costs when compared to
traditional DCS offerings . The flexibility , scalability and multidiscipline
capabilities of an open control architecture from Rockwell Automation, allow
developers to leverage a single-vendor solution from the solar field
throughout the entire process of solar electricity generation.
In addition, Rockwell Automation and our network of partners offer
best-in-class service and support worldwide. The company is committed to
working collaboratively with solar developers to reduce the cost and increase
the viability of solar power generation.
Introduction
A Solar lantern is a simple application of solar photovoltaic technology, which
has found good acceptance in rural regions where the power supply is
irregular and scarce. Even in the urban areas people prefer a solar lantern as
an alternative during power cuts because of its simple mechanism.
Home lighting System is powered by solar energy using solar cells that
convert solar energy (sunlight) directly to electricity. The electricity is stored in
batteries and used for the purpose of lighting whenever required. These
systems are useful in non-electrified rural areas and as reliable emergency
lighting
system
for
important
domestic,
commercial
and
industrial
applications. The SPV systems have found important application in the dairy
industry for lighting milk collection/ chilling centres mostly located in rural
areas.
Solar Street Light system is designed for outdoor application in unelectrified remote rural areas. This system is an ideal application for campus
and village street lighting. The system is provided with battery storage backup
sufficient to operate the light for 10-11 hours daily. The system is provided
with automatic ON/OFF time switch for dusk to down operation and
overcharge / deep discharge prevention cut-off with LED indicators.
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2. Market Potential
The demand of Solar Light Systems is day by day increasing due to it works
on consumption of NATURAL SOURCE OF ENERGY i.e. SUN LIGHT. Use of
Electric Power in decreasing and people are shifting towards use of Solar
Power. Many subsidies are also being given by Indian Government on use of
Solar Power.
CURRENT STATUS
SOLAR ENERGY TECHNOLOGIES
Photovoltaic
- Mono-crystalline and multi-crystalline
- Thin-film (amorphous silicon, cadet, CIGS)
Concentrating Solar Power
- Parabolic trough mirrors
- Dish-Stirling engines
- Distributed power towers
Solar Thermal Collectors
- Flat-plate
- Evacuated tube collectors
Page
Page
power plant:
Plant owners can view whats really happening in the site instantly
on a mobile.
Monitor the real radiation data and correlate with the corresponding
AC output generated from plant.
Generate the expected output of the plant for the given radiation
data and atmospheric conditions.
CHAPTER 3
RESEARCH METHODOLOGY
Page
Page
Due to new amendments the tax rates have been changed while it is
calculating the duties.
Activities that leads to income. It is very difficult to classify them but for
study purpose.
No information regarding new amendments.
Lack of time of qualified personnel.
3.5 TOPICS
FEATURES OF IN DIRECT TAXES
1. Source of Revenue
Indirect taxes are a major source of revenue for the Governments worldwide.
They contribute about 1/2 of the total tax revenues.
2. Levied on Goods and services
Indirect taxes are levied both on goods and services.
3. Results in rise in prices
since the indirect taxes are imposed on the goods and services, it increases
the price of the commodities and the services. Thus, the imposition of the
indirect taxes directly affects the prices of the goods and services and leads
to the inflationary pressure in the economy.
4. Promotes social welfare
higher taxes are imposed on the consumption of the harmful products such
as alcoholic products, tobacco, etc. This not only helps in controlling the
consumption of the harmful products but also helps the government to collect
the substantial revenue.
5. Regressive in nature
the indirect taxes are collected on the goods and services regressively. And
the collection authorities do not discriminate between the rich and the poor.
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Both have to pay the same rate of indirect taxes. This further increases the
income disparities between the rich and poor.
6. No direct pinch
Indirect taxes are generally inbuilt in the prices of the goods and services and
most of the consumers are not actually aware that they are paying the taxes
to the government. Thus, the consumers who bear the taxes do not feel the
direct impact while paying the indirect taxes.
7. Shift in tax burden
In case of the indirect taxes, the tax burden shifts from one person to another.
For example, excise duty paid by the manufacturer is recovered from the
ultimate consumers.
Direct and indirect taxation
Particulars
Direct Taxes
Indirect Taxes
Meaning
person.
Nature of tax
Taxable Event
nature.
in nature.
Taxable
Income
Taxable
Wealth of the Assessees.
Levy &
Collection
Purchase / Sale /
Manufacture of goods and
provision of services.
Levied & collected from the
consumer but paid /
deposited to the Exchequer
by the Assessee / Dealer.
Shifting of
Burden
Page
shifted.
Collected
services.
valuation date.
Disadvantages
of Direct taxes
/
Advantages of
Indirect Taxes
It
is
psychologically
very Since
the
price
of
in
Hence,
his
there
psychological
is
much
less
direct
tax
is direct taxes.
Manufacturers/ Dealers
Psychology
favours
indirect
taxesThe
manufacturer/ trader who
collects the taxes in his
Invoice and pays it to
Government,
has
a
psychological feeling that he
is only collecting the taxes
and is not paying out of his
own pocket (though this
feeling may not be always
correct).
Page
verification
and
carried
out
organized
mainly
sector,
in
where
Direct Taxes
Indirect Taxes
evasion
is
is on unorganized sector,
due
to
convenience
of
control.
Collection cost of direct taxes Collection costs of indirect
as percentage of tax
collected
indirect taxes.
direct taxes.
are
lower
in
taxes
on
luxury
goods,
expenditure.
Page
support development in
support
desirable
discouraging in backward
discouraging it in others,
areas, infrastructure
e.g.
development etc.
development
areas,
reducing
small
in
while
taxes
scale
on
units;
Indirect
taxes
do
progressive, as they
commodity
is
not
same,
whether it is purchased by a
poor man or a rich person.
Hence, the indirect taxes
are termed as regressive.
(This
argument
is
only
partially correct; as it is
possible to levy lower taxes
on
goods
of
daily
taxes
on
luxury
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and
services.
demand
Lesser
means
lower
growth of industrialization.
High income tax rates
increases
havala transactions.
havala
smuggling,
trade
and
mafia
duty
leads
to
evasion.
Direct taxes do not have
such effect.
inflationary.
prices
of
products
and
The State Governments get tax revenue from sales tax, excise from
liquor and alcoholic drinks, tax on agricultural income.
The Local Self Governments e.g. municipalities, etc. get tax revenue
from entry tax and house property tax.
Article 265 provides that no tax shall be levied or collected except by authority
of Law. The authority for levy of various taxes, as discussed above, has been
provided for under Article 246 and the subject matters enumerated under the
three lists set out in the Schedule-VII to the Constitution.
Page
Empowers
246(1)
Central
For
or
Government
246(1)
Central Government
246(3)
State Government
Schedule
of
the
Constitution.
Central
and
Government
Bifurcation of powers between Union and States Article 246(1) of
Constitution of India states that Parliament has exclusive powers to make
laws with respect to any of matters enumerated in List I in the Seventh
Schedule to Constitution (called Union List). As per Article 246(3), State
Government has exclusive powers to make laws for State with respect to any
matter enumerated in List II of Seventh Schedule to Constitution.
Seventh Schedule to Constitution consists of following three lists:
List III (Concurrent List) contains entries where both Union and State
Governments can exercise power. [In case of Union Territories, Union
Government can make laws in respect of all the entries in all three lists].
Page
Seventh Schedule to
Article 246 of the Indian
Constitution
List I
Union List
List II
List III
State List
Concurrent List
EXCISE DUTY
Laws relating to central exercise
Central Excise Act,1944(CEA) : The basic act which provides the
constitutional power for charging of duty, valuation , powers of officers,
provisions of arrests, penalty, etc.
Central Excise Tariff Act, 1985 (CETA): This classifies the goods under 96
chapters with specific codes assigned.
Central Excise Rules, 2002: The procedural aspects are laid herein. The
rules are implemented after issue of notification.
Page
Basic Excise Duty is levied u/s 3(1) of Central Excise Act. The section is
termed as charging section. General rate of duty of central excise on
non-petroleum products has been increased from 10% to 12% w.e.f. 173-2012. (The duty rate was 14% during 1-3-2008 to 6-12-2008, which
was reduced to 10% w.e.f. 7-12-2008 and to 8% w.e.f. 24-02-2009). This
duty is applicable to majority of excisable goods. There is partial
exemption to a few products.
12 %
0.24
%
0.12
%
12.3
6%
Page
III
the job worker, where such person authorizes the job worker to pay the
duty liveable on such goods.
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Page
Natural activity, even if carried otherwise, e.g. drying yarn in natural sun;
b
c
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Goods specified in
Central Excise Tariff Act, 1985
Non-dutiable goods
Non-Excisable Goods
Dutiable Goods
Movable Goods
Marketable Goods
Non-marketable Goods
(Commodity
which is known
to the commerce)
Valuation of goods
Excise duty is payable on any one of the following basis:
i
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can issue notification specifying that duty on such notified products will
be levied and collected on the basis of production capacity of the
factory [section 3A(1) of Central Act inserted w.e.f. 10th May 2008].
When such notification is issued, annual capacity will be determined by
Assistant Commissioner [section 3A(2)(a) of CEA]. Factors relevant to
determine production capacity will be specified by rules issued by
Central Government [section 3A(2)(b)(i)].
ii
Specific Duty - It is the duty payable on the basis of certain unit like
weight, length, volume, thickness etc. For example, duty on Cigarette is
payable on the basis of length of the Cigarette, duty on sugar is based
on per Kg basis etc.
Example:
a Excise Duty payable on cigarette is based on the length of the
Cigarette. If the length of cigarette is 5 mm the rate of duty is say ` 2 flat
irrespective of the price at which it is sold.
b
iii. Tariff value - In some cases, tariff value is fixed by Government from
time to time. This is a Notional Value for purpose of calculating the
duty payable. Once tariff value for a commodity is fixed, duty is
payable as percentage of this tariff value and not the Assessable Value
fixed u/s 4.
Products covered under the tariff basis of valuation:
a
Readymade garments
Goods must be specified under Legal Metrology Act, 2009, w.e.f. 1-8-2011
(earlier Standards of Weights and Measures Act, 1976).
Page
Problem
How would you arrive at the assessable value for the purpose of levy
of excise duty from the following particulars?
Cum-duty selling price excusive of sales tax rs .20000
Rate of excise duty 12.36
Trade discount allowed 2400
Page
Freight 1500
Answer
Trade discount of 2400 and fright 1500 is allowed as deductions
Hence net price is 16100
Since inclusive of excise duty of 12.36.excise duty will be
(16000*12.36)/112.36
=1760.056 and assessable value is 14239.94
CUSTOMS
Introduction to Customs Duties
Customs duty is an important part of national tax revenue, a chief source of
Central fiscal revenue, and also a means of the contracting parties of the
World Trade Organization to protect their domestic economies. Levying tax
legally is one of the main tasks of the Customs.
Customs duty is a kind of circulation tax levied on the goods and articles
entering or leaving the customs territory by the Customs on behalf of the
nation in conformity with the tariff policies formulated by the nation as well as
the tax laws and the import and export tariffs promulgated and implemented
by the nation.
Customs duty is a kind of national tax revenue, which is its most essential
nature. The nation is the subject of taxation of Customs duty. Customs duty is
collected from the taxpayers by the Customs on behalf of the nation. The
object of taxation is the goods and articles entering or leaving the customs
territory. The laws, the administrative rules and regulations formulated by the
nation are the foundation of the Customs duty collection
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CUSTOMS ENTRY
Declaration of information on imported or exported goods, prepared by
a customs broker on a prescribed form called entry Form or duty entry Form,
and submitted to
the customs.
goods,
and
duty
to
be
paid.
If
entry:
that
is
not
required
to
be
covered
under
an
Page
(8) Warehouse entry: for the goods stored in a bonded warehouse. Called
also customs declaration, duty entry, or just entry.
Significance of
Indian Customs
Act,1962
Any person who has landed from/ about to board/ is on board any
vessel within Indian Customs water and who has secreted about his
person, any goods liable to confiscation or any documents relating
thereto may be searched [Section 100];
ii
iii Any vessel within Indian custom water, which has been, is being, or is
about to be, used in the smuggling of any goods or in carriage of any
smuggling goods, may be stopped [Section 106];
iv Any goods which are brought within the Indian customs waters for the
purpose of being imported from a place outside India, contrary to any
prohibition imposed by or under this Act or any other law for the time
being in force, shall be liable to confiscation [Section 111(d)]; and
v
Page
Bill of Entry
for warehousing
1.
2.
3.
First
IGM submitted Custom officer
to custom officer to
can exercise their
get
jurisdiction
for
Entry Inward
the purpose of
1.
IGM before 24
hours or 12 hours
HIGH
SEA
India can be
engaged in
economic
exploitation
confiscation of
smuggle goods.
6. Others
Inner Boundary
Outer Boundary
12 NM
24 NM
200 NM
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Other documents
Completion of Export
Additional Duty of
Custom u/s 3(1)
Counter Veiling
Duty (CVD)
Additional Duty of
Standard
rate of duty
Preferential
rate of duty
Protective
D Duty
Safeguard
Anti Dumping
Duty
when the
goods are
tedImpor
in
hugeantity
qu
goods
When the
are export by
exporter lower the
rate from his
indigenous market rate.
` 500
China
India
`100
National
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covered (c) baggage does not include motor vehicles, alcoholic drinks and
goods imported through courier (d) Baggage does not include articles
imported under an import licence for his own use or on behalf of others.
Bona fide
Baggage
Exempt
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Red Channel - Person carrying dutiable goods should pass through red
channel and should submit declaration. The declaration of goods and value
as given by passenger in disembarkation card is generally accepted, but
baggage can be inspected by Customs Officer.
Rate of customs duty on baggage Rate of duty on baggage is as
follows:
General Rate on baggage - Baggage is classified in Customs Tariff in
Chapter 9803, irrespective of actual classification as per Customs Tariff. The
entry reads as All dutiable articles, imported by passenger or member of
crew in his baggage. Tariff rate is 100%. However, effective rate (i.e.
specified by a notification) is 35% w,e.f. 1-3-2005. Baggage is exempt from
CVD. However, education cess @ 2% and SAH education cess of 1% is
payable. Thus, total customs duty on baggage is 36.05%,
This rate is not available to - fire arms, cartridge of fire arms exceeding 50,
cigarettes, cigars or tobacco in excess of the quantity prescribed for
importation free of duty under Baggage Rules and goods imported through
courier service. [Notification No. 136/90 dated 20-3-90 as amended]. Since
baggage does not include motor vehicles, liquor and firearms, the rate is
obviously not applicable for those goods.
Exemption to laptop computer - Laptop computer (notebook computer)
brought as baggage by person over 18 years of age (other than member of
crew) is fully exempt from customs duty - Notification No. 1 1/2004-Cus dated
8-1-2004.
A laptop is a small portable Personal Computer (in short PC). A notebook
computer is a laptop - CC v. Hewlett Packard India (Sales) P Ltd. (2007) 215
ELT 484 (SC).
Import for personal use - Dutiable articles imported by air or post, but not as
baggage, intended for personal use, which are not prohibited under Foreign
Trade (Development and Regulation) Act are classifiable under 9804 and
general rate is 20%. The goods are exempt from additional duty (CVD).
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However, 9804 does not cover items brought as baggage. Thus, this covers
goods sent by post or air by a person abroad to another person in India.
Relevant date for determining rate of duty and valuation - As per section
78 of Customs Act, relevant date for rate of duty and baggage is date on
which declaration is made in respect of baggage as required u/s 77 of
Customs Act.
Valuation of baggage
In Naresh Lokumal Serai v. CC 2006 (203) ELT 580 (CESTAT), it was held
that there are no separate provisions for valuation of baggage. Hence,
valuation rules apply to valuation of baggage also. In baggage, most of items
may be used. Hence, valuation on basis of best judgment assessment is
appropriate. It was also held that valuation on basis of internet prices cannot
be considered for valuation. Similarly, price tags on goods cannot be
considered for valuation, since the price indicated is for sale within that
country and not for export to India.
Exemptions/ Restrictions on Baggage
Tourists can be broadly classified as (a) Indian persons going abroad for a
short trip and coming back (b) Indian persons gone abroad for work and
coming back after few years (c) tourists visiting India for sight seeing or
business purpose. Accordingly, Baggage Rules, 1998 contain different
provisions for (a) Residents from India (b) Tourists visiting India and (c)
Persons transferring their residence.
Exemption only to
bona fide
baggage
of Customs Act, bona fide baggage will be passed free of customs duty.
Section 79(1) of Customs Act provides that (a) article in any baggage of
passenger or crew will be allowed if it was in use for a period specified in
rules and (b) bona fide gifts within the limits prescribed in rules.
Present Baggage Rules do not prescribe any limit for which the articles in
baggage should be in use, but unused articles may not be held as bona
fide baggage.
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Personal effects
The term personal effects has not been defined. Rule 11 of earlier baggage
rules stated that the expression personal effects means all clothings and
other articles, new or used, which a tourist may personally and reasonably
require taking into account all the circumstances of his visit but excluding all
merchandise imported for commercial purpose.
Baggage fully exempt or at concessional rate of duty - Following
baggage is fully exempt from customs duty, as per Notification No. 49/96-Cus
dated 23-7-1996
a
Free gifts and donations to red cross, CARE or Government of India for relief
and rehabilitation (e)
Samples,
price
lists,
prototypes,
commercial
samples etc.
f
Goods brought for display, exhibition, fair etc., subject to various conditions.
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personal effects are also exempt. (This allowance is also available to foreign
citizens residing in India returning from abroad).
General Free Allowance
The free allowance as provided in Baggage Rules, 1998 is as follows:
General Free Allowance - In addition to personal effects (excluding
jewellery) and a laptop computer, a passenger of 10 or more years of age is
allowed general free allowance of ` 45,000, if the Indian Resident is returning
from country other than Nepal, Bhutan, Myanmar or China [Hong Kong
Special Administrative Region (HKSAR) is separate customs territory from
China and hence allowance of 45,000 will be applicable to persons coming
from Hong Kong - MF(DR) circular No. 25/2010-Cus dated 4-8-2010]
This allowance is also available to foreign citizens residing in India, after stay
of more than three days. This allowance cannot be pooled with General Free
Allowance of other passengers - e.g. husband and wife bringing one item of
90,000 will not be permitted duty free. This General Free Allowance is not
applicable to un-accompanied baggage.
The limit of 45,000 is reduced as follows - (a) 17,500 for passengers after
stay abroad of three days or less (This limit was 15,000 upto 10-7-2014). (b)
If the passenger is upto 10 years of age and is returning from country other
than Nepal, Bhutan, Myanmar or China (but not in case of Hong Kong), the
allowance is 17,500, if a person is returning after stay of more than 3 days
and 3,000, if his stay was 3 days or less. (c) If the passenger is returning from
Pakistan by land route, as specified in Annexure IV of Baggage Rules, the
general free allowance is 6,000 for passengers above 10 years and 1,500 for
passengers upto 10 years of age [applicable to passengers returning from
countries other than Nepal, Bhutan, Myanmar or China.
PRACTICAL PROBLEMS
Example : Mrs & Mr Menon visited Germany and brought following goods
while returning to India after 6 days stay abroad on 8th April 2012.
i
Page
ii
iii
iv
Answer:
Their personal effects like clothes, etc., valued at 45,000.
exempt
A personal computer bought for 56,000.
56,000
A laptop computer bought for 95,000.
exempt
Two liters of liquor bought for 1,600.
1,600
A new camera bought for 37,400.
37,400
Total
95,000
Less: General Free Allowance 45,000 + 45,000
90,000
Baggage taxable
5,000
Customs Duty is 1,803 (i.e. 5,000 x 36.05%) payable by Mrs & Mr Menon.
Example: After visiting USA, Mrs & Mr Rao brought to India a laptop
computer valued at 80,000 personal effects valued at 90,000 and a personal
computer for 52,000. What is the customs Duty payable?
Answer: Duty payable on baggage = (52,000 45,000) x 36.05% = 2,523
Example: Mr Ram an Indian resident, aged 45 years, returned to India after
visiting USA on 10/05/201
2. He had gone to USA on 1/05/2012. On his way back to India he brought
following goods with him His personal effects like clothes etc. valued at
90,000:
2 litre of Wine worth 11,000; A video camera worth 21,000; A watch worth
23,000.
Find the customs duty payable by Mr Ram
Answer:
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2ltrs of wine
= 11,000
Video camera
= 21,000
Watch
= 23,000
Total
= 55,000
Less: GFA
= 45,000
Net value
=10,000
Customs duty @ 36.05% on 10,000 = 3,605
Anti-Dumping
Dumping means export of goods by exporters of one country/territory to the
market of another country/ territory at a price lower than the price prevailing in
the country of export and the difference in such price is called margin of
dumping. This is an unfair trade practice which can have a distortive effect on
international trade and needs to be condemned under WTO law.
Anti-dumping is a measure to rectify the trade distortive effect of dumping and
re-establish fair trade, which is achieved by imposition of a duty on dumped
imports, not exceeding the margin of dump.
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SERVICETAX
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, in which
normally the service provider pays the tax and recovers the amount from the
recipient of service.
Service Tax was first levied on General Insurance Services, Stock Broking
and telephone and Pager services. The Central Excise Department
administers the Service Tax Law.
What Is Service?
Service has been defined in clause (44) of the new section 65B and means
any activity for consideration carried out by a person for another and
includes a
declaredservice.
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Registration
REGISTRATION
Not
Required
Required
Turnover >
`9 lacs
Provider of
Services
Exemption
Limit of
` 10 lacs Allowed
Input
ServiceTax
Distributor
(ISD)
Brand
Name of
another
person
Provider of
Services
Provider of
Services
Exemption
Limit of` 10
lacs
Allowed
Reverse
Charge
Turnover
` 9 lacs
Dealer/
Manufacture
Recipient of
Services
Exemption
Exemption
Limit of`
Limit of`
10 lacs Not
10 lacs
Allowed
Not
Allowed
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CENTRALIZED REGISTRATION
An assesse providing taxable services can obtain the centralized registration
of that premises or office which has centralized billing system or centralized
accounting system. Its the assesse option to register one of the premises as
centrally registered.
EXAMPLE
If a consulting Architect is rendering service from Bangalore Office, and has 3
branch offices in other parts of Karnataka (Branch office could be other parts
of India also), he can take centralized Registration in respect of all the
different premises at Bangalore. Only one registration will thus suffice for all
the premises located in different places.The present rate of serve tax for the
assessment year 2015-16 is 12.36
12% basic servive tax 2%education cess 1% secondary and higher education
cess.
Central Sales Tax (CST)
1) This Act may be called the Central Sales Tax Act, 1956.
(2) It extends to the whole of India [***].
(3) It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint, and different dates may be
appointed for different provisions of this Act.
INTER- STATE SALES TAX
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Explanation
Where the movement of goods commences and terminates in the same State
it shall not be deemed to be a movement of goods from one State to another
by reason merely of the fact that in the course of such movement the goods
pass through the territory of any other State.
Cst Appelate Authority
(1) The Central Government shall constitute, by notification in the Official
Gazette, an authority to settle inter-State disputes falling under section 6-A
read with section 9 of this Act, to be known as "the Central Sales Tax
Appellate Authority" (hereinafter referred to as the Authority).
(2) The Authority shall consist of the following Members appointed by the
Central Government, namely:
(a) A Chairman, who is retired Judge of the Supreme Court, or a retired Chief
Justice of a High Court;
(b) an officer of the Indian Legal Service who is, or is qualified to be, an
Additional Secretary to the Government of India ; and
(c) An officer of a State Government not below the rank of Secretary or an
officer of the Central Government not below the rank of Additional Secretary,
who is an expert in sales tax matters.
(2A) Notwithstanding anything contained in sub-section (2), the Chairman or a
Member holding a post as such in the Authority for Advance Rulings
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appointed under clause (a) or clause (c), as the case may be, of sub-section
(2) of section 245-O of the Income-tax Act, 1961 may, in addition to his being
the Chairman or a Member of that Authority, be appointed as the Chairman or
a Member, as the case may be, of the Authority under this Act.
(3) The salaries and allowances payable to, and the terms and conditions of
service of, the Chairman and Members shall be such as may be prescribed.
(4) The Central Government shall provide the Authority with such officers and
staff as may be necessary for the efficient exercise of the powers of the
Authority under this Act.
Appeals
1) An appeal shall lie to the Authority against any order passed by the highest
appellate authority of a State under this Act determining issues relating to
stock transfers or consignments of goods, in so far as they involve a dispute
of inter-State nature.
(2) Notwithstanding anything contained in the general sales tax law of a State,
the Authority shall adjudicate an appeal filed under sub-section (1).
(3) An appeal under sub-section (1) may be filed within ninety days from the
date on which the order referred to in that sub-section is served on any
aggrieved person:
Provided that the Authority may entertain any appeal after the expiry of the
said period of ninety days, but not later than one hundred and fifty days from
the date of such service, if it is satisfied that the appellant was prevented by
sufficient cause from filing the appeal in time.
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.Distinction between Sales Tax and VAT - Basic distinction between Vat and
sales tax is that sales tax is payable on total value of goods while Vat is
payable only on value addition at each stage.
RATE OF VAT
The VAT Rates in India will differ based on the type of goods and from State
to State. Therefore, it is important for the Entrepreneur to be conversant with
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the States regulation with respect to VAT. However, VAT Rates in India can be
divided into three main categories, which are common for many states.
VAT Exempted Category / NIL VAT Rate
In many states, items that are sold by the unorganized sector in natural or
unprocessed format and basic goods for the poor are listed under the VAT
exempted category. Some of the items that may be VAT exempt in many state
include: aids used by handicapped persons, glass or plastic bangles,
condoms, firewood, khaki, salt, etc
1% VAT Rate.
In many states, 1% or 2% VAT Rate is applied for precious stones, precious
metals like silver, gold and platinum, bullions, jewellery, etc.,
4% or 5% VAT Rate
Many states have adopted a VAT Rate of 4% or 5% for a large number of
basic necessity goods. Some of the goods included in this category in many
of the States include coffee, coir, cotton, edible oils, medicines, drugs,
agricultural implements, etc.,
General VAT Rate
In addition to the above VAT Rates, many states also have other levels of VAT
based on the Goods. Very high VAT Rate of over 20% is usually levied for
goods such as imported liquor, cigarettes, etc., many states also have a
General VAT Rate of around 12.5% which is meant as a catch-all for goods
not falling in any of the listed category. This category of goods not falling in
any of the other category are usually taxed at 12.5% or 13.5% or 14%
depending on the State.
REGISTRATION
Page
Page
goods. In practice, the dealer charges the tax on the full price of the goods,
sold to the consumer and at every end of the tax period reduces the tax
collected on sale and tax charged to him by the dealers from whom he
purchased the goods and deposits such amount of tax in government treasury
CHAPTER 4
DATA ANALYSIS AND INTERPRETATION
Page
49
1/2/15
1/2/15
PARTICULARS
AMOUNT RS
15,23,879.26
Opening Balance
Pragmatic industrial solution Pvt Ltd
Purchases @14.5%
Input Education Cess @2%
input Secondary Education Cess @1 %
Input Vat @ 14.5%
1,38,944.00 Cr
1,08,000.00 Dr
259.00 Dr
130.00 Dr
17,595.00 Dr
AMOUNT
RS
12,960.00Dr
1,27,329.00Cr
1,10,000.00 Dr
264.00 Dr
132.00 Dr
1,100.00 Dr
2,494.010 Dr
13,200.00Dr
Basic duty
27/2/15
(as per details)
A.P. Fasteners Pvt Ltd
Non Creditable Purchases
Input Education Cess @2%
Input secondary education cess
@1%input
Vat@5%
Basic duty
1,41,397.00Cr
1,19,850.00Dr
288.00 Dr
144.00 Dr
6,733.00Dr 14,382.0Dr
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50
INTERPRETATION:
From the above we have seen that the basic excise duty is charged at present
rate @12.36% including education cess.
On 1/2/2015 that the excise duty on purchases is charged and the education cess is
charged on the duty 12,960.
Input vat available to dealer @ 14.5% on total purchases i.e 17,595 and this can be
utilise for the payment of output tax.
On 7/2/2015 there is existence of an non creditable purchases on which no credit is
available.
CST is charged @2% after adding excise duty, education cess, and packing &
forwarding charges.
On 27/2/2015 non-credit purchases worth 1, 19,850 on which no credit available. VAT is
charged @5% after the excise duty charged.
Page
CST @2%
DATE
1/3/15
10/3/15
PARTICULARS
AMOUNT
RS
OPENING BAL
Rossi Gearmotors (India) Pvt.Ltd
NonCreditable
3,15,563.00
Purchases
2,75,000.00
AMOUNT
RS
29,172.93
6,188.00
4,08,250.00
3,87,500.00
13,000.00
7,750.00
CST
18/3/15
28/3/15
974. 00
51
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52
CST
INTERPRETATION: the CST is charged @ 2% on the goods after charging all the
duties like excise, customs etc
On 10/03/15 the CST is charged on the total value of goods including excise duty.it
means it is on the total value of the goods i.e. on 309375.
On 16/03/15 the CST is charged only on the value of purchases and not on the
postage and courier.
On 18/03/15 same as the above statement charged only on the value of the
purchases not the freight charges of those goods.
On 28/3/15 the central sales tax charged on the total value of the goods including
excise duty, purchases also on the education cess
Here the company is a registered dealer where the CST is @2%.it means it is
maintain C for the low rate of tax. Otherwise the duty will be state VAT rate which the
around 14%.
Total CST
29,172.93+ 6,188.00+ 7,750.00+ 974.00+8.189.00=52273.93
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53
PARTY NAME
TIN NO
OPENING I T C BROUGHT
FORWARD
DETAILS OF PURCHASES &
SALES
561,136
A)PURCHASES
5.00%
14.50%
TOTAL (A)
EXEMPTED PURCHASES. CST
IMPORT
NET
VAT
TOTAL
13,922,026
.
223,991
14,146,017
696,101
14,618,128
32,479
728,580
256,470
14,874,597
35,987
148,480
184,467
35,987
148,480
STOCK TRANSFERS
TOTAL (B)
184,467
14,330,484
728,580
15,059,064
13,086,442
-
654,322
-
13,740,764
-
13,086,442
12,603,272
-
654,322
252,065
-
13,740,764
12,855,337
-
B) SALES :ii)5%VAT
iii) VAT 14.5%
TOTAL VAT SALES
iv)CST-2%
FRIGHT
Page
v)CST-5%
FRIGHT
Vi )CST-14.5%
TOTAL CST SALES
54
1,181,250
13,784,522
59,063
311,128
1,240,313
14,095,650
26,870,964
965,450
27,836,414
B) EXEMPTED SALES
TOTAL EXEMPTED SALES(B)
:
:
26,870,964
965,450
27,836,414
Here the tax on inputs can be utilize for output i.e. in the above data
The total input tax (VAT) available (last)
Present input tax (VAT)
Total input vat available (A)
Total output tax payable (vat) (B)
=
=
561136
728580
------------1289716
654322
------------635394
CST Payable
(A)CST payable
(B) (-) credit available
Input tax available for carry forward =
311128
6354322
(B)-(A)
324266
Suggesting that: this available input tax can be carry forward to next month to use as
input credit
INTERPRETATION: From the above problem it is shown that the input on purchased
utilised on the value of taxable output.
The total purchases VAT is deducted from the total value of total sales VAT.
The remaining amount Rs. 635394. Can be carry forward to next years and can be
utilise for the other output tax payables.
CST input available Rs 324266 also can be forward to next year and can be utilised.
Cascading Effect of Tax
Generally, any tax is related to selling price of product. In modern production
technology, raw material passes through various stages and processes till it reaches
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55
the ultimate stage e.g., Steel Ingots are made in a steel mill. These are rolled into
plates by a re-rolling unit, while third manufacturer makes furniture from these plates.
Thus, output of the first manufacturer becomes input for second manufacturer, who
carries out further processing and supply it to third manufacturer. This process
continues till a final product emerges.
Problem
Details
A
(`)
B
(`)
110
C
(`)
Purchase
1
6
5
Value Added
100
40
35
Sub-Total
100
150
2
0
0
Add Tax 10%
10
15
20
Total
110
165
2
2
0
You will find that B is paying tax not only on his contribution of ` 40 but also on ` 100
and ` 10. Thus, same material gets taxed again and again and there is also tax on tax.
As stages of production and/ or sales continue, each subsequent purchaser has to
pay tax again and again on the material which has already suffered tax. Tax is also
paid on tax. This is called cascading effect.
VAT avoids Cascading Effect of Tax
System of VAT works on tax credit method. In Tax Credit Method of VAT, the tax is
levied on full sale price, but credit is given of tax paid on purchases. Thus, effectively,
tax is levied only on Value Added. Most of the countries have adopted tax credit
method for implementation of VAT.
The aforesaid Example will work out as follows under VAT system.
B will purchase goods from A @ ` 110, which is inclusive of duty of ` 10. Since B is
going to get credit of duty of ` 10, he will not consider this amount for his costing. He
will charge conversion charges of ` 40.00 and sell his goods at 140 . Following
example will illustrate the tax credit method of VAT.
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A
(`)
B
(`)
Transaction
with VAT
A
(`)
56
(
`
)
Purchases
110
1
0
0
Value Added
100
40
100
4
0
Sub-Total
100
150
100
1
4
0
Add Tax 10%
10
15
10
1
4
Total
110
165
110
1
5
4
Concluding that - B is purchasing goods from A. In second case, his purchase
price is ` 100 as he is entitled to VAT credit of ` 10 i.e. tax paid on purchases. His
invoice shows tax paid as ` 14. However, since he has got credit of ` 10, effectively is
paying only ` 4 as tax, which is 10% of ` 40, i.e. 10% of value added by him.
Page
57
CHAPTER 5
SUMMARY OF FINDINGS, SUGGESTIONS AND RECOMENDATIONS
Page
Knowing the basic duties that company has to pay like direct and
indirect taxes Indirect taxes: excise duty, customs duty, service tax,
central sales tax (CST), value added tax (VAT).
In excise duty for this company having exemption under ministry of new
and renewable energy (MNRE). So, the duty on the products which are
useful to renewable the energy is exempted. So, the duty is nil even the
manufacture is going on.
Customs duty baggage having several exemptions while he is returning
from abroad like personal effects, one laptop, and some professional
equipments. He can also avail the general free allowance (GFA) of
rupees 40000.
Service tax: it is the tax paid by the service provider and in some
cases it is paid by the service receiver. The registration for service
provider is compulsory when the value of taxable services exceeds 9
lakhs
Central sales tax: it is the tax paid for interstate sales and the duty
rate is 2% When the biller is registered otherwise the tax will be VAT
like 14%. So, the dealer should be registered and should maintain C
form for interstate sales
The input credit is also available for the payment of output tax of CST
(the input credit available while purchasing and paying duty on it )
VAT: it is the rate of tax where the sales within the state is held the
present AP vat is 14.5%
In vat also the input credit available for the payment of output tax of vat
(the input credit available on the purchase of products or goods from
the manufacture or distributor or wholesaler or dealer on which they
already paid tax)
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5.3 CONCLUSION
The smarttrak company is minimising the duties by following different
exemption rules. Indirect tax is a wide concept where there is duties like
excise, customs, service tax CST and VAT. Finally I concluded that all these
duties are charged on different occasions like manufacture, export or import,
sales and purchases. The central Excise duty is exempted for the products
which is manufactured by the company for solar energy renewable under
MNRE (Ministry of New and Renewable Energy).The duty paid under CST is
2% for central sales because the company is registered dealer. The duty can
be reduced due to using various schemes like exemptions, deductions, credit
on purchases etc.And input credit is utilised to the maximum extent.
Page
S.no.
1
2
3
4
BIBILOGRAPHY
Name of books
Indirect taxation
Indirect taxes-law & practice
Comprehensive guide to indirect tax laws
Authors
BY ICMAI
V.s Datey
Dr.Yogendra bangar,
Dr.Vandana bangar
Dr.k.Vinod
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