INDIRECT TAXATION IN RELIANCE COMMUNICATIONS

Chapter – 3: Objectives & Methodologies

(1) Research Problem

• Collection of Data from SAP (Systems Applications and Products) .

• Limitation of decision making powers.
• Delay in decision making process due to centralization.

(2) Objectives

• To understand the impact of rules of taxation department on Reliance Communications, in

which I studied that how far, has the rate of taxes changed the scenario of telecom industry in
our country.
• To understand the taxation norms and their necessity and impact on Indian Telecom industry.
• To understand the strategies being adopted by Reliance Communications to cope with norms of
taxation and their implications on future growth.

(3) Limitations

Data:

This project and analysis is based on secondary data collected from internet and personal meeting with
the persons concerned. Utmost care has been taken while collecting this data but still there are chances
for errors.

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Environment:

Reliance Communications is moving towards growth; as a result many changes are expected to take
place. I had taken utmost care to count these factors while calculating the taxes.
Time:

The time frame for project is restricted to 14 weeks, which is less for an extensive data analysis.

(4) Information Requirement

Complete information about group of companies under the brand name of Reliance Communications
and documentation requirements for payment of taxes according to taxation policy that applies in State
of Haryana as the training was done in branch office of Haryana.

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 Chapter – 4: Data Analysis & Interpretation

Reliance Communications has widened itself into group of companies in order to look into all the
services properly and carry the business smoothly. Reliance Communications Group of Companies
are:-

• RICL- Reliance Communications Infrastructure Ltd.

• RTIL- Reliance Infratel Ltd
• RCPL-Reliance Communications Ltd
• MNPL-Macronet Pvt. Ltd.
• RBTV-Reliance Big TV Ltd.
• RWSL-Reliance Web stores Ltd.

The rules of the company are as such that no data was provided and the data that was calculated via
SAP was provided by the assigned authority. The process is explained for each operation as under:-

 VAT

Value Added Tax (VAT) is a general consumption tax assessed on the value added to goods and
services. It is the tax paid to the government on the sales. VAT is a multi-point sales tax. It means tax
paid by the dealer is deducted from the tax payable collected at every point of sale and the tax already
paid. The companies paying VAT under the brand name Reliance Communications are RICL, MNPL,
RCPL, RBTV and RWSL. These companies deals in sales of items like handsets, data cards, PCO,
DTH (Direct to Home) etc... Tax rates for these items are:-

• Handsets and Data Cards – 4%

• PCO and DTH – 12.5 %
• Scrap (if any) – 12.5%

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Tax is calculated for the sale of these items. For calculating VAT following is the process that gives
sales reports of all these companies which helps in calculation of VAT on monthly basis. The process of
calculation of Sales report is:-

Log into SAP and enter the required command that is ZPPV for sales report. A New dialog box opens
in which select option Report-1 and then select option Sales report-2 that gives another dialog box. Fill
in the fields with company name and date from which report is required. After filling the required fields
press F8 and the process starts that give the sales report as per the requirements. This report is saved by
copying it to the local excel file on the system. From this report the taxes are calculated for each and
every group of company under the brand name of Reliance Communications.

 Quarterly Returns

Quarterly returns are compilation of VAT that was paid on monthly basis. The monthly VAT is
compiled and returns are calculated, this way it becomes easy to keep a check on the tax process of the
company. The quarterly returns are also important from the government’s point of view because
quarterly returns helps the company like Reliance Communications to reexamine the tax that was paid
per month. Quarter starts from month of April for all companies. For the preparation of Quarterly
Returns, we need to have the following data:- Sales report, Stock transfer (both in and out of the state) ,
sales returns data, purchases (both within the sate and outside the state and with and without C Forms)
purchase returns data etc..

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Haryana VAT format have separate forms for all the details mentioned above. This format for preparing
VAT is applicable only in Haryana as every state has different format. This format contains separate
annexure for purchases, sales, returns etc... The format of the quarterly returns is attached as Annexure
No. 1.

 C Forms

Form C is issued by the dealer for purchasing goods from the dealer out-side the state. As per section
8(1) (b) of CST Act, sales tax on Inter State sale is 4% or sales tax rate for sale within the State
whichever is lower, if sale is to registered dealer and the goods are covered in the registration certificate
of the purchasing dealer. If the selling dealer pays CST @ 2% or lower (if applicable), he has to
produce proof to his sales tax assessing authority that the purchasing dealer is eligible to get these
goods at concessional rate. Otherwise, the selling dealer will be asked to pay balance tax payable plus
penalty as applicable. Section 8(4) (a), therefore, provides that concessional rate is applicable only if
purchasing dealer submits a declaration in prescribed form ‘C’. The amount on C Form is mentioned
after deduction of freight charges.

Parts of C Form

• Original - To be furnished by the purchasing dealer to the selling dealer who shall furnish it to
the Assessing authority when required.
• Counterfoil - To be retained by the purchasing dealer who shall produce it before the assessing
authority when required.
• Duplicate - To be furnished by the Purchasing dealer to the selling dealer who shall retain it in
his record.

AUTHORITY TO ISSUE BLANK C FORM - The blank C form has to be obtained by purchasing
dealer from Sales Tax authority in the State in which goods are delivered, which is usually the place

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where purchasing dealer is registered. However, in case of Inter State sale by transfer of documents, the
purchasing dealer may not be registered with the sales tax authorities in the State where the goods are
delivered. In such case, he can obtain blank C form from sales tax authority where he is registered.

ONE CERTIFICATE FOR EACH QUARTER - If a transaction covers more than one quarter, separate
C form is required for each quarter. Procedure in case of Loss of C form - If duly completed or blank C
form is lost when it was in custody of purchasing dealer or when the form was in transit to selling
dealer, the purchasing dealer will have to furnish ‘Indemnity Bond’ to sales tax authority (from whom
the blank forms were obtained) in prescribed ‘G’ form. If the duly completed C form is lost after it is
received by selling dealer, he has to submit indemnity bond to sales tax authority of his State.

Replenishment of C forms: - In Case when the C forms are not adequate to be issued then a
procedure is followed for replenishing from the department. Firstly a letter, requesting for the forms to
be issued, is submitted in the department along with the annexure in which the details of the forms to be
issued to the vendors is mentioned. Then a Vakalatnama, Power of attorney and the original register
containing the details of forms issued earlier is submitted in the department. Department go through all
this and issues the required forms to the assigned authority and this person issues the pending forms as
per the details available. The process of calculation of pending C forms is: -

Log into SAP and enter the process code ZFR4. Fill in all the required fields with Company code for
which the information is required and press F8 through which the report is processed. Data could also
be obtained for different vendors with the details of transactions done. When we get the information
about the pending c forms then we match the data received from the dealers. If there is some

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discrepancy found then the reason is searched and forms are issued. A part of C form is shown in
Annexure No: - 2

 F Forms

Section 6A(1) of CST Act provides that when a dealer claims that the Inter State movement of goods is
not a sale, he has to prove the same & must produce a declaration in ‘F’ form received from
Consignment Agent or Branch Office in another State. This means F Forms are meant for the purpose
of showing that the movement of stock from one state to another is not sales but stock transfer only.
When the goods are dispatched to another State on consignment basis or to branch of dealer in another
State, there is Inter State movement of goods but there is no sale. This provision is often misused and
goods are dispatched in the garb of consignment or branch transfer though actually it may be a sale.
Goods can be sent to other State for further manufacture.

Parts of F Form

• Original - To be furnished by the purchasing dealer to the selling dealer who shall furnish it to
the Assessing authority when required.
• Counterfoil - To be retained by the purchasing dealer who shall produce it before the assessing
authority when required.
• Duplicate - To be furnished by the Purchasing dealer to the selling dealer who shall retain it in
his record.

One Form F per state covering receipts during the month can be issued. If space in form F is not
adequate, a separate list may be attached as annexure to form F giving details, provided that the
annexure is firmly attached to the form.

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The blank form has to be obtained from sales tax authority in which the transferee is situated, i.e. State
where goods were received. The F form is issued by the receiving state. If the form is lost, indemnity
bond has to be given and duplicate form clearly marked as ‘Duplicate’ can be issued. For the issuance
of F forms, stock transfer data is required from the all the dealers. This Data can also be obtained from
warehouses where stock was delivered and on monthly basis the Forms are issued. This form is
important at the time of assessment that is held once within 3 to 4 years. If the company is unable to
show the value of F forms declared in the returns at the time of assessment to the department then the
stock transfer is taken as sales and the company has to pay the penalty charges, 24% annual rate of
interest from the date of default till date and the actual tax for the sale made in the default year. The part
of F Form is shown in Annexure No: - 3.

Replenishment of F forms: - In Case when the F forms are not adequate to be issued then a
procedure is followed for replenishing from the department. Firstly a letter, requesting for the forms to
be issued, is submitted in the department along with the annexure in which the details of the forms to be
issued to the vendors is mentioned. Then a Vakalatnama, Power of attorney and the original register
containing the details of forms issued earlier is submitted in the department. Department go through all
this and issues the required forms to the assigned authority and this person issues the pending forms as
per the details available.

 VAT D-3 Forms

VAT D-3 Forms commonly known as ST -38 Forms are issued just for the transfer of goods from one
state to another state or within state for the condition where the value of goods is more than Rs
25,000/-. VAT D-3 is applicable in some states of India only and Haryana is one of them. This form is
of two types: - Inward and Outward. Inward form is used by the consignee company at that point of
time when the purchases are made from outside state. Outward forms are issued by the consignor to the
consignee for sales made outside state as well and for within state. The assigned authority for the

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issuance of ST-38 forms, submit the forms along with the details to the department and the department
keeps a track of all the forms and maintains it in a passbook that looks like a bank passbook. This way
the company maintains the details of the forms issued to the consignee and issued by the consignee in a
passbook. The data for this purpose could be taken from SAP but in most cases the data is sent by
consignor to the consignee and in case of stock transfer from one state to another F form is issued and if
it is sale C form is issued. The format of ST- 38 is shown in Annexure No: - 4.

Replenishment of ST- 38 forms: - In Case when the ST-38 forms are not adequate to be issued
then a procedure is followed for replenishing from the department. Firstly a letter, requesting for the
forms to be issued, is submitted in the department along with a Vakalatnama and the passbook
containing the details of forms issued earlier is submitted in the department. Department go through all
this and issues the required forms to the assigned authority and this person issues the pending forms as
per the details available.

 Works and Contract Tax

Some contracts are of contracts for labor, work or service and not for sale of goods, though goods are
used in executing the contract for labor, work or service e.g. when a contractor constructs a building,
the buyer pays for cost of building which includes cost of building material, labor and other services
offered by the Contractor. WCT is paid @ 4% for civil construction being done by the contractor.

In most of the State VAT Acts, the provisions of Tax deducted at source (TDS) are incorporated. The
logic behind the TDS (WC) provisions is that the Contractors are not organized in many cases and they
do not pay taxes on time, therefore in this provision the contractee deducts the prescribed % of TDS
from the Contract Price and pays the same before the prescribed dates, directly, to the respective State
Government through the specified challan. The TDS is to be deducted by the specified contractees only
as notified by the State Governments. It is responsibility of the Contractee to deduct the prescribed % of

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TDS (As provided in the relevant VAT Act & Rules) and pay the same to the State Government before
the prescribed date, otherwise interest / penalty is leviable on such Contractees.

However, as per the State VAT Act a provision, the Seller (Contractor) is liable to pay VAT, if No TDS
is made by the Contractee. The State Governments have prescribed different VAT Forms under the
provision of TDS (WC). In certain States, the Contractee has to obtain TAN (Tax deductible Account
Number) and file Annual Returns of TDS under the TDS provisions.

The process of calculating WCT is as under:-

Log into SAP and enter the code YFAP. Select the required option for the WCT data. Fill in the
company code with fiscal year and press F8 that gives the report of the contracts given and work done
by the vendors. The data so obtained is then compiled and challans are made according to the amount
deducted and the same will be filed with the department along with the Demand Draft and challans. The
data is obtained from SAP and then it is compiled and challans are made according to the amount
deducted and the same will be filed with the department along with the Demand Draft and challans. For
WCT form format refer to Annexure No: - 5. After the payment of challans, the certificate is issued that
contains the details of the contractor on whose name it is issued along with the name of the dealing
company. A table is made showing the date of contract, bill amount, WCT amount, date of deposit of
tax and demand draft number. The certificates are issued on quarterly basis and for the format of the
certificates refer to Annexure No: - 6.

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  Annual Returns

Annual returns are compilation of VAT that was paid on monthly basis and then complied in quarterly
returns .The Quarterly VAT is compiled and returns are calculated, this way it becomes easy to keep a
check on the tax process of the company. This return calculation is necessary for every company
because

• Keeps the track of the work done by the company in a financial year.
• It is a way to summarize the tax payments made in a year.
• One of the easiest ways for self assessment for a huge company like Reliance
Communications.
• If some discrepancy was made while calculation of monthly or quarterly returns then it
can be rectified in the annual returns.

So this way the annual returns are necessary for a company in the corporate world. For the preparation
of Annual Returns, we need to have the quarterly reports of the company for the required year which
must include the sales report, stock transfer (both in and out of the state) , sales returns data, purchases
(both within the sate and outside the state and with and without C Forms) purchase returns data etc..
Haryana VAT format have separate forms for all the details mentioned above. This format for preparing
VAT is applicable only in Haryana as every state has different format. This format contains separate
annexure for purchases, sales, returns etc. For the format refer to Annexure No: - 7.

 Assessment of the Company

Assessment of a company means checking /auditing or verification of the tax activities of the previous
years of a company. For the assessment process a proper procedure is carried in which a notice is sent
to the company by the Excise and taxation Officer of that district in which the company is registered.

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During the assessment the company has to provide the quarterly returns, annual reports, yearly form
details that is all the registers of the forms like C Forms, F Forms, and ST 38 Forms etc...Must be
completed and trading accounts are shown. Apart from this the details on the SAP of the trades done
and tax descriptions are cross checked with the tax calculated by the company. If the values of the
calculated tax mismatches then the company must have appropriate answer for it otherwise the
assessment team is liable to charge the company and the company has to pay the penalty for this.

This way the taxation work was carried forward in Reliance Communications and taxes were paid but
unfortunately no one was allowed to provide the data to outsiders. Hence only the processes were
taught.

Chapter – 5: Conclusion & Recommendations

(1) Conclusions

Indian economy is an emerging one and is growing very fast so in this emerging market competition
level among telecommunication services provides new players are coming who will necessarily

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intensify the competition. New products and new schemes are being offered by the telecom service
providers. The need for large information capacity has grown tremendously due to the demand of real
time information. Telecommunication has now become a major information transmission system and
telecom has undoubtedly emerged as the most important industry in India. Indian telecom companies
are putting in their best offer to rope in major telecom operators of the world e.g. Reliance, Vodafone,
Airtel, MTN etc. are playing their role in synergy with the operation of the Indian companies. Service
provided and the better quality of network etc. is provided at affordable cost. In this process of
competition it is assumed that only those companies will survive who work according to the set norms
by the government and those who are not involved in any of the illegal work. Reliance Communications
is a combination of small businesses that are being taken care of with honesty and without any chances
of having discrepancies. In the whole document the taxation handling of Haryana Circle of Reliance
communications is discussed. All the requirements are discussed properly making it clear for the
outsider to understand the work without experiencing it himself. Hence hope that everything moves
smoothly and silently in Reliance Communications in order to have growth and benefiting both the
society and the company itself.

(2) Recommendations

• As observed, due to centralization the decision making process swallows the precious time that
is not good for such a big company.
• SAP rights must be given to all the employees in order to work more effectively and efficiently.
• Unnecessary expenses must be lowered.
• Employees must be motivated from time to time according to their performance.

(2) BIBLIOGRAPHY

Reference to the web pages

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 http://www.streetdirectory.com/travel_guide/193889/entrepreneurship/business_incorporation_i
s_necessary_when_running_a_business.html
 http://business.mapsofindia.com/india-tax/
 http://finance.indiamart.com/taxation/
 http://www.telecomindiaonline.com/indian-gsm-operators-monthly-subscriber-additions-in-fy-
2008-09.html
 http://www.telecomindiaonline.com/india-telecom-growth-and-subscribers-june-2009.html
 http://www.scribd.com/doc/17704871/Project-of-Reliance-Communication
 http://www.livemint.com/2008/02/28112511/Wanted-A-clear-roadmap-to-GST.html

Reference to the group meeting with the Employees

 Mr.Goutam Somani
 Mr. Amandeep Puri
 Miss. Shilpa
 Mr. G.S Khurana
 Mr. Pawan. P. Kumar.

ANNEXTURE 1 - QUATERLY RETURNS FORMAT

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ANNEXTURE 2 - C FORM

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ANNEXTURE 3 - F FORM

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ANNEXTURE 4 ST – 38 INWARD FORM

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ST – 38 OUTWARD FORM

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ANNEXTURE 5 – WCT CHALLANS FORMAT

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ANNEXTURE 6 - WCT CERTIFICATE FORMAT

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 Certificate of Deduction of Tax at Source on payment to Contractors
under Section 24 of the Haryana Value Added Tax Act, 2003

To,
……………….
……………….
……………….

We ……………… hereby certify that a sum of Rs……../- (Amount in Words) being

Tax at source @ 4% as per Haryana Value Added Tax Act, 2003 has been
deducted from Rs …………. /- being the amount paid/credited to your account
during the quarter from Apr 200... To Jun 200... The amount deducted at source
has been paid to the credit of the State Government.

DATE OF BILL WCT DATE OF D.D.

CONTRACT AMOUNT AMOUNT DEPOSIT OF TAX NO.

Place: ……………… For Reliance ………….. Limited,

Authorized Signatory

ANNEXTURE 7 – ANNUAL RETURNS FORMAT

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