Despite the various reforms carried out in the past few years, the old indirect tax system was quite complex, with multi-layered levies both at the Federal and State level. The Federal government levied a tax on goods at the point of import (Customs duty), manufacture (Excise duty), inter-state sales (Central sales tax or CST), and on the provision of services (Service tax). The states, on the other hand, have been vested with powers to levy a tax on the sale of goods within the state (Sales tax/Value Added Tax or VAT), and on the entry of goods into the state (Entry tax), under the respective state laws
The existing regime requires businesses to undertake careful upfront analysis of the tax costs involved in a transaction, ensure adequate backup documentation to support their tax positions and constantly explore opportunities for tax optimization. Further, as India has entered uniform Goods and Services Tax (GST) regime from July 2017, this needs to be factored in any significant tax approach developed at present.
Our indirect tax professionals with their wide-ranging experience and in-depth knowledge help clients in all of these aspects. We provide advisory services in respect of the Goods and Service Tax (GST), Works Contract Tax and Custom and Excise duties. This includes services in relation to setting up a Greenfield venture including review of tax assumptions and analysis of tax exemptions/concessions which could be relevant for the project and tax modelling involving analysis of tax costs and credits impacting the business models. We also provide services in relation to setting up of Special Economic Zones (‘SEZs’)/SEZ units.
Further, an indirect tax diagnostic review or health check is a broad-based package offered to our clients. This review helps identify areas of potential tax exposure and tap opportunities for tax savings. We also assist our clients in making representations before the revenue authorities for obtaining tax concessions, relief and seeking clarifications at state as well as the federal level.
WHAT IS INDIRECT TAX?
Indirect taxes are the charges that are levied on goods and services. Some of the significant indirect taxes include Goods and Service Tax (GST), Central Excise Duty, Works Contract Tax, Customs Duty, stamp duties and expenditure tax.
Unlike Direct Taxes, Indirect Taxes are not levied on individuals, but on goods and services. Customers indirectly pay this tax in the form of higher prices. For example, it can be said that while purchasing goods from a retail shop, the GST is actually paid by the customers. The retailer eventually passes this tax to the respective authority. The indirect tax actually raises the price of a good and the customer’s purchase by paying more for that product.
GOODS AND SERVICE TAX:
GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came in to effect on 1st July 2017. Goods & Service Tax Laws in India is a Comprehensive, Multistage, and destination-based Tax Law that is levied on every value addition.GST has mainly removed the cascading effect on the sale of goods and services. Removal of the cascading effect has impacted the cost of goods. Since the GST regime eliminates the tax on tax, the cost of goods decreases.
In the GST Regime, a business whose turnover exceeds Rs 20 lacs is required to register as a normal taxable person. This process of registration is called GST registration.GST registration is mandatory for both business and not-for-profit entities that supply taxable goods or services in India.
The taxable person is required to seek registration within 30 days from the date of becoming liable for registration. Liability to obtain GST registration would arise when the entity crosses the threshold aggregate turnover or begins inter-state supply or involved in e-commerce transactions…
GOODS AND SERVICE TAX RETURN:
Currently, GST registered business typically have to file monthly return GSTR3B and GSTR1 monthly or quarterly depending on turnover in each state where they operate. Some of the GST returns in the current regime are GSTR1, GSTR3B, GSTR4, GSTR5, GSTR6, GSTR7, GSTR8, GSTR9, GST9A, GSTR10, and GSTR11
IMPORT OF SERVICES:
Import of services refers to the supply of a service, wherein the supplier is located outside India and the recipient is located in India and the place of supply of service is in India. Import of service attract GST under reverse charge basis generally,
WORKS CONTRACT TAX:
Works contract tax (WCT) is a tax imposed on a contract for work, such as assembling, construction, building, altering, manufacturing, processing, fabricating, installation, improvement, repair, or commissioning of any movable or immovable property.
In the previous regime, works contract was treated as a combination of goods and services. This meant that VAT was applicable to the goods component and the Service Tax on the service component. If in the course of work contract, a new product would be manufactured, excise would be applicable. .The situation was complicated, as different states had different VAT rates, as well as different composition schemes for different VAT rates..
Under GST, works contract services has become much simpler. A major change GST council has decided to consider works contract purely as a service. The works contract GST has been fixed at 18%.Works contract under GST will be applicable only for immovable properties. A works contract is an entire one and indivisible contract. In certain cases, a contract may be more than a works contract and it may involve a works contract as well as a contract for the transfer of immovable property.
The taxation issues regarding Works Contract require special consideration. Taxes should be properly planned for cost-efficient execution of works contract. Few other issues like a supply of goods for execution of inter-state works contract, Turnkey projects, Service and Supply Contract require proper planning from a tax angle.
CENTRAL EXCISE DUTY:
Central Excise duty is an indirect tax levied on goods manufactured in India. The tax is administered by the Central Government under the authority of Entry 84 of the Union list (List I) of the Constitution of India. The Central Excise Duty is levied in terms of Central Excise Act, 1944 and rates of duty, ad valorem or specific, are prescribed under the Schedule I and II of the Central Excise Tariff Act, 1985. Generally, the effective rate of central excise is 10.30%. Two conditions must be satisfied for the levy of central excise:- The article should be “Goods’; and It should have come into existence as a result of “Manufacture
As per the legal provisions, every person who produces, manufactures, carries on a trade, holds private store-room or warehouse. The following categories of persons require registration:
Every manufacturer of the dutiable excisable goods;
First and second stage dealer;
Person holding warehouse for storing non-duty paid goods;
the person who obtain excisable goods for availing end-use based exemption
Application for registration should be made in the prescribed form. Following are the special requirement in relation to registration:
Separate registration is required for each separate premises if a person has more than one premises.
If the business is transferred, fresh registration has to be obtained by the transferee
Change in constitution of partnership firm or company should be intimated within 30 days of the change. in case of such changes, fresh registration is not required
If the manufacturer ceases to carry on operations for which he is registered, he should apply for de-registration
If there is any change in the information given in the form, the change should be informed in the application form itself.
PAYMENT OF CENTRAL EXCISE DUTY:
Central Excise Duty is payable on a monthly basis by 5th of the following month. Duty can be paid through the current account (Personal Ledger Account) or CENVAT Credit. Small Scale units availing exemption are required to pay duty on 15th of the month following the end of the month. Duty is payable electronically or by banking channels through TR-6 challan. The prescribed challan form TR-6 should be filled in giving details like name and fifteen digit ECC number of the manufacturer, the code number of excise commissioner/division/range etc.
FILING OF CENTRAL EXCISE RETURN:
The Central excise return shall be filed on or before 10th of next month. In the case of a dealer, the excise return shall be filed on a quarterly basis. Following are the forms and description of returns
ER-1: Manufacturer not eligible for SSI Concession
ER-2: EOU Unit
ER-3: Quarterly Return BY SSI
ER-4: Annual Financial Information Statement
ER-5: Information relating to Principal Inputs
ER-6: Monthly return of receipt and consumption of each of the principal inputs
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