The Indirect Tax regime in India is in the state of evolution. There are several Laws, Rules and Regulations at the Central and the State level. It poses unique challenge to businesses and often has significant impact on cash flow, absolute costs and risk exposures. We have a dedicated team of experts providing multi-dimensional professional services in various Indirect Tax Laws. We render our services for the following:
India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies. Central Government levies taxes on income customs duties. Goods and Services tax (share with Central Government), stamp duty, land revenue and tax on professions are levied by the State Governments. Local bodies are empowered to levy tax on properties and for utilities like Electricity, water supply, drainage etc. Since 1994-95, our Indian taxation system has undergone tremendous reforms. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement.
An indirect taxes are basically the taxes where the burden of tax is shifted by the taxpayer to others. The indirect tax is a tax which is added to prices of all goods or services. An indirect tax is levied on and collected from a person or entity who manages to shift it on to some other person or persons or entity on whom the real burden of tax falls. The Indirect Taxation in India comprises various types of taxes like Goods and Services Tax, (GST), Sales Tax, Service Tax, Custom and Excise Duties, VAT and Anti-Dumping Duties, and the organizations provide services in all these related fields.
Several Types of Indirect Taxes in India - The following are some of the most applicable indirect taxes in India.
Goods and Services Tax (GST) is a largest reform of Indian Indirect Taxes. It is a consumption based indirect tax applicable on the supply of goods and services or both. It is a comprehensive, multi-stage, destination-based tax.
It is comprehensive tax, because it has subsumed almost all the indirect taxes i.e. Central Excise Duty, Additional duties of excise, Excise duty levied under Medicinal & Toilet Preparation Act , Additional duties of Customs (CVD & SAD), Service Tax, Surcharges & Cesses of central and State Taxes i.e. State VAT / Sales Tax, Central Sales Tax, Purchase Tax, Entertainment Tax (other than those levied by local bodies), Luxury Tax, Entry Tax (All forms), Taxes on lottery, betting & gambling, Surcharges & Cesses except a few state taxes.
It is a multi-staged tax, as the GST is imposed at every step in the production process and trading but is meant to be refunded to all registered person in the various stages of production and trading other than the final consumer.
It is a destination-based tax, it is collected from point of consumption and not point of origin like previous taxes.
Rate of GST: Goods and services are majorly divided into five different tax slabs for collection of tax like 0%, 5%, 12%, 18% and 28%.
However, petroleum products like crude oil, diesel, petrol, natural gas and ATF, Alcohol for human consumption and electricity are not taxed under GST.
Benefits:
The Customs Act was formulated in 1962 to prevent illegal imports and exports of goods. Besides, all imports are sought to be subject to a duty with a view to affording protection to indigenous industries as well as to keep the imports to the minimum in the interests of securing the exchange rate of Indian currency.
Customs duties are a form of indirect taxes imposed on goods when they are transported across the international borders. In other words, it is the tax levied on import and export of goods or services at the rate specified under the Customs Tariff Act, 1985 as amended from time to time. The rate of Customs duty varies depending on the nature of goods.
The central government uses this customs duty to increase its revenues, to safeguard domestic industries, and regulate movement of goods.
Custom duty in India is defined under the Customs Act, 1962, and all matters related to it fall under the Central Board of Excise & Customs (CBEC).
Various types of Custom Duty
Stamp duty in general terms is a kind of tax that it is applied to commercial and non-commercial transactions that create rights. And the administration of such rights is required to be enforced by the State from time to time.
Stamp paper is issued and sold for this purpose and appropriate values are designated under State laws for all nature of commercial transactions. Stamp duty varies from state to state. Thus, the rates also differ based on the type of structure and the kind of locality
Stamp laws are administered under the Indian Stamp Act and various State Stamp Acts and Rules.
Agreements that are not properly stamped to the exact value cannot be enforced in the court of law unless the difference in duty is paid along with penalty.
This act may be called as Central Excise Tariff Act 1985 and extends to whole of India. Central Excise duty is a form of indirect tax levied on the goods manufactured/produced in India. Excise taxes are placed on raw materials and paid for by manufacturers who consume the materials, and those taxes are embedded in the cost of the manufactured goods. The liability of Central Excise Duty arises as soon as the goods are manufactured which is paid by the manufacturer, who in turn passes on to the customers. It is necessary to pay all taxes on all the goods manufactured. This is also known as CENVAT, or Central Value Added Tax.
The term "excisable goods" means the goods which are specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 , as being subject to a duty of excise and includes salt.
One of the important components of tax reforms initiated since liberalization is the introduction of Value Added Tax (VAT). The VAT is a tax on the final consumption of goods or services and is finally borne by the consumer.
The VAT is a multi-stage destination-based system of taxation, with tax being levied on value addition at each stage of the transaction in the production/ distribution chain.
The VAT is basically a State subject and the states through Taxation Departments, are carrying out the responsibility of levying and collecting the VAT in the respective States. While the Central Government is playing the role of a facilitator for the successful implementation of VAT.
Service tax is levied on services provided by the businessman, professional or any other service provider, as defined under the service tax act. It is an indirect tax. Service tax was first introduced by the then Finance Minister Dr. Manmohan Singh, with the recommendations of the Raja Chelliah Panel on tax reforms in India. Initially service tax was levied on three services–Telephones, non life insurance and stock-broking. The rate of tax was pegged at a modest of 5%. It was increased from 5% in 1995 to 8% in 2003. It was revised to 10% with effect from September 2004 and finally to 12.36%, however it has been merged with the introduction of GST, since 2017
STT is a tax being levied on all transactions done that are listed on stock exchanges. STT is applicable on purchase or sale of equity shares, derivatives, equity-oriented funds, and equity-oriented Mutual Funds. STT on purchase or sell of an equity share is 0.075%.
Entertainment tax is an indirect tax, however it has been summed up in GST. In India, entertainment tax is imposed on services relating to such as for movie tickets, festivals, commercial shows, amusement parks etc. and the state government is the sole beneficiary of this tax collections. For e.g. earlier the cost of movie ticket is inclusive of entertainment tax now comes with GST.
A luxury tax is a tax placed on luxury products or services that are deemed to be non-essential or considered as luxury. This type of tax is an indirect tax in that the tax increases the price of the good or service and is only incurred by those who purchase or use the product.
The term has remained even though many of the products that are assessed with luxury taxes today are no longer seen as "luxuries" in the literal sense.
Sales tax which is paid to the regulating body/government for the sales of goods and services. Sales Tax is imposed under both, Central Government (Central Sales Tax) and State Government (Sales Tax) Legislation. Generally, each State follows its own Sales Tax Act and levies tax at various rates. Apart from sales tax, certain States also imposes additional charges like works contracts tax, turnover tax and purchaser tax. Thus, Sales Tax Acts as a major revenue-generator for the various State Governments.
Sales tax is generally charged as a percentage to the value of the product or service at the time of purchase of goods or services. Sales tax in other terms means the additional money one needs to pay for purchase of goods and services.
Types of sales tax: Sales tax is of different types depending upon the sale of product from manufacturer to wholesaler or retailer to the customer and other services.
Anti Dumping Duty is a tariff that a domestic government imposes on imports manufactured overseas countries and that it believes are priced below fair market value of similar goods in the domestic market.
Anti-dumping duty is imposed to protect local businesses and markets from unfair competition by imports.
Kireeti Consultants offers integrated solutions for above referred core areas including Statutory / Legal compliance at every step of Trade and Industrial requirements, and addresses all the regulatory and licensing requirements, liaison with all concerned Government Authorities.
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