Workshop On Finance For Non-Finance Executives: Mining & Beneficiation

Mining &
Beneficiation
Workshop on
Finance for
Iron
Making
Upstream
Non-Finance Executives
Steel Making
Service Centers
Retailing
1
INDIRECT TAXES
Basic concept
Taxes levied by the Govt can be split as
under :
a) Direct tax is a tax on individual
person (Income tax, Wealth tax,
Securities Transaction Tax)
b) Indirect tax - is a tax on goods and
services collected by the intermediary.
(Customs, Central Excise, Service Tax,
Sales Tax, Octroi, Entry Tax)
)The Constitution gives the power to the
Central and State governments to charge a
multitude of indirect taxes.
Basic concept
The central government charges tax on
goods at the point of import (Customs duty),
manufacture (Excise duty), inter-state sales
(Central sales tax or CST) and on provision
of services (Service tax).
The state governments charge tax on goods
sold within the state (Sales tax/Value Added
Tax or VAT) and on the goods that enter the
state (Entry tax).
Differences between Direct and Indirect taxes

Feature
Direct Tax
Indirect Tax
Levy
On other than
goods
Same person
On goods
Impact and
Incidence
Credit
Supervision
Not applicable
Different
persons
Allowed
CBDT
CBEC
Various Acts in India

There are 1074 Acts exists in India.
Out of the total number of Acts, 65 Acts
are related to Tax laws.
Some of the important Acts related to Tax
laws are Income Tax Act, Customs Act,
Central Excises and Salt Act, Central Sales
Tax Act, Wealth Tax Act etc.
Customs an overview
An ancient Custom is that, whenever a
merchant entered a kingdom with his
merchandise, he had to make a suitable
offering of gifts to the king for allowing
him to sell his goods.
Modern state formalised this custom into
Customs duty.
The taxable event is import into or export
from India.
Customs duties are levied on the goods at
the rates specified in the schedules to the
Types of Customs duties

Customs duties
Import
Export
Basic Customs duty

Additional Customs duty
Special additional duty of Customs
Protective duties
Safeguard duty
Countervailing duty on subsidized articles
Anti-dumping duty
Import procedure
Imported goods can be cleared on payment of customs duty
or request for warehousing
Imported goods
Cleared for home consumption
Public warehousing
Cleared for warehousing

Private warehousing
Export procedure
Steamer agent is required to file an application for entry outwards 14
days in advance from the date of original export.
Export of goods
Submission of S.B. , Invoice, packing list, contracts etc to Customs
Guarantee Receipt (GR), Statutory Declaration Form (SDF)
Valuation and Classification of goods by Customs
Examination of goods and Stuffing of goods by Customs
Let Export order by Customs
Central Excise an overview

Central Excise duty is an indirect tax
levied on goods manufactured in India.
The tax is administered by the Central
Government .
The Central Excise duty is levied in terms
of the Central Excise Act, 1944 and the
rates of duty, ad valorem or specific, are
prescribed under the Schedule I and II of
the Central Excise Tariff Act, 1985
The taxable event under the Central
Excise law is manufacture and the
liability of Central Excise duty arises as
The taxable event under the Central Excise law is

manufacture and the liability of Central Excise duty arises
as soon as the goods are manufactured, however duty is
collected on removal of goods.
Definition of Manufacturing
1. There should be change in physical & chemical properties
2. There should be change in characteristics
3. New product comes into existence
4. It should have marketability and commercial parlance

The study of Central Excise
understanding and analysis of
involves
Central Excise Act, 1944

Central Excise Tariff Act, 1985
Central Excise Valuation Rules, 2000
Central Excise Rules, 2002
Cenvat Credit Rules, 2004
Circulars, trade notices and notifications issued
by Ministry of Finance & CBEC
Decisions laid out by the Judiciary
1
Central Excise an
overview
All Excisable goods are specified in Central Excise
Tariff
Central Excise tariff contains 1 to 96 chapters
Iron ore Concentrate & Iron ore Pellets are falling
under Chapter-26
The present rate of Excise duty is 8.24% Incl.
ECESS & SCESS
Cenvat Credit
Scheme
CENVAT means : CENTRAL VALUE ADDED TAX
Tax on taxes is not possible
To avoid Double Taxation cenvat credit scheme
was put in place
Duties of Excise / Service Tax paid on Excisable
goods & services can be taken as cenvat credit.
Cenvat Credit
Scheme
The following duties & Taxes can be taken as
CENVAT Credit
1.
2.
3.
4.
5.
6.
7.
8.
Duties of Excise
Additional Duty of Excise
Additional Duty of Excise under customs act
NCCD (National calamity & contingent duty)
Special CVD
Service Tax paid under Finance Act
Education Cess on excisable goods
Education Cess on taxable services
Cenvat Credit
Scheme
Cenvat credit can be taken basically on Inputs,
Capital Goods & Input Services
Input : All Goods except LDO, Petrol used in
manufacture of Final product
Capital Goods : Plant & Machinery in the factory
of the manufacturer
Input Services : Any Services used by the
manufacturer directly or indirectly in relation of
manufacture of finished goods
1
Cenvat Credit
Scheme
Cenvat credits can be utilised for payment of :

1. Duty of Excise on Final product
2. Service Tax on any output service
Service Tax Basic concepts
The Union Government levied Service Tax in 1994

Service Tax is applicable to the whole of India except
the state of J&K.
As on date,114services are identified as taxable
services in India.
Finance Act 1994 empowers Central Government to
grant partial/ full exemption from payment of Service
Tax to several services such as services provided to
United Nations, an international organisation, diplomatic
missions/ consulates and to all developers of SEZ.
Small scale service providers services are exempted up
to the value of Rs.10 lakhs.
No Service Tax for free service
Service tax liability is on services provided / to be
provided by service provider.
Service Tax liability

Taxable services exceeding Rs.10 lakhs during the
previous year.
In General service provider is liable to pay Service
Tax
Service receiver is liable to pay in case
Service provider is non-resident who does not have
place of business in India
Insurance company for services received from
insurance agents
Mutual fund company for the services of mutual fund
agents
GTA , consignor or consignee who is paying freight
charges
Recipient of sponsorship
service
1
Logistics Overview
Domestic Vendor
Import Vendor
Domestic
Vendor
Import
Vendor
Subcontractor
Vizag Plant
Overseas
Customer
Stock transfer
Domestic
Customer
Hazira Plant
Kirandul Plant
Legal View: Procurement of Raw Materials

Excise Invoice
Domestic Vendor
Price: 1000
Qty : 10 PC
Duty 8%
- 80
Excise Stock/
Part I Register
Deposit Rs. 80
as Duty to the
Govt.
GR at Factory
Gate
Receipt
Qty : 10 PC
CENVAT / Part II
Register
Excise Invoice
Capture and Post
ED Credit
: Rs 80
Stock Transports
Supplying Plant
Excise Invoice
Price: 1000
Qty : 10 PC
Duty 16%
- 160
Excise Stock/
Part I Register
Receipt
Qty : 10 PC
Deposit Rs. 160
as Duty to the
Govt.
GR at Recv. Plant
CENVAT / Part II
Register
Excise Invoice
Capture and Post
ED Credit
: Rs 160
Sale from Factory

Supplying Plant
Excise Invoice
Dispatch
Price: 1000
Qty : 10 PC
Duty 8%
+ 80
Debit:
Rs. 80
Excise Duty
Payable
A/C
Monthly utilization
CENVAT/Part II Register
PLA Register
Cenvat Credit Status for 2008`09 (in crores)
Location
Vizag
Inputs
Capital
Goods
Service
Tax
Total
260.80
6.88
8.12
275.80
Kirandul
3.75
4.53
4.15
12.43
Total : >
264.55
11.41
12.27
288.23
Sales Tax - Overview
Sales Tax is a TAX on Sale of Goods

There are different types of Sales:
- Intra state (within the state) sale
- Inter state Sales (Outside state)
- Export sales
- High sea Sales
- Sale in Transit
1
What is VAT
Each commodity passes through different
stages of Production and distribution
before finally it reaches the Consumer.
Some value is added at each stage of
production and distribution chain.
Value Added Tax (VAT) is tax on value
addition at each stage
The general VAT rate is @4% on all
industrial inputs and capital goods
Input Tax credit

A Tax paid (VAT) on purchase of goods made
within the state is eligible for input tax credit
benefit
There are certain goods which are listed as
negative items for which the above benefit
cannot be extended; Ex: - LSHS, Furnace Oil,
Automobiles, Furniture & Fixtures, construction
material
The input tax credit benefit can be adjusted
against output tax on sale of goods within /
outside state
Statutory Forms
Statutory forms under the sales tax are defined
below:
C Forms: These forms can be issued by the
purchaser to the seller for availing the
concessional rate of tax in case of inter state
purchases. Presently, the concessional rate of tax
is 2%. In absence of C-Form, the Local state
Sales Tax or 2% which ever is higher will be
applicable.
These forms are used only in case of purchased
goods are used in the manufacturing process and
also items purchases are for resale. Any
Statutory Forms
H Forms : These forms can be issued by
exporter for availing the exemption of sales tax
on goods exported
F Forms : These forms can be issued against
the stock transfer of goods from one state to
another state to avail exemption of CST
E-1 Forms: These forms can be issued against
sale in transit (transfer of document while goods
in transit) to avoid local sales tax
Statutory Forms
Way-Bill : This is nothing but a Road permit for
transportation of goods within the state /out side
state.
Way bill is required for importing of goods from
other states against sensitive list. Ex : Steel,
Electric Goods etc.,
Transportation of goods without Way-bill lead to
detention of goods by check post authorities and
impose Local taxes along with penalty
Statutory Forms
Entry Tax : A Tax on entry of Goods into the
state of Import
The point of levy is on entry into the state
Entry tax can be paid as per the schedules of
respective state entry tax act
There is no Entry Tax in Andhra Pradesh (If the
goods are used as inputs / raw materials for
manufacturing of other goods
Entry is applicable in Chhattisgarh even for
purchases made within the state i.e one local
area to another local area
Rate of Tax is 1% for majority of goods in the
state of CG
This levy can also be adjusted against VAT
Statutory Forms
Works Contract Tax(WCTDS) : A Tax on Works
Contract.
Works contract means wherever goods involved
in execution of contract for works.
Examples:
Industrial & commercial construction
Erection & commissioning of Plant & Machinery
Annual Maintenance Contracts
WCTDS will be deducted / recovered from gross
value of contractors invoice
Statutory Forms
WCTDS will be deducted and deposited within 15
days from the date of deduction.
TDS certificate will be issued on monthly basis
Rate of Tax for WCTDS :
2.80%
Chhattisgarh
Andhra Pradesh:
: 2.00%
Impact of indirect taxes on a company

Indirect taxes affect businesses in many
ways: compliance, pricing, cash flows and
profitability, to name a few. Thus, it is
crucial for businesses to manage their
exposure to indirect taxes and prevent
unnecessary costs. Mistakes can be costly.

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Mining &

Differences between Direct and Indirect taxes

Various Acts in India

Types of Customs duties

Basic Customs duty

Cleared for warehousing

Central Excise an overview

Central Excise an overview

The taxable event under the Central Excise law is

Central Excise an overview

Central Excise Act, 1944

Cenvat credits can be utilised for payment of :

Service Tax Basic concepts

The Union Government levied Service Tax in 1994

Service Tax liability

Legal View: Procurement of Raw Materials

Sale from Factory

Cenvat Credit Status for 2008`09 (in crores)

Sales Tax - Overview

Sales Tax is a TAX on Sale of Goods

Input Tax credit

Impact of indirect taxes on a company

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