3. Components of Direct and Indirect Taxes
Direct Taxes
Corporation
Tax
Income Tax
Wealth Tax
Others
Indirect Taxes
Excise duty
Custom duty
Service tax
VAT
CST
4. Collection of Indirect Taxes (Rs. in crores)
Taxes/Year 2011-12 2012-13
Percentage
of Growth
over last
year
Customs 1,49,328 1,65,818 11.04%
Central Excise 1,44,116 1,75,137 21.53%
Service Tax 97,509 1,32,498 35.88%
Total 3,90,953 4,73,453 21.10%
6. Collection of Direct Taxes (Rs. in crores)
Taxes/Year 2011-12 2012-13
Percentage of
Growth over
last year
Corporate Tax 3,23,224 3,56,326 10.24%
Income Tax &
Others
1,71,575 2,01,674 17.54%
Total 4,94,799 5,58,000 12.77%
8. Percentage of Direct and Indirect Tax in the Total
Tax Revenue of the Govt. of India.
2011-12 2012-13
Direct Tax
Percentage
55.86% 54.1%
Indirect
Tax
Percentage
44.14% 45.9%
9. Percentage of Direct and Indirect Tax in the
Total Tax Revenue of the Govt. of India.
0
10
20
30
40
50
60
2011-12 2012-13
55.86
54.1
44.14
45.9
Direct Tax Percentage
Indirect Tax Percentage
10. DIRECT TAXES
Charged directly on person‟s
income, expenditure, wealth etc.
It is progressive in nature
Burden cannot be shifted.
It forms about 56% of the total tax revenue
of the Govt of India.
It will not affect in the prices of the goods
and services.
High income tax rates leads to tax evasion.
INDIRECT TAXES
Charged on goods and services.
It is regressive in nature.
Burden can be shifted.
It means, in the first instance it will be
paid by one person and later on to be
recovered from other person.
It forms about 44% of the total tax revenue
of the Govt of India.
It will have an inflationary impact as high
rate of excise duty, for example, will
increase the cost of production.
High tax leads to smuggling etc.
Point of differences
11. Distribution of Power to levy taxes
Article 246 (1) of our Constitution states that the Parliament has
exclusive powers to make laws with respect to any matters
enumerated in List I of the Seventh schedule to the Constitution
(Called Union List)
Article 246 (3) states that State Govt has exclusive power to make
laws in respect of the matter enumurated in List II (Called State
List).
Seventh schedule of the Constitution consists the following three list.
List I (Union List) contains entries over which central Govt has a
power
List II (State List) Contains entries over which State Govt has a
power.
List III (Concurrent List) Contains entries over which both
Central Govt and State Govt has a power.
12. Taxation under our Constitution
Union List (List I) State List (List II)
Entry No. 82 - Taxes on Income Except
Agriculture income
Entry No. 46 - Taxes on Agriculture
income
Entry No. 83 - Duties of Custom
Entry No. 51 - Excise duty on Alcoholic
Liquors, Opium and Narcotics
Entry No. 84 - Duties of Excise Entry No. 52 - Entry tax or Octrio
Entry No. 85 - Corporation Tax
Entry No. 54 - Tax on sale or purchase
of goods where such sales takes within
state (VAT)
Entry No. 86 - Taxes on Capital Value of
Assets
Entry No. 56 - Tax on goods and
passengers carried by road or inland
waters
Entry No. 92A - Taxes on sale or
purchase of goods between two states
Entry No. 92C - Taxes on Services
13. The law of Central Excise duties is governed by the following :
Central Excise Act ,1944
This is the basic law related to the levy and collection of duties of
central excise. However this Act does not contain the rate at
which duties are imposed
Central Excise Tariff Act ,1985
This Act classifies various goods on which central excise duties
are levied and prescribes the rates at which the duty is payable.
It has two schedule namely, Schedule I – It contains such goods
on which the basic excise levied at the prescribed rate.
Schedule II – There are certain goods which find place not only in
first Schedule but also under this schedule. These goods attract
only basic excise duty but also additional excise duties.
Central Excise Rules ,2002.
All manufacturers of excisable goods are required to register
under these rules .The registration is valid as long as production
activity continues and no renewals are necessary
Excise Duty
14. This Act is applicable to whole India, therefore, goods manufactured
or produced anywhere in India, including Jammu and Kashmir, are
liable to excise duty.
India includes-
Territorial water of India - Extending up to 12 nautical miles from
the base line
Indian Contiguous Zone – Extends up to 12 nautical miles from
the outer limit of territorial water
Notified Designated Area – In the continental shell and exclusive
economic zone. EEZ extends up to 200 nautical miles from the
base line.
1 Nautical miles = 1.1515 miles = 1.853 Kms
Any economic exploitation done within 200 nautical miles from the
base line attract excise duty.
Scope of the Act
15. Chargeability of Excise Duty
An excise tax (sometimes called an excise duty) is a type of tax charged on
goods produced within the country (as opposed to customs duties, charged
on goods from outside the country). It is a tax on the production or sale of a
good. This tax is now known as the Central Value Added Tax (CENVAT).
Section 3 of the CEA 1944, often called as Charging Section, states that
“there shall levied and collected in such a manner as may be prescribed
duties on all excisable goods (Excluding goods or manufactured in SEZ)
which are produced or manufactured in India”
Basic excise duty is levied u/s 3 at rates specified in first Schedule to the
CETA
Charging section signifies that there are four basic condition for levy of
excise duty;
1. Duty is on goods
2. Goods must be excisable
3. Goods must be manufactured or produced
4. Such manufacture or production must take place in India
16. Different Types of Excise Duties
1. Basic Excise duty
• This is a duty levied at a specified rate on all the goods mentioned in
the first schedule. This duty is leviable at 8%, exclusive EC and SAH
Education cess
2. Special Excise duty
• This is a duty leviable on the goods mentioned second schedule.
There are certain goods which are mentioned not only in the first
schedule but also in the second schedule.
• This duty is in force from 1st Match, 2006
3. Duty on Branded Jewelry
• This is a duty levied at 2% on branded article of Jewelry falling under
chapter no. 7113. This duty is leviable only if the brand name or trade
name is indelibly affixed or embossed on the article of jewelry.
4. Additional duty on textile articles
• Textile articles such as silk, wool, cotton fibers etc attract additional
duties of excise under the additional duties of excise (Textile and
Textile article Act 1978)
17. Cont.,
5. Additional duty on special importance
• The goods which are declared u/s 14 of the central sale
Tax Act of 1956 are liable to an additional duty under the
additional duties of excise (Goods of special importance)
Act 1957.
6. Education cess
• Finance Bill 2004 introduced Education Cess at the rate of
2% on the excise duty payable.
7. Secondary and Higher Education Cess
• The Finance Act 2007 introduced this levy which is
leviable at 1% on aggregate of all the duties of excise.
18. Basis of levy of Excise duty
Excise duty is levied on any one of the following basis;
1. Specific duty - based on some measures, like
weight, volumes, length etc.
2. Tariff value u/s 3(2) - it is valued which is to be fixed by the Govt
and duty is levied at a certain percentage on this value.
3. Duty based on annual production capacity u/s 3.
4. Duty based on compounded levy scheme under rule 15 of Central
excise rule 2002
5. Duty based on assessable value u/s 4 - here transaction value is
adopted as the assessable value subject to fulfillment of the
following conditions.
Goods must have been sold
For delivery at the time and place of removal
Price must be the sole consideration
The buyer and seller should not be related
6. Duty based on maximum retail price printed on the carton after
allowing deduction u/s 4A
19. Custom Duty
Entry No. 83 of Union List I empower the Central Govt to levy duty on
import of goods into India and export of goods from India.
A various provisions of Custom Duty are covered under the following
Act;
1. Custom Act 1962 – this is a basic Act deals with levy of
import/export duty on import or export of goods by any means.
2. Custom Tariff Act 1975 – deals with various types of duties to be
levied as well as classification of import and export of goods. It has
two schedule, namely;
• Schedule I – provides rate of duty applicable to import of goods
• Schedule II – provides rate of duty applicable to export of goods
3. Rules – Section 156 of Custom Act grants power to the Central
Govt. to frame rules to enforce the Custom duty.
20. Chargeability
Section 12 of the Act, often called as charging section, provides that duties
of the Customs shall be levied at such rate as may be specified under CTA
or any other law for the time being in force, on goods imported into India or
export from India.
The basic Custom Duty is 10%.
• Taxable Event
• In case of import, duty is leviable when the goods are cleared from
home consumption.
• Export duty is leviable when the goods crosses territorial water of India.
• Import commences when the goods enter into India and import is
completed when the goods joins landmass of India and importer files
the bill of entry for home consumptions.
• Export starts when an exporter files shipping bill in respect of export
and it is complete when goods crosses territory water of India.
21. Basic Concepts:
Goods u/s 2(22): Includes
Vessels, aircrafts & Vehicles
Stores
Baggage
Currency & Negotiable instruments and
Any other kind of movable property.
Baggage u/s 2(3): Includes
Unaccompanied baggage but does not include motor vehicles
Bill of Entry u/s 2(4):
It is filed for import of goods with details
Shipping bill u/s 2(37)Includes
It applies in case of export by Vessels / Aircrafts
Bill of Export u/s 2(5): It applies when the goods are exported by road.
22. Cont’d
Customs Port u/s 2(12): Means
Any port appointed u/s 7 to be a custom port and
Includes a place appointed u/s 7 to be an inland container depot.
Customs Airport u/s 2(10): Means
Any airport appointed u/s 7 to be a customs airport and
Includes a place appointed u/s 7 to be an air freight station.
Land customs station u/s 2(29): Means any place appointed u/s 7(b) to be a
land customs station.
Customs station u/s 2(13): Means
Customs port
Customs airport or
Land customs station
Custom Area u/s 2(11): Means
The area of a customs station and
Includes any area in which:-
Imported goods or export goods are ordinarily kept
Before clearance by customs authorities
23. Rate of Duty and Tariff:
Imported goods: It is levied at a rate prevailed on
Date on which the bill of entry in respect of such goods is
presented or
Date of entry inwards of the vessels or the arrival of the aircraft by
which the goods are imported, whichever is later
Exported goods: It is levied at a rate prevailed on the date on
which the proper office makes an order permitting clearance & loading
of the goods for exportation u/s 51
24. Service Tax
Service Tax is said to be a tax of 21st century.
This tax made a small beginning in 1994.
Its scope has been increasing every year.
In a span of 19 years, it has grown from a baby to a monster.
The share of service sector to the GDP has increased to 55%
from mere of 30% of GDP in 1950-51.
When it was introduced there were only 3 services under its net
but today we are taxing almost all services except those which
are listed in the negative list. (since 1-07-2012)
Central Board of Excise and Custom (CBE&C) has been
entrusted the task of administration of this tax.
It has been one of the faster growing source of revenue to the
Govt. ever since it was introduced in the year 1994.
25. From To Service Tax Rates
1994 2003 5%
2003 2004 8%
2004 2006 10% + 2% of EC on S T payable
2006 2007 12% + 2% of EC on S T payable
2007 2009
12% + 2% of EC on S T payable + 1% of the
SAH on S T
2009 2012
10% + 2% of EC on S T payable + 1% of the
SAH on S T
2012 Till date
12% + 2% of EC on S T payable + 1% of the
SAH on S T
Service Tax Rates
26. Interim Budget 2014: Highlights
* Income tax rates kept unchanged
* 10 % surcharge on „super-rich‟ having annual income
above Rs 1 crore to continue
* 10 % surcharge on domestic corporates with income of Rs
10 crore
* Excise duty on small cars, motorcycles and commercial
vehicles cut from 12 to 8%
* Excise duty on SUVs cut from 30 to 24%
* Large and mid-segment cars from 27-24% to 24-20%
* Excise duty on mobile handsets to be 6% on CENVAT
credit to encourage domestic production
* Excise duty cut on capital goods, non-consumer durables
cut from 12 to 10%
27. The success rate of Departmental
orders are pitiable
84 per cent of departmental orders are set aside at Tribunal
stage.
70 per cent in high court stage.
90 per cent in the Supreme Court.
Rs 86,000 crore were held up in court cases. But it
should not give the impression that the government
will get this much money, if the litigations are
finalised.
It will only get about 10-15 per cent of this amount
which may be about Rs 12,000 crore, if all cases are
decided, which is not possible.
