Customs duty

 Customs duty

---- Indian Customs have been assigned a number of risks, more important of which are:

(I) Collection of customs duties on imports an export as per basic Customs Laws (The Customs Act, 1962 and the Customs Tariff Act, 1975).

(II) Enforcement of the various provisions of the Customs Act governing imports and export of cargo, baggage, postal articles and arrival & departure of vessels, aircrafts etc.

(III) Discharge of various agency functions and enforcing various prohibitions and restrictions on imports and exports under Customs Act and other allied enactments.

(IV) Prevention of smuggling including interdiction of narcotics/drug trafficking; and

(V) International passenger processing.

----- The Constitutional provisions have given to the Union, the right to legislate and collect duties on imports and exports as per Entry 83 of List I TO Sch VII of the Constitution. The Customs Act, 1962 is the basic Statute, effective from I February 1963, empowering duties to be levied on goods imported into or exported from India.

---- The categories of goods and the rates of duties leviable have been specified int he schedules to the customs Tariff Act, 1975. The First schedule to the said Act specifies various categories of import commodities in a systematic and well considered d manner, it accordance with the Internationa scheme of classification of internationally traded goods - termed Harmonized system of commodity classification Different rates of duties have been prescribed by the legislature on different commodities/group of commodities mentioned in the Furst sockeye.

---- The durries are levied both on specific and ad valorem basis; while there are few cases where at times specific-cum ad valorem duties are also Tariff Act. 1975 incorporates commodities subject to exports duties and rates thereof.

----- Where ad valorem duties (i.e. duties with reference to value) are collected, which are the predominate mode of levy, the value of the goods for customs duty purposes is determined as per provisions laid down under sec 14 of the customs Acts and the Customs Valuation (Determination of prices of Imports Goods) Rules. 2007 issued thereunder.

----- Customs duties on import are primarily of three types: -

(a) Basic customs Duty (levied u/s 12 of the Customs Act).

(b) Additional Customs Duty (CVD) under sections 3(1) and 3(3) of the customs Tariff Act, in lieu of excise duty.

(c) Special Additional Duty of customs (SAD) under sec 3(5) of the customs Tariff Act to counterbalance the sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or Transporation in India.

Existing indirect tax structure in India

 

Existing indirect tax structure in India

As per Act.246(1) of Constitution of India, the parliament has exclusive powers to make laws with respect to any matters enumerated in List I of the seventh schedule to the Constitution of India (Called union List).

As per Art. 246 (3), the state governments have exclusive powers to make laws with respect to the matter enumerated in List II (called state List)-

Schedule VII of the Constitution consists of following three lists --

(1) List I (Union List) contain entries over which the central government has a power to legislate.

(II) List II (State List) contains entries over which the state government has a power to legislate, and

(III) List III (Concurrent List) contains entries over which both the central government and the state government has a power.

Broad indirect taxes/duties in Schedule VII of the Constitution

UNION LIST (LIST I)

 > Entry 83 - Duties of Customs

> Entry 84 - Duties of Excise

> Entry 92A - Taxes on sale or purchase of goods between two State (CST)

> Entry 92B- Taxe on the consignment of goods, where such consignment takes place in the course of inter-state trade.

> Entry 92C - Taxes on services

> Entry 91-Stamp duty in respect of bill of exchange, cheques,promissory notes, bills of lading.

> Letter of credit, insurance policies, transfer of shares, debentures, proxies & receipts.

STATE LIST (LIST II)

>Entry 51 - Excise duty on Alcoholic Liquors, Opium & Narcotics.

> Entry 52 - Taxes on entry of goods.

> Entry 53 - Taxes on the consumption or sale of electricity

> Entry 54 - Taxes on sale and purchase of goods where such sale/ purchase takes within the state (VAT), subject to Entry 92A of List I.

> Entry 55 - Taxes on advertisements other than in newspaper, radio ad television.

> Entry 62 - Taxes on luxuries, entertainments, amusements, betting and gambling.

> Entry 63 - Stamp duty in respect of document other than those specified in List I.

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Marketing model

 Marketing Model

Taxpayers would have to decide whether they would like to reorganize their marketing model. As seamless credit of input tax is available across the states, the industries must revisit their marketing model, number of warehouses required across India, and the number of marketing teams.

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Human resources

 Human resources

Taxpayers might require additional human resources which are well qualified and trained to meet this challenge, due to -

(i)  Increase in number of registrations, particularly, the service providers'

(ii) Increase in number of details and information required to be given in each return.

(iii) Increase in number of details and information required to be given in each return;

(iv)  Maintenance of additional records and documents.

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Updating of software

 

Updating of software

Dealers and service providers need to upgrade their accounting and tax software. In the modern world, when all the large-scale companies have sophisticated ERP software, like SAP etc., to upgrade and customize the same will be a big challenge to the software companies. Huge cost to begin with: continuous training of people t each level and continuous updating of all operation systems is essential.

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UNDER GST

 

Determination of cost or price structure in the GST

All invoices received and raised after the appointed day would be subject to GST. Therefore, it is essential to determine the impact on the cost, right now, without waiting for the final day. The impact would depend, inter-alia, the following factors:

(i) Existing rate of VAT and excise duty v/s Tax rates under GST.

(II) CENVAT/Input tax credit presently available v/s Availability of input GST credit.

(iii) Non-creditable list in the GST.

style="font-size: medium;">(IV) Impact on input suppliers and output receivers of the concerned entity under the GST.

(v)  Taxes/activities to be kept outside the scope of GST, such as, stamp duty alcohol and petroleum products.

(vi) Change in the manner of determination of supply and its valuation under the GST, May transaction, even without consideration, would be deemed as supply and be subject to GST.

(vii)  Cost of additional human resources and professionals for compliance of GST provisions.

(viii) Capacity of the supplier to pass on the additional GST burden to its customers.

(ix) Denial of Input credit to an entity due to non-deposit of taxes by its counterparty suppliers.

Additional working capital requirements

 

Additional working capital requirements

The entities must evaluate their working capital requirements in the post - GST regime so that they may approach to their banks in advance for additional credit facility. Additional working capital might be required due to increase in investment in taxes for the following reasons:

(1)   Abolition of Statutory Form C, I, J specified under the Central sales tax Act: Presently, taxpayer can purchase goods from other states at a concessional rate of 2% or at nil rate, as the case may be on the strength of Central Forms, however, under the GST, these goods would be purchased only after payment of full GST. of course, the working capital requirement of the buyer, during the Golding period of stock, in respect of taxes paid.

(ii)  Presently, stock transfer from one state to another take place free of tax against Form F. however under the GST stock transfers by a dealer from one state to its branch/agent located in other state would be treated as interstate supply and be subject to IGST. https://vdbaa.com/fullpage.php?section=General&pub=539318&ga=g

(III) With the abolition of Form H, sale and purchase between the penultimate exporter and the actual exporter would take place only after payment of full GST. The amount of tax so paid will be claimed as refund by the exporter on a future date.

(iv)  Sale in the course of import and high seas sale, which are exempt presently, would be made only after payment of GST.

(V) Garment exporters are purchasing fabrics and textile without payment of tax; thus, their investment in taxes is confined only to the extent of tax paid on accessories and packing materials. Under the GST, since fabrics would he taxable, their investment in taxes would increase considerably by the amount of tax paid on these goods.

Invoice and records

 Invoices and records

Format of invoice has been prescribed in the Draft GST Invoice Formats, which has number of additional columns as compared to the columns presently applicable. After the appointed day, the taxpayer will use that format only therefore, he must have suitable software before that day, which

could facilitate the generation of invoice in the prescribed format.

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GST RETURNS

RETURNS

For B2B transaction, the taxpayer shall give the line-wise and state-wise details of supplies,credit and debit note would be linked with the original invoice against which the same is being issued.

Further, returns would be filed on monthly basis Number of returns during the year would also multiply.

Therefore, the taxpayer must have adequate staff to comply these additional requirements. Unless the accounting is done in competent software by the capable accountant, timely and properly, required reports could not be generated.

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Additional restrictions for claiming input tax credit

 Additional restrictions for claiming input tax credit

Under the GST, input tax credit would be available to the buyer only if the counter party supplier has paid tax to the appropriate government and has filed its valid returns. It means that if a supplier does not deposit his GST liability, all of his counterparty recipients would not receive the credits of ITC, even if they have paid the entire consideration to the supplier. These provisions require chasing by the recipients of the suppliers to deposit tax liability on or before the due date.

Therefore, efforts should be started right now to identify such dealers who are generally tax defaulters. Taxpayers might have to change their business model by keeping security deposit or indemnity bound from such suppliers till the date these suppliers file their valid return.