taxation report
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this is reports on taxation...TRANSCRIPT
A Study on the Taxation in HEG Ltd.”
Dissertation submitted
In Partial fulfillment for the
Post Graduate Diploma in Business Management
By
Atul Kumar Rai
Roll No.: GJUJUL08AC050
Batch 2008-2010
Under the Guidance of
Mr. P.K.Jain
DGM-Finance
HEG Ltd.
NSB SCHOOL OF BUSINESS B-II/1, MCIE, Delhi-Mathura Road, New Delhi-44
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NSB SCHOOL OF BUSINESS
B-II/1, MCIE, Delhi-Mathura Road, New Delhi
CERTIFICATE
This is to certify that the summer project report title “A
study on Taxation in HEG.” is a bonafide work done by Mr.
Atul Kumar Rai, Roll No.: (GJUJUL08AC050) of Batch
2008 – 2010, Submitted to NSB School of Business, New
Delhi in partial fulfillment of the requirement for the award of
Post Graduate Diploma In Business Management, and that the
report represents independent and original work on the part
of the candidate.
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Prof.
Alok Satsangi
Corporate Relations
Cell
ACKNOWLEDGEMENT
I wish to express my sincere gratitude to my institute to provide this
opportunity to learn the element of TAXATION.
One person is seclusion is hardly ever able to complete any project or
training. There is always discussion with professionals about conceptual
matters, which enhance the idea and the knowledge of trainee.
Thereby, I would like to acknowledge the contribution and support that
each person’s at HEG Ltd. extended to me during my training period.
I would also like to express my special thanks to my guide Mr. P.K. Jain
(DGM-Finance), Mr.Ved B. Gupta (Dy. Manager-Finance), Sanjeev Asati,
Anubhav Chowdhary who provide me valuable insight about aspect of
taxation with respect of the company and the external environment
with which it associated.
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ATUL KUMAR RAI
DECLARATION
I hereby declare that the work which is being presented in project report
entitled “TAXATION” is an authentic record of my work carried out
under the able guide of Mr. P.K. Jain; DGM-Finance
The work has been carried out by me as summer training at premises of
HEG Ltd. Mndideep(Near Bhopal) and was undertaken as part of course
curriculum PGDBM program of NSB, NEW DELHI.
DATE- ATUL KUMAR RAI
PLACE-
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CONTENT-
S.NO. TOPIC PAGE
NUMBER
1 VISION AND MISSION 8
2 PROFILE OF THE ORGANISATION 9-20
3 HEG Ltd. 21-27
4 PERFORMANCE HIGHLIGHTS AND DATA
ANALYSIS
28-38
5 TAXATION 39
6 INCOME TAX 39-64
7 SALE TAX 65-73
8 VAT 74-89
9 PAN 90-91
10 EXCISE DUTY 92-96
11 CUSTOM DUTY 97-102
13 FINANCE OF HEG 103-105
12 CONCLUSION 106-113
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13 BIBILIOGRAPHY 114
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VISION
HEG LTD. -GRAPHITE DIVISION
A vibrant globally acknowledge top league player in Graphite
Electrode and allied business with commitment to growth,
innovation, quality and customer focus.
MISION
HEG LTD. -GRAPHITE DIVISION
To become a leading international player in Graphite
Electrodes and related business by leveraging our core
competence value to our customer, shareholders, employee,
and society.
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PROFILE OF THE GROUP
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Group Profile
The 500 million dollar LNJ Bhilwara Group is a diversified group with
interests in Graphite Electrodes, Textiles,
In its over four-decade long existence, the LNJ Bhilwara Group has
come to be identified with quality and technology. Six
of the Group companies have been awarded ISO 9001:2000
certification for their exemplary quality standards. The fact
that export earnings comprise over forty percent of the Group’s
turnover underlines its high quality standards. Awarded ISO
9001:2000 & ISO 14001:2004 Certifications.
The journey of the LNJ Bhilwara Group began in 1961 when
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the Group founder, L. N. Jhunjhunwala established a textile
mill in Bhilwara, Rajasthan.
Today that single textile mill has expanded into several
textile mills; the Group has diversified strategically and
stands proud as a multi-product and service conglomerate.
Industry pioneers in many cases, we have also established
ourselves one of the top 50 Indian business groups.
The marriage of traditional values and foresight has
combined advancement while retaining our core. Hence,
while expanding our original business of yarn, we have
moved into manufacturing fabric, technical textiles,
automotive fabric, knitted and ready-to-wear garments and
now denim.
Opportunity is the window to the future and we are looking
out of it. We have diversified into areas that few players have
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ventured into... Graphite Electrodes, which has been forward-
integrated into sponge iron and steel billets business is one
such example. We also have the largest single site graphite
electrode manufacturing plant in Asia.
Self-reliance is our mantra. The success of our first hydro
captive power plant led us to set up India's first merchant
hydro power plant. Today, the group's power business is
flourishing with five projects already under its belt and is well
on track towards producing 1500 / 2000 mw by 2012. Our in-
house power consultancy firm consolidates our position in
this segment
The main group companies are
1. Graphite electrode
HEG Limited
2. Textile
RSWM Ltd.
Maral overseas ltd.
BSL Ltd.
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Bhilwara Spinners
3. POWER
Bhilwara energy ltd.
Malana Power company ltd.
AD Hydro power ltd.
4. Infotech
Textile
Bhilwara Spinners Limited, is an integral part of the LNJ Bhilwara
Group. The Group is a multi-product conglomerate with a global
presence and business interests spanning diverse indstries like
Textiles, Power Generation, Graphite Electrodes and IT enabled
services.
Bhilwara Spinners, based at Bhilwara (Rajasthan), manufacturer of
cotton, synthetic blended yarns of various counts and blends. The
present capacity of the unit is 18,496 spindles.
Based on the requirement of the market, Bhilwara Spinners
diversified their product portfolio and now producing various value
added product mix like Polyester / Acrylic, mod acrylic flame
retardant yarn, Sewing thread, Slub yarn, Viscose Carpet Yarn, Linen
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Yarn etc. The unit is also manufacturing products suitable for other
uses like upholstery, tapestry, and industrial fabrics.
Products
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Bhilwara Spinners Limited,
The company is manufacturing synthetic blended yarn in raw white
and the range includes :
* 100% Polyester, Viscose, Acrylic, Polyester/Viscose blended,
* Polyester/Acrylic blended
* Polyster/Viscose blended
* Polyester/Linen blended
* Viscose/Linen blended
* High Twist / Super High Twist
* Slub/ Spun yarn
* Blended with Texturised, Special Application yarns for Carpet,
Sewing Thread,
* Flame and Temperature Resistance yarn like Aramide, Modacrylic,
Homo Acrylic, Poly Sulphide yarn (PPA) .
Mayur Suitings,
Mayur Suitings the innovative and value for money brand, is a part of
RSWM Limited, the flagship company of Rs 2859 crore LNJ Bhilwara
Group.
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For almost 30 years, Mayur has been constantly delivering high quality
fabric to the markets in India as well as other countries in the world.
Mayur has emerged as a leader in fabric due to its ability to transform
itself rapidly to meet the challenges of a highly competitive global
economy. Constant modernization and introduction of state-of-the art
technology has enabled it to stay ahead in the industry and successfully
surpass all expectations.
All this fabric is manufactured at the state of the art manufacturing unit
at LNJ Nagar, Mordi, District Banswara in Rajasthan. Innovation and
consistent quality are the two pillars that the company has always
believed in. And it is on these two pillars that the company has built its
hugely popular status in the world.
The comprehensive product-mix includes fabric ranges for classic
formal wear as well as semi formal wear. This includes unique blends of
Polyester Viscose. All this is available in different yarn counts and
shades. What's more, exciting innovations are accentuated by an array
of blends in new finishes, including poly / viscose / silk, poly / wool / silk
feather-touch, Poly / wool / Lycra, poly / viscose / linen and poly /
viscose cationic dyed soya protein / bamboo and functional fabric.
Performance fabric like high wicking, cool comfort, anti-bacterial, anti-
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static, odor preventive, biodegradable and energy fabric, etc.
Mayur produces in excess of 12 Million Meter / Annum. Mayur has been
the recipient of the extremely prestigious SRTEPC award for many
consecutives years.
Quality does not happen by chance at Mayur. Men and machines work
together to achieve the customer’s expectation. Continuous
improvement, innovative technology and avant-garde ideas about
applying technology are the cornerstones of Mayur’s in industry
leadership position.
We have the most stringent quality control protocols and we have the
latest certifications. ISO 9002 and ISO 9001:2000 Accreditation, TQM
Implemented Plant, ERP Management systems to ensure Timely
delivery and Internationally acceptable ‘4-Point’ system for Grading are
some of the certifications we have. Product quality, innovation and eco-
friendliness are a hallmark of all the company’s division.
For testing purposes we have ICI Pilling tester, Random pilling tester,
Vertical flammability tester, Automatic light fastness tester, Spectra
data color, Color matching cabinet and Crease recovery tester to name
a few.
The backbone of the company is the robust distribution network that
takes the product to the four corners of the country. The company has
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its products in over 7000 retail outlets all over India. For us, it is not
enough to manufacture the finest fabric. The real challenge is to ensure
that the finished fabric reach our customers on time, every time.
Ever motivating management practice, excellent leadership, highly
skilled workforce and a well focused approach leads us to achieve our
goal of being a leader in the Textile industry. We own this strong
position not only to our technical competence but also to our clear
orientation towards the wishes of our customers. Our technical
expertise and unrelenting trust towards continuous quality
improvement are the principal strengths of Mayur.
POWER GENERATION:-
Bhilwara Energy Limited will be focusing on diversification of The
Group's portfolio in the power Business, like Power Transmission,
Power Distribution, Power Trading and Power Generation from non
hydro sources like wind and thermal and to further consolidate its
presence in Hydro power generation.
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The company endeavors to develop or acquire new green field
power projects in states like Himachal Pradesh, Uttranchal, Sikkim,
Madhya Pradesh, Chattisgarh & Arunachal Pradesh.
BEL holds 51% equity stake in Malana Power Company Limited
(Kullu), a joint venture with S N Power, Norway.
Thereby, it holds 45.9% holding of A D Hydro Power Limited
(Manali) indirectly, since MPCL holds a 90% stake in ADHPL.
Today, it is one of the largest private players in the power sector of
India. Leveraging upon its engineering skills and understanding of
the power business, BEL is effectively managing its companies.
Among its many achievements BEL can boast of effectively
implementing projects taken up by its member companies.
BEL would also be independently implementing hydropower
projects which are smaller than 100 MW and also some of the larger
projects in case the Norwegian partners do not want to undertake
them under MPCL, while larger projects above 100 MW would
continue to be implemented by MPCL.
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Bhilwara Infotech
"We, at BIL, strive to ensure Customer Satisfaction by providing
quality software and services, on time, every time. We are
committed to comply with the requirements of our Quality
Management System and to continually improve its effectiveness
through Management Reviews of the Quality Objectives."
HEG Limited
HEG Ltd, a premier company of the LNJ Bhilwara group, is
today India's leading graphite electrode manufacturer. It has one
of the largest integrated graphite electrode plants in South-East
Asia, processing sophisticated UHP (Ultra High Power) Electrodes.
The company exports over 80% of its production to more
than 25 countries of the world.
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The position the company enjoys today in India and abroad
is largely due to its commitment to constant upgradation of its
product quality to match international standards and to meet new
challenges to win and excel in all situations.
In the 1990's, we set our “Vision” to be : “ A vibrant globally
acknowledged top league player in Graphite Electrodes and allied
businesses with commitment to growth, innovation, quality and
customer focus”.
In Graphite, our focus is on UHP grade electrodes, and we
have expanded our product range and established the same on
some of the toughest furnaces of our customers. Today, we have
years of experience supplying quality UHP grade electrodes all
over the world.
The encouragement from our customers has led us to
increase production capacity and become a significant global
producer of quality UHP grade electrodes for EAF application. Our
ability to source the best raw materials from sources worldwide
and the skills of our human resources has been the key to our
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growth.
With a recent Rs 4.5 billion ( US$ 120 million) investment, we have now
expanded our manufacturing capacity.
As a responsible graphite electrode manufacturer, we continue to invest in
technology, development of new products and in our human resources.
Set up in 1977, HEG is a diversified company with interests in Graphite Electrodes and Power. From a modest investment made in 1977, the company reported a turnover of Rs. 6500 million (US$140 million) in fiscal 2007. A Flagship of the LNJ Bhilwara Group, HEG is Asia's leading graphite electrodes manufacturer and exporter.
It is an ISO 9001 & ISO 14000 Certified Company, by M/s Bureau Veritas.
Largest integrated graphite electrodes plant in South East
Asia & Middle East and second largest in the World.
Technology originally sourced from 'SERS' - a subsidiary of
Pechiney, France. The Collaboration ended in the early 1990s.
Won the country's top export award (CAPEXCIL) for 17
consecutive years.
Also won the National Top Export Award from the
Government of India and the Rajiv Gandhi National Quality
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Commendation Award.
QualityPolicy
We, in HEG, are committed to being a customer-oriented
organisation where Quality is the inspiration and innovation is the
way of life.
We believe that world is our market and therefore competitive
quality of our products, response and service is the essence of
our being.
We recognise that the involvement of the employees is basic to
quality and for continuing growth and improvements.We would
involve our suppliers in the continuing programme for Quality
Improvement.
We believe that quality can only be obtained in a safe, clean and
orderly environment and therefore, we are committed to these
basics in our day to day activity.
SafetyPolicy
We in heg, are committed to being a safe and eco - friendly organization. we
believe that protection of our personnel and the environment is one of our prime
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responsibilities.
We, therefore, commit ourselves to:
Introduce sound safety, health and environment
management practices.
Conduct our business responsibly through adoption of safer,
healthier, cleaner and energy- efficient technologies.
Comply with all applicable legislations and regulations related
to safety health and environment.
Continually improve our safety, health and environmental
performance by developing effective controls of our
operation.
Investigate the accidents to identify root causes and
introduce corrective and preventive measures.
Generate a high degree of awareness amongst all the
interested parties,
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Care for Ecology
HEG, an ISO 14001:1996 company, is fully
aware of the ecological impact of its processes and
actions can have and has put in place effective
mechanisms to minimise any negative fallout.
Also, the Company has carried out comprehensive
afforestation programme in and around its facilitiesd
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.The Company’s facility at Mandideep has been
regarded one of the cleanest graphite electrode plant
in the world when seen in the light of the material used and
the products manufactured there.
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Performance Highlights and data analysis
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Taxation
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Tax system in India is divided in to two types, Direct Tax and
Indirect Tax.
Direct Taxes that comprising of income tax, wealth tax, etc. are
those whose burden falls directly on the taxpayer.
The indirect taxes are levied on goods and services and its
ultimate falls indirectly on the consumers. The indirected taxes are
comprising of sales tax, service tax, VAT, excise duty, custom duty,
etc.
INCOME TAX
Income Tax is all income other than agricultural income levied and
collected by the central government and shared with the states.
According to Income Tax Act 1961, every person, who is an assessee
and whose total income exceeds the maximum exemption limit, shall
be chargeable to the income tax at the rate or rates prescribed in the
finance act. Such income tax shall be paid on the total income of the
previous year in the relevant assessment year.
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The total income of an individual is determined on the basis of his
residential status in India.
Income Tax Timeline in India (History)-
1860 1860 Introduced for the first time for a period of
five years to cover the 1857 mutiny expenses. It
was abolished in 1873.
1877 1877 The tax system was revived as a result of
the Great Famine of 1876.
1886 1886 Introduced as Act II of 1886. It laid down
the basic scheme of income tax that continues
till the present day.
1918 1918 Introduced as Act VII of 1918. It had
features like aggregation of income from various
sources for the determination of the rate,
classification of income under six heads and
application of the Act to all income that accrued
or arose or was received in India from whatever
source in British India.
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1922 1922 On the recommendations of the All-India
Income Tax Committee, the father of the present
act was introduced. The central government was
vested with the power to administer the tax.
1961 1961 The Act came into force from 1 April 1962,
it extended to the whole of India.
1997 1997 Establishment of the Tax Reform
Committee under the chairmanship of Dr. Raja J.
Chelliah. It was followed by restructuring the
income tax with parameters like lower taxes,
fewer slabs, higher execptions, etc.
2003 The Kelkar Task Force, which was followed by
outsourcing of PAN/TAN, exemption of dividend
income, compensated by levy of the dividend
distributed tax to be paid by the company.
Income Tax Rates Across the World
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Country Personal Income Tax Rate
Australia 0% - 48.5%
Canada 16% - 29%
Estonia 24% - 24%
Denmark 44% - 63%
Hong Kong 0% - 33%
India 0% - 33%
Israel 10% - 49%
Malaysia 0% - 29%
Mexico 3% - 32%
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Russia 13% - 13%
Singapore 0% - 22%
UK 0% - 40%
US 10% -35%
INCOME TAX RATES/ SLABS
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For individuals, HUF, Association of Persons (AOP) and Body of
individuals (BOI):
For the Assessment Year 2009-10
*A surcharge of 10
per cent of the total tax liability is applicable where the total income
exceeds Rs 1,000,000.
Note : -
Taxable income slab (Rs.) Rate
(%)
Up to 1,60,000
Up to 1,90,000 (for women)
Up to 2,40,000 (for resident individual of
65 years or above)
NIL
1,60,001 – 3,00,000 10
3,00,001 – 5,00,000 20
5,00,001 upwards 30*
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Education cess is applicable @ 3 per cent on income tax, inclusive
of surcharge if there is any.
A marginal relief may be provided to ensure that the additional IT
payable, including surcharge, on excess of income over Rs
1,000,000 is limited to an amount by which the income is more
than this mentioned amount.
Agricultural income is exempt from income-tax.
ResidenceRules
An individual is treated as resident in a year if present in India
I. for 182 days during the year or
II. for 60 days during the year and 365 days during the preceding
four years. Individuals fulfilling neither of these conditions are
nonresidents. (The rules are slightly more liberal for Indian citizens
residing abroad or leaving India for employment abroad.)
A resident who was not present in India for 730 days during the
preceding seven years or who was nonresident in nine out of ten
preceding yeas I treated as not ordinarily resident. In effect, a
newcomer to India remains not ordinarily resident.
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For tax purposes, an individual may be resident, nonresident or not
ordinarily resident.
Non-Residents and Non-Resident Indians
Residents are on worldwide income. Nonresidents are taxed only on
income that is received in India or arises or is deemed to arise in
India. A person not ordinarily resident is taxed like a nonresident but
is also liable to tax on income accruing abroad if it is from a business
controlled in or a profession set up in India.
Capital gains on transfer of assets acquired in foreign exchange is not
taxable in certain cases.
Non-resident Indians are not required to file a tax return if their
income consists of only interest and dividends, provided taxes due on
such income are deducted at source.
It is possible for non-resident Indians to avail of these special
provisions even after becoming residents by following certain
procedures laid down by the Income Tax act.
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Taxability of individuals is summarised in the table
below
Status Indian
Income
Foreign
Income
Resident and ordinarily
residentTaxable Taxable
Resident but not ordinary
residentTaxable Not Taxable
Non-Resident Taxable Not Taxable
INCOME TAX - TAXABLE HEADS OF INCOME
Remuneration for work done in India is taxable irrespective of the
place of receipt.
Remuneration includes:
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Tax upon salaries and wages
Tax upon pension
Tax upon bonus, fees & commissions
Tax upon Gratuity
Tax upon Annuity
Tax upon profits in lieu of or in addition to salary
Tax upon advance salary and perquisites
Others:
Tax upon Allowances
Tax upon Deferred compensation
Tax equalisation
Besides remuneration for work, individuals may be
taxed on the following income:
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Tax upon Income from house property
The annual value of property, consisting of any buildings or lands
appurtenant thereto of which the assessee is the owner, other than
such portions of such property as he may occupy for the purposes of
any business or profession carried on by him, the profits of which are
chargeable to income tax, shall be chargeable to income tax under
the head "Income from House Property".
Tax upon Income from business or professions :-
For charging the income under the head "Profits and Gains of
business," the following conditions should be satisfied:
There should be a business or profession
The business or profession should be carried on by the
assessee.
The business or profession should have been carried on by the
assessee at any time during the previous year.
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Tax upon Income from capital gains :-
Capital asset means property of any kind held by an assessee
whether or not connected with his business or profession.
Tax upon Income from other sources:-
Income of every kind, which is not chargeable to income tax
under the heads
salary
income from house property,
profits and gains of business and profession,
capital gains can be taxed under the head "income from other
sources".
However such income should also not fall under income not forming
part of total income under the IT Act.
Tax upon Clubbing of Income:-
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The total income of an individual also includes certain income of
other persons. These are:-
a. Income of spouse from,
remuneration derived from the concern in which the individual is
substantially interested unless the remuneration is by virtue of the
application of technical or professional skill possessed by him or her;
o assets transferred by the individual to the spouse or to
any other person for the benefit of the spouse unless the transfer is
for adequate consideration or in consideration of an agreement to live
apart.
b. income of son's wife from assets transferred by the individual
to her or to any other person for her benefit unless the transfer is for
adequate consideration.
c. income of his minor child - other than the minor child suffering
from disability specified in section 80-U, referred to in para 5.3.9
except when such income arises to the child on account of any
manual work done by him or on account of any activity which
involves application of any skill, talent or specialised knowledge and
experience.
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The individual in whose income the income of other spouse as
mentioned in (a) (i) above is to be included will be the husband or
wife whose total income - before including such remuneration income
- is greater. Similarly the income of minor child is to be included in
the income of the parent having greater income. If the marriage of
the parents does not subsist, it will be parent who maintains the
child.
Tax Rates
In India, Individual income tax is a progressive tax with three slabs.
From April 1, 2008 new tax slabs apply, which are as follows:
No income tax is applicable on all income up to Rs. 1,50,000 per
year. (Rs. 1,80,000 for women and Rs. 2,25,000 for senior
citizens)
From 1,50,001 to 3,00,000 : 10% of amount greater than Rs.
1,50,000 (Lower limit changes appropriately for women and
senior citizens)
From 3,00,001 to 5,00,000 : 20% of amount greater than Rs.
3,00,000 + 15,000 (slightly less for women and further less for
senior citizens)
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Above 5,00,000 : 30% of amount greater than Rs. 5,00,000 +
55,000 (slightly less for women and further less for senior
citizens)
SURCHARGE
A 10% surcharge (tax on tax) is applicable if the taxable income (taking
into consideration all the deductions) is above Rs. 10 lakh (Rs. 1
million). The limit of 10 lacs was increased to Rs. 1 crore (Rs. 10 million)
with effect from 1 June 2007 for corporate assesses.
EDUCATION CESS
All taxes in India are subject to an education cess, which is 2% of the
total tax payable. With effect from assessment year 2008-09,
Secondary and Higher Secondary Education Cess of 1% is applicable on
the subtotal of taxable income.
TAX RATE FOR NON-INDIVIDUALS
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There are special rates prescribed for Firms, Corporates, Local
Authorities & Co-operative Societies. [5]
REFUND STATUS FOR SALARIED TAX PAYERS
The Income Tax Department has put on its website the list of income
tax refunds of all salary tax payers which could not be sent to the
concerned persons for want of correct address. (link to check refund)
CORPORATE INCOME TAX
For companies, income is taxed at a flat rate of 30% for Indian
companies, with a 10% surcharge applied on the tax paid by companies
with gross turnover over Rs. 1 crore (10 million). Foreign companies pay
40%.[7].An education cess of 3% (on both the tax and the surcharge) are
payable, yielding effective tax rates of 33.99% for domestic companies
and 41.2% for foreign companies.
From 2005-06, electronic filing of company returns is mandatory.
FRINGE BENEFIT TAX
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Fringe Benefit Tax is a tax payable by companies against benefits that
are seen by employees but cannot be attributed to them individually.
This tax is paid as 33.99% of the benefit, which is only a percentage of
the actual amount paid.
TAX PENALTIES
"If the Assessing Officer or the Commissioner (Appeals) or the
Commissioner in the course of any proceedings under this Act, is
satisfied that any person-
(b) has failed to comply with a notice under sub-section (1) of section
142 or sub-section (2) of section 143 or fails to comply with a direction
issued under sub-section (2A) of section 142, or
(c) has concealed the particulars of his income or furnished inaccurate
particulars of such income,
he may direct that such person shall pay by way of penalty,-
(ii) in the cases referred to in clause (b), in addition to any tax payable
by him, a sum of ten thousand rupees for each such failure;
(iii) in the cases referred to in clause (c), in addition to any tax payable
by him, a sum which shall not be less than, but which shall not exceed
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three times, the amount of tax sought to be evaded by reason of the
concealment of particulars of his income or the furnishing of inaccurate
particulars of such income"
Avoidation of double taxation
Since a 'resident' is liable to pay tax in India on his 'total world
income', it is possible that he may have to pay tax on his foreign
income in that country also, where it is earned. Such situation leads
to double taxation of the same income -in India and again in the
country where it is earned. To avoid such a situation, the Government
of India has entered into agreements for avoidance of double taxation
with different countries, a discussion about which is made in Chapter
XII.
Filing of Return - compulsory
As per AY 2008-09 Non-auditable accounts are furnished by those
businesses, which have annual turnover of up to Rs 40 lakh per
annum and those professionals having income up to Rs 10 lakh per
annum.
From July 26 onwards taxpayers including salaried class would also be
allowed for the first time to file tax returns in 1,000 designated post
offices in the country.
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Earlier the one-by-six scheme that prescribed the return was to be
filed compulsorily, if any of the following six items were present and
whether the person had taxable income or not.
One-by-six scheme--
If a person is enjoying any of the following item, he/she has to file
his/her return.
Occupation of a House
Ownership of a motor car
Expenditure on foreign travel
Holder of credit card
Electricity payments in excess of Rs 50,000/annum
Member of a club - where the entrance fee is more than Rs
25,000/-.
Penalty
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Under the existing law, penalty for delay in filing of return of income
is calculated as a percentage of the shortfall of tax. Where tax has
already been deducted at source, or advance tax has been duly paid,
no penalty is leviable. It is proposed to amend the law to provide for
the penalty of Rs.1000 even in such cases. This provision is targeted
towards the salary earners who always had the impression that their
liability was over the moment the tax was deducted by the employer.
Types of Assessments
Basically assessment is an estimation for an amount assessed while
paying Income Tax. It is a compulsory contribution that is required for
the support of a government. It is generally of the following types.
Self assessment
The assessee is required to make a self assessment and pay the tax
on the basis of the returns furnished. Any tax paid by the assessee
under self assessment is deemed to have been paid towards regular
assessment.
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Regular assessment
On the basis of thereturn of income chargeable to tax furnished by
the assessee an intimation shall be sent to the assessee informing
him about the tax or interest payable or refundable to him.
Best judgement assessment
In a best judgement assessment the assessing officer should really
base the assessment on his best judgement i.e. he must not act
dishonestly or vindictively or capriciously. There are two types of
judgement assessment :
1. Compulsory best judgement assessment made by the assessing
officer in cases of non-co-operation on the part of the assessee or
when the assessee is in default as regards supplying informations.
2. Discretionary best judgement assessment is doen even in cases
where the assessing officer is not satisfied about the correctness or
the completeness of the accounts of the assessee or where no
44
method of accounting has been regularly and consistently employed
by the assessee
Income escaping assessment or re-assessment
If the assessing officer has reason to believe that any income
chargeable to tax has escaped assessment for any assessment year
assess or reassess such income and also nay other income
chargeable to tax which has escaped assessment and which comes to
his notice in course of the proceedings or any other allowance, as the
case may be.
Precautionary assessment
Where it is not clear as to who has received the income, the
assessing officer can commence proceedings against the persons to
determine the question as to who is responsible to pay the tax.
Section 80C
Section 80L used to allow deduction of interest earned on, say, a
National Savings Certificate or a bank deposit up to a limit of Rs
12,000. But now all these are gone .In their place has come Section
80C -- "u/s 80CCC, & u/s 80CCD", as the Finance Bill puts it. Thus, the
44
new Section 80C of the Income Tax Act proposed in Union Budget
gives you a bigger tax break than what the current regime offers.
Deduction in respect of Life Insurance Premia, Contribution to
Provident Fund, etc.
Rs 1 lakh can be invested under this section without any
individual sub-limits except in the case of Rs 10,000 in pension funds.
Sections 88, 80L, 80CCC and 80CCD is clubbed in.
Schemes eligible for Section 80C benefits
PPF
ELSS - Mutual Funds
NSC
KVP
Life Insurance
Senior Citizen Saving Scheme 2004
Post Office Time Deposit Account
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Sale Tax
Central Sales tax is generally payable on the sale of all goods by a
dealer in the course of inter-state Trade or commerce or, outside a
State or, in the course of import into or, export from India.
Interstate sale
According to S3, a sale or purchase shall be deemed to take place in
the course of interstate trade or commerce in the following cases:
when the sale or purchase occasions the movement of goods
from one State to another;
when the sale is effected by a transfer of documents of title to
the goods during their movement from one State to another.
44
Where the goods are delivered to a carrier or other bailee for
transmission, the movement of the goods for the purpose of clause
(b) above, is deemed to start at the time of such delivery and
terminate at the time when delivery is taken from such carrier or
bailee. Also, when the movement of goods starts and terminates in
the same State, it shall not be deemed to be a movement of goods
from one State to another.
To make a sale as one in the course of interstate trade, there must be
an obligation to transport the goods outside the state. The obligation
may be of the seller or the buyer. It may arise by reason of statute or
contract between the parties or from mutual understanding or
agreement between them or, even from the nature of the transaction,
which linked the sale to such transaction. There must be a contract
between the seller and the buyer. According to the terms of the
contract, the goods must be moved from one state to another. If
there is no contract, then there is no inter-state sale.
There can be an interstate sale even if the buyer and the seller
belong to the same state; even if the goods move from one state to
another as a result of a contract of sale; or, the goods are sold while
they are in transit by transfer of documents.
44
Sales tax is payable to the sales tax authority in the state from which
the movement of goods commences. It is to be paid by every dealer
on the sale of any goods effected by him in the course of inter-state
trade or commerce, notwithstanding that no liability to tax on the
sale of goods arises under the tax laws of the appropriate state.
Possible offences and the penalties for such
offences.
The offences that may be committed and, the penalties, prescribed
for can be summarised as under. Offences, under section10, are
punishable with simple imprisonment (up to 6months) with or without
fine.
1. Giving false declaration in Form C, E-I, E-II, F or H, which he
knows or has reason to believe it to be false.
2. Not getting registered under the CST Act, when required to be
registered or not complying with provisions relating to security.
44
3. False representation by a registered dealer that the goods,
purchased are covered under his certificate of registration for a
concessional rate.
4. Falsely representing that he is a registered dealer, though he is
not.
5. Misusing or using for different purpose, the goods, obtained
under C form at a concessional rate.
6. Having possession of form C, which is not obtained as per
provisions of the CST Act.
7. Collecting any amount, representing as sales tax, by an
unregistered dealer or by a registered dealer in contravention of the
provisions of the CST Act.
Liability of a Company in liquidation, liability of the
directors of a private company .
If a liquidator or receiver is appointed in the case of a company, he
should inform the Sales Tax authorities within 30 days of his
appointment. The Sales Tax Authority shall intimate him the amount
44
of tax due from the company in liquidation within 3 months. The
Sales Tax authorities are "preferential creditors' in a case of
liquidation.
The Liquidator shall not dispose of assets of the company before
setting aside the amount of dues as intimated by sales tax
department. The liquidator may, however, part with such assets or
properties in compliance with any order of a court or for the purpose
of payment of the tax, payable by the company under the CST Act or,
for making any payment to secured creditors whose debts are
entitled under law to priority of payment over debts due to the
government, on the date of liquidation or, for meeting such costs and
expenses of the winding up of the company, as are in the opinion of
the appropriate authority, reasonable.
The power to levy Sales tax
1. No state can levy sales tax on any sale or purchase where such
sale or purchase takes place
o outside the state and
o in the course of import of goods into or export of goods
outside India.
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2. Only the parliament can levy tax on inter-state sale or purchase
of goods
Main Principles in State Sales Tax Laws
1. A sale or purchase of goods is said to take place when the
transfer of property in the existing goods or future goods takes place
for consideration of money.
2. The goods have been divided into different categories and
different rates of sales tax are charged for different categories of
goods.
3. In most of the cases related to the sales tax, the tax on the sale
or purchase of goods is at single point.
4. Under the provisions of some state laws the assesses are
divided into several categories such as manufacturer, dealer, selling
agent etc. and such as assess is required to obtain a registration
certificate to that effect. The sales tax or the purchase tax is levied
on that assessee on the basis of his category such as dealer,
manufacturer etc. on production of certain forms or certificates (and
differential rates of sales tax are levied).
44
5. Generally , a quarter return of sales or purchases is insisted
upon and the assessee is required to furnish the return in the
prescribed form.
6. At the time of assessment, the assessee has to furnish all the
documentary evidence and satisfy the concerned sales tax /
commercial tax officer.
7. The sales tax laws of the states prescribe the procedure to be
followed in case an assessee prefers to make an appeal.
8. Every dealer should apply for registration and obtain a
registration certificate to that effect. The registration certificate
number should be quoted in all the bill / cash memos.
Transactions not amounting to inter-state sales
Not all despatches of goods from one state to another result in inter
state sales rather the movement must be on account of a covenant or
incident of the contract of sales. There are some instances wherein
the goods are moved out of the selling state and yet they are not
considered inter state sales :-
Intra-state sales
44
Stock transfer from head office to branch & vice versa
Import and Export sales or purchases
Sale through commission agent / on account sales
Delivery of Goods for executing works contract
Sales Tax ID number
A state sales tax ID number is basically a business version of your
Social Security number under which you collect and pay tax for any
service or product you sell that qualifies for taxation in your state.
The state department of taxation provides sales tax ID numbers and
it takes about a month to get one.
The rule of thumb for sales tax is that most services are exempt and
most products are taxable except for food and drugs. However, states
have been gradually adding to the list of services that are taxable for
the last few years. Check with your state department of taxation to
determine if the product or service you sell is taxable in your state.
Exception in the sales taxes
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Sales to resellers such as wholesalers and retailers that have a
valid state resale certificate.
Sales to tax-exempt institutions such as schools or charities
Which forms are to be filled?
Form C;
Form G;
Forms E-I & E-II.
VAT
44
VAT is value added tax, which is charged on value addition. VAT can be
considered as a multi-point sales tax with set-off for tax paid on
purchases of inputs material and capital goods. Therefore dealers can
deduct the amount of tax paid on purchase from the tax collected on
sales, thereby paying just the balance amount to the government
VAT ‘v’ Sale Tax
According to VAT Act:
VAT is a more transparent and accurate system of taxation. The existing
sales tax structure allows for double taxation thereby cascading the tax
burden. In VAT Act we can take credit of tax paid on input.
44
Sale
@ 100/-
B of Sale
@ 114/-
Sale
@
124/-
Sale
@134/-
Tax implication under Value Added Tax Act:
Selling Tax Rate Invoice Tax Tax Net Tax Net Tax
B of Raipur
C of Raipur
D of Raipur
Consumption in Raipur
44
Price incl.
profit
(Excl Tax)
value
(Incl. Tax)Payable Credit Outflow Outflow
100 4% CST 104 4 0 4.00 4.00
114 12.5% VAT 128.25 14.25 0 * 14.25 14.25
124 12.5% VAT 139.50 15.50 14.25 1.25 1.25
134 12.5% VAT 150.75 16.75 15.50 1.25 1.25
Total to Govt. VAT
CST
16.75
4.00
*Note: CST Paid cannot be claimed for credit.
According to Sale Tax act:
44
The manufacturer pays tax on each raw material, which is used to
production of finished goods. Such tax paid goes to the government.
The manufacturer adds the taxes to his cost. Then labour charge,
processing charges and his profit will be added to make up the sales
price. Thereafter he paid tax on the entire amount. The government
receives tax two times - once on the raw materials bought by the
manufacturer and again on the final product. This means manufacturer
pays tax on the tax already paid. It has in effect increased the cost of
the goods. In the example below, we pay 14.40 sales tax on the bill, but
the government receives 26.40.
Seller Buyer
Sellin
g
Price
Sales
Tax
Rate
Tax
AmountTotal
A (Raw Material B (Mfr) 100 12%
12.00 112.00
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Supplier)
B (value addition by
way of labour, profit etc
of Rs 10)
Consume
r
122 12%
14.40 134.40
Total Sales Tax
collected by Govt
26.40
VAT solves the problem for both the government and the consumer.
Each dealer is allowed to deduct the tax paid on their purchases from
the tax collected on sales and to pay only the balance to the
government. This means that the purchase and sales will be correctly
recorded.
Credit on Opening Stock:
1. When VAT is introduced, Opening stock of raw material or
consumable (which is purchased as on or after April 1, 2005 and
44
still unsold on 31st March 2006) will be eligible to receive input
credit subject to submission of requisite documents. VAT will be
levied on such goods, which is sold on or after April 1, 2006 and
input tax credit will be given for the sales tax already paid in the
previous year. This tax credit will be available over a period of 12
months.
2. If finished goods held in opening stock as on 01.04.2006 and it
was manufactured from tax-paid goods, which have been
purchased on or after 01.04.05. Then tax paid on raw
material, packing material or explosives consumed in mining,
will be allowed as VAT Credit.
For calculation of VAT credit on consumed raw material, FIFO base
will be adopted.
3. Credit will be allowed only on local purchase i.e. Credit will not
be allowed on inter state purchase or purchase under CST.
Therefore only local purchase will be considered in calculation of
VAT Credit on opening stock.
4. Credit is allowed to registered dealer subject to material
purchased from registered dealer.
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5. Sale tax should be mentioned in invoice. If sale tax is not
mentioned on invoice and it is included in purchase price then
Rate, under Sale Tax Act or VAT Act which ever is lower,
will be applied on net turnover for calculation of VAT Credit.
Where net turnover is as followed-
Net Turnover= Purchase Value- sale tax (i.e. Sale price x rate of sales
tax)
100 + rate of sales tax
VAT Credit on opening stock will be allowed to dealer, if he prove in
satisfaction of assessing officer that such material (i.e. raw material or
consumable which is lying in opening stock and those material which
has consumed in manufacturing of finished goods like cement) were
liable to tax in hand of selling registered dealer. If dealer fails to prove
the same then 75 % of net turnover will be consider in calculation of
input VAT Credit.
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6. Tax paid on capital goods which is lying in opening stock will not
be allowed as Credit.
"Capital goods" means plants, machinery and equipments
directly used in the process of manufacture and / or in the course
of business excluding such equipments as may be notified."
7. Input Credit on following opening stock will not be allowed-
Receive under replacement
Receive Gift
Receive Free sample
Petrol, diesel, aviation turbine fuel, natural gas, kerosene,
liquefied petroleum gas.
Furniture and fixture including AC and refrigerator.
Material used in capital expenditure in land or civil
construction.
44
Issue: what will tax treatment on replacement if there is new goods
emerge or major value additions take place?
Credit on Capital Goods:
1. Capital Goods should be purchased within Chhattisgarh.
"Capital goods" means plants, machinery and equipments directly
used in the process of manufacture and / or in the course of business
excluding such equipments as may be notified."
2. Capital Goods should be purchased from registered dealer.
3. Tax portion should be separately mentioned in invoice or cash
memorandum.
Issue: 1. Purchase Value=?
2. If purchase value=100000.00
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4. VAT Credit will not be allowed on following Capital Goods-
Capital Goods purchased from un-registered dealer.
Capital expenditure on land and civil construction for use in
manufacture or trade, including office building or other
construction.
Furniture and fixture including AC and refrigerator.
Notified by state govt.
CREDIT ON INPUT MATERIAL:
What is input tax?
Input generally mean goods purchased by a dealer in the course of his
business for re-sale or for use in the manufacture, processing,
packing/storing of other goods or any other business use. The tax paid
on inputs is known as Input Tax. "Input tax means the tax paid or
44
payable under this Act by a registered dealer to another registered
dealer on the purchase of goods in the course of business for resale or
for manufacture of taxable goods or for use as containers or packing
material or for the execution of works contract."
What is input tax credit?
It is the credit for tax paid on inputs. Every dealer has to pay output tax
on the taxable sale affected by him. The basic formula of VAT is that
every dealer pays tax only on the value addition in his hands. In simple
words input tax credit is the mechanism by which the dealer is enabled
to set off against his output tax. Dealers are not eligible for input tax
credit on all inputs. There are certain restrictions and conditions on the
eligibility of input tax credit as it is stipulated in the VAT Act and Rule.
1. Credit will be allowed only on local purchase i.e. Credit will not be
allowed on inter state purchase or purchase under CST. Therefore
only local purchase will be considered in calculation of VAT Credit.
2. Credit is allowed to registered dealer. Material should be
purchased from registered dealer.
44
3. No input tax Credit under sub-section (1) shall be claimed or be
allowed to a registered dealer-
(i) In respect of any goods specified in schedule II purchased by
him from another such dealer for sale but given away by him
by way of free sample or gift or given to or received by him by
way of replacement.
(ii) In respect of goods specified in schedule II for use or
consumption for manufacture or mining of goods but the goods
manufactured or mined are given away by him by way of
free sample or gift or given to or received by him by way of
replacement.
(iii) Purchase of Petrol, diesel, aviation turbine fuel, natural gas,
kerosene, liquefied petroleum gas.
44
(iv) If tax amount is not mentioned separately in the invoice or
cash memorandum.
4. If manufactured goods disposed otherwise than by way of sale
then amount of input tax Credit relating to such goods will be
reverse or paid.
5. If manufactured goods sold within Chhattisgarh or outside the
state under CST sale then input VAT Credit will be adjusted from
VAT payable on sale within CG or CST payable on sale out side
state.
6. CST paid on inter state sale will not be allowed as VAT Credit.
7. If goods sold out side the state of CG by way of stock transfer
then input tax Credit will be allowed at the rate in excess of 4 %
of input tax. Therefore VAT Credit will be calculated as follow-
Amount of VAT Credit which will be claimed in respect of
purchased those goods which are taxed @ 4%-
44
A x B
C
Where
A = Total amount of tax paid @ 4 % on input material which is eligible
for Credit)
B = value of taxable sale including international sale and inter-state
sale but excluding sale by way of stock transfer)
C = Total sale turnover including sale by way of stock transfer.
Amount of VAT Credit on those goods on which input tax was paid
@ 12.5%-
Tax amounting to 8.5 % portion is given as input tax credit in total
and remaining 4 % portion will be allowed from above formula.
8. If goods sold by way of stock transfer then full amount of VAT on
sale in out side the state will be paid in such state
9. If un-adjusted Credit still remains after two year then refund can
be claim.
Payment of Tax:
44
Payment of tax for the first and second month of each quarter will be
paid before 10th day of following month and balance tax of such quarter
will be made before filing of return of such quarter.
Interest:
Registered dealer shall be liable to pay interest 1 %, if he fails to
furnish return or fail to payment of tax
P.A.N.
Permanent Account Number is a number by which the Assessing
Officer can identify any person. Presently the Income Tax Department
is allotting PAN under the New Series to all assessees which consists
of ten alphanumeric character and is issued in the form of a
laminated card. The PAN is ultimately meant to supplant the General
Index Register Number which is currently in use. The General Index
Register Number is a number given an Assessing Officer to the
assessees in the General Index Register maintained by him which
also contains the designation and the particulars of the Assessing
Officer. As per section 139A of the Act obtaining PAN is a must for the
following persons:-
44
1. Any person whose total income or the total income of any other
person in respect of which he is assessable under the Act exceeds the
maximum amount which is not chargeable to tax.
2. Any person who is carry on any business or profession whose total
sales, turnover or gross receipts are or is likely to exceed Rs. 5 lacs in
any previous year.
3. Any person who is required to furnish a return of income under
section 139(4) of the Act.
The requirement for applying for allotment of PAN under the
New Series has now been extended to the whole of India.
PAN is required to be quoted in all the transactions mentioned
below:-
o In all returns and in all correspondence with the
department.
o In all challans for payment of any tax or sum due to the
department.
44
o In certain notified transaction. (see the sub module on
notified transactions where PAN has to be quoted)
Application for allotment of PAN is to be made in Form 49A.
44
CENTRAL EXCISE
Central Excise duty is an indirect tax levied on those goods which
are manufactured in India and are meant for home consumption.
The taxable event is 'manufacture' and the liability of central excise
duty arises as soon as the goods are manufactured. It is a tax on
manufacturing, which is paid by a manufacturer, who passes its
incidence on to the customers.
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.
The term "manufacture" includes any process,
1. Incidental or ancillary to the completion of a manufactured
product and
2. Which is specified in relation to any goods in the Section or
Chapter Notes of the First Schedule to the Central Excise
Tariff Act, 1985 as amounting to manufacture or
3. Which, in relation to the goods specified in the Third
Schedule, involves packing or repacking of such goods in a
unit container or labeling or re-labelling of containers
44
For the Assessment Year 2007-08
The general rate of Basic Excise Duty (BED) reduced to
8%. (As per changes made on Feb 24, 2009)
Extension of the earlier 4 percent cut in excise duty
beyond 31 March 2009. (As per changes made on Feb 24,
2009)
1% cess for secondary and higher education introduced.
For small scale excemption, the turnover ceiling is increased
from Rs 10 million to Rs 15 million.
The valuation rule for all the goods manufactured by job worker
has been introduced.
The effective rates on petrol and diesel is reduced from 8 per
cent to 6 per cent.
The settlement commission provisions is to be amended.
The e-payment has become mandatory in cases where the
annual excise duty payable is in excess of Rs 5 million.
CENTRAL EXCISE
Central Excise duty is an indirect tax levied on those goods which
are manufactured in India and are meant for home consumption.
The taxable event is 'manufacture' and the liability of central excise
duty arises as soon as the goods are manufactured. It is a tax on
manufacturing, which is paid by a manufacturer, who passes its
incidence on to the customers.
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.
The term "manufacture" includes any process,
1. Incidental or ancillary to the completion of a manufactured
product and
2. Which is specified in relation to any goods in the Section or
Chapter Notes of the First Schedule to the Central Excise
Tariff Act, 1985 as amounting to manufacture or
3. Which, in relation to the goods specified in the Third
Schedule, involves packing or repacking of such goods in a
unit container or labeling or re-labelling of containers
44
Importance of Central Excise Duty
Central excise revenue is the biggest single source of revenue for the
Government of India. The Union Government tries to achieve different
socio-economic objectives by making suitable adjustments in the scope
and quantum of levy of Central Excise duty. The scheme of Central
Excise levy is suitably adapted and modified to serve different purposes
of price control, sufficient supply of essential commodities, industrial
growth, promotion of small scale industries and like Authority for
collecting the Central Excise duty.
Article 265 of the Constitution of India has laid down that both levy and
collection of taxes shall be under the authority of law. The excise duty is
levied in pursuance of Entry 45 of the Central List in Government of
India Act,1935 as adopted by entry 84 of List I of the seventh Schedule
of the Constitution of India. Charging section is Section 3 of the Central
Excises and Salt Act,1944.
Liability to pay Central Excise Duty
Section 3 of the Central excises and Salt Act,1944 provides that there
shall be levied and collected in such manner as may be prescribed,
CENTRAL EXCISE
Central Excise duty is an indirect tax levied on those goods which
are manufactured in India and are meant for home consumption.
The taxable event is 'manufacture' and the liability of central excise
duty arises as soon as the goods are manufactured. It is a tax on
manufacturing, which is paid by a manufacturer, who passes its
incidence on to the customers.
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.
The term "manufacture" includes any process,
1. Incidental or ancillary to the completion of a manufactured
product and
2. Which is specified in relation to any goods in the Section or
Chapter Notes of the First Schedule to the Central Excise
Tariff Act, 1985 as amounting to manufacture or
3. Which, in relation to the goods specified in the Third
Schedule, involves packing or repacking of such goods in a
unit container or labeling or re-labelling of containers
44
duties of excise on all excisable goods other than salt which are
produced or manufactured in India at the rates set forth in the schedule
to the Central excise Tariff Act,1985.it is therefore clear that as soon as
the goods in question are produced or manufactured, they will be liable
to payment of Excise duty. However for convenience duty is collected at
the time of removal of the goods. While Section 3 of the Central Excises
and salt Act,1944 lays down the taxable event, Rules 9 and 49 of the
Central excise Rules,1944 provides for the collection of duty.
Customs Duty
Introduction
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.
Duties of customs are levied on goods imported or exported from India
44
at the rate specified under the customs Tariff Act, 1975 as amended
from time to time or any other law for the time being in force. For the
purpose of exercising proper surveillance over imports and exports, the
Central Government has the power to notify the ports and airports for
the unloading of the imported goods and loading of the exported goods,
the places for clearance of goods imported or to be exported, the routes
by which above goods may pass by land or inland water into or out of
Indian and the ports which alone shall be coastal ports.
In order to give a broad guide as to classification of goods for the
purpose of duty liability, the central Board of Excises Customs (CBEC)
bring out periodically a book called the "Indian Customs Tariff Guide"
which contains various tariff rulings issued by the CBEC. The Act also
contains detailed provisions for warehousing of the imported goods and
manufacture of goods is also possible in the warehouses.
For a person who do not actually import or export goods customs has
relevance in so far as they bring any baggage from abroad.
Types of duties
Under the custom laws, the following are the various types of duties
44
which are leviable.
Basic Duty:
This is the basic duty levied under the Customs Act. The rate varies for
different items from 5% to 40%.
Additional Duty (Countervailing Duty) (CVD):
This additional duty is levied under section 3 (1) of the Custom Tariff Act
and is equal to excise duty levied on a like product manufactured or
produced in India. If a like product is not manufactured or produced in
India, the excise duty that would be leviable on that product had it been
manufactured or produced in India is the duty payable. If the product is
leviable at different rates, the highest rate among those rates is the
rate applicable. Such duty is leviable on the value of goods plus basic
custom duty payable. eg. If the customs value of goods is Rs. 5000 and
rate of basic customs duty is 10% and excise duty on similar goods
produced in India is 20%, CVD will be Rs.1100/-.
Additional Duty to compensate duty on inputs used by Indian
manufacturers. This Additional Duty is levied under section 3(3) of the
Customs Act. It can be charged on all goods by the central government
to counter balance excise duty leviable to raw materials, components
44
and other inputs similar to those used in the production of such good.
Anti-dumping Duty:
Sometimes, foreign sellers abroad may export into India goods at prices
below the amounts charged by them in their domestic markets in order
to capture Indian markets to the detriment of Indian industry. This is
known as dumping. In order to prevent dumping, the Central
Government may levy additional duty equal to the margin of dumping
on such articles, if the goods have been sold at less than normal value.
Pending determination of margin of dumping, such duty may be
provisionally imposed. After the exact rate of dump ing duty is finally
determined, the Central government may vary the provisional rate of
dumping duty. Dumping duty can be imposed even when goods are
imported indirectly or after changing the condition of goods. There are
however certain restrictions on imposing dumping duties in case of
countries which are signatories to the GATT or on countries given "Most
Favoured Nation Status" under agreement. Dumping duty can be levied
on imports on such countries only if the Central Government proves
that import of such goods in India at such low prices causes material
injury to Indian industry.
Protective Duty:
44
If the Tariff Commission set up by law recommends that in order to
protect the interests of Indian industry, the Central Government may
levy protective anti-dumping duties at the rate recommended on
specified goods. The notification for levy of such duties must be
introduced in the Parliament in the next session by way of a bill or in the
same session if Parliament is in session. If the bill is not passed within
six months of introduction in Parliament, the notification ceases to have
force but the action already undertaken under the notification remains
valid. Such duty will be payable upto the date specified in the
notification. Protective duty may be cancelled or varied by notification.
Such notification must also be placed before Parliament for approval as
above.
Duty on Bounty Fed Articles:
In case a foreign country subsidises its exporters for exporting goods to
India, the Central Government may import additional import duty equal
to the amount of such subsidy or bounty. If the amount of subsidy or
bounty cannot be clearly deter mined immediately, additional duty may
be collected on a provisional basis and after final determination,
difference may be collected or refunded, as the case may be.
Export Duty:
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Such duty is levied on export of goods. At present very few articles such
as skins and leather are subject to export duty. The main purpose of
this duty is to restrict exports of certain goods. The Central Government
has been granted emergency powers to increase import or export
duties if the need so arises. Such increase in duty must be by way of
notification which is to be placed in the Parliament within the session
and if it is not in session, it should be placed within seven days when
the next session starts. Notification should be approved within 15 days.
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FINANCE OF HEG Ltd.
Overall performance:-
The Company during the year shows strong growth of sales graphite
electrode.
Net sales increased to rs.945.98 crore higher by closed to 16% from rs.
817.87 crore in the previous year.
The export turnover increased approximately 48% as compared to
previous year.
The net profit increased substantially to rs. 146.35 crore from 73.84
crore.
Earnings per share increase increased to rs. 35.17 crore (previous year-
rs. 18.32 crore).
The company had paid an interim dividend @ rs. 7 per share on Equity
share in January, 2008.
External sales revenue of graphite is 88538.53 lac.
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TAXES PAID BY HEG
Rs. In crore
Taxes 2007-2008 2006-2007
Excise Duty 33.02 49.66
Inter division sales 106.88 10.02
Current year 67.67 12.58
Deferred 9.88 13.97
Provision for fringe benefit taxes 0.43 0.36
Income tax for earlier year 2.62 0.67
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Following dues of income tax, sales tax, service tax, excise duty along
with the forum where the dispute is pending.
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Conclusion
The 500 million dollar LNJ Bhilwara Group is a diversified group with
interests in Graphite Electrodes, Textiles,
Steel , Power Generation and IT Enabled Services.
The group is awarded ISO 9001:2000 & ISO 14001:2004
Certifications.
HEG Limited - HEG Ltd, a premier company of the LNJ Bhilwara
group, is today India's leading graphite electrode manufacturer. It has
one of the largest integrated graphite electrode plants in South-
East Asia, processing sophisticated UHP (Ultra High Power)
Electrodes.
The company exports over 80% of its production to more than 25
countries of the world.
It is an ISO 9001 & ISO 14000 Certified Company, by M/s Bureau
Veritas.
In Graphite, HEG focus is on UHP grade electrodes, and we have
expanded our product range and established the same on some of
the toughest furnaces of our customers. Today, we have years of
experience supplying quality UHP grade electrodes all over the world.
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HEG Won the country's top export award (CAPEXCIL) for 17
consecutive years.
Also won the National Top Export Award from the Government of
India and the Rajiv Gandhi National Quality Commendation Award.
Taxes - Taxes in India are of two types, Direct Tax and Indirect Tax.
Direct Tax, like income tax, wealth tax, etc. are those whose burden
falls directly on the taxpayer.
The burden of indirect taxes, like service tax, VAT, etc. can be passed
on to a third party.
Income Tax
Income Tax Rates
No income tax is applicable on all income up to Rs. 1,50,000 per
year. (Rs. 1,80,000 for women and Rs. 2,25,000 for senior
citizens)
From 1,50,001 to 3,00,000 : 10% of amount greater than Rs.
1,50,000 (Lower limit changes appropriately for women and
senior citizens)
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From 3,00,001 to 5,00,000 : 20% of amount greater than Rs.
3,00,000 + 15,000 (slightly less for women and further less for
senior citizens)
Above 5,00,000 : 30% of amount greater than Rs. 5,00,000 +
55,000 (slightly less for women and further less for senior
citizens)
A 10% surcharge (tax on tax) is applicable if the taxable income (taking
into consideration all the deductions) is above Rs. 10 lakh (Rs. 1
million). The limit of 10 lacs was increased to Rs. 1 crore (Rs. 10 million)
with effect from 1 June 2007 for corporate assesses.
All taxes in India are subject to an education cess, which is 2% of the
total tax payable. With effect from assessment year 2008-09,
Secondary and Higher Secondary Education Cess of 1% is applicable on
the subtotal of taxable income.
For companies, income is taxed at a flat rate of 30% for Indian
companies, with a 10% surcharge applied on the tax paid by companies
with gross turnover over Rs. 1 crore (10 million).
Sale Taxes - Central Sales tax is generally payable on the sale of all
goods by a dealer in the course of inter-state Trade or commerce or,
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outside a State or, in the course of import into or, export from India.
Interstate sale
According to S3, a sale or purchase shall be deemed to take place in
the course of interstate trade or commerce in the following cases:
when the sale or purchase occasions the movement of goods
from one State to another;
when the sale is effected by a transfer of documents of title to
the goods during their movement from one State to another.
Sales tax is payable to the sales tax authority in the state from which
the movement of goods commences. It is to be paid by every dealer
on the sale of any goods effected by him in the course of inter-state
trade or commerce, notwithstanding that no liability to tax on the
sale of goods arises under the tax laws of the appropriate state.
Possible offences and the penalties for such offences.
The offences that may be committed and, the penalties, prescribed
for can be summarised as under. Offences, under section10, are
punishable with simple imprisonment (up to 6months) with or without
fine.
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8. Giving false declaration in Form C, E-I, E-II, F or H, which he
knows or has reason to believe it to be false.
9. Having possession of form C, which is not obtained as per
provisions of the CST Act
10. Not getting registered under the CST Act, when required to be
registered or not complying with provisions relating to security.
VAT- VAT is value added tax, which is charged on value addition. VAT
can be considered as a multi-point sales tax with set-off for tax paid on
purchases of inputs material and capital goods. Therefore dealers can
deduct the amount of tax paid on purchase from the tax collected on
sales, thereby paying just the balance amount to the government.
VAT is a more transparent and accurate system of taxation. The existing
sales tax structure allows for double taxation thereby cascading the tax
burden. In VAT Act we can take credit of tax paid on input.
According to Sale Tax act:- The manufacturer pays tax on each raw
material, which is used to production of finished goods. Such tax paid
goes to the government. The manufacturer adds the taxes to his cost.
Then labour charge, processing charges and his profit will be added to
make up the sales price. Thereafter he paid tax on the entire amount.
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The government receives tax two times - once on the raw materials
bought by the manufacturer and again on the final product.
CENTRAL EXCISE- Central Excise duty is an indirect tax levied on
those goods which are manufactured in India and are meant for home
consumption.
For the Assessment Year 2007-08, The general rate of Basic
Excise Duty (BED) reduced to 8%. (As per changes made on Feb
24, 2009).
1% cess for secondary and higher education introduced.
For small scale excemption, the turnover ceiling is increased from
Rs 10 million to Rs 15 million.
Central excise revenue is the biggest single source of revenue for
the Government of India. The Union Government tries to achieve
different socio-economic objectives by making suitable
adjustments in the scope and quantum of levy of Central Excise
duty.
Customs Duty - Duties of customs are levied on goods imported or
exported from India at the rate specified under the customs Tariff Act,
1975 as amended from time to time or any other law for the time being
in force. In order to give a broad guide as to classification of goods for
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the purpose of duty liability, the central Board of Excises Customs
(CBEC) bring out periodically a book called the "Indian Customs Tariff
Guide" which contains various tariff rulings issued by the CBEC. The Act
also contains detailed provisions for warehousing of the imported goods
and manufacture of goods is also possible in the warehouses.
Types of duties: Basic Duty(5-40%), Additional Duty (Countervailing
Duty) (CVD), Anti-dumping Duty, Protective Duty, Duty on Bounty Fed
Articles, Export Duty.
BIBILIOGRAPHY:-
BOOKS
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I. Economic India (2008), India’s Tax Reform, Academic
Foundation.
II. Sekhar Gvs (2008), Income Tax, Excel books.
III. P. Subramanian (2008), Guide To T.D.S., T.C.S. and Advance
Tax 2008-2009, Excel books.
JOURNALS
I. Annual report 2007-2008 of HEG Ltd.
WEBSITES
I. www.lnjbhilwara.com
II. www.hegltd.com