Value Added Tax
VAT is the indirect tax on the consumption of the goods, paid by its original producers upon the change in goods or upon the transfer of the goods to its ultimate consumers. It is based on the value of the goods, added by the transferor. It is the tax in relation to the difference of the value added by the transferor and not just a profit.
All over the world, VAT is payable on the goods and services as they form a part of national GDP. It means every seller of goods and service provider charges the tax after availing the input tax credit. It is the form of collecting sales tax under which tax is collected in each stage on the value added of the goods. In practice, the dealer charges the tax on the full price of the goods, sold to the consumer and at every end of the tax period reduces the tax collected on sale and tax charged to him by the dealers from whom he purchased the goods and deposits such amount of tax in government treasury.
Method of Collection
There are two methods for collection of VAT in India. In the first method, tax is charged separately on the basis of the tax which is paid on purchase, and the tax that is payable on the sale (shown separately in the invoice). Therefore, the difference between the tax paid on purchase and the tax payable on sale as per the invoice is the VAT.
In the second method, tax is collected and charged on the aggregate value of the tax payable on sale and purchase, by applying the rate of tax applicable to the goods. Therefore, the difference between the sale price and purchase price would be VAT. It means VAT is the tax which consumers ultimately face, which is collected at each stage.
Sales tax is levied on the sale of a commodity, which is produced or imported and sold for the first time. If the product is sold subsequently without being processed further, it is exempt from sales tax.
Sales Tax is a levy on purchase and sale of goods in India and is levied under the authority of both Central Legislation (Central Sales Tax) and State Governments Legislations (Sales Tax). The government levies Sales Tax principally on intra-state sale of goods. States also levy tax on transactions which are "deemed sales" like works contracts and leases.
In addition to Sales Tax, some states also levy additional tax, surcharge, turnover tax and the like. Ordinarily, Sales tax is recovered from the buyer as a part of consideration for sale of goods.
Sales tax is paid by every dealer on the sale of any goods made by him in the course of inter-state trade or commerce, despite the fact that no liability to tax is raised on the sale of goods under the tax laws of the appropriate state.
Sales Tax ID number
A state Sales Tax ID number is essentially a business version of your Social Security number, under which you collect and pay tax for any service or product you sell, which in turn, qualifies for taxation in your state.
The rule of thumb for Sales Tax is that most services are exempt and most products are taxable except for food and drugs, though recent history reflects that states have been gradually adding to the list of services that are taxable.
Service Tax
Service tax is a tax levied on services rendered by a person and the responsibility of payment of the tax is cast on the service provider. It is an indirect tax as it can be recovered from the service receiver by the service provider in course of his business transactions. Service Tax was introduced in India in 1994 by Chapter V of the Finance Act, 1994 . It was imposed on a initial set of three services in 1994 and the scope of the service tax has since been expanded continuously by subsequent Finance Acts. The Finance Act, extends the levy of service tax to the whole of India, except the State of Jammu & Kashmir.
The Central Board of Excise & Customs (CBEC) under Department of Revenue in the Ministry of Finance, deals with the task of formulation of policy concerning levy and collection of Service Tax. In exercise of the powers conferred, the Central Government makes service tax rules for the purpose of the assessment and collection of service tax. The Service Tax is being administered by various Central Excise Commissionerates, working under the Central Board of Excise & Customs. There are six Commissionerates located at metropolitan cities of Delhi, Mumbai, Kolkata, Chennai, Ahmedabad and Bangalore which deal exclusively with work related to Service Tax. Directorate of Service Tax at Mumbai over sees the activities at the field level for technical and policy level coordination.
Registration
- A person liable to pay service tax should file an application for registration within thirty days from the date on which the service tax on particular taxable service comes into effect or within thirty days from the commencement of his activity.
- Every service provider of a taxable service is required to take registration by filing the Form ST-1 (External website that opens in a new window) in duplicate with the jurisdictional Central Excise Office (External website that opens in a new window).
- A 'registered' service provider is referred to as an 'assessee'.
- A single registration is sufficient even when an assessee is providing more than one taxable services. However, he has to mention all the services being provided by him in the application for registration and the field office shall make suitable entries/endorsements in the registration certificate.
- A fresh registration is required to be obtained in case of transfer of business to another person.
- Any registered assessee when ceases to provide the taxable service shall surrender the registration certificate immediately.
- In case a registered assessee starts providing any new service from the same premises, he need not apply for a fresh registration. He can simply fill in the Form S.T.1 for necessary amendments he desires to make in his existing information. The new form may be submitted to the jurisdictional Superintendent for necessary endorsement of the new service category in his Registration certificate.
In case of Individuals or Proprietary Concerns and Partnership Firm, service tax is to be paid on quarterly basis. The due date for payment of service tax is the 5th of the month immediately following the respective quarter. (Quarters are : April to June, July to September, October to December and January to March). However, payment for the last quarter i.e. January to March is required to be made by 31st of March itself. In case of any other category of service provider than specified above, service tax is to be paid on a monthly basis, by the 5th of the following month. However, payment for the month of March is required to be made by 31st of March itself. Service tax is to be paid on the amount realized / received by the assessee during the relevant period ( i.e. a month or a quarter as the case may be).
The unique feature of Service Tax is reliance on collection of tax, primarily through voluntary compliance. System of self-assessment of Service Tax Returns by service tax assesses was introduced w.e.f. 01.04.2001. The jurisdictional Superintendent of Central Excise is authorized to cross verify the correctness of self assessed returns. Tax returns are expected to be filed half yearly. Central Excise officers are authorized to conduct surveys to bring the prospective service tax assesses under the tax net.
Service tax is payable @ 10% of the 'gross amount' charged by the service provider for providing such taxable service. The Education Cess is payable @ 2%, and Secondary and Higher Education Cess payable @ 1% of the service tax payable.
Service Tax Exemptions
The Central Government can grant partial or total exemption by issuing an exemption notification. But it cannot be granted by the Government with retrospective effect. The general exemptions are :-
- Small service providers whose turnover is less than Rs.4 lakhs per annum are exempt from service tax.
- There is no service tax on export of services.
- Services provided to UN and International Agencies and supplies to SEZ(Special Economic Zones) are exempt from service tax.
- Service tax is not payable on value of goods and material supplied while providing services. Such exclusion is permissible only if Cenvat credit on such goods and material is not taken.
Wealth Tax
The Wealth Tax Act is an important direct tax legislation, which came into existence on 1 st April 1957. Wealth tax is levied on the benefits derived from property ownership. The tax is to be paid year after year on the same property on its market value, whether or not such property yield any income.
An assessee or a person, who is liable to pay wealth tax under the Wealth Tax Act, includes legal envoy, perpetrator or administrator of a deceased person and a person deemed to be an agent of a non-resident. Under the Act, tax is charged on the following persons in respect of the wealth held by them during the assessment year:
- A company.
- A Hindu Undivided Family (HUF), which is a type of assessee recognised under the Act, consisting of all persons lineally descended from a common ancestor and deriving income from joint family corpus. Hindu, Jain, Buddhist, and Sikh families have been so recognised.
- An association of persons or a body of individuals.
- Non-corporative taxpayers whose accounts are to be statutorily audited.
- Those who fall in the 1-by-6 category (External website that opens in a new window).
Chargeability to tax also depends upon the residential status of the assessee and the citizenship of a person.
It may be noted here that productive assets like shares, debentures, bank deposits and investments in mutual funds are exempt from wealth tax. The non-productive assets include jewellery, bullion, motorcars, aircraft, urban land, etc. Foreign nationals are exempt from wealth tax on non-Indian assets. The details of Wealth Tax can be accessed through Acts and Rules as framed by the Constitution. Click on the links below for more:
- Wealth Tax Act (External website that opens in a new window)
- Wealth Tax Rules (External website that opens in a new window)
To file your Wealth Tax Returns, you need to fill Form BA, Form A and Form B. Visit the link below to download these forms.
Download forms for Return of Net Wealth
Income Tax
Posted by admin on September 4th, 2011
Income tax is a tax paid to the central government on personal income. It is the direct tax paid on income by an individual or a company/firm within a given financial year. The Indian Income Tax department is governed by the Central Board for Direct Taxes (CBDT)and is part of the Department of Revenue under the Ministry of Finance , Government of India.
Detailed information on all types of taxation in India can be found here.
The Income Tax Act, 1961 as amended by Finance Act 2010 , under Section 139 makes it obligatory upon any person to file return if the person's total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax.
Provided that a person referred to, who is not required to furnish a return under this sub-section and residing in such area as may be specified by notification in the Official Gazette, and who during the previous year incurs an expenditure of fifty thousand rupees or more towards consumption of electricity or at any time during the previous year fulfils any one of the following conditions, namely:
- is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified; or
- is the owner or the lessee of a motor vehicle other than a two-wheeled motor vehicle, whether having any detachable side car having extra wheel attached to such two-wheeled motor vehicle or not; or
- has incurred expenditure for himself or any other person on travel to any foreign country; or
- is the holder of a credit card, not being an "add-on" card, issued by any bank or institution; or
- is a member of a club where entrance fee charged is twenty-five thousand rupees or more.
The tax liability to be computed for AY 2012 -2013 is as per the under:-
(i) In case of individuals (other than women and individuals who are of the age of 60 years or more at any time during the financial year 2011-12) -
Income (In Rs.): Tax Liability (In Rs.)
- Upto Rs.1,80,000 : Nil
- Between Rs.1,80,001 – Rs.5,00,000 : 10%
- Between Rs.5,00,001 – Rs.8,00,000 : 20%
- Above Rs.8,00,000 : 30%
(ii) In case of women (other than women who are of the age of 60 years or more at any time during the financial year 2011-12)-
Income (In Rs.) : Tax Liability (In Rs.)
- Upto Rs.1,90,000 : Nil
- Between Rs.1,90,001 – Rs.5,00,000 : 10%
- Between Rs.5,00,001 – Rs.8,00,000 : 20%
- Above Rs.8,00,000 : 30%
(iii) In case of individuals who are of the age between 60 and 80 years at any time during the financial year 2011-12-
Income (In Rs.) : Tax Liability (In Rs.)
- Upto Rs.2,50,000 : Nil
- Between Rs.2,50,001 – Rs.3,00,000 : 10%
- Between Rs.3,00,001 – Rs.5,00,000 : 20%
- Above Rs.5,00,000 : 30%
(iv) In case of individuals who are of the age of 80 years or more at any time during the financial year 2011-12-
Income (In Rs.) : Tax Liability (In Rs.)
- Upto Rs.5,00,000 : Nil
- Between Rs.5,00,001 – Rs.8,00,000 : 20%
- Above Rs.8,00,000 : 30%
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