It has been announced by the Finance Minister that by 2012 a scheme of Goods and Service Tax will be implemented. With the implementation of GST it is a expected that there will be a unified taxation regime and excise duty, VAT and service tax will be merged to a single scheme of GST. Keeping this in view, the CST is already started to be phased out.
4.7.1 Customs Duty
Customs duty is levied on commodities imported into India. Duty drawbacks are possible if the imported items are re-exported or used in manufacture for export. Customs duty is also imposed on the value of certain exports. Peak rate of Customs Duty and Education Cess maintained at 10 and 3 per cent respectively in case of non- agricultural products.
The rates are prescribed under the Customs Tariff Act, 1975 and are revised from time to time by the annual Finance Act or through various notifications. Customs duties, particularly on imports, may be a significant cost factor in an Indian project due to the generally high rates of duties, unless corresponding drawbacks are available upon export.
An overview of the Custom Tariff Act is given below
( i) Three types of customs duties are levied on imported goods i. e.
• Basic custom duty( BCD)
• Additional custom duty( ACD) and
• Special additional duty( SAD)
In addition to the above, countervailing duty and / or anti dumping duty may be levied by the Central Government by notifying in the official gazette.
4.7.2 Excise Duty
Excise duty is imposed on the manufacturer of products and is levied on a variety of commodities. This duty is an important source of revenue for the central government. Rates vary depending on the type of commodity. Even in case of similar commodities, the rates often vary depending on circumstances such as end-use. Although generally ad-valorem 15, the rates may also be specific or a combination of ad-valorem and specific, based on the value of goods. The rates are prescribed under the Central Excise Tariff Act and are revised from time to time by the annual Finance Bill or through notifications.
Cenvat rate and Education cess maintained at 12 and 3 per cent respectively.
Excise duty is to be paid as the goods are cleared from the factory. Small-scale Industries( SSI) enjoy exemption from excise duty up to the specified value of goods cleared. All industries irrespective of their investment or number of employees are eligible for concession. In fact, even a large industry will be eligible for the concession for annual turnover upto ` 40 million. The SSI unit need not be registered with any authority. SSI units availing this benefit are denied cenvat credit although a federal tax, the state governments are also empowered to levy excise duty on certain commodities, such as liquor. Furthermore, in case of goods manufactured and exported, there is provision for duty drawback of the excise duty paid on such goods.
4.7.3 Service Tax
Service tax is levied at 12 per cent 16( plus an education cess of 3 per cent) on the value of taxable services. The service provider will charge this to the service receiver. On collection, this is to
15
Duty which is payable, based on the value of goods
16
Applicable for the Financial Year 2012-13
40