1. An Overview of Indirect TaxesBy
PROF V.N. PARTHIBAN, FICWA, ACS, FIII, ASM, ADIM, MBA, LLM

2. Customs Duty Basic Customs Duty :Levied under Customs Act, 1962 on :
Imported goods: (means any goods brought into India from a place outside India)
Export goods : (means any goods which are to be taken out of India to a place outside India)
Additional Duty equal to Excise duty (CVD) and Additional duty equal to Sales Tax , local tax or any other charges (SAD) is levied under Customs Tariff Act, 1975
Anti dumping duty and safeguard duty , if notified, are also levied under Customs Tariff Act, 1975

3. Central Excise Duty
Basic conditions which must be satisfied for deciding dutiability / Excisability of any article
are
1. The article should be “Goods” and,
2. It should have come into existence as a result of “Manufacture”.
If either of the conditions is not satisfied,
Central Excise duty can not be levied.

4. CONCEPT OF MANUFACTURE

5. Definitions of “Excisable Goods” & “Manufacture”
Goods: Central Excise Law does not define goods.
An article can be called “Goods” if
It is known to the market as such and
Can ordinarily come to the market for being bought and sold.
Concept of Marketability
An article to be excisable, it must be marketable.
The aspect of marketability has been further emphasized and elaborated by the Hon’ ble Supreme Court in the following cases.
Bhor Industries Ltd. vs Collector – 1989 (40) ELT 280(SC)
Moti Laminates vs UOI – 1995 (76) ELT 241 (SC)
Even semi finished articles, sub-standard articles, by produce, residues, process scrap, articles in unassembled or CKD condition would be “Goods” if it fulfills test of marketability.
Immovable property or articles embedded to earth, structures, erections, installations and turnkey projects are not “Good” because they can not ordinarily come to the market to be bought and sold

6. Manufacture : - The expression ‘Manufacture’ has been defined under Section 2 (f) of Central Excise Act, 1944.
Accordingly to which it includes any process-
(i) incidental or ancillary to the completion of a manufactured product and
(ii) which is specified in relation to any goods in the Section or Chapter Notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture
(iii) which in relation to the goods specified in the Third Schedule (MRP goods etc.) involves packing or repacking of such goods in a unit container or labelling or relabelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods render the product marketable to the consumer.

7. The activity or process in order to amount to ‘manufacture’ must lead to emergence of a new commercial product, different from the one with which the process started. In other words, it should be an article with name, character and use.
It is not the nature of the process or activity which determines the issue but the end- result of that process or activity - Empire Industries Ltd. vs UOI (20) ELT 179 (SC)
Repair and reconditioning of an article does not amount to manufacture because no new goods come into existence.
Repacking of goods from bulk pack to smaller packs would not ordinarily amount to manufacture unless there is ‘deemed manufacture’ clause in relevant chapter.
Putting together different duty paid items in a kit or box does not amount to manufacture.

8. ORGANISATIONAL STRUCTURE OF CBEC
ZONE-1
ZONE-III
ZONE-II
Commissionerate-I
Commissionerate-II
Commissionerate-III
Commissionerate-IV
Division-I
Division-II
Range-I
Range-II
Range-III
Range-IV

9. Important changes brought in Administration of Central Excise Duty
Self removal procedure in 1969
Central Excise Tariff Act based on HSN in 1985
MODVAT scheme in 1986
In 1994, the Gate Pass used for clearances was replaced by invoice and consequently filing of Price declarations was dispensed with.
Filing of Classification list dispensed with during 1995
Self Assessment by assessees was introduced during the year 1996

10. Fortnightly payment of duty in 2000
Concept of Valuation of Excisable goods on the basis of ‘Transaction value’ instead of ‘normal whole sale price’ introduced during 2000
Central Excise Rules, 2001 replacing Central Excise Rules,1944 (32 Rules replacing 234 Rules)
Relaxation in Budget day restrictions
E-filing of returns from 2004
Formation of Large Tax payer Units during 2006
Introduction of ACES- A web based workflow based application in 2009

11. GST- Overview

12. GST is:
An indirect tax on final consumption of goods and services
Levied on businesses and recovered by them on supplies
Collected at each stage in the commercial and production chain by producers and suppliers
GST is typically charged on registered businesses
Input GST incurred in relation to taxable output supplies of goods and services is available as an offset
GST thus operates as a pure Value Added Tax (VAT)

13. Date
GST-Global Scenario
More than 150 countries have already introduced GST/National VAT
Typically GST is a single rate system but two/three rate systems are also in use depending upon requirements
The standard GST rate in most countries ranges between 15-20%
All sectors are taxed with very few exceptions/ exemptions
Full input tax credits on inputs are available.
Canada and Brazil alone have dual GST
US does not have a GST but only sales taxes
Slide 13 13

14. Objectives of GST
Lowered tax rates due to broadening of the tax base and minimizing exemptions & exclusions
Creation of a common market across the country
Redistribution of the burden of taxation equitably between manufacturing and services
Reduction in transaction and compliance costs.
Facilitation of business decisions on purely economic considerations
Enhanced efficiencies & productivity through the supply chain

15. Dual GST - Current State of Play – latest developments
Date
Date
Dual GST - Current State of Play – latest developments
States have agreed to have two basic rates of GST.
CGST will also be in conformity with the SGST
Standard rate in the range of 8% to 9%
Lower rate for essential commodities in the range of 4% to 5%
Special rate for precious metals is expected to be at 1%
Small set of specified products will be exempt from the GST
The Central Government and State Governments have agreed to evolve a mechanism for compensating States for revenue losses.
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16. Dual GST – Structure Dual GST will comprise
the Central GST and the State GST
Both taxes to operate in parallel and to apply on every transaction
Stamp duty, toll tax, passenger tax and road tax not subsumed under dual GST
Coverage
Tobacco products to be subjected to GST, Centre to levy excise duty over and above the GST ?
Alcoholic beverages to be kept out of the purview of GST ?
Petroleum products also to be kept out of the purview of GST ?
Slide 16

17. Proposed dual GST Model
Date
Date
Proposed dual GST Model
* Figures are only indicative
Dual GST
Goods
Services
Existing Rate: %
Existing Rate: 10%
GST: 16 %
GST: 16 %
8%- CGST
8%- SGST
8%- CGST
8%- SGST
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18. Taxes subsumed in dual GST
Date
Date
Taxes subsumed in dual GST
Dual GST
Central Taxes CGST
State Taxes SGST
VAT
Entertainment tax
Luxury tax
Lottery taxes
State cesses and surcharges
Entry tax not in lieu of octroi
Central Excise
CVD
SAD
Service Tax
CST will be phased out
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19. Significant features of proposed dual GST Model
Date
19/04/2017
Date
Significant features of proposed dual GST Model
Taxable Events in GST
The Federal and State GST will both be leviable on supply of goods and services
Hence, the present taxable events of manufacture, for central excise, and sale of goods for State VAT, will have no relevance
Rules for determining the place and time of supply of goods and services to be formulated
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20. GST paid on imports available as input tax credits
Date
Date
GST on Imports
Central & State GST on imports to replace Countervailing duty (CVD) and Additional Duty of Customs (SAD) currently levied on import of goods as part of customs duties
GST paid on imports available as input tax credits
Place of supply rules to determine the State in which the SGST on imports is payable
Input tax credits
Full credits under the CGST and SGST that will operate in parallel
Cross-utilization of credits between CGST and SGST not permitted
Refund of unutilized accumulated ITC
Exports to be zero rated
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21. Inter-State supplies of goods and services
Date
Date
Inter-State supplies of goods and services
Integrated GST (IGST) model to be adopted for taxing all inter-State supplies of goods and services including stock / branch transfers
Centre alone to tax inter-State supplies
Centre to levy IGST which would be aggregate of CGST and SGST
Input credits of IGST, CGST & SGST will be available as offsets
Central agency to act as a clearing house for funds transfer amongst the States
Elegant and business friendly model of taxing inter-State supplies
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22. All services to be taxed with few exceptions
Date
19/04/2017
Date
Treatment of Services
Any economic activity which is not a supply of goods is a supply of services
All services to be taxed with few exceptions
Central GST on services relatively easy to collect
Services to be taxed in the State of consumption
Supply rules to determine the place of consumption for cross-border services
State GST could be charged based on the location of the recipient of services
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23. Single tax invoice for charging and collecting both taxes.
Date
19/04/2017
Date
Procedures :
Allotment of a PAN-linked taxpayer identification number with 13/ digits.
Uniform procedure for collection of both CGST & SGST to be prescribed in the respective legislations.
Single tax invoice for charging and collecting both taxes.
Submission of periodical returns, in common format, to both the CGST & SGST authorities.
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24. Taxation of inter-State transactions – IGST model
Date
19/04/2017
Date
Taxation of inter-State transactions – IGST model
State 1
State 2
Invoice
Invoice
Dealer
Input
IGST
CGST
SGST
Value
CGST Nil
State 1 GST Nil
IGST *
116
Input
IGST
CGST
SGST
Value
CGST
State 2 GST
232
Final Consumer
*IGST, CGST & SGST can be used to offset IGST liability
Input SGST used to pay IGST to be paid by exporting States to Central Govt.
Central Govt to pay input IGST used to pay SGST in the importing State to the importing State Govt.
Central Clearing agency will manage the allocation of funds between States 24 24 24

25. Key Issues & Challenges
Federal GST law to be drafted
Uniform State GST law – model State GST code to be adopted
Constitutional amendments required
- to enable Central Government to tax beyond manufacturing stage
to enable States to charge service tax
to enable levy of GST on imports
Rates
Integration of a large number of Central & State Taxes
Multiplicity of taxes and tax rates
Thresholds
Continuation of area specific exemptions – Central GST and State GST