Qaafafafg Tax

8/11/2019 Qaafafafg Tax

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Service Tax Vs.Excise Tax

Indirect Tax

2011

Group 3

6/2/2011


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2Service Tax Vs. Excise Tax

Group Members List :

Roll Numbers Names

13 Jinit Jain

14 Riyam Jain

18 Zeba kachwala

35 Jigar jain

45 Jugal shah46 Nisha shah

49 Saloni shah


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Acknowledgement

We, the students of SY-BAF, would like to thank our Professor Ms. Geeta

Sachdev for giving us an opportunity to work on the topic Service Tax Vs.

Excise Tax. It was a pleasure working on this topic. It also helped us in

improving our co-ordinating skills by working as a group together. We got

to know the topic in detail and will be helpful since it covers a part of our

syllabus as well.

Thank you!


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IndeX

Sr. No. Topics Page No.

1. Indirect Taxes 52. Service Tax

Introduction

FeaturesExemptions

Service Tax Rates

7-10

3. Excise TaxIntroduction

TypesFeatures

ExemptionsRates

11-14

4. Distinguish between Service Tax andExcise Tax

15-16

5. Similarities between Service Tax andExcise Tax

17

6. Conclusion 18


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INDIRECT TAXES

Indirect Taxes refers to those taxes which are levied on goods and services rather

than on persons or organizations.

The various types of Indirect Taxes are :-

1.

Sales Tax

2.

Excise Duty

3.

Customs Duty

4. Service Tax

5. Entertainment Tax

6.

Entry Tax

However, we will study only about Service Tax and Excise Tax and their

various differences in our project.


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SERVICE TAX

INTRODUCTION

Service Tax was first brought into force with effect from 1 July 1994. All service

providers in India, except those in the state of Jammu and Kashmir, are required to

pay a Service Tax in India. Initially only three services were brought under the netof service tax and the tax rate was 5%. Gradually more services came under the

ambit of Service Tax. The rate of tax was increased from 5% to 8% w.e.f 14 May

2003. From 10 September 2004 the rate of Service Tax was enhanced to 10% from

8%. Besides this 2% education cess on the amount of Service Tax was alsointroduced. In the Union Budget of India for the year 2006-2007, service tax was

increased from 10% to 12%. On February 24, 2009 in order to give relief to theindustry reeling under the impact of economic recession, the rate of Service Taxwas reduced from 12% to 10%.

Service Tax is a form of indirect tax imposed on specified services called "taxableservices". Service tax cannot be levied on any service which is not included in the

list of taxable services.

TheFinance Minister of India,Pranab Mukherjee in hisBudget speech hasindicated the government's intent of merging all taxes like Service Tax, Excise and

VAT into a common Goods and Service Tax by the year 2011. To achieve thisobjective, the rate of Central Excise and Service Tax will be progressively altered

and brought to a common rate. In budget presented for 2008-2009 It wasannounced that all Small service providers whose turnover does not exceed Rs 10lacs need not pay service tax.

Currently there are 118 services covered under Service Tax.
http://en.wikipedia.org/wiki/Finance_Minister_of_Indiahttp://en.wikipedia.org/wiki/Pranab_Mukherjeehttp://en.wikipedia.org/wiki/Budgethttp://en.wikipedia.org/wiki/Budgethttp://en.wikipedia.org/wiki/Pranab_Mukherjeehttp://en.wikipedia.org/wiki/Finance_Minister_of_India


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Payment of service tax :The person providing the service (i.e. the serviceprovider) has to pay service tax in such manner and within such period as is

prescribed in the Service Tax Rules, 1994. The service tax is to be paid only onthe receipt of payment towards the value of taxable services.

Procedures:Provisions have been made for registration, assessment includingself assessment, rectifications, revisions, appeals and penalties on the serviceprovider.

CENVAT credit:The credit of service tax and excise duty across goods andservices is allowable in accordance with the CENVAT Credit Rules, 2004.

Services provided by an unincorporated association/body to

its members also taxable:

[Explanation to Sec. 65] :Taxable service includes any taxable serviceprovided or to be provided by any unincorporated association or body ofpersons to a member thereof, for cash, deferred payment or any other valuable

consideration. Hence, the services (falling under any category of taxable service)provided or to be provided by any unincorporated association/body to member

thereof shall be liable to service tax.

Performance of statutory activities/duties, not service:An

activity performed by a sovereign /public authority under provisions of lawdoes not constitute provision of taxable service to a person and, therefore, no

service tax is leviable on such entities.


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Import/Export of services:While import of services is chargeable to taxu/s 66A, the export of services has been made exempt from tax. Import/export

provisions are discussed separately.


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EXEMPTIONS

The following exemptions are applicable to all services:-

Exemption to UNO or International Organization.Special Economic Zones.Cost of goods and materials (barring few exceptions like beauty parlour).

Export of services.Payment received in non-repartriable freely convertible foreign exchange.

Services rendered abroad.

Software engineering enjoys a complete exemption from service tax.Services rendered free of charge.

SERVICE TAX RATES

Period Basic rate

01/04/1994 to 13/05/2003 5%

14/05/03 to 9/09/2004 8%

10/09/2004 to 17/04/2006 10%

18/04/2006 to 23/02/2009 12%

24/02/2009 to date 10%


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EXCISE TAX

INTRODUCTION

Excise Taxis more commonly known as Excise Duty and is one of the most well-

known forms of taxation in India.Excise duty is a tax on manufacture or

production of goods.Any manufacturer of excisable products is liable to pay this

tax and is levied on a wide variety of commodities manufactured in India.

For the Indian central government this duty is an important source of revenue. The

Excise Tax is required to be paid before the goods leave the factory, as a result ofwhich the small-scale industries do not pay Excise Tax up to the specified value of

goods cleared from the factory. The state governments are liable to levy exciseduty on a few commodities including liquor, provided the central government fails

to do so. At times when the manufactured goods are exported excise drawback is

available.


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TYPES OF EXCISE TAXES :-

In India, the three types of Central Excise Taxes being collected include the Basic

Excise Duty, Additional Duty of Excise, and Special Excise Duty.

The Basic Excise Duty is charged under the Section 3 of the Central Excises and

Salt Act, 1944. According to this all excisable goods other than salt produced or

manufactured in India, has to pay the rates given in the schedule to the Central

Excise Tariff Act, 1985.

As per the Section 3 of the Additional duties of Excise Act, 1957 it is authorized

that only the goods described in the Schedule to this Act are liable for Excise Tax

payments. Generally these are imposed under different categories like medicinaland toilet preparations, sugar and other industries development.

The Special Excise Duty following the Section 37 of the Finance Act, 1978 was

imposed on all excisable goods that are also subjected to Basic excise Duty under

the Central Excises and Salt Act, 1944. However, the Finance Act provisions

regarding the said fiscal year specify the levy and collection of the Special Excise

Duty.

Who is liable to pay Excise Duty?

Every manufacturer is liable to pay excise duty.

Warehouse keeper is liable to pay excise duty if goods are cleared from factorywithout payment of duty.

In case of molasses the purchaser is liable to pay excise duty.


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FEATURES OF EXCISE TAX

It is an indirect tax.

Central excise duty is levied on all excisable goods produced or

manufactured in India (except goods produced or manufactured in specialeconomic zone).

Excisable goods are specified in Central Excise Tariff Act, 1985.

Such duty is levied and collected uniformly throughout India in accordancewith the provisions of a specific Act known as Central Excise Act, 1944.

Taxable event of Central excise is manufacture or production i.e. charge is

fixed at the time of occurrence of manufacture or production.

Though taxable event is manufacture or production, duty is payable on the

date of removal i.e. clearance from factory.

Excise duty is payable by the manufacturer or producer of excisable goodsin certain cases.


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EXEMPTIONS

The following are the exemptions under Excise Tax :-

Special Economic Zones.

EOUs, Units in EPZs, STPs, or EHTPs.Exemption to export goods for repairs, etc.

Expemption to excisable goods sent for trade fair, exhibition, etc.

Exemption related to Goods manufactured in specific areas such as North-Eastern States, State of Jammu and Kashmir, Kutch and State of Uttaranchal

and Himachal Pradesh.

Exemption to goods captively consumed.Exemption to goods manufactured in government factories and supplies to

defence.Exemption to technical, educational and research institutes.

Exemption to certain goods for rehabilitation work.Exemption to goods produced without aid of power and for units in rural areasJob Work Notifications.

RATES

Excise duty on most commodities ranges between 0 to 16%. Only on seven items

duty is imposed at 32%, viz., motor cars, tyres, aerated soft drinks, airconditioners, polyesters filament yarn, pan masala and chewing tobacco. Duty is

charged at 30% on petrol with additional excise duty at Rs. 7 per litre. The saidrates are subject to exemptions and deductions thereon as may be notified from

time to time. Central VAT (CENVAT) is applicable to practically all manufactured

goods, so as to avoid cascading effect on duty. Small Scale Sector is exemptedfrom payment of excise duty from annual production upto Rs.10 million.


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Distinguish between service tax and

excise tax

Service tax Excise tax1.

Definition Service tax isTax imposedonservice providers in Indiaexcept for the State of

Jammu and Kashmir.

There is no fixed definition for

Excise tax. As per dictionary,it is a tax levied on goods and

commodities produced or soldwithin the country.

2. Governing act Introduced for the first time

under Finance Act, on 1stJune 1994.

Provisions governed by

Central Excise Act, 1944.

3.

Applicability It is charged on services. It is charged or levied onproducts only onmanufacturers and not buyers.

4.

Commonly known

as

It is commonly known asthe tax of the future.

It is commonly known asExcise Duty or Inland

Tax.

5.

Source of

revenue

Does not give as muchrevenue to the government

as Excise Tax.

Biggest Source of Revenue forthe government.

6. Rate Current rate is 10.3% Excise tax on mostcommodities is between 0% to

16%. Only on seven items it isimposed at 32%.

7.

Contribution to

GDP

Largest contributor to GDP Average contribution to GDP.
http://www.investorwords.com/4879/tax.htmlhttp://www.businessdictionary.com/definition/service-provider.htmlhttp://www.investorwords.com/9618/except.htmlhttp://www.investorwords.com/9618/except.htmlhttp://www.businessdictionary.com/definition/service-provider.htmlhttp://www.investorwords.com/4879/tax.html


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8.

Person liable to

pay

Service provider is liable topay Service tax.

Manufacturer of producer ofgoods is liable to pay Excisetax.

9.

Government

involved

It is charged by central and

state government.

It is charged by the centralgovernment only.

10.

Parties

involved

2 parties i.e. service providerand service client.

Only 1 party involved i.e.manufacturer.

11.

When is it

payable

It is payable only on receipt

of value of taxable servicefrom customer/clientBEFORE, DURING OR

AFTER rendering theservice.

It is payable or chargeable

only at the time of productionof goods and not on sale.

12.

Evasion Evasion of service tax is notas difficult as it is in ExciseTax.

Evasion of Excise tax is very

difficult or nearly impossible.

13. Number There are 118 taxableservices.

There is no specific number of

taxable goods. All goodsmanufactured are taxable.

14.

Exemption limit Current exemption limit isRS 10 Lac governed byFinance Act, 2008.

There is no such exemption

limit under Excise Tax.

15. Types There are no different typesof service taxes.

Three types of Central Excise

Taxes i.e. Basic Excise Duty,Additional Duty of Excise,

and Special Excise Duty.


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SIMILARITIES

The similarities between Service Tax and Excise Tax are as follows :-

Service Tax and Excise Tax are Indirect Taxes.

Service Tax and Excise Tax are leviable only in India except for the state ofJammu and Kashmir.

Service Tax and Excise Tax do not include import of goods or services.

Service Tax and Excise Tax are sources of revenue for the government.

Being Indirect Taxes, Service Tax and Excise Tax are difficult to evade.


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Conclusion

Thus we can conclude that,

Service Tax and Excise Tax are both Indirect Taxes and are leviable only in India.

Service Tax was first brought into force with effect from 1 July 1994, and it ischarged only on taxable services. Initially only three services were there but now

there are 118 services. The current rate of Service Tax is 10.3 % and it is the

largest contributor to the GDP. Service Tax is payable by the Service provider. It is

an important source of revenue for the government. We can also say that there arevarious exemptions in Service Tax.

On the other hand, Excise duty is a tax on manufacture or production of goods.

Any manufacturer of excisable products is liable to pay this tax and is levied on a

wide variety of commodities manufactured in India. The current rate of Excise is

between 0% to 16% for most commodities except for seven commodities which

have a rate of 32%. Excise Tax is paid by the manufacturer on goods or

commodities manufactured by him. Also, there are various exemptions under

Excise Tax.

We also noticed that there are various differences between Service Tax and Excise

Tax like rate, applicability, governing act, parties involved, source of revenue, etc.

Thus we can say that both Service Tax and Excise Tax are important in their own

way and help the government equally in earning revenue by way of taxes.


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Bibliography:

K.C College Librarywww.google.com

www.wikipedia.comDirect and Indirect Taxes I - Ainapure

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Qaafafafg Tax