Indirect Tax Law

International Trade & Tax

An indirect tax (such as sales tax, per unit tax, value added tax (VAT), or goods and services tax (GST ), excise, consumption tax, tariff) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer).

Indirect taxes are not directly paid by the assesses to the government authorities. These are levied on goods and services and collected by intermediaries (those who sell goods or offer services)

 

GST

As a significant step towards the reform of indirect taxation in India, the Central Government has introduced the Goods and Service Tax (GST). GST is a comprehensive indirect tax on the manufacture, sale and consumption of goods and services throughout India and will subsume many indirect taxes levied by the Central and State Governments. GST will be implemented through Central GST (CGST), Integrated GST (IGST) and State GST (SGST).

Four laws (IGST, CGST, UTGST & GST (Compensation to the States), Act) have received President assent. All the States & UT expected to pass State GST Act, by end of May 2017. GST law is expected to take effect from July 1, 2017.

GST is the biggest tax-related reform in the country bringing uniformity in the taxation structure and eliminating the cascading of taxes that was levied in the past. The GST Council meets from time to time to revise the GST rates for various products.

 GST stands for Goods and Services Tax. It is classified into three types:

CGST –Central GST

SGST –State GST

IGST –Integrated GST

GST Tax Rates on some common items:

RatesProducts
5%Household necessities such as edible oil, sugar, spices, tea, and coffee (except instant) are included. Coal ,Mishti/Mithai (Indian Sweets) and Life-saving drugs are also covered under this GST slab.
12%This includes computers and processed food
18%Hair oil, toothpaste and soaps, capital goods and industrial
intermediaries are covered in this slab
28%Luxury items such as small cars, consumer durables like AC and Refrigerators, premium cars, cigarettes and aerated drinks , High-end motorcycles  are included here.

 

CUSTOM

Custom duties are levied on nearly all goods that are imported into the nation. While export duties are levied on goods as specified by the Second Schedule, import duties are not levied on certain items like fertilizers, food grains, lifesaving drugs etc. Custom duty can be classified into the following types:

  • Basic Customs Duty: This duty is imposed on the value of goods at a specified rate as it is fixed on an ad-valorem basis. After being amended time and again, it is currently regulated by the Customs Tariff Act, 1975. The Central Government, however, holds the rights to exempt specific goods from this tax.
  • Countervailing Duty: CVD or Additional Customs Duty is levied on imported goods that fall under Section 3 of the Customs Tariff Act of 1975. It is the same as the Central Excise Duty which is levied on similar goods that are produced in India.
  • Education Cess: The cess used to be levied at 2% and an additional 1% of the aggregate of customs duties.
  • Protective Duty: This duty is imposed in order to shield the domestic industry against the imports at rates that are recommended by the Tariff Commissioner.
  • Safeguard Duty: As the name suggests, this duty serves as a means of safeguarding the rise in imports. Sometimes, if the government feels that a rise in imports can damage the existing domestic industry, it may levy this duty.
  • Anti-Dumping Duty: This duty is based on the dumping margin, i.e. the difference between the export price and the normal price. It is only imposed when the goods that are imported are below the fair market price.
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