Indirect Taxation

1
Indirect Taxation
2
Part I Value Added Tax
3
Value Added Tax

• A state tax
• Imposed through State legislature enactments
• An Indirect Tax on sale of goods
• Goods sold within the State
• Responsibility of the Seller to collect the tax
  and pay it to the State
• VAT Act does not apply to
• inter-state sale
• Export or import of goods

4
1 Identify whether VAT would be applicable in
following transactions
Sr. Particulars VAT applicable?
1 Sale of goods from Mumbai to Bangalore
2 Export of goods to Europe
3 Services provided from Mumbai to a trader of goods in Pune
4 Sale of goods from Mumbai to Nasik
5
1 Identify whether VAT would be applicable in
following transactions
Sr. Particulars VAT applicable?
1 Sale of goods from Mumbai to Bangalore N
2 Export of goods to Europe
3 Services provided from Mumbai to a trader of goods in Pune
4 Sale of goods from Mumbai to Nasik
6
1 Identify whether VAT would be applicable in
following transactions
Sr. Particulars VAT applicable?
1 Sale of goods from Mumbai to Bangalore N
2 Export of goods to Europe N
3 Services provided from Mumbai to a trader of goods in Pune
4 Sale of goods from Mumbai to Nasik
7
1 Identify whether VAT would be applicable in
following transactions
Sr. Particulars VAT applicable?
1 Sale of goods from Mumbai to Bangalore N
2 Export of goods to Europe N
3 Services provided from Mumbai to a trader of goods in Pune N
4 Sale of goods from Mumbai to Nasik
8
1 Identify whether VAT would be applicable in
following transactions
Sr. Particulars VAT applicable?
1 Sale of goods from Mumbai to Bangalore N
2 Export of goods to Europe N
3 Services provided from Mumbai to a trader of goods in Pune N
4 Sale of goods from Mumbai to Nasik Y
9
Registered Dealers

• The Act taxes all sale transactions of dealers
  within the State
• The dealers whose turnover exceeds a turnover of
  Rs. 5 lakhs a year are required to register for
  application of VAT
• Dealer broadly covers every one who is buying and
  selling goods in relation to business
• Depending upon the turnover of the dealer, the
  taxes are deposited with the State either on
• Monthly basis or Quarterly basis or Half Yearly
  basis.

10
Period of filing VAT VAT Return
Sr Annual Tax Liability Period of payment of VAT filing returns
1 Upto Rs. 1 Lacs Half Yearly
2 Above Rs 1 Lacs But less than Rs 10 Lacs Quarterly
2 More than Rs. 10 Lacs Monthly

11
Output and Input tax

• Output tax
• The tax liability of the Dealer for a period,
  month or quarter, is required to be calculated
  taking into account each sale and rate of
  taxation for that goods
• Input tax
• The VAT paid by the Dealer on the purchases with
  adequate documentation supporting the payment of
  tax

12
2 Calculate Input Tax for the dealer based in
Mumbai
Sr. Particulars Input tax? Rs.000
1 Tax paid on purchase of goods from Pune 50
2 Import duty paid on purchase of goods from Malaysia 150
3 Sales Tax paid on purchase of goods from New Delhi 40
4 Octroi paid on goods brought into city limits 10
Total
13
2 Calculate Input Tax for the dealer based in
Mumbai
Sr. Particulars Input tax? Rs.000
1 Tax paid on purchase of goods from Pune Y 50
2 Import duty paid on purchase of goods from Malaysia 150
3 Sales Tax paid on purchase of goods from New Delhi 40
4 Octroi paid on goods brought into city limits 10
Total
14
2 Calculate Input Tax for the dealer based in
Mumbai
Sr. Particulars Input tax? Rs.000
1 Tax paid on purchase of goods from Pune Y 50
2 Import duty paid on purchase of goods from Malaysia N
3 Sales Tax paid on purchase of goods from New Delhi 40
4 Octroi paid on goods brought into city limits 10
Total
15
2 Calculate Input Tax for the dealer based in
Mumbai
Sr. Particulars Input tax? Rs.000
1 Tax paid on purchase of goods from Pune Y 50
2 Import duty paid on purchase of goods from Malaysia N
3 Sales Tax paid on purchase of goods from New Delhi N
4 Octroi paid on goods brought into city limits 10
Total
16
2 Calculate Input Tax for the dealer based in
Mumbai
Sr. Particulars Input tax? Rs.000
1 Tax paid on purchase of goods from Pune Y 50
2 Import duty paid on purchase of goods from Malaysia N
3 Sales Tax paid on purchase of goods from New Delhi N
4 Octroi paid on goods brought into city limits N
Total 50
17
3 Calculate VAT payable by Lloyds Machinery
Manufacturers Ltd.
Sr Particulars Rs.000 VAT
1 Material purchased from local market 3000
2 Value Added Tax on above 375
3 Conversion cost and profit 1000
4 Total Sale Value
5 Output VAT rate 12.5
6 Less VAT credit
7 Net VAT Payable
18
3 Calculate VAT payable by Lloyds Machinery
Manufacturers Ltd.
Sr Particulars Rs.000 VAT
1 Material purchased from local market 3000 3000
2 Value Added Tax on above 375
3 Conversion cost and profit 1000
4 Total Sale Value
5 Output VAT rate 12.5
6 Less VAT credit
7 Net VAT Payable
19
3 Calculate VAT payable by Lloyds Machinery
Manufacturers Ltd.
Sr Particulars Rs.000 VAT
1 Material purchased from local market 3000 3000
2 Value Added Tax on above 375 -
3 Conversion cost and profit 1000
4 Total Sale Value
5 Output VAT rate 12.5
6 Less VAT credit
7 Net VAT Payable
20
3 Calculate VAT payable by Lloyds Machinery
Manufacturers Ltd.
Sr Particulars Rs.000 VAT
1 Material purchased from local market 3000 3000
2 Value Added Tax on above 375 -
3 Conversion cost and profit 1000 1000
4 Total Sale Value 4000
5 Output VAT rate 12.5
6 Less VAT credit
7 Net VAT Payable
21
3 Calculate VAT payable by Lloyds Machinery
Manufacturers Ltd.
Sr Particulars Rs.000 VAT
1 Material purchased from local market 3000 3000
2 Value Added Tax on above 375 -
3 Conversion cost and profit 1000 1000
4 Total Sale Value 4000
5 Output VAT rate 12.5 500
6 Less VAT credit
7 Net VAT Payable
22
3 Calculate VAT payable by Lloyds Machinery
Manufacturers Ltd.
Sr Particulars Rs.000 VAT
1 Material purchased from local market 3000 3000
2 Value Added Tax on above 375 -
3 Conversion cost and profit 1000 1000
4 Total Sale Value 4000
5 Output VAT rate 12.5 500
6 Less VAT credit 375
7 Net VAT Payable
23
3 Calculate VAT payable by Lloyds Machinery
Manufacturers Ltd.
Sr Particulars Rs.000 VAT
1 Material purchased from local market 3000 3000
2 Value Added Tax on above 375 -
3 Conversion cost and profit 1000 1000
4 Total Sale Value 4000
5 Output VAT rate 12.5 500
6 Less VAT credit 375
7 Net VAT Payable 125
24
4 Calculate VAT payable by Quick fix Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 1000 1000
2 Import duty paid on above 125
3 Material purchased from local market 2000
4 Value Added Tax on above 250
5 Conversion cost and profit 1875
6 Total Sale Value
7 Output VAT rate 12.5
8 Less VAT credit
9 Net VAT Payable
25
4 Calculate VAT payable by Quick fix Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 1000 1000
2 Import duty paid on above 125 125
3 Material purchased from local market 2000 2000
4 Value Added Tax on above 250
5 Conversion cost and profit 1875
6 Total Sale Value
7 Output VAT rate 12.5
8 Less VAT credit
9 Net VAT Payable
26
4 Calculate VAT payable by Quick fix Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 1000 1000
2 Import duty paid on above 125 125
3 Material purchased from local market 2000 2000
4 Value Added Tax on above 250 -
5 Conversion cost and profit 1875 1875
6 Total Sale Value 5000
7 Output VAT rate 12.5
8 Less VAT credit
9 Net VAT Payable
27
4 Calculate VAT payable by Quick fix Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 1000 1000
2 Import duty paid on above 125 125
3 Material purchased from local market 2000 2000
4 Value Added Tax on above 250 -
5 Conversion cost and profit 1875 1875
6 Total Sale Value 5000
7 Output VAT rate 12.5 625
8 Less VAT credit
9 Net VAT Payable
28
4 Calculate VAT payable by Quick fix Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 1000 1000
2 Import duty paid on above 125 125
3 Material purchased from local market 2000 2000
4 Value Added Tax on above 250 -
5 Conversion cost and profit 1875 1875
6 Total Sale Value 5000
7 Output VAT rate 12.5 625
8 Less VAT credit 250
9 Net VAT Payable
29
4 Calculate VAT payable by Quick fix Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 1000 1000
2 Import duty paid on above 125 125
3 Material purchased from local market 2000 2000
4 Value Added Tax on above 250 -
5 Conversion cost and profit 1875 1875
6 Total Sale Value 5000
7 Output VAT rate 12.5 625
8 Less VAT credit 250
9 Net VAT Payable 375
30
5 Calculate VAT payable by Excel Printers Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 500 500
2 Import duty paid on above 50
3 Material purchased from local market 4000
4 Value Added Tax on above 500
5 Material purchased from another state 1000
6 Central Sales Tax paid 20
7 Conversion cost and profit 1430
8 Total Sale Value
9 Output VAT rate 12.5
10 Less VAT credit
11 Net VAT Payable
31
5 Calculate VAT payable by Excel Printers Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 500 500
2 Import duty paid on above 50 50
3 Material purchased from local market 4000 4000
4 Value Added Tax on above 500
5 Material purchased from another state 1000
6 Central Sales Tax paid 20
7 Conversion cost and profit 1430
8 Total Sale Value
9 Output VAT rate 12.5
10 Less VAT credit
11 Net VAT Payable
32
5 Calculate VAT payable by Excel Printers Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 500 500
2 Import duty paid on above 50 50
3 Material purchased from local market 4000 4000
4 Value Added Tax on above 500 -
5 Material purchased from another state 1000 1000
6 Central Sales Tax paid 20
7 Conversion cost and profit 1430
8 Total Sale Value
9 Output VAT rate 12.5
10 Less VAT credit
11 Net VAT Payable
33
5 Calculate VAT payable by Excel Printers Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 500 500
2 Import duty paid on above 50 50
3 Material purchased from local market 4000 4000
4 Value Added Tax on above 500 -
5 Material purchased from another state 1000 1000
6 Central Sales Tax paid 20 20
7 Conversion cost and profit 1430 1430
8 Total Sale Value
9 Output VAT rate 12.5
10 Less VAT credit
11 Net VAT Payable
34
5 Calculate VAT payable by Excel Printers Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 500 500
2 Import duty paid on above 50 50
3 Material purchased from local market 4000 4000
4 Value Added Tax on above 500 -
5 Material purchased from another state 1000 1000
6 Central Sales Tax paid 20 20
7 Conversion cost and profit 1430 1430
8 Total Sale Value 7000
9 Output VAT rate 12.5
10 Less VAT credit
11 Net VAT Payable
35
5 Calculate VAT payable by Excel Printers Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 500 500
2 Import duty paid on above 50 50
3 Material purchased from local market 4000 4000
4 Value Added Tax on above 500 -
5 Material purchased from another state 1000 1000
6 Central Sales Tax paid 20 20
7 Conversion cost and profit 1430 1430
8 Total Sale Value 7000
9 Output VAT rate 12.5 875
10 Less VAT credit
11 Net VAT Payable
36
5 Calculate VAT payable by Excel Printers Ltd.
Sr Particulars Rs.000 VAT
1 Material imported from Taiwan 500 500
2 Import duty paid on above 50 50
3 Material purchased from local market 4000 4000
4 Value Added Tax on above 500 -
5 Material purchased from another state 1000 1000
6 Central Sales Tax paid 20 20
7 Conversion cost and profit 1430 1430
8 Total Sale Value 7000
9 Output VAT rate 12.5 875
10 Less VAT credit 500
11 Net VAT Payable 375
37
6 Calculate VAT payable by Design Creations
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1600 1600
2 VAT paid on above 200
3 Office material purchase local 200
4 Value Added Tax on above 25
5 Conversion cost and profit 200
6 Total
7 Output VAT rate 12.5
8 Less VAT credit
9 Net VAT Payable
38
6 Calculate VAT payable by Design Creations
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1600 1600
2 VAT paid on above 200 -
3 Office material purchase local 200 200
4 Value Added Tax on above 25
5 Conversion cost and profit 200
6 Total
7 Output VAT rate 12.5
8 Less VAT credit
9 Net VAT Payable
39
6 Calculate VAT payable by Design Creations
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1600 1600
2 VAT paid on above 200 -
3 Office material purchase local 200 200
4 Value Added Tax on above 25 -
5 Conversion cost and profit 200 200
6 Total
7 Output VAT rate 12.5
8 Less VAT credit
9 Net VAT Payable
40
6 Calculate VAT payable by Design Creations
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1600 1600
2 VAT paid on above 200 -
3 Office material purchase local 200 200
4 Value Added Tax on above 25 -
5 Conversion cost and profit 200 200
6 Total 2000
7 Output VAT rate 12.5 250
8 Less VAT credit
9 Net VAT Payable
41
6 Calculate VAT payable by Design Creations
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1600 1600
2 VAT paid on above 200 -
3 Office material purchase local 200 200
4 Value Added Tax on above 25 -
5 Conversion cost and profit 200 200
6 Total 2000
7 Output VAT rate 12.5 250
8 Less VAT credit 225
9 Net VAT Payable 25
42
7 Calculate VAT payable by Clean Enviro Pvt. Ltd.
Sr Particulars Rs.000 VAT
1 Raw material purchase inter-state 2400 2400
2 VAT paid on above 300
3 Consumables/spares imported 500
4 Value Added Tax on above 50
5 Conversion cost and profit 650
6 Total
7 Output VAT rate 12.5
8 Less VAT credit
9 Net VAT Payable
43
7 Calculate VAT payable by Clean Enviro Pvt. Ltd.
Sr Particulars Rs.000 VAT
1 Raw material purchase inter-state 2400 2400
2 VAT paid on above 300 300
3 Consumables/spares imported 500 200
4 Value Added Tax on above 50
5 Conversion cost and profit 650
6 Total
7 Output VAT rate 12.5
8 Less VAT credit
9 Net VAT Payable
44
7 Calculate VAT payable by Clean Enviro Pvt. Ltd.
Sr Particulars Rs.000 VAT
1 Raw material purchase inter-state 2400 2400
2 VAT paid on above 300 300
3 Consumables/spares imported 500 200
4 Value Added Tax on above 50 50
5 Conversion cost and profit 650 650
6 Total 3600
7 Output VAT rate 12.5 450
8 Less VAT credit
9 Net VAT Payable
45
7 Calculate VAT payable by Clean Enviro Pvt. Ltd.
Sr Particulars Rs.000 VAT
1 Raw material purchase inter-state 2400 2400
2 VAT paid on above 300 300
3 Consumables/spares imported 500 200
4 Value Added Tax on above 50 50
5 Conversion cost and profit 650 650
6 Total 3600
7 Output VAT rate 12.5 450
8 Less VAT credit -
9 Net VAT Payable
46
7 Calculate VAT payable by Clean Enviro Pvt. Ltd.
Sr Particulars Rs.000 VAT
1 Raw material purchase inter-state 2400 2400
2 VAT paid on above 300 300
3 Consumables/spares imported 500 200
4 Value Added Tax on above 50 50
5 Conversion cost and profit 650 650
6 Total 3600
7 Output VAT rate 12.5 450
8 Less VAT credit -
9 Net VAT Payable 450
47
Important Concepts
Particulars Added for calculation of Total Price on which VAT is calculated? Whether credit available?
VAT paid on purchase of Raw/Packing Mat. NO YES
Import Duty YES NO
Central Sales Tax YES NO
48
Variants of VAT with regards to credit for VAT
paid on inputs
Gross Product Variant Income Variant Consumption Variant
Credit of VAT paid on all inputs except VAT paid on purchase of Capital Assets. Credit of VAT paid on all inputs. VAT paid on purchase of capital assets is available in proportion to the depreciation on such assets. Credit of VAT paid on all inputs including VAT paid on purchase of Capital Assets is available in the year of purchase.
Most of the states in India follow the
Consumption Variant
49
7 Calculate VAT payable by Health Works Ltd.
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1200 1200
2 VAT paid on above 150
3 Capital exp(Depreciated_at_20 SLM) 5000
4 Value Added Tax on above 625
5 Conversion cost and profit 200
6 Total Sale Value
7 Output VAT rate 12.5
8 Less VAT credit
9 Net VAT
50
7 Calculate VAT payable by Health Works Ltd.
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1200 1200
2 VAT paid on above 150 -
3 Capital exp(Depreciated_at_20 SLM) 5000
4 Value Added Tax on above 625
5 Conversion cost and profit 200
6 Total Sale Value
7 Output VAT rate 12.5
8 Less VAT credit
9 Net VAT
51
7 Calculate VAT payable by Health Works Ltd.
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1200 1200
2 VAT paid on above 150 -
3 Capital exp(Depreciated_at_20 SLM) 5000 1000
4 Value Added Tax on above 625
5 Conversion cost and profit 200
6 Total Sale Value
7 Output VAT rate 12.5
8 Less VAT credit
9 Net VAT
52
7 Calculate VAT payable by Health Works Ltd.
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1200 1200
2 VAT paid on above 150 -
3 Capital exp(Depreciated_at_20 SLM) 5000 1000
4 Value Added Tax on above 625 -
5 Conversion cost and profit 200 200
6 Total Sale Value 2400
7 Output VAT rate 12.5 300
8 Less VAT credit
9 Net VAT
53
7 Calculate VAT payable by Health Works Ltd.
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1200 1200
2 VAT paid on above 150 -
3 Capital exp(Depreciated_at_20 SLM) 5000 1000
4 Value Added Tax on above 625 -
5 Conversion cost and profit 200 200
6 Total Sale Value 2400
7 Output VAT rate 12.5 300
8 Less VAT credit 775
9 Net VAT
54
7 Calculate VAT payable by Health Works Ltd.
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1200 1200
2 VAT paid on above 150 -
3 Capital exp(Depreciated_at_20 SLM) 5000 1000
4 Value Added Tax on above 625 -
5 Conversion cost and profit 200 200
6 Total Sale Value 2400
7 Output VAT rate 12.5 300
8 Less VAT credit 775
9 Net VAT carried forward for set-off against future VAT payable (475)
55
8 Calculate VAT payable by Fast Liners Ltd.
having 100 Exports
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1600 1600
2 VAT paid on above 200
3 Capital exp(Depreciated_at_25 SLM) 4000
4 Value Added Tax on above 500
5 Conversion cost and profit 400
6 Total Sale Value
7 Output VAT rate 0
8 Less VAT credit
9 Net VAT Net VAT
56
8 Calculate VAT payable by Fast Liners Ltd.
having 100 Exports
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1600 1600
2 VAT paid on above 200 -
3 Capital exp(Depreciated_at_25 SLM) 4000 1000
4 Value Added Tax on above 500
5 Conversion cost and profit 400
6 Total Sale Value
7 Output VAT rate 0
8 Less VAT credit
9 Net VAT Net VAT
57
8 Calculate VAT payable by Fast Liners Ltd.
having 100 Exports
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1600 1600
2 VAT paid on above 200 -
3 Capital exp(Depreciated_at_25 SLM) 4000 1000
4 Value Added Tax on above 500 -
5 Conversion cost and profit 400 400
6 Total Sale Value 3000
7 Output VAT rate 0
8 Less VAT credit
9 Net VAT Net VAT
58
8 Calculate VAT payable by Fast Liners Ltd.
having 100 Exports
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1600 1600
2 VAT paid on above 200 -
3 Capital exp(Depreciated_at_25 SLM) 4000 1000
4 Value Added Tax on above 500 -
5 Conversion cost and profit 400 400
6 Total Sale Value 3000
7 Output VAT rate 0 0
8 Less VAT credit
9 Net VAT Net VAT
59
8 Calculate VAT payable by Fast Liners Ltd.
having 100 Exports
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1600 1600
2 VAT paid on above 200 -
3 Capital exp(Depreciated_at_25 SLM) 4000 1000
4 Value Added Tax on above 500 -
5 Conversion cost and profit 400 400
6 Total Sale Value 3000
7 Output VAT rate 0 0
8 Less VAT credit 700
9 Net VAT Net VAT
60
8 Calculate VAT payable by Fast Liners Ltd.
having 100 Exports
Sr Particulars Rs.000 VAT
1 Raw material purchase local 1600 1600
2 VAT paid on above 200 -
3 Capital exp(Depreciated_at_25 SLM) 4000 1000
4 Value Added Tax on above 500 -
5 Conversion cost and profit 400 400
6 Total Sale Value 3000
7 Output VAT rate 0 0
8 Less VAT credit 700
9 Net VAT (eligible for claiming refund in absence of future VAT payable) Net VAT (eligible for claiming refund in absence of future VAT payable) (700)
61
Part II Excise Duty
62
Excise Duty

• Governed under Central Excise Act, 1944
• A central act under control of Central Govt.
• An indirect tax on goods
• Excise duty is a duty on excisable goods produced
  or manufactured in India
• Basic excise duty is also known as CENVAT

63
Sec.3 Basic conditions for levy of excise duty

• There must be goods
• The goods must be excisable
• The goods must have been produced or manufactured
• Such production or manufacture must be in India

64
Concept of Taxable Event andDate of Removal of
goods

• Taxable Event in Central Excise is production or
  manufacture of excisable goods.
• Rule 4 Duty is payable at the time of removal of
  goods from the factory or warehouse.
• Rule 5 The relevant date for determining rate of
  duty and tariff valuation shall be the date of
  actual removal of goods from the factory or
  warehouse

65
What is Goods under Central Excise

• Goods has not been defined in the Act
• In the case of UOI v. Delhi Cloth and General
  Mills Co. Ltd., Supreme Court held that 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
• Thus, the two fundamental characteristics of
  goods are Movability and Marketability

66
Excisable Goods

• Sec.2(d) Goods specified in the First Schedule
  and the Second Schedule to the Central Excise
  Tariff Act, 1985
• Even goods with nil rate of duty, if find an
  entry in the Schedules to the Tariff, are
  excisable goods, because nil rate is also a rate
  of duty
• CCEx. v. Vazir Sultan Tobacco Co. Ltd. (SC)

67
Factory

• Sec.2(e) Factory means any premises, including
  precincts thereof, wherein or in any part of
  which any excisable goods other than salt are
  manufactured or wherein or in part of which any
  manufacturing process connected with production
  of these goods is being carried on or is
  ordinarily carried on.

68
Basis of payment of excise duty

• Specific Duty payable on the basis of certain
  units like length, weight, volume, thickness etc.
  (Cement, Cig.)
• Ad-Valorem Duty levied by applying the given
  percentage of the value of goods
• Tariff value (Pan Masala, Readymade garments)
• Transaction value
• Retail Sale price (Cosmetics, Detergents)
• Duty based on Production capacity also known as
  Compounded Levy Scheme

69
CENVAT Scheme

• Allows the credit of the duty paid on the inputs
  and capital goods and service tax paid on input
  service, which is to be utilised for the payment
  of excise duty
• Objective of reducing cascading impact on price
  of finished goods
• Credit of duty on Capital Goods restricted to 50
  in the first year and balance in second year
• Input Service Tax credit allowed only when
  payment for services is made
• No CENVAT credit for exempted final product

70
Compute the cost of product with and without
CENVAT
Raw Material X of Rs. 20000 converted into
Product Y by value addition of Rs. 30000 Product
is converted into final Product Z by value
addition of Rs. 40000. Applicable Excise Duty is
8 (plus EC and SHEC)
71
Raw Material X of Rs. 20000 converted into
Product Y by value addition of Rs. 30000 Product
is converted into final Product Z by value
addition of Rs. 40000. Applicable Excise Duty is
8 (plus EC and SHEC). Compute Cost of Product Z
with and without CENVAT.
Sr Particulars Without CENVAT With CENVAT
1 Raw Material Cost X 20000
2 Add Excise _at_ 8.24 1648
3 Total 21648
4 Credit allowed
5 R.M.Cost of X (net of excise)
6 Value Addition
7 Total
72
Raw Material X of Rs. 20000 converted into
Product Y by value addition of Rs. 30000 Product
is converted into final Product Z by value
addition of Rs. 40000. Applicable Excise Duty is
8 (plus EC and SHEC). Compute Cost of Product Z
with and without CENVAT.
Sr Particulars Without CENVAT With CENVAT
1 Raw Material Cost X 20000
2 Add Excise _at_ 8.24 1648
3 Total 21648
4 Credit allowed -
5 R.M.Cost of X (net of excise) 21648
6 Value Addition 30000
7 Total 51648
73
Raw Material X of Rs. 20000 converted into
Product Y by value addition of Rs. 30000 Product
is converted into final Product Z by value
addition of Rs. 40000. Applicable Excise Duty is
8 (plus EC and SHEC). Compute Cost of Product Z
with and without CENVAT.
Sr Particulars Without CENVAT With CENVAT
7 Total 51648
8 Add Excise _at_ 8.24 4256
9 Cost of Product Y 55904
10 Credit allowed
11 Cost of Y (net of excise)
12 Value Addition
13 Total
74
Raw Material X of Rs. 20000 converted into
Product Y by value addition of Rs. 30000 Product
is converted into final Product Z by value
addition of Rs. 40000. Applicable Excise Duty is
8 (plus EC and SHEC). Compute Cost of Product Z
with and without CENVAT.
Sr Particulars Without CENVAT With CENVAT
7 Total 51648
8 Add Excise _at_ 8.24 4256
9 Cost of Product Y 55904
10 Credit allowed -
11 Cost of Y (net of excise) 55904
12 Value Addition 40000
13 Total 95904
75
Raw Material X of Rs. 20000 converted into
Product Y by value addition of Rs. 30000 Product
is converted into final Product Z by value
addition of Rs. 40000. Applicable Excise Duty is
8 (plus EC and SHEC). Compute Cost of Product Z
with and without CENVAT.
Sr Particulars Without CENVAT With CENVAT
13 Total 95904
14 Add Excise _at_ 8.24 7902
15 Cost of Product Z 103806

76
Raw Material X of Rs. 20000 converted into
Product Y by value addition of Rs. 30000 Product
is converted into final Product Z by value
addition of Rs. 40000. Applicable Excise Duty is
8 (plus EC and SHEC). Compute Cost of Product Z
with and without CENVAT.
Sr Particulars Without CENVAT With CENVAT
1 Raw Material Cost X 20000 20000
2 Add Excise _at_ 8.24 1648 1648
3 Total 21648 21648
4 Credit allowed -
5 R.M.Cost of X (net of excise) 21648
6 Value Addition 30000
7 Total 51648
77
Raw Material X of Rs. 20000 converted into
Product Y by value addition of Rs. 30000 Product
is converted into final Product Z by value
addition of Rs. 40000. Applicable Excise Duty is
8 (plus EC and SHEC). Compute Cost of Product Z
with and without CENVAT.
Sr Particulars Without CENVAT With CENVAT
1 Raw Material Cost X 20000 20000
2 Add Excise _at_ 8.24 1648 1648
3 Total 21648 21648
4 Credit allowed - 1648
5 R.M.Cost of X (net of excise) 21648 20000
6 Value Addition 30000 30000
7 Total 51648 50000
78
Raw Material X of Rs. 20000 converted into
Product Y by value addition of Rs. 30000 Product
is converted into final Product Z by value
addition of Rs. 40000. Applicable Excise Duty is
8 (plus EC and SHEC). Compute Cost of Product Z
with and without CENVAT.
Sr Particulars Without CENVAT With CENVAT
7 Total 51648 50000
8 Add Excise _at_ 8.24 4256 4120
9 Cost of Product Y 55904 54120
10 Credit allowed -
11 Cost of Y (net of excise) 55904
12 Value Addition 40000
13 Total 95904
79
Raw Material X of Rs. 20000 converted into
Product Y by value addition of Rs. 30000 Product
is converted into final Product Z by value
addition of Rs. 40000. Applicable Excise Duty is
8 (plus EC and SHEC). Compute Cost of Product Z
with and without CENVAT.
Sr Particulars Without CENVAT With CENVAT
7 Total 51648 50000
8 Add Excise _at_ 8.24 4256 4120
9 Cost of Product Y 55904 54120
10 Credit allowed - 4120
11 Cost of Y (net of excise) 55904 50000
12 Value Addition 40000 40000
13 Total 95904 90000
80
Raw Material X of Rs. 20000 converted into
Product Y by value addition of Rs. 30000 Product
is converted into final Product Z by value
addition of Rs. 40000. Applicable Excise Duty is
8 (plus EC and SHEC). Compute Cost of Product Z
with and without CENVAT.
Sr Particulars Without CENVAT With CENVAT
13 Total 95904 90000
14 Add Excise _at_ 8.24 7902 7416
15 Cost of Product Z 103806 97416

81
2. Calculate CENVAT credit and Excise Duty Payable
Corus Ltd. sold the following units at the under
mentioned price. Calculate the excise duty
leviable if the rate of excise on the product is
_at_ 8.24 (inclusive of E.C. and S.H.E.C.) Sales
Value Rs.1,000,000 Excise on sales _at_
8.24 Rs.????? Total amount of purchases Rs.
600,000 Excise on purchases _at_ 8.24 Rs.
49,440 Amount of cenvat credit availed Rs.
????? Net Excise Duty payable Rs. ?????
82
2. Calculate CENVAT credit and Excise Duty Payable
Corus Ltd. sold the following units at the under
mentioned price. Calculate the excise duty
leviable if the rate of excise on the product is
_at_ 8.24 (inclusive of E.C. and S.H.E.C.) Sales
Value Rs.1,000,000 Excise on sales _at_
8.24 Rs.82,400 Total amount of purchases Rs.
600,000 Excise on purchases _at_ 8.24 Rs.
49,440 Amount of cenvat credit availed Rs.
????? Net Excise Duty payable Rs. ?????
83
2. Calculate CENVAT credit and Excise Duty Payable
Corus Ltd. sold the following units at the under
mentioned price. Calculate the excise duty
leviable if the rate of excise on the product is
_at_ 8.24 (inclusive of E.C. and S.H.E.C.) Sales
Value Rs.1,000,000 Excise on sales _at_
8.24 Rs.82,400 Total amount of purchases Rs.
600,000 Excise on purchases _at_ 8.24 Rs.
49,440 Amount of cenvat credit availed Rs.49,440
Net Excise Duty payable Rs. ?????
84
2. Calculate CENVAT credit and Excise Duty Payable
Corus Ltd. sold the following units at the under
mentioned price. Calculate the excise duty
leviable if the rate of excise on the product is
_at_ 8.24 (inclusive of E.C. and S.H.E.C.) Sales
Value Rs.1,000,000 Excise on sales _at_
8.24 Rs.82,400 Total amount of purchases Rs.
600,000 Excise on purchases _at_ 8.24 Rs.
49,440 Amount of cenvat credit availed Rs.
49,440 Net Excise Duty payable Rs. 32,960
85
3. Calculate Assessable Value when Cum-Duty Price
is available
Assessable Value Cum-duty price -
permissible deductions 100 100 rate of
duty

• Permissible deductions
• Sales Tax
• Cost of secondary, durable, returnable packing
• Freight
• Insurance, etc

86
Question Online Tec Ltd. gives the following
information. Derive the assessable value of
excisable goods.
Particulars Amount (Rs)
Cum-duty wholesale price including following costs 15,000
Sales tax 2,000
Normal packing cost 1,000
Freight Insurance 1,500
Durable returnable packing 1,500
Rate of excise duty _at_ 8.24
87
Answer
Particulars Amount (Rs)
Cum-duty wholesale price 15,000
Less Sales Tax 2,000
Normal packing cost
Freight Insurance
Durable returnable packing
Assessable Value
88
Answer
Particulars Amount (Rs)
Cum-duty wholesale price 15,000
Less Sales Tax 2,000
Normal packing cost -
Freight Insurance
Durable returnable packing
Assessable Value
89
Answer
Particulars Amount (Rs)
Cum-duty wholesale price 15,000
Less Sales Tax 2,000
Normal packing cost -
Freight Insurance 1,500
Durable returnable packing
Assessable Value
90
Answer
Particulars Amount (Rs)
Cum-duty wholesale price 15,000
Less Sales Tax 2,000
Normal packing cost -
Freight Insurance 1,500
Durable returnable packing 1,500
Sub-total 10,000
Assessable Value ?
91
Answer
Particulars Amount (Rs)
Cum-duty wholesale price 15,000
Less Sales Tax 2,000
Normal packing cost -
Freight Insurance 1,500
Durable returnable packing 1,500
Sub-total 10,000
Assessable Value 10,000 108.24 9,239
Hence, excise duty Rs. 761 (Rs. 9,239 8.24)
92
4. Calculate Assessable Value when product is
covered under MRP provision
Swift Ltd. supplies raw materials to job worker
Crisp Ltd. After completing the job work, the
finished product of 100 packets are returned to
Swift Ltd. with retail sale price as Rs. 20 on
each packet. Product is covered under MRP
provision and 40 abatement is available.
Determine the assessable value.
93
Swift Ltd. supplies raw materials to job worker
Crisp Ltd. After completing the job work, the
finished product of 100 packets are returned to
Swift Ltd. with retail sale price as Rs. 20 on
each packet. Product is covered under MRP
provision and 40 abatement is available.
Determine the assessable value.
Answer
Particulars Amount (Rs)
Retail Sale price of each packet 20
94
Swift Ltd. supplies raw materials to job worker
Crisp Ltd. After completing the job work, the
finished product of 100 packets are returned to
Swift Ltd. with retail sale price as Rs. 20 on
each packet. Product is covered under MRP
provision and 40 abatement is available.
Determine the assessable value.
Answer
Particulars Amount (Rs)
Retail Sale price of each packet 20
Less Abatement 8
Assessable Value per packet 12
95
Swift Ltd. supplies raw materials to job worker
Crisp Ltd. After completing the job work, the
finished product of 100 packets are returned to
Swift Ltd. with retail sale price as Rs. 20 on
each packet. Product is covered under MRP
provision and 40 abatement is available.
Determine the assessable value.
Answer
Particulars Amount (Rs)
Retail Sale price of each packet 20
Less Abatement 8
Assessable Value per packet 12
Total assessable value (Rs 12 100) 1,200
96
5. Compute CENVAT credit and Excise Duty payable
Sr Particulars Rs.lacs Duty Cenvat
1 Input Raw Material 200 8.24
2 Capital goods for mfr. 400 8.24
3 Input R.M. rejected 4
4 Unused Cap. goods 20
5 Excisable sale 600 24.72
97
5. Compute CENVAT credit and Excise Duty payable
Sr Particulars Rs.lacs Duty Cvat 000
1 Input R.M. 200 8.24
2 Capital goods for mfr. (credit of 50 in 1st year) 400 8.24
Total Input credit Total Input credit (A)
3 Input R.M. rejected 4
4 Unused Cap. goods 20
Sub-total Sub-total (B)
Net Input Credit Net Input Credit
5 Excisable sale 600 24.72
Net Excise duty payable in Cash Net Excise duty payable in Cash Net Excise duty payable in Cash
98
5. Compute CENVAT credit and Excise Duty payable
Sr Particulars Rs.lacs Duty Cvat 000
1 Input R.M. 200 8.24 1,648
2 Capital goods for mfr. (credit of 50 in 1st year) 400 8.24
Total Input credit Total Input credit (A)
3 Input R.M. rejected 4
4 Unused Cap. goods 20
Sub-total Sub-total (B)
Net Input Credit Net Input Credit
5 Excisable sale 600 24.72
Net Excise duty payable in Cash Net Excise duty payable in Cash Net Excise duty payable in Cash
99
5. Compute CENVAT credit and Excise Duty payable
Sr Particulars Rs.lacs Duty Cvat 000
1 Input R.M. 200 8.24 1,648
2 Capital goods for mfr. (credit of 50 in 1st year) 400 8.24 1,648
Total Input credit Total Input credit (A) 3,296
3 Input R.M. rejected 4
4 Unused Cap. goods 20
Sub-total Sub-total (B)
Net Input Credit Net Input Credit
5 Excisable sale 600 24.72
Net Excise duty payable in Cash Net Excise duty payable in Cash Net Excise duty payable in Cash
100
5. Compute CENVAT credit and Excise Duty payable
Sr Particulars Rs.lacs Duty Cvat 000
1 Input R.M. 200 8.24 1,648
2 Capital goods for mfr. (credit of 50 in 1st year) 400 8.24 1,648
Total Input credit Total Input credit (A) 3,296
3 Input R.M. rejected 4 8.24 32.96
4 Unused Cap. goods 20
Sub-total Sub-total (B)
Net Input Credit Net Input Credit
5 Excisable sale 600 24.72
Net Excise duty payable in Cash Net Excise duty payable in Cash Net Excise duty payable in Cash
101
5. Compute CENVAT credit and Excise Duty payable
Sr Particulars Rs.lacs Duty Cvat 000
1 Input R.M. 200 8.24 1,648
2 Capital goods for mfr. (credit of 50 in 1st year) 400 8.24 1,648
Total Input credit Total Input credit (A) 3,296
3 Input R.M. rejected 4 8.24 32.96
4 Unused Cap. goods 20 8.24 82.40
Sub-total Sub-total (B) 115.36
Net Input Credit Net Input Credit
5 Excisable sale 600 24.72
Net Excise duty payable in Cash Net Excise duty payable in Cash Net Excise duty payable in Cash
102
5. Compute CENVAT credit and Excise Duty payable
Sr Particulars Rs.lacs Duty Cvat 000
1 Input R.M. 200 8.24 1,648
2 Capital goods for mfr. (credit of 50 in 1st year) 400 8.24 1,648
Total Input credit Total Input credit (A) 3,296
3 Input R.M. rejected 4 8.24 32.96
4 Unused Cap. goods 20 8.24 82.40
Sub-total Sub-total (B) 115.36
Net Input Credit Net Input Credit (A-B) 3,180.64
5 Excisable sale 600 24.72
Net Excise duty payable in Cash Net Excise duty payable in Cash Net Excise duty payable in Cash
103
5. Compute CENVAT credit and Excise Duty payable
Sr Particulars Rs.lacs Duty Cvat 000
1 Input R.M. 200 8.24 1,648
2 Capital goods for mfr. (credit of 50 in 1st year) 400 8.24 1,648
Total Input credit Total Input credit (A) 3,296
3 Input R.M. rejected 4 8.24 32.96
4 Unused Cap. goods 20 8.24 82.40
Sub-total Sub-total (B) 115.36
Net Input Credit Net Input Credit (A-B) 3,180.64
5 Excisable sale 600 24.72 14,832.0
Net Excise duty payable in Cash Net Excise duty payable in Cash Net Excise duty payable in Cash
104
5. Compute CENVAT credit and Excise Duty payable
Sr Particulars Rs.lacs Duty Cvat 000
1 Input R.M. 200 8.24 1,648
2 Capital goods for mfr. (credit of 50 in 1st year) 400 8.24 1,648
Total Input credit Total Input credit (A) 3,296
3 Input R.M. rejected 4 8.24 32.96
4 Unused Cap. goods 20 8.24 82.40
Sub-total Sub-total (B) 115.36
Net Input Credit Net Input Credit (A-B) 3,180.64
5 Excisable sale 600 24.72 14,832.00
Net Excise duty payable in Cash C-(A-B) Net Excise duty payable in Cash C-(A-B) Net Excise duty payable in Cash C-(A-B) 11,651.36
105
Thank You