Indirect taxes valuation_for_excise


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A presentation on Indirect taxation and the valuation methods for calculating excise

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Indirect taxes valuation_for_excise

  1. 1. Indirect Taxes Session 2
  2. 2. Valuation Under Central Excise <ul><li>Excise Duty is Computed </li></ul><ul><ul><li>On Value of Goods Manufactured </li></ul></ul><ul><ul><li>By Applying the rates in force </li></ul></ul><ul><li>Basis of Valuation </li></ul><ul><ul><li>Based on Specific Duty </li></ul></ul><ul><ul><li>Based on Tariff Section (Section 3(2) of the Central Excise Act) </li></ul></ul><ul><ul><li>Based on Compound Levy Scheme (Rule 15 of the Central Excise Act 1944) </li></ul></ul><ul><ul><li>Based on MRP (Section 4A of the Central Excise Act 1944) </li></ul></ul><ul><ul><li>Based on Assessable Value with reference to Transaction Value (Section 4(1) of Central Excise Act 1944) </li></ul></ul>
  3. 3. Based on Specific Duty <ul><li>Based on Length </li></ul><ul><ul><li>Excise duty on Cigarette is based on the length of the cigarette irrespective of the price at which it is sold. </li></ul></ul><ul><li>Based on Weight, Volume, etc </li></ul><ul><ul><li>Excise duty on Sugar is based on quintals of sugar </li></ul></ul>
  4. 4. Based on Tariff Value <ul><li>Tariff Value is Fixed as per Section 3(2) of the Act </li></ul><ul><li>Applied on the Wholesale price or the Average Price of the manufacturer </li></ul><ul><li>Excise duty is then applied on the tariff value </li></ul><ul><ul><li>Eg: Government fixes 60% as the tariff rate for Readymade garment. The tariff is 8%. Then a Rs.1000 shirt will suffer 1000 x 60% x 8% = Rs.48 as excise duty. </li></ul></ul>
  5. 5. Based on Compound levy Scheme <ul><li>Applicable only to Stainless Steel Pattas / Patties and Aluminium Circles </li></ul><ul><li>As per Rule 15 of the Act </li></ul><ul><li>No procedure related to excise regarding storage & clearance of goods </li></ul><ul><li>Rates are </li></ul><ul><ul><li>Rs.30,000 per cold rolling machine per month for SS </li></ul></ul><ul><ul><li>Rs.12,000 per blanking machine per month for Al </li></ul></ul>
  6. 6. Based on MRP <ul><li>As per Section 4A of the Act </li></ul><ul><li>Two Conditions </li></ul><ul><ul><li>Goods specified under Weights & Measures Act 1976 </li></ul></ul><ul><ul><li>Rates of Abatement given by Government of India </li></ul></ul><ul><li>Eg: MRP of Auto Component costs Rs.1000/-, abatement is 50% and Excise is 4% </li></ul><ul><li>Wholesale packs ment for industrial & institutional consumers do not come under the MRP provisions </li></ul>
  7. 7. Based on Transaction value <ul><li>Transaction Value considered for Assessment Value </li></ul><ul><li>4 Conditions </li></ul><ul><ul><li>Goods must be sold at the time and place of removal </li></ul></ul><ul><ul><li>The assessee and buyer are not related </li></ul></ul><ul><ul><li>The price should be the sole consideration for the sale </li></ul></ul><ul><ul><li>Each removal will be considered as separate transaction & values separately </li></ul></ul>
  8. 8. Determination of Retail sale price of Excisable goods 2008 <ul><li>Rule 1 & 2 are the title & meaning of terms </li></ul><ul><li>Rule 3 – Excisable goods under sub-section 4 of section 4A will be determined as per these rules </li></ul><ul><li>Rule 4 – if the retailer removes goods under Sub-section 1 of 4A </li></ul><ul><ul><li>Without declaring the retail sales price </li></ul></ul><ul><ul><li>Declares a retail sales price not governed by Weights & Measures act </li></ul></ul><ul><ul><li>Declares but obliterates after emoval form the place of manufacture, then </li></ul></ul><ul><ul><ul><li>If the manufacturer has removed or manufactured identical goods within the past one month, their value will be considered </li></ul></ul></ul><ul><ul><ul><li>If above does not apply, the retail price of goods sold in the market at the time of removal or manufacture will be considered. </li></ul></ul></ul>
  9. 9. Determination of Retail sale price of Excisable goods 2008 <ul><li>Rule 5 – if the manufacturer alters or tampers the retail sales price after removal for increasing the price, then the higher price will be considered for all goods removed during one month before and one month after the increase in price. </li></ul><ul><li>Rule 6 – if retails sales price cannot be ascertained under these Rules, Provisions of Section 4A of the Act will be used. </li></ul>
  10. 10. Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 <ul><li>Rule 1 – Title </li></ul><ul><li>Rule 2 – Definitions </li></ul><ul><li>Rule 2(a)– Act </li></ul><ul><li>Rule 2(b) – Value means value refered in Section 4 of the act </li></ul><ul><li>Rule 2(c) – Normal transaction means the transaction value at which the greatest aggregate quantity of goods is sold. </li></ul><ul><li>Rule 2(d) – Words and expressions </li></ul><ul><li>Rule 3 – Section 4(1)(b) of the Act governsthese rules </li></ul>
  11. 11. Determination of Price of Excisable Goods - Rules 2000 <ul><li>Rule 4 – Valuation of Samples </li></ul><ul><li>Value will be determined as per price of similar products sold by the assessee </li></ul><ul><li>Does not apply if the clear markings are made on the packaging that the products are free samples. </li></ul><ul><ul><li>Eg: 500 units sold at Rs.450; 875 units sold at Rs.400; 20 units given as sample. Find Assessable value </li></ul></ul>
  12. 12. Determination of Price of Excisable Goods - Rules 2000 <ul><li>Rule 5 – Goods sold at places other than place of removal </li></ul><ul><ul><li>Assessable value = Transaction Value – Cost of transportation </li></ul></ul><ul><li>Find assessable value if all units are sold at Rs.1000. Units at Coimbatore (Factory) - 1000; Chennai – 2000; Trichy – 500. transport cost to Chennai – Rs.15,000 & Trichy is Rs.4000. </li></ul><ul><li>A CA/ CS/ C&WA should certify the freight </li></ul>
  13. 13. Determination of Price of Excisable Goods - Rules 2000 <ul><li>Rule 6 – Price is not Sole Consideration </li></ul><ul><li>Assessable value = Price paid + monetary value of the Consideration </li></ul><ul><ul><li>Includes when supplied directly or indirectly transportation, free or reduced cost of raw material, components or parts </li></ul></ul>
  14. 14. Determination of Price of Excisable Goods - Rules 2000 <ul><li>Rule 7 – Sale from Depot / Consignment Agent </li></ul><ul><li>There is not sale at the time of removal. </li></ul><ul><li>Valuation is done at the time of sale at prices prevailing at the depot but based on the prices when the goods were removed from the factory. </li></ul><ul><li>Eg </li></ul>Units Price at Factory Price at Depot Goods transfered from Factory to depot 1 st January 1000 Rs.100 Rs.150 Goods sold at the Depot 31 st January 450 Rs.175 Rs.225
  15. 15. Determination of Price of Excisable Goods - Rules 2000 <ul><li>Rule 8 – Goods Captively Consumed </li></ul><ul><li>Assessable value = Cost of production + 10% </li></ul><ul><li>Eg: Cost of raw material is Rs.20000/-, Conversion cost is Rs.5000/- . Find the assessable value. </li></ul>
  16. 16. Determination of Price of Excisable Goods - Rules 2000 <ul><li>Rule 9 & 10 – Rules related to sale to related person & Sale to interconnected undertaking. </li></ul><ul><li>Sale to related person should be evaluated as per rule 2 – price of greatest aggregate quantity. </li></ul><ul><li>For holding or subsidiary company rule 8 applies. </li></ul><ul><li>Rule 10A – Job Work </li></ul><ul><li>If delivery happens directly from the job worker’s factory to the principal manufacturer’s customer (non- related), then the transaction value is the value of the excisable goods. </li></ul>
  17. 17. Determination of Price of Excisable Goods - Rules 2000 <ul><li>Rule 11 – Best Judgment Assessment </li></ul><ul><li>If the situation is not covered by any of the rules above. </li></ul><ul><li>Eg: Parts replaced free of cost under warranty – Cost of production + 10% </li></ul>