IndiaTaxApplicability

ByPavanRaparlaOracleonMay24,2016

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Withthis,willquicklymoveontothefirstpost'IndiaTaxApplicability',whichwillhelpthe
users/audienceunderstandtheoveralltaxstructureinIndiaacrossdifferentbusinessscenarios.

Theintentistohelptheusersunderstandataveryhighlevel,varioustaximplicationsinregardstothe
daytodaybusinesstransactionstherebyaidingtheuserscomeupwiththehasslefreebusiness
mappingrulesandgapanalysisastheyfurtherembarkonIndiaspecificrolloutorimplementationof
theOracleFinancialsforIndia(OFI)product.

Scope

ThemainobjectiveofthisBlogistoprovideabriefoverviewofthetaxapplicabilityacrossdifferent
businesstransactionflowsinIndia.

Thiscontentisintendedtobesupplementaryinnatureforknowledge&informationpurposesanddoes
notinanyway,purporttobeasubstituteforanyofficialdocumentexistingorbeingdraftedor
currentlypublished.Beforeinitiatinganypurchase/saletransactions,theusersshouldconsulttheir
respectivetax/financedepartmentsforanytaxapplicabilitydetails.

Overview

BusinessesinIndiamustpaytothesupplier,thetaxesrelatedtocentral,state,andcitytaxauthorities
onmostofthegoodsandservicesthattheypurchase.Also,Businessescollectfromcustomers,the
taxesrelatedtocentral,stateandcitytaxauthoritiesonmostofthegoodsandservicesthattheysell.
FindbelowthequicksnapshotoftheTaxstructureinIndia:

FollowingtaxesareapplicableforthebusinesstransactionsinIndiabasedonthenatureoftransaction:

1.IncomeTax:

IncomeTaxistheTaxleviedontheincomeoftheIndividualsorotherentitieslikeHinduUndivided
Familiesorfirmsoranyothertrusts.

2.CapitalGainsTax:

CapitalGainsTaxisataxonGainsorProfitsarisingfromtransferofaCapitalAsset.

3.SecuritiesTransactionTax(SST:

SSTistaxpayablesonthevalueofSecurities.

4.PerquisiteTax:

Perquisitesaretheperksorbenefitsreceivedbyanindividualinviewofhisemployment/professional
associationwithanyOrganizationorcompany.Perquisitetaxisthetaxleviedontheseperquisites.
ThisshallbepaidbytheemployerwhoprovidesthesebenefitstotheEmployees.

5.CorporationTax:

ItisataxleviedonthenetincomeoftheCompany.CompanieswhichareregisteredinIndiaunderthe
CompaniesAct1956areliabletopayCorporateTax.

6.Surcharge:
Itisanadditionaltaxleviedonthetotaltaxliability.Theapplicabilitydependsonthetotaltaxliability
payable.

7.TaxDeductedAtSource(TDS):

TaxDeductedatsourceistheamountwithheldfrompaymentsofvariouskindssuchassalary,contract
payment,commissionetc.

8.TaxCollectedAtSource(TCS):

TaxCollectedatSourcearisesonthepartofthesellerofgoods.Here,taxiscollectedatthesourceof
incomeitself.Itistobecollectedatsourcefromthebuyer,bytheselleratthepointofsale.

Everyperson,beingaseller,shallcollecttaxatsource(TCS)fromthebuyerofgoods
specifiedinsection206C(1)

9.EducationCess(EC):

EducationCessisanadditionallevyontheBasictaxliability.Asthenamesuggests,thisisacessthat
iscollectedinordertoenabletheGovt.toruntheeducationprogramsandanysuchschemetoimprove
thequality/standardsofEducationinIndia.

Leviedfrom2004

TheCessisleviedin2parts:

o PrimaryEducationcess(EC)=>2%applicableonthetotaltaxpayable.

o SecondaryHigherEducationCess(SHC)=>1%applicableonthetotaltaxpayable.

Budget20152016proposedtoincreasethepresentrateofservicetaxplus(EC+SHC)from
12.36%toaconsolidated14%.Withthis,itgotproposedthatboththeECandSHCwillget
subsumedintothenewtaxrateinServiceTaxRegime.ThisisapplicableevenfortheECand
SHCoftheExcisetax.

10.SecondaryHigherEducationCess(SHEC):

SHECistheadditionallevyimposedtocreateanexpenditurepoolforhighereducationimprovement.

11.CustomsDuty:

CustomsDutyisthedutyleviedbyCustomsonimportedgoodsandexports(insomecases).In
addition,Additionalcustomsdutywouldalsobeapplicableincaseofsometransactions.

12.CentralExciseDuty:

CentralExcisedutyisanindirecttaxleviedongoodsmanufacturedinIndia.Themanufactureroffinal
productshallbeallowedtotakecreditofdutyofexcisepaidonanyinputreceivedinthefactory.

13.ServiceTax:

Servicetaxisanindirecttaxleviedonspecifiedtaxableservices.Theresponsibilityofpaymentofthe
taxiscastontheserviceprovider.ThecreditoftheServiceTaxpaidontheinputservices/Central
Excisedutiespaidoninputs/capitalgoods/AdditionalCustomsdutycanbeutilizedtowardspaymentof
ServiceTaxbyanassesseeontheiroutputservices.

ItisleviedunderSection66B[1]oftheFinanceAct,1994.

ItisadministeredbytheCentralExcise&ServicetaxCommissioneratesandtheServiceTax
CommissioneratesworkingundertheCentralBoardofExcise&Customs,Departmentof
Revenue,MinistryofFinance,GovernmentofIndia

Section68(1)[2]confersliabilitytopayservicetaxonserviceprovider

14.SwachhBharathCess(SBC):

ItisaCesswhichshallbeleviedandcollectedinaccordancewiththeprovisionsofChapterVIofthe
FinanceAct,2015onallthetaxableservicesattherateof0.5%ofthevalueoftaxableservice.

CameintoeffectfromNov2015(Ref:(notificationNo.21/2015ServiceTax,dated6th
November,2015)

Effectively,therateofSBCwouldbe0.5%andnewrateofservicetaxplusSBCwouldbe
14.5%.

AssuchSBCtranslatesintoataxof50paisaonlyoneveryonehundredrupeesworthof
taxableservices.TheproceedsfromthiscesswillbeexclusivelyusedforSwachhBharat
initiatives

15.KrishiKalyanCess(KKC):

KKCisanadditionallevyimposedforthepurposeoffinancingandpromotingtheAgriculture
improvementinitiativesandmeasures.

ThisisanewCessintroducedfromBudget2016.

Thiswouldbelevied@0.5%ontheTaxableServicevalue.

16.SalesTax:

Salestaxisleviedonthesaleofacommodity,whichisproducedorimportedandsold.SalesTaxisa
levyonpurchaseandsaleofgoodsinIndiaandisleviedundertheauthorityofbothCentral
Legislation(CentralSalesTax)andStateGovernmentsLegislations(SalesTax).

TheGovernmentleviesSalesTaxprincipallyonintrastatesaleofgoods.Statesalsolevytaxon
transactionswhichare"deemedsales"likeworkscontractsandleases.InadditiontoSalesTax,some
statesalsolevyadditionaltax,surcharge,turnovertaxandthelike.Ordinarily,Salestaxisrecovered
fromthebuyerasapartofconsiderationforsaleofgoods.

17.ValueAddedTax(VAT):

ValueAddedTaxisamultipointsalestaxwithsetofffortaxpaidonpurchases.Itisbasicallyataxon
thevalueadditionontheproduct.Atpresentthesetoffwouldbeavailableonthegoodslocally
purchasedwithintheStateonly.Nosetoffwouldbeavailabletothegoodspurchasedinthecourseof
interstatetradeandcommerce.VATisastatesubject.
18.OtherTaxes(StateSpecific):

ProfessionalTax:

Itisthetaxonincomeoftheindividual.ItisleviedbytheStateGovernmentsinIndia.The
applicabilitytaxamountvariesfromStatetoState.

GiftTax:

GiftTaxisthetaximposedonthegiftofpropertyoranyothersuchfinancialassetswithoutreceiving
orexpectingsomethingofmonetarygainsorvalueinreturn.

TollTax:

Itisauserfeecollectedfromthepeoplewhousetheroadi.ethefeepaidbytheusersforusingthe
serviceoffered.

Octroi:

Octroiisthedutyleviedonacertaingoodsenteringaspecifictown/municipalityoraCity.

WorksContractsTax(WCT):

Workscontracttax(WCT)isataximposedonacontractforwork,suchasassembling,construction,
building,altering,fabricatingetc.

PurchaseTax:

PurchaseTaxisthetaxpaidtotheVATdepartmentforthepurchasesmadefromanunregistered
dealer.

TurnoverTax:

TurnoverTaxisthetaxleviedontheNetvalueofthesalesdonebyaBusinessFirminanyparticular
financialyear.

ItisnotapplicableasofnowinIndia.

EntertainmentTax:

Itisthetaxleviedonanyfinancialtransactionthatisrelatedtoentertainment(e.g.Movietickets,
Amusementparksetc.)

RegistrationTax:

ItisthetaxleviedonanyRegistrationofthedocuments(e.g.saledeed)madeundertheprovisionsof
therelevantRegistrationactofanyState.