TAXATION-II

Submitted by:
Thomas Thomas Poovathingal
Finance
Sec-C
0920229
Q.1. What is AV for excise purpose and what are the inclusions and exclusions from AV?

Ans. 1. Section 4(1)(a) defines assessable value or transaction value as follows:-

AV is the value on which duty is payable as a percentage. When duty of excise is chargeable on excisable
goods with reference to value will be ‘transaction value’ on each removal of goods. The following
conditions should be satisfied:-

 The goods should be sold at the time and place of removal

 Buyer and assessee should not be related.
 Price should be the sole consideration for the sale.
 Each removal will be treated separate and will have separate AV fixed.

Inclusions in AV:-

 Packing charges except returnable packing charges.

 Design, engineering and technical knowhow charges.
 Consultancy charges.
 Loading and handling charges within the factory.
 Royalty charged in franchise agreement.
 Advance authorization surrendered in favour of seller is additional consideration and includible.
 Free after sale service/warranty.
 Pre-delivery inspection charges for vehicles.

Exclusions in AV:-

 Trade discount
 Loading charges outside the factory.
 Sale at factory gate but transport arranged by the seller.
 Price FOR but sale at factory gate.
 Equalized freight.
 Profit earned by seller in transport of final products.
 Value addition done after ‘place of removal’ not relevant for valuation
 Handling charges outside the factory.
 Installation and erection expense.
 Bank charges for collection of sale proceeds. Interest on receivables.

Q.2. What is customs value? What are the inclusions and exclusions from CV.?

Ans.2. The value of imported goods as appraised by the customs and used as the basis for assessing
the amount of import duty and other taxes. It may be computed in several ways, but the most
preferred method is transaction-value which (in addition to the price paid by a buyer to a seller) includes
other costs incurred by the buyer, such as packing costs, license fee or royalty, and any other sum(s)
that accrue to the seller. It is the customs officer (and not the importer, exporter or customs broker) who
has the final say in assigning this value. Also called customs import value.

Customs Value Inclusions

Some costs, services & expenses are to be added to the price paid / payable if these are not already
included in the AV.

1. Commission & Brokerage:- Commission & Brokerage except buying commission is included.
Commission paid to local agent in Indian currency also included.
2. Packing cost includible:- Cost of packing is included in the AV but cost of durables &
returnable containers not to be included.
3. Value of goods supplied by buyer to be added:- Any goods supplied by buyer @ free of cost or
@ reduced rate should be added back
4. Services / Documents / Technical know-how:- Supplied by buyer @ free of cost or @ reduced
rate should be added.
5. Royalty or license fees:- If paid separately in relation to imported goods, has to be included.
6. Value of any re-sale proceeds payable to foreign supplier:- Subsequently has to be added.
7. Cost of transportation upto the port of importer:- If cost is not ascertainable 20% of FOB
value should be takes as cost of transportation. In case of air transport – Freight charges should be
restricted to 20% of FOB price.
8. Insurance charges:- If it is not ascertainable it is calculation @ 1.125% of Fob value.
9. Landing Charges:- Cost of unloading, and handling charges associated with imported goods @
1% of CIF value has to be added.

Exclusions from AV
1. Charges for construction, erection, assembly, maintenance, or technical assistance after
importation.
2. Any cost of transportation after importation.
3. Duties and taxes in India.
4. Interest for deferred payment

Q.3. Explain the customs provisions relating to Baggage?

Ans.3. U/S 2(3) “Baggage includes unaccompanied baggage but does no include motor vehicle. Thus
baggage rules are also applicable in respect of baggage which comes separately & which dispatched from
abroad before or after the travelers departure.

Thus Baggage may be:-

1. All dutiable articles imported by passenger or crew member in his baggage.

2. Unaccompanied baggage.
3. Baggage does not include motor vehicle, alcoholic drinks, goods imported through courier.
4. Baggage does not include articles imported under an import license.
General Prohibits:-

1. Foreign and Indian Currency:- Only on RBI permission

2. Narcotic Drugs
3. Domestic pets like dogs, cats etc. – on strict health certificate.
 4. Taking our exotic birds, wild life creature etc.
5. Endangered Species.
Declaration by owner of Baggage:-

Declaration has to be made by owner of the baggage & rate of duty & tariff valuation shall be the rate &
valuation in force on the date of declaration.

Passenger not possessing any dutiable goods can walk through a Green channel.

Passenger carrying dutiable goods should pass through red channel & submit declaration in
disembarkation Card.

Rate of Duty on Baggage:-

All dutiable articles imported by passenger or member of crew in his baggage attract a different rate of
duty.

Tariff rate on baggage is 100%. However as per notification W.e.f. 1-03-05 rate of duty on baggage is
35% plus education cess of 3%

On baggage there will be no CVD or SAD is applicable.

Duty on gold: Gold bought as a baggage by a passenger of Indian origin or a person holding Indian
passport. Duty is Rs 100 per 10gms. Plus education cess.

(In case of Gold Bars) Rs 250per 10gms in case of ornaments. Up to 10 Kg of gold can be brought by a
passenger.

Duty on Silver: Silver bought as a baggage by a passenger of Indian origin or a person holding Indian
passport. Duty is Rs 500 per Kg. Plus education cess. Up to 100 Kg of silver can be brought by a
passenger.

Exemption to Bonafide Baggage:-

Tourists can be broadly classified into:-

1. Indian persons going abroad for tour & coming back to India.
2. Indian persons gone abroad for work & coming back to India.
3. Foreign tourists visiting India.
Bonafide baggage which is exempted includes. Wearing apparels, personal & household effect meant
from personal use. Jewelleries include articles as per status of passenger. Instruments of physician
surgeons etc.

Q.4. Explain the salient features of service tax in India.

Ans.4. Service sector constitutes approx 50% of India’s GDP. A beginning was made on 1994 to bring
this sector under tax bracket which was untaxed till then.
2000-01 Service sector contributes to GDP is 49% from 28% in 1950. 1n 2004-05 service sector
accounted for 56.1% of GDP , agriculture accounted for 22.2 and manufacturing sector 21.7. average
annual growth of value addition in service sector has been 7.9% in India in last 10 years.

Service tax was introduced for the first time in 1994 with finance act of 1994. Service tax @ 5% was
introduced w.e.f. 1-7-94. Tax rate was increased to 8% wef 14-5-03, then it was increased to 10% wef 10-
9-04. Service tax rate was 12% wef 18-4-2006

Presently service tax rate is 10% wef 24-2-2009 & education cess of 3 %

( Effective rate 10.3%)

Service tax is imposed as per finance act of 1994 as amended from time to time.

There is no service tax act.

Presently more than 100 services are taxed.

Govt. has formed service tax rules 1994, prescribing procedure. “Central Excise department has been
entrusted to look after the administration of service tax. Characteristics of service are (a) economic
activity (b) value addition (c)intangible and (d) instantly perishable.

Characteristics of service tax.

1. Charging of Service Tax:- As per 65(95) of finance act of 1994

2. Payable on taxable Services:- This tax is levied on taxable services as defined u/s66 of finance
act 1994.
3. Taxable event:- Provision of service in India constitute taxable event.
4. Service tax is destination based and liable only of service rendered in India.
5. No service tax is levied in the state of J&K.
6. Value of taxable Services:- Value shall be gross amount charged by the service provider for
such Service rendered by him. Tax is payable only on actual amount received.
7. No tax if Service is provided free of cost.
8. Person Liable:- Service providing taxable service is liable to pay service tax but there is a
provision to shift the burden.
9. No exemption & deduction in case of service tax
10. This is a tax on service but not on reimbursement of expenses or material supplied.
11. No Service tax is levied on services provided on Sub-Contract.
12. Taxable only on actual amount received and not on amount billed.
13. No Service tax on export of services.
14. No Service tax on small service providers ( where turnover is upto Rs 10,00,000 w.e.f 1-4-08)
before Rs 4,00,000
15. No Service tax on services provided to international agencies, UN, SEZs
16. No Service tax on services provided by RBI
17. No Service tax if payment is received in India in foreign exchange.