Tuesday, November 26, 2013

Excise and SSI

http://dcmsme.gov.in/policies/central/t-ed.htm

Today, the SSI sector produces almost 8000 products. The number of units have gone up from 19 lakhs in 1991 to over 31 lakhs in 1999. During the 7 year period from 1991 when liberalization began till 1998, the SSI sector created almost 42 lakhs new jobs whereas the entire organised industry including government was able to create only 14.3 lakhs new jobs.

From time to time, various incentives in the shape of exemptions from payment of excise duties and licensing registration controls have been extended to small scale units producing excisable goods. This has been the long standing and consistent policy of the Government to encourage the small scale sector and to improve their competitive position vis-à-vis the large manufacturing units. Government of India has provided a major relief by granting full exemption from the Payment of central excise duty on a specified output and thereafter slab-wise concessions of certain specified items in 1978. A general Small Scale Exemption Scheme in respect of specified commodities was introduced in 1985. The same was replaced in 1986 and subsequently amended from time to time by a number of notifications in 1993. With effect from 1-4-1994, Gate-Pass System was replaced by manufacturer invoice to cover clearances of goods as the duty-paying document.

In the Budget 1995-96, the limit of Rs.2 crore turnover for a small scale unit to be eligible to exemption was revised to Rs.3 crore. SSI units whose clearances dis not exceed Rs.30 lakhs in a financial year were exempted from payment of excise duty. SSIs are also not required to maintain any statutory records such as daily stock account of production and clearances, raw material account, personal ledger account, RG-23A account, RG-23C account, stock register of goods sent for processing of job-work, invoice records etc. Their own records are adequate for excise purposes. The exemption limit was raised to Rs.50 lakhs in the budget 1998-99 and further to Rs.100 lakhs in 2000. SSIs have been allowed to pay duty on a monthly basis w.e.f 1-4-1999.

Eligibility as an SSI Unit

The pre-requisite for the eligibility for excise concessions was that SSI unit should be registered with the State Directorate of Industries or DC(SSI). At-the time of obtaining the exemptions and concessions, the SSI unit was required to produce such a certificate of registration from the respective Directorate of Industries or DC(SSI),

In the year 1986, SSI units not registered with the State Directorate of Industries were also given exemptions, but on different eligibility conditions. With effect from 1-4-1994, the requirement of obtaining registration certificate from the Directorate of Industries or DC(SSI) has been dispensed with as a condition for available or excise duty concessions. This implies that there would be no distinction between registered and unregistered units for SSI concessions. Further, the eligibility for excise concessions for SSIs has been based on annual turnover rather than SSI registration which is based on the criterion of investment in plant and machinery. Only the units previously registered with DGTD and now with SIA are not considered eligible for SSI concessions.

There are two exemption schemes available for the SSI sector which have been amended by the Finance Act, 2000. The schemes are:

SSI Scheme (Without CENVAT)

This scheme as contained in Notification No.8/2003-CE dated 1.3.2003 is effective from 1.4.2000. The following rate of duty is applicable to such manufactures whose turnover does not exceed Rs. 3 crores in the previous financial year in respect of clearances of excisable goods for home consumption (including exports to Nepal or Bhutan) from one or more factories of the same manufacturer or from factory by one or more manufacturers:

Rate of duty in respect of Clearances of Excisable Goods

Value of Clearance (Rs.)	Rate of duty	Remarks
Upto 100 Lakhs	Nil	Not to avail Cenvat
100-300 Lakhs	Normal rate of duty	Can avail Cenvat

It may be noted that beyond clearances of Rs.100 lakhs, the manufacturer is liable to pay normal rate of duty and accordingly he can avail CENVAT credit at this stage. Similarly, CENVAT credit on capital goods can be availed and utilised after crossing the limit of Rs.100 lakhs.

The scheme has been extended to articles of plastic, cosmetic and toilet preparations, tread rubber, airconditioning and refrigeration and parts, which were earlier covered under a separate exemption. All such clearances of the specified goods which are used for captive consumption in production of the specified goods are subjected to 'nill' rate of duty and the Table itself. The notification grants exemption in respect of basic excise duty and special excise duty. The manufacturer may opt for not availing exemption contained in the notification and instead pay the normal rate of duty on the clearances. But once the option is exercised, it shall continue till the remaining part of the financial year.

SSI exemption notifications clearly use the words 'first clearances on or after 1st April in any financial year'. In Remakrishna Engineering Works v. CCE, (1996) 83 ELT 346 (CEGAT), it has been held that all clearance from 1st April in chronological order have to be considered for purpose of calculation of exemption limit of Rs.100 lakhs. Thus, if some goods are cleared on payment of duty, those will also have to be considered for calulating the limit of 100 lakhs.

Value for purpose of calculating the limit of 100 and 300 lakhs is the 'Assessable value' as per section 4 i.e., wholesale price at factory gate, exclusive of taxes, where price is the sole criteria. When goods are assessed on basis of MRP (Maimum Retail Price) the 'Value' will be as determined under section 4A.

SSI Scheme (with CENVAT)

This scheme as contained in Notification No.9/2003-CE dated 1.3.2003 is effective from 1.4.2003. The Notification provides the concessional rate of duty in respect of clearances of specified goods for home consumption (including exports to Nepal or Bhutan), and also states that all clearances of the specified goods which are used for captive consumption in production of the specified goods shall be subjectedd to 'nil' rate of duty. Such clearances shall not be counted for determining the aggregate value of clearance of the specified goods. The following Table shows the Rate of Duty.

Rate of duty in respect of Clearances of Specified goods

Value of Clearance (Rs.)	Rate of duty	Remarks
Upto 100 Lakhs	60% of normal rate	Cenvat credit is of duty available from the beginning itself
100-300 Lakhs	Normal rate of duty	Can avail Cenvat

The exemption shall apply only subject to the following conditions:

A manufacturer who intends to avail the exemption under this notification shall exercise his option in writing for availing the exemption under this notification shall exercise his option in writing for availing the exemption under this notification before effecting the first clearances and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year.
While exercising the option under condition (i), the manufacturer shall inform in writing to the jurisdiction Deputy Commissioner or Assistant Commissioner of Central Excise with a copy of the Superintendent of Central Excise giving the following particulars, namely:-

name and address of the manufacturer;
location/locations of factory/factories;
description of specified goods produced;
date from which option under this notification has been exercised;
aggregate value of clearances of specified goods (excluding the value of clearances referred to in para 3 of this notification) till the date of exercising the option.

Where a manufacturer opts for availing the exemption under this notification in terms of condition (i) above, the clearances of specified goods already made during the financial year, prior to the exercise of such option, shall be taken into account for computing the aggregate value of clearances, as specified in the said table.
Where a manufacturer clears the specified goods from one or more factories, the exemption in this case shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said table, and not separately for each factory.
Where the specified goods are cleared by one or more manufacturers from a factory, the exemption shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said table and not separately for each manufacturer.
The aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturer, does not exceed preceding financial year Rs.300 lakhs.

The exemption contained shall not apply to the specified goods bearing a brand name of trade name, whether registered or not, of another person, except in the following cases, namely:-

Where specified goods, being in the nature of components or parts of any machinery or equipment orappliances by following the procedure laid down in Chapter X of the Central Excise Rules, 1944, However, manufacturers, whose aggregate value of clearances for home consumption of such specified goods for use as original equipment does not exceed rupees fifty lakhs in the financial year 1999-2000, may submit a declaration regarding such use instead of following the procedure laid down in chapter X of the said rules;
Where the goods bear a brand name of trade name of -

the Khadi and Village Industries Commission; or
a State Khadi and Village Industry Board; or
the National Small Industries Corporation; or
a State Small Industries Development Corporation; or
a State Small Industries Corporation;

Where the specified goods are manufactured in a factory located in a rural area.

Goods exempted from whole of the Duty of Excise/The Additional Duty of Excise

Specified goods produced without the aid of power. All capital goods, intermediate goods and inputs if captively consumed within the factory of their production or used in the manufacture of specified final products in the manufacturer or specified goods.
Specified goods if manufactured on job work basis/cleared for job work/manufactured as a job work and used in the manufacture of final products.
Genuine specified products of village industry/certain specified goods manufactured in the rural areas by Co-operatives/K.V.I.C., etc.
Goods meant for repairing, reconditioning and reengineering.
Goods sent abroad as exhibits for exhibition in International Trade Fairs or for demonstration or carrying out tests or trials.
Certain goods if cleared for display in any fair or exhibition in India.
Goods produced in a technical, educational and research institute during the course of technical training or an academic or vocational nature or carrying out experiments or research.
Goods supplied to specified research institutions.
Goods produced in Government Factories, Mines, Mints, prisons Defence Production etc.
Goods manufactured by specified units/Institutions for use by Governmnet Departments or Defence purposes.
Goods supplied for Defence or other specified purposes.
Specified goods manufactured in a State Government factory and intended for use in any of its department.
Duty in excess of 10% is exempted on goods for supply to Gas Authority of India Limited, Oil and Natural Gas Corporation Ltd., or the Oil India Limited.
Certain specified goods connected with solar and natural energy.
Improved Chulhas (including smokeless Chulhas) capable of burning wood, agro-waste, cow-dung, briquettes and coal.
Good required for Nuclear Fuel Complex.
Duty in excess of 5% ad valorem on pollution control equipment.
Goods manufactured by institution for handicapped persons.
Good produced or manufactured in a Free Trade Zone.
Specified goods used by units in Export Processing Zones/Free Trade Zones.
Goods brought to any gem and jewellery manufacturing units set up in Santa Cruz Electronics Export Processing Zone (SEEPZ).
Goods produced in 100% Export Oriented undertakings but not sold within India.

Concessions

SSI units having turnover less than Rs.60 lakhs per annum need not have a separate storeroom for storing the finished products.

SSI units are required to pay duty on monthly basis instead of paying at the time of every clearance. Duty liability is to be discharged by 15th of the following month. The duty can be paid either through PLA or RG23 register.

SSI exemption is available in respect of goods exported to Nepal & Bhutan. The SSI exemption is available for home consumption, i.e. for consumption within India. However, explanation to SSI exemption notifications make it clear that clearances for home consumption shall also include clearances for export to Bhutan & Nepal. Thus, exports to Nepal & Bhutan will qualify for SSI exemption.

As per the CBE&C circular No.406/39/98-CX dated 7.7.1998, since the exemption SSI units do not have to file any declaration, they will not be given any code number and it need not be mentioned in the invoice or challan. In Lokhandwala Construction Industries v. CCE, 1997 (92) ELT 703(CEGAT) & K.S. Mills v. CCE, 1998 (98) ELT 619 (CEGAT), it has been held that the declaration to be given by SSI is only for purpose of exemption from registration. The duty exemption to SSI is available whether or not such declaration is given. Thus, SSI exemption is available even if such declaration is not submitted.

Normally, excise officers are not expected to visit SSI units paying less than Rs.10 lakhs duty annually. According to Mumbai II Commissionerate Trade Notice No.15/93 dated 31-3-1993, excise inspectors as well as preventive and internal audit parties can visit SSI units only with specific permission of Assistant Commissioner for specific purpose. Officers are required to enter relevant particulars in the visitors' book maintained as assessee.

Courtesy: Dr. V. BALACHANDRAN, ACS, Faculty of Corporate Secretaryship, Alagappa University, Karaikudi.

Update:-01-10-09

Wednesday, September 4, 2013

My Quick Reference on TNVAT FAQs

VALUE ADDED TAX

Frequently Asked Questions

1. What is VAT?

VAT is a multi point levy where the tax paid on local purchases from the
registered dealer can be set off against the tax payable on the sale of goods,
other than special goods.

2. How is the method of calculation of determining the tax liability
under the present Sales Tax system different from this
method ?

In the present Sales tax system, tax liability of a dealer for a particular
period is determined using the multiplication method i.e. The taxable
turnover of a dealer for a particular period is multiplied by the rate of tax
applicable to that turnover. In VAT, the method adopted is Input Tax Credit
method as stated above. This is the only difference between the present
Sales Tax system and the VAT.

3. What are the taxes that will be replaced by VAT?

General Sales Tax, Resale Tax, Surcharge, Additional Sales Tax will be
replaced by VAT. The Central Sales Tax Act, 1956 regulating the inter-state
transactions of sale and purchase will continue. The Entry Tax on Vehicles
and Goods will continue.

4. What are rates of tax under VAT?

The rates are 1%, 4% and 12.5% on goods eligible for input tax credit.

5. Is there any special rate of tax other than above 3 rates?

Yes. There are special rates of tax on certain goods which are kept out of
VAT. No input tax credit is allowable for these goods.(e.g) Petrol 2

6. Who are dealers under VAT?

A dealer is a person who purchases, sells, supplies or distributes the goods in
the course of his business for valuable consideration. The VAT Act includes:
(1) Local authority, Company, Hindu undivided family,
Association of persons, Firm
(2) Casual trader, factor, commission agent, delcredere agent,
auctioneer, local branch of the firm or company situated
outside the State
(3) Person who effects transfer of property in goods other than
by way of sale
(4) dealer in hire purchase, works contract, person who
transfers right to use the goods
(5) Dealer in eatables including food and drinks (ie., hotels,
restaurants and sweet stalls).
(6) Port Trust, Railway Administration, Shipping, Transport and
Construction Companies, Air Transport Corporation and
Airlines.
(7) Any person holding permit for transport vehicles
(8) Tamil Nadu State Road Transport Corporation
(9) Customs Department, Insurance Company, Advertising
Agencies
(10) Corporation or Companies of State and Central Governments

7. Who are liable for Registration?

1) Those dealers whose total turnover in respect of purchase and sales
in the State is not less than Rs.10 lakhs for a year are to get
registered under the Act.
2) The other dealers whose total turnover for a year is not less than
Rs.5 lakhs shall get registered.
3) Casual Traders, agent of non-resident dealer and dealers in
jewellery irrespective of quantum of turnover shall obtain
registration. 3
4) Those dealers who intend to commence the business, on option,
may obtain registration.

8. What is the Registration fee?

The registration fee is Rs.500/- for principal place of business and Rs.50/- for
each additional place of business. (Branches, Godowns). No Security Deposit
is necessary for Registration, for dealers. There is no renewal of registration
under VAT and it is permanent till it is cancelled by the Department or on
stoppage of business when reported by the dealer. No security deposit is
necessary for Registration.

9. Who is the registering authority?

Head of the assessment circle in whose jurisdiction the dealer’s principal
place of business is situated.

10. What is TIN?

The registration number allotted to the dealers is popularly known as TIN i.e.
Taxpayer Identification Number. This is a eleven digit number to be quoted
in all VAT transactions and correspondence

11. Whether dealer registered under Tamil Nadu General Sales Tax
Act, 1959 has to apply for TIN ?

All registered dealers under TNGST Act 1959 whose registration is in force
shall be provided with TIN automatically without any fee. But after receipt of
TIN, the dealers have to file application for obtaining certificate of
registration under VAT. Dealers may get TIN, download application and file
the details of the application online in the websites ‘www.tnsalestax.com, or
www.tnsalestax.gov.in or www.tnvat.gov.in to speed up the process of
registration.

12. How to apply for registration?

On Introduction of VAT, a new dealer shall file an application in the specified
form along with fee as detailed above to the registering authority in whose
jurisdiction, his principal place of business is situated with a sufficiently
stamped self addressed enveloped, with necessary documents required in the
application form.

13. How is the certificate of registration issued?

The registered authority shall acknowledge the receipt of application filed by
the dealer. Thereafter, he shall issue certificate of registration within 30
days from the date of receipt of application. In order to speed up the
process of registration one can utilise the e-services through web sites of the
department www.tnsalestax.com, or www.tnsalestax.gov.in or
www.tnvat.gov.in

14. What is exempted sale?

An exempted sale is a sale on which no tax is levied, and no Input Tax Credit
is allowed.

15. What is zero rated sale?

Zero rate sale is a sale for which no tax is levied but the tax paid on local
purchases is refunded to dealer who effected that sale. The Value Added Tax
Act specified the zero rated sales as:
a) Export Sec.5(1)
b) Sale in the course of export [5 (3) of CST Act, 1956] (ie) Sale to
Exporters
c) Sale to International organizations
d) Sale to SEZ

16. Is there any provision for compounding system of tax under
VAT?

Yes there is. It is available for, on their option: 5
1) The dealers who effects second and subsequent sale in the State.
The Act provides tax not exceeding 1% as notified by Government
on the turnover for the above dealers whose total turnover for a
year is less than Rs. 50 lakhs. Government have notified this
rate as 0.5%
2) The Works contractors may opt to pay at compounded rates at 2%
(civil), 4% (others) instead of paying tax at the rate prescribed for
the goods involved.
3) The hotels, restaurants and sweet stalls may opt to pay tax at
compounded rate prescribed in the Act at slab rates where total
turnover is not less than Rs.10 lakhs but not more than Rs.50
lakhs.
No Input tax credit is allowable to those dealers who have opted
for compounded system.

17. Whether the dealers must maintain detailed accounts under
VAT as in TNGST regime?

The details of accounts to be maintained are available in the Rules

18. Whether dealers paying tax on composition basis have to
maintain detailed accounts ?

Not necessary

(a) The dealers who opted to pay tax on his total turnover not
exceeding Rs. 50 lakhs are to maintain purchase and sales
accounts alone.
(b) The dealers in hotels and restaurants are to maintain purchase and
sales accounts alone.
(c) The works contractors are to maintain the accounts showing the
details of contract and payments received alone. 6

19. How the returns are to be filed?

Every dealer who is liable to pay tax under this Act shall file return on or
before 20th of the succeeding month to Assessing authority in whose
jurisdiction the principal place of business is located along with statement of
purchases and sales effected by him during the month in the Form specified
in Rules.
Every dealer whose taxable turnover in the preceding year is Two hundred
crores of rupees and above shall file return on or before 12th of succeeding
month along with statement of purchases and sales effected by him during
the month.
The returns shall be filed either electronically or by ICR forms. The returns
so filed shall be accompanied with proof of payment.
The category of dealers to file returns either electronically or by ICR
forms may be notified by the Commissioner as per VAT rules.

20. What is the mode of payment of tax ?

(i) by remittance into a State Bank of India or any other bank
authorised by Government from time to time (or)
(ii) by remittance in cash into a Government Treasury or to the
assessing authority or other officer empowered to make the demand or
authorised to make the collection (or)
(iii) by means of a crossed cheque in favour of the assessing authority
drawn on any one of the banks situated within the city / town where office of
the assessing authority is situated (or )
(iv) by means of a crossed demand draft or a banker’s cheque drawn
in favour of the assessing authority (or)
(v) by any other mode as authorised by the Government from time to
time.

21. How is the assessment made?

All the assessments are self-assessments as all returns filed are to be
accepted. The dealers need not appear before assessing authority or produce
the accounts for annual assessments. The assessing authority shall accept
the returns filed by the dealer and pass assessment order after the
assessment year is over. The orders shall be served on dealers in the manner
prescribed in Rules.

22. What is self-assessment?

Self determination of tax liability by dealer through periodical returns
prescribed in the Act is called Self-assessment.

23. Will there be any random check of accounts?

Yes. The Commissioner of Commercial Taxes, may select assessments not
exceeding 20% of total self assessments in the State for detailed check of
accounts. The details of such selection shall be placed on notice board in the
assessment circle and in the department websites The accounts which are
selected for detailed check shall be called and checked by assessing
authority. After check, the assessing authority either accept and confirm the
self assessment already passed or revise the assessment.

24. What are inputs?

Input means all purchases by a dealer in the course of his business, including
capital goods. These goods may be meant for re-sale or use in manufacture,
processing of other goods or packing of goods manufactured.

25. What is industrial input?

The industrial inputs are those goods which are notified by Government and
generally go into manufacture of other goods and they are taxable at 4%.

26. What is input tax?

Input tax is the amount of tax paid on local purchases by a registered dealer
to another registered dealer.

27. What is output?

Output means sale of goods made by a registered dealer to other registered
dealers and Consumers in the course of his business.

28. What is output tax?

Output tax is tax collected on sale of goods from the buyer. The output tax
is calculated by applying the rate of tax on taxable turnover of these goods.

29. What is Tax invoice?

Tax invoice is popularly known as bill, which should contain details of sale
such as name and address of the purchaser with his TIN, name of goods,
quantity of goods sold, its value etc. and tax rate and amount charged
separately. This invoice / bill is to be issued in duplicate, the original for
purchaser and duplicate to be retained by the selling dealer.

30. What is input tax credit?

Input tax credit is an aggregate total amount of tax paid by a registered
dealer on the total purchases made by him within the State from other
registered dealers (for a particular period.); but not eligible in some cases.
The input tax credit includes the purchase tax paid under Section 12 of the
VAT Act.

The input tax credit can be adjusted against the tax payable by the
purchasing dealer on his sales.
The dealers are not eligible for input tax credit on all inputs. There are
certain restrictions and conditions on eligibility of input tax credit. They are
given in detail under TNVAT Act, 2006.

31. How is input tax credit claimed?

Input tax credit shall be claimed only on the basis of original purchase tax
invoice issued by registered selling dealer.
A registered dealer can claim input tax credit on his purchases, if he holds a
valid "Tax Invoice" / bill at the time of furnishing his return to assessing
authority.

32. Whether input tax credit can be claimed , if the original invoice
is lost ?

Yes. It can be claimed on the basis of duplicate / carbon copy of the invoice
obtained from selling dealer.

33. Is this benefit available to the dealers who opt to pay tax at a
Compounded rate?

No.

34. What are the transactions not eligible for input tax credit?

(a) Sale of exempted goods
(b) purchase of goods from outside the State
(c) goods purchased in the course of business, but used for
personal facility of proprietor, partner or director
(d) goods damaged in transit
(e) goods stolen, destroyed or lost
(f) goods sold in the course of inter-state sale without support of C
form
(g) goods transferred to outside the State for sale either by branch
or agent without support of Form F
(h) goods returned

35. Can a dealer claim Input Tax Credit for goods sold in InterState trade?

Yes. It can be claimed only when those sales are effected to the Registered
dealers of other State against Form C.

36. Whether claim of input tax credit is on a one to one basis?

No. The tax paid on purchases in a period can be deducted from tax payable
on sale, whether such goods is sold or not during that particular period.

37. Will there be Input Tax Credit for all purchases?

No, It will be available only for local purchases from registered dealers, but
not on goods taken for self-use/given as samples, gifted, lost in theft, fire,
damaged or destroyed/all automobiles including two wheelers, three
wheelers and their spare parts for repair or maintenance, air-conditioning
units, refrigerators.

38. Whether the goods held in closing stock are eligible for input
tax credit?

Yes. A registered dealer is entitled for input tax credit for goods held in
closing stock on the previous date of the commencement of VAT Act 2006.
The goods should have been purchased within one year prior to
commencement of the Act (closing stock relating to purchases locally made
during the period January 2006 to December 2006) from registered dealer –
where tax amount with rate of tax are shown separately in purchase invoices

39. Is there any time-limit to claim the Input Tax Credit?

Yes. In the case of goods held in Closing stock on 31.12.2006,the time-limit
is within 30 days from the date of commencement of the VAT Act, that is,
before 1.2.2007.In the case of other goods it is three years.

What should I do when TNVAT Server is slow and I am not able to efile the return?

Avoid peak hours trying for e filing.
Try filing during late hours in the night when the server is free.

What I should do when I post correct amount in annexure II and filled wrong amount monthly return?

For Sale

If it sales show as sales return and reverse vat out put. Make correct entry in annexure 2 that effect.

For Purchase

Correct the wrong entry in the form I annexure.
Next month give a reverse if its a purchase put it in purchase return and input to that effect.
Give correct data in annexure 1 .

Now the figure will tally. Make a note of the correction so made in a paper and file along with your Form I for future reference.