Central Excise and SCM

Central Excise and SCM
Coverage
Manufactured goods
Liability on manufacture but duty is payable only
on removal out of the factory
Goods Covered in the Central Excise Tariff alone
liable.
Marketability of the goods is essential.

Assessable Value
Transaction value is the basis
Freight, Transit Insurance, Taxes & Duties Excluded
Amounts Collected Separately in connection with
sale are liable to be included.

Rate of duty and payment
16% Median rate
Monthly payment of duty
Due date is 5th of the following month.

Returns to be filed
ER1 - General Category

ER2 - For 100% EOU units
ER3 - for SSI units
ER4 - Annual Information statements
ER5 - Annual Return of Information relating to
Principal inputs
ER6 - Monthly return of information relating to
Principal inputs/
ER7 - Quarterly Return for Cenvat Dealers
Canvat Credit
Procedure for input duty set off
Available for specified inputs and capital goods
Instant credit (for capital goods 50% credit in the 1st year
and balance in the next year)

No one-to-one correlation between input and output
Document based system

Important Exemptions /
Concessions
SSI Unit
Industrial Units in the North east, Uttaranhal and J &K.
Certain specified Defence projects
Exports
Supplies to EOU, SEZ, STP, EHTP, BTP
Supplies to projects funded by world bank and specified
UN and international organisations

SSI Benefits
Full exemption upto Rs.1 crore in turn-over for specified
goods
Overall turnover limit of Rs.4 cr.
Not eligible if brand name of another person is used.

Export Benefit and Procedure
Exports are duty free

Options for clearance under Bond or against claim for
rebate
Self-Sealing Allowed.
Documents – ARE 1 and ARE – 2
Letter of undertaking sufficient in most cases, instead of
Bond
Merchant exports allowed.
Refunds
Time limit of one year for claims
No time limit when duty was paid under protest
Form ‘R’ to be used
Proof of payment of duty essential
Bar of unjust enrichment

Basic Excise Documents
Invoice
Supplementary Invoice
Credit Note / Debit Note
Lorry Receipt
ARE-1, ARE-2, Packing List shipping bill and contract

Service Tax and SCM
Scope and Coverage
Nearly 100 services taxed now
Tax expands vertically and horizontally from year to
year.
Possibility of merger with central Excise duty by 2010
as Goods and services tax.

Service definitions use liberal terms for widening the
scope of tax.
Tax value
Gross Amount Charged (to be full consideration)
Abatements for certain services

Rate and Payment
12% + 2% education less on 12%
Due date 5th of following month
Quarterly payment for individuals / proprietary firms /
partnerships
Monthly for others

Returns
Half yearly returns in form ST-3
April – September and October – March
Due date 25th of following month

Cenvat Credit
Cross set off involving central excise duty and service tax
Liberal input tax relief involving specified input services
No instant credit - to be taken only after paying off service
provider
Credit restriction when there are exempted and tax Paying
categories
Concessions / Exemptions
Tax Payable only on the received amount, not on the
billed amount
Threshold exemption of Rs.4 lacs per annum
Supply of goods is exempt
Services provided to 100% EOU exempt
Exports are rebated
Abatements for select services.
Export Refund Forms
ASTR – 1
ASTR – 2
Other Refunds
As per Excise Norms
Form R
Bar of Unjust enrichment

Documentation
ST – 1
ST – 2
ST – 3
ST – 3A
Tax Invoice
LARGE TAX PAYER UNIT
(LTU)
LARGE TAX PAYER UNIT
A Special system intended to administer Large Scale Tax
Payers
Available in several OECD (Organisation for Economic Co-
operation and Development) countries.

International experience is seen to be successful
13 Asian countries have LTUs including Pakistan, Sri
Lanka, Bangladesh and Nepal

A single window agency
ELIGIBILITY
Every Tax payer (Single PAN-based entity)
a) Who is presently assessed to income tax / corporation tax under the
Income – tax Act, 1961 in any of the five cities (Bangalore, Chennai,
Delhi, Kolkata or Mumbai)
b) Who has paid during financial year 2004-05
1. Excise duty in cash (account current) of Rs.5

crore or more or
2. Service tax in cash (account current) of Rs.5
crore or more or
3. Advance (income) tax / corporation tax of Rs.10
crore or more
BENEFITS AND FACILITIES ON
OFFER
 All Excise, Service Tax and Income Tax returns can be filed
at a single center irrespective of the geographical location of
the units of the tax payer.
 All correspondence and intimations can also be similiarly
filed
 Electronic filing of returns and electronic payment of tax
 No need of filing parallel paper documents.
 One exclusive IRS officer appointed as client executive for
each tax payer
 The tax payer needs to be in contact only with the Client
Executive and not with each section and officers of the LTU
Cont….
 LTU assesses will not be visited by the erstwhile

jurisdictional field officers except for actions taken prior to
the formation of LTU and in other matters with the express
permission of LTU.
 Pending adjudication will be transferred to LTU
 LTU assessee can virtually write a cheque on his
CENVAT credit and transfer it to his other units through a
simple mechanism.
 LTU tax payer can remove actual goods and inputs from
unit to unit without payment of duty and reversal of credit.
Cont….
 Finished products also can be transferred by LTU assessee from unit
to unit without payment of duty provided, the receiving unit uses the
products as inputs and pays excise duty on the finished products
manufactured.
 LTUs will not have mandatory audit
 Audits to be restricted to risk assessment
 Audit schedules in consultation with LTU
 LTUs will enjoy self-sealing for all exports
 Uniformity of taxation procedures assured for LTU units
 Rebate and refund schemes will be settled within 30 days of filing
 On-line filing of appeals and grievances for income tax payers
ORGANISATIONAL STRUCTURE
 Manned by officers drawn from customs, excise and
income tax
 Headed by Chief Commissioner
 There will be other IRS and Supervisory Staff

PROCEDURE FOR ADMISSION
 Consent form for opting for LTU

 Membership No allocated on acceptance of consent form
 No new registration required. However, if new units of the
tax payer emerge after opting for LTU, new Registration will
be necessary
 Facility for payment of tax through internet
 In case of any difficulties, not having revenue implications,
the chief commissioner in-charge of LTU can prescribe the
necessary relaxations to facilitate tax compliance by the tax
payer
INTERACTIVE WEBSITE
[email protected]
OTHER DETAILS
 One LTU already operational at Bangalore
 One LTU for Chennai expected from 1.1.2007

THANK YOU

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Central Excise and SCM

Liability on manufacture but duty is payable only

on removal out of the factory

Goods Covered in the Central Excise Tariff alone

Marketability of the goods is essential.

Transaction value is the basis

Freight, Transit Insurance, Taxes & Duties Excluded

Amounts Collected Separately in connection with

sale are liable to be included.

16% Median rate

Monthly payment of duty

Due date is 5th of the following month.

ER1 - General Category

Procedure for input duty set off

Available for specified inputs and capital goods

and balance in the next year)

Document based system

Industrial Units in the North east, Uttaranhal and J &K.

Certain specified Defence projects

Supplies to EOU, SEZ, STP, EHTP, BTP

Supplies to projects funded by world bank and specified

UN and international organisations

Full exemption upto Rs.1 crore in turn-over for specified

Not eligible if brand name of another person is used.

Exports are duty free

Time limit of one year for claims

No time limit when duty was paid under protest

Form ‘R’ to be used

Proof of payment of duty essential

Bar of unjust enrichment

Credit Note / Debit Note

ARE-1, ARE-2, Packing List shipping bill and contract

Nearly 100 services taxed now

Tax expands vertically and horizontally from year to

as Goods and services tax.

Gross Amount Charged (to be full consideration)

Abatements for certain services

12% + 2% education less on 12%

Due date 5th of following month

Quarterly payment for individuals / proprietary firms /

Monthly for others

Half yearly returns in form ST-3

April – September and October – March

Due date 25th of following month

Liberal input tax relief involving specified input services

No instant credit - to be taken only after paying off service

Credit restriction when there are exempted and tax Paying

Tax Payable only on the received amount, not on the

As per Excise Norms

Bar of Unjust enrichment

A Special system intended to administer Large Scale Tax

operation and Development) countries.

Lanka, Bangladesh and Nepal

Every Tax payer (Single PAN-based entity)

a) Who is presently assessed to income tax / corporation tax under the

b) Who has paid during financial year 2004-05

1. Excise duty in cash (account current) of Rs.5

 LTU assesses will not be visited by the erstwhile

 Manned by officers drawn from customs, excise and

 There will be other IRS and Supervisory Staff