Indirect Tax

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In India, the indirect taxes are levied by the Department of Revenue of the Ministry of Finance. These taxes are normally levied through the Central Board of Excise and Customs (CBEC), which is premier authority for indirect taxes in India.

The CBEC is responsible for administering and implementing the laws that bind central excise and service taxes. It also issues circulars, clarifications and notifications in order to balance these laws.

The judiciary normally takes the decisions when it comes to issues regarding the interpretation and use of these laws.

Sales Taxes in India



India does not have a conventional structure when it comes to value added taxes. In different states there are different taxes for the selling of goods and provision of services.

Sales taxes are normally levied on the buying and selling of goods. These are normally administered by both the central and state level tax authorities. The division is done on the basis of the goods’ movements following sales.

If the goods are moved from one state to another after transfer, the sales tax is imposed in accordance with the Central Sales Tax Act (CSTA), 1956. This act also deals with the goods that are imported and exported in and from India.

The sales taxes are levied on the basis of the origin of transaction and the rates normally vary from one state to another. The State Sales Tax Acts also deal with transactions that can be deemed as sales. Major examples of such transactions are leases and work contracts.

A work contract is essentially an agreement of executing work that involves supply of materials and labor. The term lease implies a contract whereby permission to use a particular good or service for a specified period of time is provided.

At the state level in India the sales taxes focus specifically on products and leave out the services. Certain states also impose extra tax or surcharge on the sales tax apart from levying entry tax, and turnover tax.

Value Added Taxes in India



21 states across India have replaced the sales tax with value added taxes from April 1, 2005. This structure is fairly similar to local system for sales taxes – the only difference being the focus on value addition at every level of the network for distribution.

At the state level sales tax and value added taxes are paid by the sellers to the government. Under normal circumstances, VAT and sales taxes are normally taken from buyers by including it in the price of the goods.

Last Updated on 2/24/2012

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