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Answer 4: Custom duty

Custom duty is the duty imposed on goods imported into the country. In the years before globalization it is

difficult to import goods on account of stiff duty rates and procedures, especially for less developed and

developing nation like India. A joke used to be that the word ‘custom’ was said to come from Sanskrit

‘Kashtam’ meaning difficulty. 

But the origin of the word is something else. Centuries ago, it was customary for a trader coming to sell

his/her wares in a particular kingdom to offer gifts to the king, and seek his approval to sell his/her goods

in that kingdom. This customary practice of gifts being collected by the Government has come to be

called ‘customs duty’ in the modern era. The practice has now been extended to cover even exporters in

the form of export duty.

The Customs Act makes it clear that goods imported into or exported out of India create a ‘taxable event’

in which customs duty (import duty or export duty) becomes payable.

1. Taxable event for imported goods – Taxable event with respect to imports is the day of crossing

of the customs barrier and not the date on which goods land in India or enter its territorial waters.

2. Taxable event for warehoused goods – the taxable event in case of warehouse goods is whengoods are cleared from custom bonded warehouse by submitting sub bill of entry.

3. Taxable event for exported goods – Taxable event arises for exported goods when proper officer 

makes an order permitting clearance and loading of goods for exportation under section 51 of the

custom act 1962.

Types of duties in customs

Basic customs duty

Additional customs duty

Special additional duty of custom

Protective duties

Safeguard duty

Countervailing duty on subsidised articles

Anti-dumping duty

Calculations of assessable values and custom duty 

Relevant rate of duty for the imported goods is 10 % ( date of submission of bill entry or date of entry

inward granted to the vessel whichever is later)

Exchange rate is Rs.45 / $ ( the rate of CBE&C as on the date of submission of bill entry by the

importer)

 Assessable values = Rs 450,000 ($10,000 X Rs.45)

Basics customs duty = Rs 45,000 (Rs.450,000 X 10 %)

2% Education cess = Rs 900 ( 45,000X 2%)

1% Secondary Education cess = Rs 450 (45,000 X 1%)

Total custom duty = Rs 46,350

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Answer 5.

Service Tax Law in India

Service tax was introduce in India in 1994 under finance act 1994. It was imposed on an initial set of three

services in 1994 and scope of the service tax as since been expanded continuously by subsequent

finance acts.

There is no separate service Tax act but all pronouncements relating to service tax are in annual finance

acts service act rules 1994 were in enacted began with notification with time to time the law has been

embedded and updated. The new section 65B introduce in finance act 2012 defines services in clause

44.

Service tax is levied @ 12 % plus education cess 3% i.e. 12.36 % for financial year 2012-2013. The tax

operates on the principal value addition. From Tax payable on the service being sold (called output

service), the assesses can deduct the service tax component of all services used by him/her in his/her 

output service and pay only the balance. In other word the assesse is given credit for the Tax collected

from him/her on his/her services. The system avoids cascading effect on Taxes by taxing only the value

addition.

 A service provider whose service is taxable has to register under the act if his/her gross revenue is more

than rupees 9 lakh in financial year. When the revenue exceed rupees 10 lakh in one year he/she should

charge service at the prescribed rates and pay it to the exchequer as per the rules.

No tax is payable on reimbursement received from the client for expenses incurred on behalf of the client.

The department has clarified that out-of-pocket expenses like traveling, boarding, lodging etc, are not

subject to service tax. The assesse however has to provide documentary evidence substantiating his/her 

claim for reimbursements.

In Instances where values received becomes refundable if service is not provided by the assesse either 

wholly or partly for any any session, the assesse can adjust the amount payable and pay ne amount asservice tax. Such adjustment is permissible only if the assesse refund the values of service not rendered

together with service tax throne to client.

I terms of the rule 6(2) of the service tax rule, liable to be paid by thee assesse, shall be deposited

together with form TR-6 only into a bank designated by the central board of Excise and customs.

The responblity of payment of the tax is on the service provider. System of self-assessment by service

tax assesse has been introduce from 2001. The jurisdictional superintendent of central excise is

authorized to verify the correctness of self \-assessed returns. Tax returns are to be filed half yearly.

Central Excise Officers are authorized to conduct surveys to bring the prospective service tax assesse

under the tax net. Directorate of service Tax at Mumbai oversees the activities at the field level for technical and policy level coordination.

The concept of negative List

 A comprehensive and elaborate note from Tax Research Unit of ministry of Finance ( Dept. of Revenue),

Issued on 16th March, 2012 sets the tone for a major paradigm shift in regard to service tax. To quote V.K

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Garg (Joint Secretary), “budgetary changes relating to services tax the is year are aimed at addressing a

number of basics issues: simplicity and certainly in tax processes, neutrality of business to tax by

mitigating cascading, encouraging exports, optimizing compliance “. 

 A major change that has been effected from 1st June , 2012 is the concept of listed out the exclusion,

instead of the service to the service to be taxed. Therefore any service that is not part of the exclusions

automatically gets taxed.

1. Negative list of services  –  A list of 17 services that will be exempt from service tax, as per 

notification no. 19/2012-ST dated 5/6/2012.

2. Exceptions under mega notification  –  A list of 34 services have been notified for exclusion

from service tax vide a Mega notification N. 12/2012 dated 17.03.2012 with effect from 1.7.2012.

These are exemption related to the kind of services being provided. Apart from these, we have

some other exemption relented to others aspects like scale and geography. Select abatements

are also provided for specified services.

Exemptions and Rebates in Service Tax Law

Exemptions (Section 93)

If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by

notification in the Official Gazette, or individual special order, exempt generally or subject to such

conditions as may be specified, taxable service of any specified description from the whole or any

part of the service tax.

Rebate (Section 93A)

Where any goods or services are exported, the Central Government may grant rebate of service paid

on taxable services which are used as input services for the manufacturing or processing of such

goods or for providing any taxable services.

The rebate may be disallowed if the proceeds of export sales are not received within the time

specified by Reserve Bank of India.