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Corporate Taxes - An Overview 5 th MSOP :ICSI-Hyderabad Chapter Ankem Sri Prasad Chief Tax Officer - Deloitte U.S. India Offices March 26, 2012.

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Presentation on theme: "Corporate Taxes - An Overview 5 th MSOP :ICSI-Hyderabad Chapter Ankem Sri Prasad Chief Tax Officer - Deloitte U.S. India Offices March 26, 2012."— Presentation transcript:

1 Corporate Taxes - An Overview 5 th MSOP :ICSI-Hyderabad Chapter Ankem Sri Prasad Chief Tax Officer - Deloitte U.S. India Offices March 26, 2012

2 Copyright © 2012 Deloitte Development LLC. All rights reserved. 2 The best things in life are free, but soon, the government will find a way to tax them.

3 Copyright © 2011 Deloitte Development LLC. All rights reserved. 3 Index I.Corporate Taxes Introduction – Some Facts, Business & Taxes, Your role with Taxes4 - 7 A.Overview of taxes – Compliance Management8 B.Direct Taxes C.Individual Taxation D.International Taxation – Evolution, Objective, Treaty & Transfer pricing E.In-Direct Taxation II.Practical Challenges A.Practical challenges and mitigating strategies

4 A.Introduction

5 Copyright © 2012 Deloitte Development LLC. All rights reserved. 5 Introduction – Some facts In Rs. Lakh Crores Actual Rev Estimate Budget Revenue Net Tax Non Tax Capital, Public Debt, Loans/Advances recovery, Misc cap receipts Total Consolidated Revenue Expenditure General, Social, Economic Services, Grants & Payments to Union Territories Capital Expense – Gen, Social & Eco Services Government Public Debt, Loans/Advances Total Consolidated Disbursements DEFICIT

6 Copyright © 2012 Deloitte Development LLC. All rights reserved. 6 Business and Taxes - Nexus Business Competition Cost Management Cash flow Management Tax Savings Tax planning/ Management Decision making Profits Affect

7 Copyright © 2012 Deloitte Development LLC. All rights reserved. 7 Where you play a role YOUR ROLE Tax Planning / Structuring / Due Diligence Share Capital Issue Dividend Taxation Capital Gains Mergers & Acquisitions Contracts / Agreements Investments Expatriate Transactions

8 Copyright © 2012 Deloitte Development LLC. All rights reserved. 8 A. Overview - Corporate Taxes – Compliance Management Corporate Taxes Direct Taxes (CBDT) Entity Level Taxes Advance Tax (210 & 211) / Minimum Alternate Tax Tax deduction at source Contractors (194 C) Rent (194 I) Professionals (194J) Foreign payments withholding (195) Individual Taxes Salary TDS (192) Profession Tax International Taxes Double Taxation Avoidance Agreements (Treaty) Transfer Pricing Rules / Arms Length Price Expatriate Taxation Indirect Taxes (CBEC) Customs duty on Imports Excise Duty on Domestic Manufacturing Services Tax Bonding (Central Excise) Local Sales Tax Central Sales Tax Software Technology Park of India (STPI), SEZ and RBI are regulatory authorities

9 B.Direct Taxes

10 Copyright © 2012 Deloitte Development LLC. All rights reserved. 10 B.Direct Taxes – Entity Level Taxes (Advance Tax) Advance Tax (Sec 210) Payment of advance tax by the assessee of his own accord or in pursuance of order of Assessing Officer (1) Every person who is liable to pay advance tax under section 208 (whether or not he has been previously assessed by way of regular assessment) shall, of his own accord, pay, on or before each of the due dates specified in section 211, the appropriate percentage, specified in that section, of the advance tax on his current income, calculated in the manner laid down in section 209.section 208section 211section 209 … Advance Tax (Sec 211) Installments of advance tax and due dates [(1) Advance tax on the current income calculated in the manner laid down in section 209 shall be payable by (a) all the companies… 95 section 209 Amount of Tax PayableDue date of installment Not < 15% of advance tax.On or before the 15th Jun Not < 45% of advance tax, less paid earlier.On or before the 15th Sept Not < 75% of advance tax, less paid earlier.On or before the 15th Dec 100% of advance tax, less paid earlier.On or before the 15th Mar

11 Copyright © 2012 Deloitte Development LLC. All rights reserved. 11 B.Direct Taxes – Minimum Alternate Tax (MAT) MAT (Sec 115JB) Special provision for payment of tax by certain companies 115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the , is less than 18% of its book profit, [such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of 18%..

12 Copyright © 2012 Deloitte Development LLC. All rights reserved. 12 B.Direct Taxes – Tax Deduction at Source (TDS -194C) TDS on Contractors (Sec 194C) Payments to contractors C. (1) Any person responsible for paying any sum to any resident (contractor) for carrying out any work (including supply of labor for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 15 … TDS on Contractors (Sec194 C) Payment is being made or credit is given to% of TDS Individual or a Hindu undivided family 1% a person other than an individual or a HUF 2%

13 Copyright © 2012 Deloitte Development LLC. All rights reserved. 13 B.Direct Taxes – Tax Deduction at Source (TDS 194 J) TDS on Professional or Technical Services (Sec 194J) Fees for professional or technical services. 194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of— (a)fees for professional services, or (b)fees for technical services, [or] (c) royalty, or (d) any sum referred to in clause (va) of section 28,section 28 shall, at the time of credit to the payee or at payment thereof in cash or cheque or any other mode, whichever is earlier, deduct an amount equal to.. Provided … Payment is being made or credit is given to% of TDS Individual or a Hindu undivided family 10% Where payment for services in a tax year to such person does not exceed Rs 30,000/- no tax shall be deducted

14 Copyright © 2012 Deloitte Development LLC. All rights reserved. 14 B.Direct Taxes – Tax Deduction at Source (TDS -194-I) TDS on Rent (Sec 194-I) Rent 194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to [a resident] any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by cheque or any other mode, whichever is earlier, [deduct income-tax thereon at the rate of— … TDS on Rent (Sec194-I) Payment is being made or credit is given% of TDS for use of any machinery or plant or equipment 2 % for use of any land / building (including factory building) / land appurtenant to a building (including factory building)/ furniture or fittings 10% Where payment for rent in a tax year to such person does not exceed Rs 180,000/- no tax shall be deducted

15 Copyright © 2012 Deloitte Development LLC. All rights reserved. 15 B.Direct Taxes – Tax Deduction at Source (TDS -195) TDS on Foreign payment (Sec 195) Other sums (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest / any other sum chargeable under the Income Tax Act (not being income chargeable under “Salaries” ) shall, at the time of credit or payment of such income in cash or cheque or any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : Provided… TDS on Foreign payment (Sec 195) Payment is being made to a foreign recipient % of TDS Where the Foreign Party does not have a PAN 20 % Where the Foreign Party does not have a PAN 10% Where such Income / such payment is not taxable in India, no tax shall be deducted, however it has to be certified by a qualified chartered accountant in prescribed format

16 C.Individuals Taxes

17 Copyright © 2012 Deloitte Development LLC. All rights reserved. 17 C.Individual Taxes - TDS on Salaries (Sec 192) TDS on Salaries (Sec 192) Salary. 192 (1) Any person responsible for paying any income chargeable under the head “Salaries” shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the [rates in force] for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year. … TDS on Salaries (Sec 192) Apr 11 to Mar 12 (Prior Yr ) Apr 12 to Mar 13 (Budget) Income SlabsTax RateIncome SlabsTax Rate Up to Rs. 1.8 LNilUp to Rs. 2 LNil Rs. 1.8 L to 5 L10%Rs. 2 L to 5 L10% Rs. 5 L to 8 L20%RS. 5 L to 10 L20% Rs. > 8 Lakhs30%Rs. > 10 Lakhs30% Cess % on Tax3%Cess % on Tax3% Max Marginal Rate30.9%Max Marginal Rate30.9%

18 Copyright © 2012 Deloitte Development LLC. All rights reserved. 18 C.Individual Taxes - Professional Taxes Professional Tax ANDHRA PRADESH - TAX ON PROFESSIONS, TRADES, CALLINGS AND EMPLOYMENTS ACT, 1987 The AP State Legislature empowered the local authorities to levy tax on professions, trades, callings and employments by incorporating that power in the statutes relating to local authorities i.e. the Municipal Corporations, the Municipalities and the Gram Panchayats. Thus, the levy and collection of the tax was administered by the local authorities Website: apvat.in Professional Tax) Professional Tax Slabs in AP, Maharastra & Karnataka Gross Income RsAP Tax in RsMaharashtra Tax in Rs. Karnataka Tax in Rs. Up to 5 KNil 5K to 6K K to 10K80 10K to 15K * 300 for February K to 20K >20K200

19 D.International Taxation

20 Copyright © 2012 Deloitte Development LLC. All rights reserved. 20 D. International Taxes - Evolution International Law evolved 1. Out of needs in fields like: Shipping, E-commerce, etc 2. resulting to certain accepted codes of conduct in Domestic Law 3. though the transactions are between 2 different countries International Tax can be considered as: 1. The body of legal provisions of different countries, covering tax aspects of cross border transactions (Direct and Indirect Taxes) OECD – Organisation for Economic Co-operation & Development To facilitate cross border transactions with ease, without barriers of any kind & to eliminate double taxation of one’s single income, The OECD prepared a draft called as “Model Convention” in 1977.

21 Copyright © 2012 Deloitte Development LLC. All rights reserved. 21 D. International Taxes - Objectives National Wealth Maximisation 1. Country ensures fair share of revenue in cross border transactions 2. For the well being of its citizens, 3. And maintains domestic tax base Tax Equity or fairness : 1. is all about imposing equal taxes on tax payers with equal income or 2. equal ability to pay 3. Without reference to legality or source or type of Income Economic Efficiency: 1. Developing a competitive domestic economy, 2. The pretax return should not distort the after tax return thereby affecting investment decisions

22 Copyright © 2012 Deloitte Development LLC. All rights reserved. 22 D. International Taxes - Treaty Aspects Treaty : is a formally concluded and ratified agreement between independent nations. Tax Treaties between nations: 1. Is generally a matter of bargain between 2 countries, 2. Keeping in view the economic interests of the countries involved How Treaty becomes a Law? 1. Only when it has the sanction of the constitution of the participating nations. 2. Part IV of Indian Constitution setting out the “Directive Principles of State Policy” includes specific provision, covering International Law and treaty obligations in Article 51.

23 Copyright © 2012 Deloitte Development LLC. All rights reserved. 23 D. International Taxes - Double Taxation Double Taxation : It is possible that Tax payers engaged in cross border transactions are taxed more than one (twice) on the same amount of Income, this phenomenon is known as Double Taxation. This led to 2 fundamental methods of Taxation under International Law: 1. Source based taxation 2. Residence based taxation

24 Copyright © 2012 Deloitte Development LLC. All rights reserved. 24 D. International Taxes - Concept of Nexus Connecting Factors: Income Connecting Factors: Foreign sourced Income earned by Non residents is not taxable in India – As there is no nexus with India SubjectConnecting Factor 1.AssesseeResidential Status 2.IncomeSource AssesseeTaxable Indian Resident (R)World Income Non residents /NOR’s Only Income sourced in India is Taxable IncomeTaxable Indian sourced Income (irrespective of Assessee status) in India Foreign Sourced Income Only if earned by an Indian resident

25 Copyright © 2012 Deloitte Development LLC. All rights reserved. 25 D. International Taxes - Nexus with Income Tax Act * Section 4 – Charging section Sec 4 (1) Income Tax shall be charged, at that rate or those rates, for that year, in accordance with the provisions of this act, In respect of the Total Income, of the previous year, of every person Sec 4 (2) In respect of income chargeable under clause (1), Income Tax shall be deducted at source or paid in advance, Where it is so deductible under the Act.

26 Copyright © 2012 Deloitte Development LLC. All rights reserved. 26 D. International Taxes - Nexus with Income Tax Act *** Sec 5 (1) The Total income of any previous year, of a Sub sec (1) Resident person ; Sub sec (2) Non Resident person Includes all incomes from whatever source is derived a) Is received or deemed to be received in India in such year, b) Accrues or arises or is deemed to accrue or arise in India during such year, c) Accrues or arises to him outside India during such year (For Resident Only) Provided that, in case of a person NOR in India, under Sec 6 (6), income accruing or arising to him outside India shall not be included unless it is derived from a Business controlled or profession set up in India. Explanation 1. Income shall not be deemed to be received by reason of the fact that it is taken into account in the Balance sheet prepared in India. Explanation 2. Income which has been included in the total income on the basis that it is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India.

27 Copyright © 2012 Deloitte Development LLC. All rights reserved. 27 D. International Taxes - Income deemed to Accrue/Arise* Sec 9 (1) The following Income shall be deemed to accrue or arise in India Sec 9 (I) (i) Income accruing or arising thru From a business connection in India, Income from any property in India, Income from any asset or any source in India, Transfer of capital asset situated in India Sec 9 (I) (ii) Income under head Salaries earned in India Sec 9 (I) (iii) Income under head Salaries paid by Govt. of India to a citizen outside India Sec 9 (I) (iv) Dividends by Indian company outside India Sec 9 (I) (v) Income by way of Interest Sec 9 (I) (vi) Income by way of Royalty Sec 9 (I) (vii) Income by way of Fees for technical Services

28 Copyright © 2012 Deloitte Development LLC. All rights reserved. 28 D. International Taxes - Business Connection Sec 9 (1) Explanation 2. It is declared that “business connection” shall include any business activity carried out thru a person acting on behalf of a NR a)..Trader of goods b)..Stockist c) authorized representative Provided that such “business connection” shall not include any business with Dependant agent Independent agent acting in the ordinary course of his business Sec 9 (1) Explanation 3. Attribution Rule (only so much of income attributable to operations carried out in India shall be deemed to accrue or arise in India). Business connection Requires continuity of action between a R in India and a NR who receives profit, Transaction must be of a commercial nature intimately linked with the business of a NR, contributing to an NR’s Profit Isolated transactions between a R and NR will not constitute a business connection.

29 Copyright © 2012 Deloitte Development LLC. All rights reserved. 29 D. International Taxes - Model Treaty Article 1 – Persons Covered : Article 2 – Taxes Covered Article 3 – General Definitions : Person, Company, Enterprise of a contracting state, International Traffic, Competent Authority, National Article 4 – Resident Article 5 – Permanent Establishment 1. Basic rule PE – Criteria is : “Fixed place of Business” 2. Construction PE - Criteria is : “Time and activities carried on” 3. Agency PE - Criteria is : “legal and economic dependence” 4. Service PE – Most India treaties have this clause Article 6 – Income from Immovable property Article 7 – Business Profits Article 8 – Shipping, Inland waterways, Transport and Air Transport Article 9 – Associated Enterprises -

30 Copyright © 2012 Deloitte Development LLC. All rights reserved. 30 D. International Taxes - Model Treaty Article 10 – Dividends : Article 11 – Interest Article 12 – Royalties Article 13 – Capital Gains Article 14 – Independent Professional Services (IPS) Article 15 – Income from Employment Article 16 – Directors Fee’s Article 17 – Artists & Sportsmen Article 18 – Pensions Article 19 – Government Service Article 20 – Students Article 21 – Other Income Article 22 – Capital

31 Copyright © 2012 Deloitte Development LLC. All rights reserved. 31 D. International Taxes - Model Treaty Article 23 – Methods for elimination of Double Taxation : Article 24 – Non Discrimination Article 25 – Mutual Agreement Procedure Article 26 – Exchange of Information Article 27 – Assistance in collection of Taxes Article 28 – Members of Diplomatic Mission Article 29 – Territorial Extension Article 30 – Entry into force Article 31 – Termination

32 Copyright © 2012 Deloitte Development LLC. All rights reserved. 32 D. International Taxes - Article 4 (Tie Breaker Test)

33 Copyright © 2012 Deloitte Development LLC. All rights reserved. 33 D. International Taxes - Transfer Pricing Basics: Transfer Pricing is the process of setting prices for intra-group transactions All stakeholders of a business may question intra-group / inter-unit prices Commonly questioned by Government as a stakeholder and therefore need for specific legislation OECD recommends the Arm's length principle for setting Transfer Prices

34 Copyright © 2012 Deloitte Development LLC. All rights reserved. 34 D. International Taxes - Transfer Pricing Definition and objective: Transfer pricing refers to the pricing of cross-border transactions between two associated entities When two related entities enter into any cross-border transaction, the price at which they undertake the transaction is ‘transfer price’ Due to the special relationship between related companies, the transfer price may be different than the price that would have been agreed between unrelated companies Price between unrelated parties in uncontrolled conditions is known as the “arm’s length” price (ALP) Company ACompany B IndiaOverseas To prevent shifting of profits from India

35 Copyright © 2012 Deloitte Development LLC. All rights reserved. 35 D. International Taxes - Transfer Pricing in India International Transactions between Associated Enterprises at Arms Length Price supported by Extensive contemporaneous documentation

36 Copyright © 2012 Deloitte Development LLC. All rights reserved. 36 D. International Taxes - Transfer Pricing in India International Transaction: Between non-resident and non-resident Between non-resident and resident Normally not between resident and resident

37 Copyright © 2012 Deloitte Development LLC. All rights reserved. 37 D. International Taxes - Transfer Pricing in India Arms Length Price: Law requires an “Arms Length Price” (‘ALP’) to be established ALP means price applied in uncontrolled conditions (open market price) Determined as an Arithmetic Mean of uncontrolled prices (or margins) Flexibility accorded to taxpayer to adopt any price within (+/-) 5% of the arithmetic mean (Budget 2012 clarified, cannot be considered a standard deduction)

38 ©2011 Deloitte Touche Tohmatsu India Private Limited Arm’s length price As per Section 92F, “Arm’s length price” means a price which is applied or proposed to be applied in a transaction between persons other than associated enterprises, in uncontrolled conditions 38 Controlled Transaction Uncontrolled Transaction (ALP) Enterprise A Unrelated Enterprise B Related Enterprise C “Arm’s length price” would be similar price charged to Unrelated Enterprise in an uncontrolled Transaction The ALP can vary by 5% of the Arithmetic Mean of more than one price (Budget 2012 clarified, cannot be considered a standard deduction)

39 Copyright © 2012 Deloitte Development LLC. All rights reserved. 39 Associated Enterprise Equity / Debt >= 26% direct /indirect holding by enterprise OR By same person in each enterprise Loan >= 51% of Total Assets Guarantees > = 10% of debt > 10% interest in Firm / AOP / BOI Management Appointment > 50% of Directors / one or more Executive Director by an enterprise OR Appointment by same person in each enterprise Activities 100% dependence on use of intangibles for manufacture / processing / business Direct / indirect supply of >= 90% Raw Materials under influenced prices and conditions Sale under influenced prices and conditions Control One enterprise controlled by an individual and the other by himself or his relative or jointly One enterprise controlled by HUF and the other by itself, a member or his relative or jointly

40 Methods for Arm’s length price determination Indian law provides for application of following methods: Comparable Uncontrolled Price method (CUP): Comparison of actual price Resale Price Method (RPM): Comparison of gross margin for a distributor Cost Plus Method (CPM): Comparison of gross margin for a manufacturer / service provider Profit Split Method (PSM): Sharing of profits among entities sharing proportionately in risks in a highly integrated operation Transaction Net Margin Method (TNMM): Comparison on a net (operating) profit basis 40 No priority of methods; flexibility granted to tax-payer for selection of Most Appropriate Method

41 Copyright © 2012 Deloitte Development LLC. All rights reserved. Transfer Pricing Rules Rule 10B Arms’ Length Price Sets out General Applicability of all five transfer pricing methods Comparability criteria defined Rule 10C Most Appropriate Method Flexibility of choice depending on facts and circumstances Sets out the factors to be considered in selecting the ‘most appropriate’ method Rule 10D Documentation Mandatory / Supplementary Documentation requirements prescribed If aggregate value of the transactions does not exceed Rs. 10 million - documentation requirements are relaxed Rule 10E Accountants Report Accountant's Report required as prescribed To assist the Assessing officer in selecting cases for scrutiny Rule 10A - Defines certain expressions 41

42 Copyright © 2012 Deloitte Development LLC. All rights reserved. Contemporaneous Documentation Step wise process 42 Group Overview: This section of the TP Report discusses the following:  Multinational group profile of which assessee enterprise is a part;  Ownership structure and share holding pattern of the assessee enterprise with details of shares or other ownership interest Industry Analysis: The Industry analysis of the company covers the following  A broad description of the business of the client and the industry in which the client operates, and of the business of the associated enterprises with whom the client has transacted Economic Analysis Functional Analysis Group Overview and Industry Analysis Determination of ALP

43 Copyright © 2012 Deloitte Development LLC. All rights reserved. Contemporaneous Documentation Step wise process 43 Functional Analysis: A functional analysis enables mapping of the economically relevant facts and characteristics of transactions between associated enterprises with regard to their functions, assets and risks. Hence a functional analysis facilitates characterization of the associated enterprises and assists in establishing a degree of comparability with similar transactions in uncontrolled conditions. Economic Analysis: This section provides the following details: Value of international transactions Selection of MAM (Most Appropriate method Bench marking Process Adjustments Determination of ALP Result: Maintain Documentation to comply with the Transfer Pricing Regulations in India To establish that the international transactions of the Company are at arm’s length as prescribed in the Indian Regulations

44 D.Indirect Taxes

45 Copyright © 2012 Deloitte Development LLC. All rights reserved. 45 D.Indirect Taxes – Overview VAT Tax on commodities/ Goods Service Tax Tax on services Customs duty Tax on imports / exports Central Excise Duty Tax on locally manufactured goods

46 Copyright © 2012 Deloitte Development LLC. All rights reserved. 46 D.Indirect Taxes – Customs duty on Imports / Exports Customs duty Customs duty is applicable on Import transactions Refer to customs tariff act 1975 Part II for rates of duty applicable Part II of the Import tariff act is categorized into 98 chapters Part II of the Import tariff act also has a list of Generally exempted items Part III The second schedule covers Export Tariff & corresponding exemption notifications Customs duty

47 Copyright © 2012 Deloitte Development LLC. All rights reserved. 47 D.Indirect Taxes – Central Excise – Manufactured goods Central excise duty Central Excise Act 1944, The Levy of Duty on manufactured goods is covered under SECTION 3. of the Central Excise a duty of excise to be called the Central Value Added Tax (CENVAT)] on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of … Refer to the Central excise Tariff act 1985 for rates of duty Rate of duty at present is 10% basic duty (Budget recommends 12%) Depending on the item manufactured, Additional duties are applied (CVD, Special Duty, etc) Note: Central excise duty is based on valuation rules and the classification of the item manufactured. (Example : Tobacco attracts highest rate of duty while note books attract lower rate of duty)

48 Copyright © 2012 Deloitte Development LLC. All rights reserved. 48 D.Indirect Taxes – Services Tax Service Tax Service Tax is administered under chapter V of the Finance Act and governed by rules of Central Excise Act Sec 65 covers the definition of services, 121 services are covered, more services are being added in the Budget 2012 Budget 2012 introduced the a negative list of 17 services not taxable There are more exempted services covered by various notifications from time to time Rate applicable for the services is specified in Sec 66 of Finance Act currently specified at 12% w.e.f 1 st Apr 2012 Service Tax Returns to be filed half yearly in prescribed format (ST 3 return) Service Tax payments have to be made online

49 Copyright © 2012 Deloitte Development LLC. All rights reserved. 49 D.Indirect Taxes – VAT (Local Sales Tax) Local Sales Tax AP VAT Act 2005 An act to provide for and consolidate the law relating to levy of value added tax on sale or purchase of goods in the state of Andhra Pradesh and for matters connected therewith and incidental thereto.. Charging sec is Sec 4.. Sale is taxed.. Local Sales tax

50 II. Knowledge management, Appellate Hierarchy and Practical challenges

51 Copyright © 2012 Deloitte Development LLC. All rights reserved. 51 Knowledge Management Respective Acts Income Tax Rules, Central Excise Rules, Customs rules Circulars and notifications Advance rulings Case laws (SC, HC, Tribunal) Concept Papers Committee reports Clarifications & FAQ’s Press Information Bureau releases

52 Copyright © 2012 Deloitte Development LLC. All rights reserved. 52 Appellate Hierarchy Tax filing A O CIT (A) ITAT High Court Supreme Court MAP If selected for audit Normal course AO — Assessing officer; CIT(A) — Commissioner Income Tax (Appeals); ITAT — Income Tax Appellate Tribunal (Highest Fact finding Authority) MAP — Mutual Agreement Procedure (USA and India Government level negotiation); NA — Not Applicable DC — Deputy Commissioner; CCE(A) — Commissioner Customs & Central Excise(Appeals); Comm. – Jurisdictional Commissioner, CESTAT — Customs, Excise & Service Tax Appellate Tribunal (Highest Fact finding Authority) Income Tax Hierarchy Service Tax Hierarchy Refund Application by Assessee Notice/PH DC CCE(A) High Court Supreme Court CESTAT Remand Refund can be sanctioned by any of the authorities EA 2000 Audit Notice/PH DC(A) CCE(A) High Court Supreme Court CESTAT CENVAT Refund Procedure CENVAT Audit Procedure Comm.

53 Copyright © 2012 Deloitte Development LLC. All rights reserved. 53 Practical Challenges  Manage EGO’s of Revenue officials,  Systems automation by Revenue wings, not fully automated  Software related challenges  Frequent changes in forms / formats  Statutory due dates / conflicting holidays  Internal revenue targets – How realistic?  Availability of authorized signatories  Teams knowledge, application of correct rates, classification / chapter issues  Right and appropriate documentation  New notifications, clarifications, advance rulings & court judgments  Retrospective amendments to law Specifics Generic Challenges  PAN not available of service provider  Service Tax Registration #  Typographical errors, 95% PAN rule, TAN mismatch  Application of correct TDS sections, rates, amount deducted vs paid  Correctly filling the forms (assessment year, Section, range, lower rates etc)  Lower deduction certificate (with amount & period limitation)– Interpretation issues  E-TDS filings center's working hours  Online filing requirements, not all banks notified to collect taxes  Revisions / Revised filing requirements  Digital signature requirements

54 Questions

55 About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright © 2011 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limitedwww.deloitte.com/about


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