Venkat Project .

A STUDY ON TDS ,ORDER & GROSS MARGIN BOOKING AND GOODS AND SERVICE TAX

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CHAPTER-1 INTRODUCTION

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1.1TAXATION SYSTEM IN INDIA: India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies. Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), customs duties, central excise and service tax. Value Added Tax (VAT), stamp duty, state excise, land revenue and profession tax are levied by the State Governments. Local bodies are empowered to levy tax on properties, octroi and for utilities like water supply, drainage etc. Indian taxation system has undergone tremendous reforms during the last decade. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement. The process of rationalization of tax administration is ongoing in India. Direct Taxes In case of direct taxes (income tax, wealth tax, etc.), the burden directly falls on the taxpayer. Income tax According to Income Tax Act 1961, every person, who is an assessee and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the Finance Act. Such income tax shall be paid on the total income of the previous year in the relevant assessment year. Assessee means a person by whom (any tax) or any other sum of money is payable under the Income Tax Act, and includes (a) Every person in respect of whom any proceeding under the Income Tax Act has been taken for the assessment of his income (or assessment of fringe benefits) or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; (b) Every person who is deemed to be an assessee under any provisions of the Income Tax Act; (c) Every person who is deemed to be an assessee in default under any provision of the Income Tax Act.

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Where a person includes: 

Individual

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Hindu Undivided Family (HUF)

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Association of persons (AOP)

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Body of individuals (BOI)

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Company

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Firm

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A local authority and,

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Every artificial judicial person not falling within any of the preceding categories. Income tax is an annual tax imposed separately for each assessment year (also called the tax year). Assessment year commences from 1st April and ends on the next 31st March. The total income of an individual is determined on the basis of his residential status in India. For tax purposes, an individual may be resident, non-resident or not ordinarily resident. Resident An individual is treated as resident in a year if present in India: 1. For 182 days during the year or 2. For 60 days during the year and 365 days during the preceding four years. Individuals fulfilling neither of these conditions are non-residents. (The rules are slightly more liberal for Indian citizens residing abroad or leaving India for employment abroad.) Resident but not Ordinarily Resident A resident who was not present in India for 730 days during the preceding seven years or who was non-resident in nine out of ten preceding years is treated as not ordinarily resident. Non-Residents Non-residents are taxed only on income that is received in India or arises or is deemed to arise in India. A person not ordinarily resident is taxed like a non-resident but is also liable to tax on income accruing abroad if it is from a business controlled in or a profession set up in India. Non-resident Indians (NRIs) are not required to file a tax return if their income consists of only interest and dividends, provided taxes due on such income are deducted at source. It is possible for non-resident Indians to avail of these special provisions even after becoming residents by following certain procedures laid down by the Income Tax act. 4

Status

Indian Income

Foreign Income

Resident and ordinarily resident

Taxable

Taxable

Resident but not ordinary resident

Taxable

Not taxable

Non-Resident

Taxable

Not taxable

Personal Income Tax Personal income tax is levied by Central Government and is administered by Central Board of Direct taxes under Ministry of Finance in accordance with the provisions of the Income Tax Act. Definition of a company A company has been defined as a juristic person having an independent and separate legal entity from its shareholders. Income of the company is computed and assessed separately in the hands of the company. However the income of the company, which is distributed to its shareholders as dividend, is assessed in their individual hands. Such distribution of income is not treated as expenditure in the hands of company; the income so distributed is an appropriation of the profits of the company. Residence of a company 

A company is said to be a resident in India during the relevant previous year if:

o

It is an Indian company

o

If it is not an Indian company but, the control and the management of its affairs is situated wholly in India

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A company is said to be non-resident in India if it is not an Indian company and some part of the control and management of its affairs is situated outside India. Corporate sector tax The taxability of a company's income depends on its domicile. Indian companies are taxable in India on their worldwide income. Foreign companies are taxable on income that arises out of their Indian operations, or, in certain cases, income that is deemed to arise in India. Royalty, interest, gains from sale of capital assets located in India (including gains from sale of shares in an Indian company), dividends from Indian companies and fees for technical services are all treated as income arising in India. Current rates of corporate tax. Different kinds of taxes relating to a company Minimum Alternative Tax (MAT) 5

Normally, a company is liable to pay tax on the income computed in accordance with the provisions of the income tax Act, but the profit and loss account of the company is prepared as per provisions of the Companies Act. There were large number of companies who had book profits as per their profit and loss account but were not paying any tax because income computed as per provisions of the income tax act was either nil or negative or insignificant. In such case, although the companies were showing book profits and declaring dividends to the shareholders, they were not paying any income tax. These companies are popularly known as Zero Tax companies. In order to bring such companies under the income tax act net, section 115JA was introduced w.e.f assessment year 1997-98. A new tax credit scheme is introduced by which MAT paid can be carried forward for set-off against regular tax payable during the subsequent five year period subject to certain conditions, as under:

When a company pays tax under MAT, the tax credit earned by it shall be an amount, which is the difference between the amount payable under MAT and the regular tax. Regular tax in this case means the tax payable on the basis of normal computation of total income of the company.

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MAT credit will be allowed carry forward facility for a period of five assessment years immediately succeeding the assessment year in which MAT is paid. Unabsorbed MAT credit will be allowed to be accumulated subject to the five-year carry forward limit.

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In the assessment year when regular tax becomes payable, the difference between the regular tax and the tax computed under MAT for that year will be set off against the MAT credit available.

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The credit allowed will not bear any interest Fringe Benefit Tax (FBT) The Finance Act, 2005 introduced a new levy, namely Fringe Benefit Tax (FBT) contained in Chapter XIIH (Sections 115W to 115WL) of the Income Tax Act, 1961. Fringe Benefit Tax (FBT) is an additional income tax payable by the employers on value of fringe benefits provided or deemed to have been provided to the employees. The FBT is payable by an employer who is a company; a firm; an association of persons excluding trusts/a body of individuals; a local authority; a sole trader, or an artificial juridical person. This tax is payable 6

even where employer does not otherwise have taxable income. Fringe Benefits are defined as any privilege, service, facility or amenity directly or indirectly provided by an employer to his employees (including former employees) by reason of their employment and includes expenses or payments on certain specified heads. The benefit does not have to be provided directly in order to attract FBT. It may still be applied if the benefit is provided by a third party or an associate of employer or by under an agreement with the employer. The value of fringe benefits is computed as per provisions under Section 115WC. FBT is payable at prescribed percentage on the taxable value of fringe benefits. Besides, surcharge in case of both domestic and foreign companies shall be leviable on the amount of FBT. On these amounts, education cess shall also be payable. Every company shall file return of fringe benefits to the Assessing Officer in the prescribed form by 31st October of the assessment year as per provisions of Section 115WD. If the employer fails to file return within specified time limit specified under the said section, he will have to bear penalty as per Section 271FB. The scope of Fringe Benefit Tax is being widened by including the employees stock option as fringe benefit liable for tax. The fair market value of the share on the date of the vesting of the option by the employee as reduced by the amount actually paid by him or recovered from him shall be considered to be the fringe benefit. The fair market value shall be determined in accordance with the method to be prescribed by the CBDT. Dividend Distribution Tax (DDT) Under Section 115-O of the Income Tax Act, any amount declared, distributed or paid by a domestic company by way of dividend shall be chargeable to dividend tax. Only a domestic company (not a foreign company) is liable for the tax. Tax on distributed profit is in addition to income tax chargeable in respect of total income. It is applicable whether the dividend is interim or otherwise. Also, it is applicable whether such dividend is paid out of current profits or accumulated profits. The tax shall be deposited within 14 days from the date of declaration, distribution or payment of dividend, whichever is earliest. Failing to this deposition will require payment of stipulated interest for every month of delay under Section115-P of the Act.

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Rate of dividend distribution tax to be raised from 12.5 per cent to 15 per cent on dividends distributed by companies; and to 25 per cent on dividends paid by money market mutual funds and liquid mutual funds to all investors. Banking Cash Transaction Tax (BCTT) The Finance Act 2005 introduced the Banking Cash Transaction Tax (BCTT) w.e.f. June 1, 2005 and applies to the whole of India except in the state of Jammu and Kashmir.BCTT continues to be an extremely useful tool to track unaccounted monies and trace their source and destination. It has led the Income Tax Department to many money laundering and hawala transactions. BCTT is levied at the rate of 0.1 per cent of the value of following "taxable banking transactions" entered with any scheduled bank on any single day: 

Withdrawal of cash from any bank account other than a saving bank account; and

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Receipt of cash on encashment of term deposit(s). However,Banking Cash Transaction Tax (BCTT) has been withdrawn with effect from April 1, 2009. Securities Transaction Tax (STT) Securities Transaction Tax or turnover tax, as is generally known, is a tax that is leviable on taxable securities transaction. STT is leviable on the taxable securities transactions with effect from 1st October, 2004 as per the notification issued by the Central Government. The surcharge is not leviable on the STT. Wealth Tax Wealth tax, in India, is levied under Wealth-tax Act, 1957. Wealth tax is a tax on the benefits derived from property ownership. The tax is to be paid year after year on the same property on its market value, whether or not such property yields any income. Under the Act, the tax is charged in respect of the wealth held during the assessment year by the following persons: -

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Individual

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Hindu Undivided Family (HUF)

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Company Chargeability to tax also depends upon the residential status of the assessee same as the residential status for the purpose of the Income Tax Act.

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Wealth tax is not levied on productive assets, hence investments in shares, debentures, UTI, mutual funds, etc are exempt from it. The assets chargeable to wealth tax are Guest house, residential house, commercial building, Motor car, Jewellery, bullion, utensils of gold, silver, Yachts, boats and aircrafts, Urban land and Cash in hand (in excess of Rs 50,000 for Individual & HUF only). The following will not be included in Assets: 

Assets held as Stock in trade.

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A house held for business or profession.

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Any property in nature of commercial complex.

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A house let out for more than 300 days in a year.

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Gold deposit bond.

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A residential house allotted by a Company to an employee, or an Officer, or a Whole Time Director (Gross salary i.e. excluding perquisites and before Standard Deduction of such Employee, Officer, Director should be less than Rs 5,00,000). The assets exempt from Wealth tax are "Property held under a trust", Interest of the assessee in the coparcenaries’ property of a HUF of which he is a member, "Residential building of a former ruler", "Assets belonging to Indian repatriates", one house or a part of house or a plot of land not exceeding 500sq.mts(for individual & HUF assessee) Wealth tax is chargeable in respect of Net wealth corresponding to Valuation date where Net wealth is all assets less loans taken to acquire those assets and valuation date is 31st March of immediately preceding the assessment year. In other words, the value of the taxable assets on the valuation date is clubbed together and is reduced by the amount of debt owed by the assessee. The net wealth so arrived at is charged to tax at the specified rates. Wealth tax is charged @ 1 per cent of the amount by which the net wealth exceeds Rs 15 Lakhs. Tax Rebates for Corporate Tax The classical system of corporate taxation is followed in India

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Domestic companies are permitted to deduct dividends received from other domestic companies in certain cases.

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Inter Company transactions are honored if negotiated at arm's length. 9

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Special provisions apply to venture funds and venture capital companies.

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Long-term capital gains have lower tax incidence.

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There is no concept of thin capitalization.

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Liberal deductions are allowed for exports and the setting up on new industrial undertakings under certain circumstances.

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There are liberal deductions for setting up enterprises engaged in developing, maintaining and operating new infrastructure facilities and power-generating units.

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Business losses can be carried forward for eight years, and unabsorbed depreciation can be carried indefinitely. No carry back is allowed.

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Dividends, interest and long-term capital gain income earned by an infrastructure fund or company from investments in shares or long-term finance in enterprises carrying on the business of developing, monitoring and operating specified infrastructure facilities or in units of mutual funds involved with the infrastructure of power sector is proposed to be tax exempt. Capital Gains Tax A capital gain is income derived from the sale of an investment. A capital investment can be a home, a farm, a ranch, a family business, work of art etc. In most years slightly less than half of taxable capital gains are realized on the sale of corporate stock. The capital gain is the difference between the money received from selling the asset and the price paid for it. Capital gain also includes gain that arises on "transfer" (includes sale, exchange) of a capital asset and is categorized into short-term gains and long-term gains. The capital gains tax is different from almost all other forms of taxation in that it is a voluntary tax. Since the tax is paid only when an asset is sold, taxpayers can legally avoid payment by holding on to their assets--a phenomenon known as the "lock-in effect." The scope of capital asset is being widened by including certain items held as personal effects such as archaeological collections, drawings, paintings, sculptures or any work of art. Presently no capital gain tax is payable in respect of transfer of personal effects as it does not fall in the definition of the capital asset. To restrict the misuse of this provision, the definition of capital asset is being widened to include those personal effects such as archaeological collections, drawings, paintings, sculptures or any work of art. Transfer of above items shall now attract capital gain tax the way jewellery attracts despite being personal effect as on date. 10

Short Term and Long Term capital Gains Gains arising on transfer of a capital asset held for not more than 36 months (12 months in the case of a share held in a company or other security listed on recognised stock exchange in India or a unit of a mutual fund) prior to its transfer are "short-term". Capital gains arising on transfer of capital asset held for a period exceeding the aforesaid period are "long-term". Section 112 of the Income-Tax Act, provides for the tax on long-term capital gains, at 20 per cent of the gain computed with the benefit of indexation and 10 per cent of the gain computed (in case of listed securities or units) without the benefit of indexation. Double Taxation Relief Double Taxation means taxation of the same income of a person in more than one country. This results due to countries following different rules for income taxation. There are two main rules of income taxation i.e. (a) Source of income rule and (b) residence rule. As per source of income rule, the income may be subject to tax in the country where the source of such income exists (i.e. where the business establishment is situated or where the asset / property is located) whether the income earner is a resident in that country or not. On the other hand, the income earner may be taxed on the basis of the residential status in that country. For example, if a person is resident of a country, he may have to pay tax on any income earned outside that country as well. Further,some countries may follow a mixture of the above two rules. Thus, problem of double taxation arises if a person is taxed in respect of any income on the basis of source of income rule in one country and on the basis of residence in another country or on the basis of mixture of above two rules. In India, the liability under the Income Tax Act arises on the basis of the residential status of the assessee during the previous year. In case the assessee is resident in India, he also has to pay tax on the income, which accrues or arises outside India, and also received outside India. The position in many other countries being also broadly similar, it frequently happens that a person may be found to be a resident in more than one country or that the same item of his income may be treated as accruing, arising or received in more than one country with the result that the same item becomes liable to tax in more than one country. 11

Relief against such hardship can be provided mainly in two ways: (a) Bilateral relief, (b) Unilateral relief. Bilateral Relief The Governments of two countries can enter into Double Taxation Avoidance Agreement (DTAA) to provide relief against such Double Taxation, worked out on the basis of mutual agreement between the two concerned sovereign states. This may be called a scheme of 'bilateral relief' as both concerned powers agree as to the basis of the relief to be granted by either of them. Unilateral relief The above procedure for granting relief will not be sufficient to meet all cases. No country will be in a position to arrive at such agreement with all the countries of the world for all time. The hardship of the taxpayer however is a crippling one in all such cases. Some relief can be provided even in such cases by home country irrespective of whether the other country concerned has any agreement with India or has otherwise provided for any relief at all in respect of such double taxation. This relief is known as unilateral relief. Double Taxation Avoidance Agreement (DTAA) List of countries with which India has signed Double Taxation Avoidance Agreement : 

DTAA Comprehensive Agreements - (With respect to taxes on income)

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DTAA Limited Agreements – With respect to income of airlines/ merchant shipping

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Limited Multilateral Agreement

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DTAA Other Agreements/Double Taxation Relief Rules

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Specified Associations Agreement

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Tax Information Exchange Agreement (TIEA) Indirect Taxation Sales tax Central Sales Tax (CST) Central Sales tax is generally payable on the sale of all goods by a dealer in the course of interstate trade or commerce or, outside a state or, in the course of import into or, export from India. The ceiling rate on central sales tax (CST), a tax on inter-state sale of goods, has been reduced from 4 per cent to 3 per cent in the current year. Value Added Tax (VAT) 12

VAT is a multi-stage tax on goods that is levied across various stages of production and supply with credit given for tax paid at each stage of Value addition. Introduction of state level VAT is the most significant tax reform measure at state level. The state level VAT has replaced the existing State Sales Tax. The decision to implement State level VAT was taken in the meeting of the Empowered Committee (EC) of State Finance Ministers held on June 18, 2004, where a broad consensus was arrived at to introduce VAT from April 1, 2005. Accordingly, all states/UTs have implemented VAT. The Empowered Committee, through its deliberations over the years, finalized a design of VAT to be adopted by the States, which seeks to retain the essential features of VAT, while at the same time, providing a measure of flexibility to the States, to enable them to meet their local requirements. Some salient features of the VAT design finalized by the Empowered Committee are as follows: 

The rates of VAT on various commodities shall be uniform for all the States/UTs. There are 2 basic rates of 4 per cent and 12.5 per cent, besides an exempt category and a special rate of 1 per cent for a few selected items. The items of basic necessities have been put in the zero rate bracket or the exempted schedule. Gold, silver and precious stones have been put in the 1 per cent schedule. There is also a category with 20 per cent floor rate of tax, but the commodities listed in this schedule are not eligible for input tax rebate/set off. This category covers items like motor spirit (petrol), diesel, aviation turbine fuel, and liquor.

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There is provision for eliminating the multiplicity of taxes. In fact, all the State taxes on purchase or sale of goods (excluding Entry Tax in lieu of Octroi) are required to be subsumed in VAT or made VATable.

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Provision has been made for allowing "Input Tax Credit (ITC)", which is the basic feature of VAT. However, since the VAT being implemented is intra-State VAT only and does not cover inter-State sale transactions, ITC will not be available on inter-State purchases.

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Exports will be zero-rated, with credit given for all taxes on inputs/ purchases related to such exports.

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There are provisions to make the system more business-friendly. For instance, there is provision for self-assessment by the dealers. Similarly, there is provision of a threshold limit for registration of dealers in terms of annual turnover of Rs 5 lakh. Dealers with turnover lower than this threshold limit are not required to obtain registration under VAT and are exempt from 13

payment of VAT. There is also provision for composition of tax liability up to annual turnover limit of Rs. 50 lakh. 

Regarding the industrial incentives, the States have been allowed to continue with the existing incentives, without breaking the VAT chain. However, no fresh sales tax/VAT based incentives are permitted. Roadmap towards GST The Empowered Committee of State Finance Ministers has been entrusted with the task of preparing a roadmap for the introduction of national level goods and services tax with effect from 01 April 2007.The move is towards the reduction of CST to 2 per cent in 2008, 1 per cent in 2009 and 0 per cent in 2010 to pave way for the introduction of GST (Goods and Services Tax). Excise Duty Central Excise duty is an indirect tax levied on goods manufactured in India. Excisable goods have been defined as those, which have been specified in the Central Excise Tariff Act as being subjected to the duty of excise. There are three types of Central Excise duties collected in India namely Basic Excise Duty This is the duty charged under section 3 of the Central Excises and Salt Act,1944 on all excisable goods other than salt which are produced or manufactured in India at the rates set forth in the schedule to the Central Excise tariff Act,1985. Additional Duty of Excise Section 3 of the Additional duties of Excise (goods of special importance) Act, 1957 authorizes the levy and collection in respect of the goods described in the Schedule to this Act. This is levied in lieu of sales Tax and shared between Central and State Governments. These are levied under different enactments like medicinal and toilet preparations, sugar etc. and other industries development etc. Special Excise Duty As per the Section 37 of the Finance Act,1978 Special excise Duty was attracted on all excisable goods on which there is a levy of Basic excise Duty under the Central Excises and Salt Act,1944.Since then each year the relevant provisions of the Finance Act specifies that the Special Excise Duty shall be or shall not be levied and collected during the relevant financial year. 14

Customs Duty Custom or import duties are levied by the Central Government of India on the goods imported into India. The rate at which customs duty is leviable on the goods depends on the classification of the goods determined under the Customs Tariff. The Customs Tariff is generally aligned with the Harmonised System of Nomenclature (HSL). In line with aligning the customs duty and bringing it at par with the ASEAN level, government has reduced the peak customs duty from 12.5 per cent to 10 per cent for all goods other than agriculture products. However, the Central Government has the power to generally exempt goods of any specified description from the whole or any part of duties of customs leviable thereon. In addition, preferential/concessional rates of duty are also available under the various Trade Agreements. Service Tax Service tax was introduced in India way back in 1994 and started with mere 3 basic services viz. general insurance, stock broking and telephone. Today the counter services subject to tax have reached over 100. There has been a steady increase in the rate of service tax. From a mere 5 per cent, service tax is now levied on specified taxable services at the rate of 12 per cent of the gross value of taxable services. However, on account of the imposition of education cess of 3 per cent, the effective rate of service tax is at 12.36 per cent. Tax Proposal Direct Taxes: 

According to the Finance Minister,there is a little room to give away tax revenues or raise tax rates in a constrained economy.

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No case to revise either the slabs or the rates of Personal Income Tax. Even a moderate increase in the threshold exemption will put hundreds of thousands of Tax Payers outside Tax Net.

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However, relief for Tax Payers in the first bracket of USD 0.004 million to USD 0.009 million. A tax credit of USD 36.78 to every person with total income upto USD 0.009 million.

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Surcharge of 10 percent on persons (other than companies) whose taxable income exceed USD 0.18 million to augment revenues.

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Increase surcharge from 5 to 10 percent on domestic companies whose taxable income exceed USD 1.84 million.

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In case of foreign companies who pay a higher rate of corporate tax, surcharge to increase from 2 to 5 percent, if the taxabale income exceeds USD 1.84 million.

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In all other cases such as dividend distribution tax or tax on distributed income, current surcharge increased from 5 to 10 percent.

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Additional surcharges to be in force for only one year.

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Education cess to continue at 3 percent.

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Permissible premium rate increased from 10 percent to 15 percent of the sum assured by relaxing eligibility conditions of life insurance policies for persons suffering from disability and certain ailments.

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Contributions made to schemes of Central and State Governments similar to Central Government Health Scheme, eligible for section 80D of the Income tax Act.

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Donations made to National Children Fund eligible for 100 percent deduction.

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Investment allowance at the rate of 15 percent to manufacturing companies that invest more than USD 1.84 million in plant and machinery during the period 1st April 2013 to 31st March 2015.

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‘Eligible date’ for projects in the power sector to avail benefit under Section 80- IA extended from 31st March 2013 to 31st March 2014.

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Concessional rate of tax of 15 percent on dividend received by an Indian company from its foreign subsidiary proposed to continue for one more year.

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Securitisation Trust to be exempted from Income Tax. Tax to be levied at specified rates only at the time of distribution of income for companies, individual or HUF etc. No further tax on income received by investors from the Trust.

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Investor Protection Fund of depositories exempt from Income-tax in some cases.

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Parity in taxation between IDF-Mutual Fund and IDF-NBFC.

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A Category I AIF set up as Venture capital fund allowed pass through status under Income-tax Act.

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TDS at the rate of 1 percent on the value of the transfer of immovable properties where consideration exceeds USD 0.092 million. Agricultural land to be exempted.

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A final withholding tax at the rate of 20 percent on profits distributed by unlisted companies to shareholders through buyback of shares.

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Proposal to increase the rate of tax on payments by way of royalty and fees for technical services to non-residents from 10 percent to 25 percent.

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Reductions made in rates of Securities Transaction Tax in respect of certain transaction.

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Proposal to introduce Commodity Transaction Tax (CTT) in limited way.Agricultural commodities will be exempted.

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Modified provisions of GAAR will come into effect from 1st April 2016.

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Rules on Safe Harbour will be issued after examing the reports of the Rangachary Committee appointed to look into tax matters relating to Development Centres & IT Sector and Safe Harbour rules for a number of sectors.

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Fifth large tax payer unit to open at Kolkata shortly.

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A number of administrative measures such as extension of refund banker system to refund more than USD 918.86, technology based processing, extension of e-payment through more banks and expansion in the scope of annual information returns by Income-tax Department. Indirect Taxes

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No change in the normal rates of 12 percent for excise duty and service tax.

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No change in the peak rate of basic customs duty of 10 percent for non-agricultural products. Customs

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Period of concession available for specified part of electric and hybrid vehicles extended upto 31 March 2015.

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Duty on specified machinery for manufacture of leather and leather goods including footwear reduced from 7.5 to 5 percent.

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Duty on pre-forms precious and semi-precious stones reduced from 10 to 2 percent.

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Export duty on de-oiled rice bran oil cake withdrawn.

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Duty of 10 percent on export of unprocessed limonite and 5 percent on export on ungraded limonite.

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Concessions to air craft maintenance, repair and overhaul (MRO) industry.

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Duty on Set Top Boxes increased from 5 to10 percent.

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Duty on raw silk increased from 5 to 15 percent.

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Duties on Steam Coal and Bituminous Coal equalised and 2 percent custom duty and 2 percent CVD levied on both kinds coal.

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Duty on imported luxury goods such as high end motor vehicles, motor cycles, yachts and similar vessels increased.

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Duty free gold limit increased to USD 918.86 in case of male passenger and USD 1,837.47 in case of a female passenger subject to conditions. Excise duty

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Relief to readymade garment industry. In case of cotton, zero excise duty at fibre stage also. In case of spun yarn made of man made fibre, duty of 12 percent at the fibre stage.

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Handmade carpets and textile floor coverings of coir and jute totally exempted from excise duty.

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To provide relief to ship building industry, ships and vessels exempted from excise duty. No CVD on imported ships and vessels.

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Specific excise duty on cigarettes increased by about 18 percent. Similar increase on cigars, cheroots and cigarillos.

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Excise duty on SUVs increased from 27 to 30 percent. Not applicable for SUVs registered as taxies.

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Excise duty on marble increased from USD 0.55 per square meter to USD 1.10 per square meter.

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Proposals to levy 4 percent excise duty on silver manufactured from smelting zinc or lead.

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Duty on mobile phones priced at more than USD 36.78 raised to 6 percent.

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MRP based assessment in respect of branded medicaments of Ayurveda, Unani,Siddha, Homeopathy and bio-chemic systems of medicine to reduce valuation disputes. Service Tax 18

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Maintain stability in tax regime.

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Vocational courses offered by institutes affiliated to the State Council of Vocational Training and testing activities in relation to agricultural produce also included in the negative list for service tax.

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Exemption of Service Tax on copyright on cinematography limited to films exhibited in cinema halls.

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Proposals to levy Service Tax on all air conditioned restaurant.

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For homes and flats with a carpet area of 2,000 sq.ft. or more or of a value of USD 0.18 million or more, which are high-end constructions, where the component of services is greater, rate of abatement reduced from from 75 to 70 percent.

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Out of nearly 1.7 million registered assesses under Service Tax only 0.7 million file returns regularly. Need to motivate them to file returns and pay tax dues. A onetime scheme called ‘Voluntary Compliance Encouragement Scheme’ proposed to be introduced. Defaulter may avail of the scheme on condition that he files truthful declaration of Service Tax dues since 1st October 2007.

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Tax proposals on Direct Taxes side estimated to yield to USD 2,444.32 million and on the Indirect Tax side USD 863.68 million. Good and Services Tax

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A sum of USD 1,653.78 million towards the first instalment of the balance of CST compensation provided in the budget.



Work on draft GST Constitutional amendment bill and GST law expected to be taken forward. 1.2 TAX DEDUCTED ON SOURCE (TDS): TDS is the tax amount paid by individuals on different types of income they get. As the name indicates, it is the collection of amount at the source of income itself.TDS is the most powerful mechanism to track financial transactions. Once the transaction is recorded, the seller is forced to declare it while filing returns and pay capital gains, if any Also, the government gets some part of the tax money immediately rather than at end of the year. The TDS rates are issued by the government, different rates are imposed on different revenues. 19

1.3 CENTRAL SALES TAX: CST which plays a major role in taxation. Value added tax has two components: One is VAT and another is CST. CST plays a major role in taxation. Vat is the tax imposed by the states in which buyer and seller are in the same state and the value is 13.5 %(max), 5 %(min) in most of the states. Central sales tax is the tax imposed when buyer and the seller are in the different states. 

For example VAT will be come in to play whenever business deals are between Mysore and Bangalore and whenever you were dealing with Bangalore and Delhi CST will come in to play.



Recently, CST was cut from 4% to 2% on April1st.Central sales tax is levied on the state where the actual transaction i.e.., where the goods are sold and movement commence. This tax goes in to the treasury of State. It is controlled by the sales tax

Forms which come under CST: 

Buyers have to issue certain forms to sellers so that they can reduce their tax percentage.. The type of forms are C, D, E1, E2, F, Hand I. Forms C, E1, E2, F and H are printed and supplied by Sales Tax authorities. Dealers have to issue declarations in these forms printed and supplied by the Sales Tax authorities. Form D is to be issued by government organization departments making purchases. These forms are to be prepared in triplicate.

Form–C: 

C-form is the form issued by the central sales department to the buyer of the goods and the buyer issues it to the supplier of the goods when the transaction happens on CST basis. Here the buyer and the seller should be the registered sales tax payers. Sale tax will be collected and deposited to the government by the buyer. This form is issued when the purchase of the goods is from outside the state. If the C-form is issued then buyer can only bear the central sales tax of only 2% and the local tax is not counted. If the C-form is not issued then the buyer has to pay FULL CST to the issuer. 20



C-Form has to collect on Total Invoice Value. If we fail to submit the certificate government may charge 10% on total sale as a Penalty. It is our responsibility to collect from the customer the original c form and submit to the govt.

Form D: 

Sale to government is taxable @ 4% or applicable sales tax rate for sale within the State whichever is lower. This concession on CST is applicable if Form D is issued by the government department which purchases the goods.

Form E1: 

This form is issued by the dealer who makes the first inter-state sale during movement of goods from one State to another. This enables the purchaser to claim exemption from CST on the second inter-state sale during the movement of goods by transfer of documents of title.

Form E2: 

This form is issued by the second or the subsequent seller when the goods move from one state to another in a series of inter-state sales by transfer of documents of title. This form enables the purchaser to claim exemption form CST on subsequent sale of goods.

Form F: 

This form is issued when goods are dispatched to another state as a consignment or to the branch of a dealer in another State. The CST is not payable if there is only inter-state stock transfer and there is no sale. To claim inter-state movement of goods as “not a sale”, the dealer has to produce a declaration in Form ‘F’ received from Consignment Agent or Branch Office in another State. One Form F covering receipts during one calendar month has to be issued.

21

Form H: 

This form is issued by an exporter for purchase of goods. The purchase of goods is for an export order or in pursuance of an export order. These goods are then sold in export and the form enables seller of the goods to the exporter to claim deduction on the goods sold for export.

Form I: 

This form is issued by a dealer located in a Special Economic Zone (SEZ). No CST is levied when sales is made to a dealer located in SEZ.

1.4 ORDER AND GROSS MARGIN BOOKING: Order/Contract is a contact signed between a seller and a buyer to supply a product or set of products and/or provide a service or a set of services to a customer within a specified time, and under specified quality, price and funding conditions. Service that we are doing is Post Warranty Services that is when the Product has been delivered we in Grid unit have to do the after maintaining services. As a part of Orders/Contract we do four activities:  Alstom supply Spares.  Alstom to the site and do the Repair which is called Field Service.  Alstom there is some new thing is coming, the required guidance to the customer for better performance and this activity is called RME(Renovation, Modernization and Expansion) 22

 Network Consultancy in which we give some specific support to the customer. Here we guide the customer whether they have to go Field Service or RME(Renovation, Modernization and Expansion) Order booking must be recorded in the OPERATION INFORMATION SYSTEM-ALT@IS and in the Alstom Reporting system- TERENGA, in the month the contract comes into force. The responsibility of leading unit, participating unit in the contract process are studied and how to report Order cancellations, Order adjustments in the books of accounts. 1.5 GOODS AND SERVICE TAX: It is said that all the taxes are going to subsumed in to single tax called GST. So, the basic rules of the Tax Games were that the Centre would tax manufacturing and the states would tax retail sales. Some found out that manufacturing was such a small and low-growth sector in India that making a living by taxing manufacturing would get them nowhere. In addition, they also realised that the value added in manufacturing was small compared to the value added in the sales and after sales activity of the product. So, they took the first step in capturing some of the action in sales activity by introducing a central sales tax. The tax bureaucrats looked around in desperation and discovered that the real action in the Indian economy was in services and not manufacturing. And the revenue from a manufactured object (for example, air-conditioners) could be less from outright sales of these objects than from services such as the leasing out these objects. So, the Centre started taxing services. Today, goods, services, and other types of supplies are packaged as composite bundles (to continue our air-conditioner example: air-conditioners on lease with three years maintenance free thrown in) and offered for sale to consumers through a bewildering assortment of wholesalers, retailers and others, so that it was no longer clear what part of the invoice was for a "good" and what part for a "service" and thus who had the power to collect a tax on it, the central government or the state government. Some states, out of desperation for revenues and not being able to persuade the party in power in Delhi to help them with revenue grants, started stopping goods entering their borders and charging a tax. This meant that goods that should have taken two to three days to go from a manufacturing point (or importing point) to the end consumer would end up taking two to three 23

weeks lying at state border check-posts. This has started off the next round of Tax Games, the GST Reforms Game. When implemented, in one fell sweep it will replace central exercise, service tax (charged by the central government) and VAT, sales tax, entertainment tax and luxury tax (levied by state governments). GST will be levied on and paid at the point of consumption and not at the point of manufacture.

24

CHAPTER 2 COMPANY PROFILE

25

2.1 COMPANY HISTORY: Alstom has been associated with India’s progress for a century and has a long-standing reputation for providing highly innovative and sustainable solutions for meeting the country’s energy and transport requirements. The company has full capabilities in engineering, manufacturing, project management and supply of power generation, transmission and transport sector requirements. Since its inception in the year 1911, the company has been at the forefront of leading-edge technology at every level, serving these three infrastructure markets essential to economic, social and environmental development of India. The company works with a number of strategic partners in India to offer a wide range of solutions for every sector – Power, Transport & Grid. With power transmission now included in the business portfolio, Alstom in India looks forward to new synergies amongst its three core sectors and is well poised to offer end-to-end solutions to its customers. 2.2 Alstom India Statistics 

Around 9,000 employees in India



Three R & D Centres in Bengaluru (Power and Transport), Vadodara (Power) and Hosur (Grid)



Two Engineering Centres for Power in Noida, Kolkata



Manufacturing Units 

Power – Vadodara, Durgapur, Shahabad, Sanand*



Transport – Coimbatore, Sricity



Grid – Padappai, Pallavaram, Hosur, Vadodara, Naini

Global Engineering & Software Centre for Railway & Metro in Bengaluru for TransportMetro & Railway Signaling Engineering and Software Centre in Bengaluru. 1911: First factory built in Kolkata. 1950: Participated in setting up the first major manufacturing unit of BHEL, Bhopal 26

1959: Power Boilers facility established in Durgapur 1963: Boiler/Mill facility established in Shahabad 1992: Asea Brown Boveri Management Limited (ABBML) established in Bombay 1999: Asea Brown Boveri Management Limited (ABBML) became ABB ALSTOMPower India Limited (ABBPL) 2000: ABB ALSTOM Power India Limited (ABBPL) became ALSTOM Power India Limited 2002: ALSTOM Power India Limited became ALSTOM Projects India Ltd. 2004: Hydro manufacturing facility established in Vadodara 2005: Strategic partnership with Infosys in the areas of Global R&D, Engineering and Engineering services. 2008: Global Technological Centre (GTC) established in Vadodara 2009: Foundation stone laid of power equipment manufacturing plant at Mundra in Gujarat. Three Green Field manufacturing units were setup in Hosur, Padappai and Vadodara 2012: Areva

T&D

became

Alstom

T&D

India

ALSTOM Projects India Limited became ALSTOM India Limited

2.3 OUR VISION Be one of the Credible Private Sector Supplier of STG packages in India 

Benefits from an upcoming state of the Art manufacturing facility



Be a recognized, Reliable, Safe and highest quality standard organization/supplier



Promote clean sustainable solutions for long term growth of India

2.4 OUR MISSION 27

Limited

Deliver state-of-the-art technology while increasing market share in India  

Define, Develop, Market, Sell, Design, Manufacture and build to Customer Satisfaction: Competitive, reliable and sustainable components, systems and solutions for STG

  

packages State-of-the-art manufacturing facility with highest quality and safety standards Manufacture state-of-the-art products Execute projects on time with optimal quality and in budget with Optimized project

  

gross margin and cash flow Compliance to the contract specifications, terms and conditions World-class Environment, Health Safety (EHS) standard World class Quality and Ethical Standards.

2.5GLOBAL SCENARIO AND INDIAN SCENARIO Global Scenario Alstom is

a

French multinational

company which

holds

interests

in

the electricity

generation and rail transport markets. In 2012–2013 Alstom had annual sales of 20.3 billion euros, and employed approximately 96,000 people in around 100 countries. Alstom's headquarters are located in Levallois-Perret, west of Paris. Its CEO isPatrikKron. “Alstom is a global leader in the world of power generation, power transmission and rail infrastructure and sets the benchmark for innovative and environmentally friendly technologies..” Global Scenario :(key statistics)        

Among the top 3 global players with 10% market share Sales around 3.5 billion euros(out of 20.3 billion for the Alstoms group) 90% of the power utilities worldwide has been equipped by Alstom Grid 87 manufacturing and engineering sites 40 R&D competence centres and 5 technology centres in 12 countries world wide 17,000 employees (out of 93,000 for alstoms group) 4% of sales invested yearly in R&D from 2010 Over 130 years of experience

Indian Scenario 28



Alstom has two listed entities in India with business interests in Power Generations and transport-Alstom India & Alstom T&D(Transmission and Distribution).The French



Parent owns a 68.56% stake in Alstom India and 75% stake in Alstom T&D India. Alstom T&D is a Power Transmission and Distribution equipment maker.Over the past 100 years, Alstom has continuously invested, localized and introduced the latest Technologies in India. It’s recent milestone is that it has completed country’s first 800kv HVDC convertor transformer from its Vadodara Plant and demonstrate once again



Alstom’s manufacturing and technological prowess. Alstom T&D India has awarded a contract worth approximately 2,266 million by Power Grid Corp of India Ltd to supply GAS Insulated Substations(GIS) in Madhya Pradesh and Gujarat.Both substations will be completely manufactured in India,making this



Power grids first “Make In India” 400 kvGIS. Recently General Electric(GE) made an open offer to acquire 25% stake in the company for Rs 1,672 crore.The offer price made by the GE was in accordance with the guidelines of the Securities and Exchange Board of India(Sebi).

2.6 SERVICES OFFERED BY ALSTOM T&D: Alstom thermal power sector designs ,manufactures,and delivers solutions which allow customers to generate competitive ,eco-friendly,reliable and flexible power.It has the industry’s most wide-ranging portfolio of thermal technologies –coal,gas,oil and nuclear –and holds leading position in turnkey power plants ,power generation equipment,air quality control systems and service for the installed base.It is also pioneer in carbon capture technologies.Thermal power has workforce of 36,500 and booked orders of 9euro billion. Alstom renewable power offers most comprehensive range of renewable power generation solutions for integrated power plants covering hydroelectricity,wind,geothermal,biomass,solar as well as wave and tidal stream energies.In addition it provides individual components including all types of generators,and has full range of services,including plant modernization ,maintenance and operational support. Alstom renewable power has the workforce of 9,200 and booked orders of 2.5 euro billion. Alsto grid is the worlds leading manufacturer of engineered solutions for electrical grid applications in utility and industry settings .It provides integrated and customized trunkey 29

solutions such as alternating current and direct current substations for medium up to ultrahigh voltages.Alstoms solutions enble the efficient transmission of electricity and support the development of smart grids and super grids. Grid has the work force of 17,000 and booked orders of 3.5 euro billion . Alstom transport continuously develops supplies and maintains railway systems that run smoothly and efficiently to meet the new challenges of smarter mobility .It proposes complete solutions for trains, signaling,infrastructure and services adapted to each railway systems. It offer its customers the most efficient technologies and materials in order to reduce environmental footprint through out the lifecycle of the product, from manufacturing to recycling. Transport has a workforce of 28,300 and booked orders of 6.4billion Euros. 2.7 KEY STATISTICS:      

1st in Grid market since 2008. 8 manufacturing units . 14 sales offices across India. 3,399 Employees. 35,235 MINR sales . Financial results

Net Sales 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2010

2011

2012-13

30

2013-14

2014-15

Operating Profit(MINR) 4000 3500 3000 2500 2000 1500 1000 500 0 2010-11

2011-12

2012-13

2013-14

2014-15

Operating Profit(%) 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2010-11

2011-12

2012-13

31

2013-14

2014-15

Order Backlog 70000 60000 50000 40000 30000 20000 10000 0 2010-11

2011-12

2012-13

2013-14

2014-15

2013-14

2014-15

PAT(MINR) 2500 2000 1500 1000 500 0 2010-11

2011-12

2012-13

32

Dividend(%) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2010-11

2011-12

2012-13

33

2013-14

2014-15

2.8 MAJOR PLAYER IN THE INDUSTRY Kalapataru Power,Kec Intl,BS Limited are major player in the industry. Comparison with its peers: Alstom

Alstom India

Kalapataru

Kec Intl

BS Limited

Total

T&D Share 51.21

67.23

Power 30.69

51.42

43.9

capital Equity

share 51.21

67.23

30.69

51.42

43.9

0

0

0

0

0

Money Preference Share 0

0

0

0

0

Capital Reserves Revaluation

1260.13 0.46

907.92 3.39

1923.48 0

1059.47 0

439.97 0

1311.80 0 216.58 216.58 1528.38 Alstom

978.54 0 0 0 978.54 Alstom India

1954.17 693.82 4.92 698.74 2652.91 Kalapataru

110.89 1460.83 0 1460.83 2571.72 Kec Intl

483.87 451.88 68.56 451.88 1004.31 BS Limited

capital Share Application

Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liability

T&D Application

Power

of

Funds: Gross Block Less:Accm-

1,212.61 525.89

872.34 475.96

919.65 345.86

961.88 237.49

311.07 93.54

Depreciation Net Block 686.72 Capital work in 70.17

396.38 49.97

573.79 18.04

724.39 12.42

217.53 2.51

Progress Investments Inventories Sundry Debtors Cash and Bank

0 49.59 964.66 716.82

383.55 543.77 1541.65 64.7

6.57 371.99 3226.57 126.13

51.09 165.24 935.94 68.09

0.01 693.2 2,147.80 81.51

34

Balance Total current 2922.51

1731.07

2150.12

3724.69

1169.27

Assets Loans

889.5

1491.60

1677.37

198.94

0 2620.57

0 3641.72

0 5402.06

0 1368.21

0 2737.77

0 1816.54

0 1793.00

0 3452..31

0 588.82

Liabilities Provisions 226.22 Total Current 2963.99

271.84 2088.38

171.2 1964.20

121.4 3573.71

46.22 635.04

Provisions Net Current 771.48

532.19

1677.52

1828.35

733.17

Assets Miscellaneous

0

0

0

0

0

Expenses Total Assets Contingent

1528.38 168.48

978.54 54.69

2652.90 219.4

2571.73 1260.9

1004.30 533.49

Liabilities Book value

51.21

145.05

127.34

43.21

11.02

and 812.96

Advances Fixed Deposits 0 Total Current 3735.47 Assets Loans and Advances Deffered Credit Current

Liabilities

and

2.9 Future of Alstom India GE will acquire Alstom’s energy assets globally for $16.7 bn, while Alstom will retain its rail transport business. Alstom has two listed entities in India with business interests in power generation and transport Alstom India and Alstom T&D (transmission and distribution). The French parent owns a 68.56 per cent stake in Alstom India and 75 per cent in Alstom T&D. In May, GE proposed aRs 2,340-crore open offer to acquire the publicly-held shares in Alstom's two India units

35

The Board of Directors of Alstom on June 21, 2014 has given its nod to the offer from General Electric (GE) to acquire the power and grid businesses of Alstom, ignoring the joint revised proposal from Siemens and Mitsubishi Heavy Industries. “The ad hoc committee of independent directors appointed by the Board on April 29, 2014 and led by Jean-Martin Folz, thoroughly reviewed, on multiple occasions, the proposed transactions. Based on the works of the committee and financial and legal advisors, the Board of Directors has unanimously decided to issue a positive recommendation of the offer from GE,” said Alstom in a press release In addition, Alstom and GE would create a 50:50 Global Nuclear and French Steam alliance, which would include the production and servicing of the Arabelle steam turbine equipment for nuclear power plants, as well as Alstom’s steam turbine equipment and servicing for applications in France. In addition, the French State would hold a preferred share giving it veto and other governance rights over issues relating to security and nuclear plant technology in France.

CHAPTER 3 RESEARCH METHODOLOGY

36

3.1 TAX DEDUCTED AT SOURCE (TDS): The study focuses on extensive study of Primary data collected from ALSTOM MESSENGER that is been updated by FIANANCE AIR SERVICE TEAM residing in Chennai. TDS is the tax amount paid by individuals on different types of income they get. As the name indicates, it is the collection of amount at the source of income itself.TDS is the most powerful mechanism to track financial transactions. Once the transaction is recorded, the seller is forced to declare it while filing returns and pay capital gains, if any Also, the government gets some part of the tax money immediately rather than at end of the year. The TDS rates are issued by the government, different rates are imposed on different revenues. The types of income which include TDSare:      

Salary paid to employees. Interest on bank deposits and bonds. Interest on Securities. Dividends. Fees for professional or technical services. Payments to contractors and sub-contractors.

Deductor who deducts the amount will give a TDS certificate to the Deductee. This certificate will be useful when filing the returns. TDS certificate displays the entire details about the tax cut.

37

The responsibility of deducting tax at source and depositing it with the government lies with the Deductor. The TDS should be deposited within a week of the end of the month in which the deduction is made. 3.1.1 PROCEDURE FOR TDS FILING: Alstom provide the following two services to its customer’s for which TDS is deducted. They are  Fees for professional or technical services (194J).  Payments to contractors and Sub-contractors (194C). Here the DEDUCTOR will be the customer and the DEDUCTEE will be ALSTOM T&D.  The tax rate for 194C is 2% and Tax rate for 194J is 10%.  Form 16A contains the latest transaction reported by the Deductor in the TDS/TCS statement.  If the seller is the Resident Indian the TDS is 1 % for the sale value of above 50 lakh and if the seller is an NRI the TDS is 20% irrespective of the sale value.  If the seller has to pay long term capital gains tax, TDS will be adjusted. The buyer has to   



give form 16A to the seller as proof of tax deducted. Through ERP tool the process of TDS certificate is processed. ERP is the Alstom’s internal tool which is called MESSENGER. There are different columns available in the tool  Customer code  TDS certificate standard gl code  TDS certificate amount  Project Code(5427pu----) Period is issuance of TDS certificate according to the quarterly basis that is from 1st April

2013 to 30th June 2013(It is the rule given by Income Tax Department).  In the summary of Payment you can see amount paid by the customer to the Alstom for the Service he got on respective dates.  Nature of payments indicates the type of service he got from Alstom.194-C indicates payments to Contractors and Sub-Contractors.  Tax rate for 194-C type of payment is 2%.  So, the tax deducted in respect of the deductee will be 2% of the total amount and that amount will be remitted in respect of deductee that is Alstom.

38

3.1.2 NATURE OF PAYMENTS OF TDS: The Following List provided the nature of payments for different TDS filling.

Section No

Description

193

Interest on Securities

194

Dividends

194A

Interests other than “ Interest on Securities”

194B

Winning from lottery or cross word puzzle

194BB

Winning from Horse Race

194C

Payments to Contractors and Sub-Contractors

194D

Insurance Commission

194E

Payments to Non-resident Sportsmen or sport associations

194EE

Payments in respect of deposits under National Savings Scheme

194F

Payments on account of repurchase of units by Mutual fund

194G

Commission ,price, etc.on sale of lottery tickets

194H

Commission on Brokerage

194I

Rent

194J

Fees for Professional or technical Services

194LA

Payments On Compensation on Acquisition of certain Immovable Property

!94LB

Income by the Way of Interest from Infrastructure Debt fund

195

Other Sums Payable to a Non-Resident

196A

Income with respect of units of Non-Residents

196B

Payments in respect of units to an Offshore fund

196D

Income of Foreign Institutional Investors from Securities

206CA

Collection at Source from Alcoholic liquor for human Consumption

206CB

Collection at Source from timber obtained under forest lease

206CE

Collection at source from any Scrap

206CH

Collection at Source from Contractors or licensee or lease on min Quarry 39

Section No 206CG

Description Collection at Source from Contractors or License or lease relating to Toll Plan

 For the issuance of the TDS certificate for the customer Alstom had a practice of sending invoice copy, Work order copy and letter for the request of issuance of TDS certificate.  Upon our calculation we found that a certain amount has been pending due to non-issuance of TDS Certificate by our customers.  If we receive the TDS document from the customer we place all details in the Alstom internal tool worked on ERP called Alstom messenger. 3.2 GOODS AND SERVICE TAX: The study focuses on extensive study of secondary data collected from various books ,National and International Journals ,government reports ,publications from various websites which focuses on various aspects of Goods and service tax. 1.GST, or Goods and Services Tax, will subsume central indirect taxes like excise duty, countervailing duty and service tax, as also state levies like value added tax, octroi and entry tax, luxury tax.

2. The final consumer will bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. 3. As a measure of support for the states, petroleum products, alcohol for human consumption and tobacco have been kept out of the purview of the GST. 4. It will have two components - Central GST levied by the Centre and State GST levied by the states. 5. However, only the Centre may levy and collect GST on supplies in the course of inter-state trade or commerce. The tax collected would be divided between the Centre and the states in a manner to be provided by parliament, on the recommendations of the GST Council.

40

7. The GST Council is to consist of the union finance minister as chairman, the union minister of state of finance and the finance minister of each state. 8. The bill proposes an additional tax not exceeding 1% on inter-state trade in goods, to be levied and collected by the Centre to compensate the states for two years, or as recommended by the GST Council, for losses resulting from implementing the GST. 3.3 ORDER AND GROSS MARGIN BOOKING: The study focuses on primary data collected from the ALSTOM T&D guiding manual. Order/Contract is a contact signed between a seller and a buyer to supply a product or set of products and/or provide a service or a set of services to a customer within a specified time, and under specified quality, price and funding conditions. Gross margin is net sales less the cost of goods sold. The gross margin reveals the amount that an entity earns from the sale of its products and services, before the deduction of any selling and administrative expenses. The figure can vary dramatically by industry. For example, a company that sells electronic downloads through a website may have an extremely high gross margin, since it does not sell any physical goods to which a cost might be assigned. Conversely, the sale of a physical product, such as an automobile, will result in a much lower gross margin. The amount of gross margin earned by a business dictates the level of funding left with which to pay for selling and administrative activities and financing costs, as well as to generate a profit. It is a key concern in the derivation of a budget, since it drives the amount of expenditures that can be made in these additional expense classifications.

41

CHAPTER 4: PROJECT PROFILE

42

OBJECTIVE -1 : TO STUDY ABOUT TDS FILING IN ALSTOM MESSENGER: PROCEDURE FOR TDS FILING IN ALSTOM MESSENGER: In the Alstom internal tool called Alstom Messenger, for example TDS certificate posting against Delhi International Airport .So in the Alstom internal Messenger tool We put Customer code (this code will be identified by the customer), TDS certificate posting GL code (standard GL code for Alstom), Project code (5427-----), TDS certificate amount, Document Number (System generated number i.e. TDS certificate amount which is collected from the customer accounting through this document number) There will be another team called FSSC (FINANCE SHARE SERVICE CENTRE) which is centralized team for final posting. This is the for not only TDS certificate, but for C-Form, Supplier Invoice, Collection etc. FINANCE SHARE SERVICE TEAM: Finance Share service team is the centralized team sitting in Chennai. They work on:       

Supplier Invoice Booking Debit, Credit Transaction Clearing Transaction DD making Transaction TDS C-Form Any issue regarding these transactions, we raise a call through our Alstom Internal Tool “MESSENGER” worked on ERP. This call directly goes to Validator. For different works there will be different Validators. For Invoicing the call goes to one validator, for TDS it

goes to another validator etc..,  TDS documents filed using “Messenger” and FSSC team will be reviewing all those documents and prepare the final document (edited) and we will check those customers who has not issued TDS Certificate .  The finance team will be sending the WORK ORDER, INVOICE and REQUEST LETTER for those customers for the issuance of TDS certificate. If Customer issue TDS certificate the finance team will put all the details in Messenger and that will be reviewed by our FASC team to prepare the final document and send back to us.

43

 Here the document consistsof Buyers Address which indicates Head Office Address and the Consignee Address indicates the place where the actual work took place.  In the description column we can see the actual work took place in the site, for example Inspection of 400kv SF6 Breaker, model: GL316 Breaker Sl.No. [email protected] 

this service, Customer paid Rs.Xamount and you can see different taxes levied on it. Service tax: The Tax levied by the Government on Service Providers on certain Service Transaction. But it is charged on customers by these Service Providers. It is charged to the individual service providers on cash basis, and to companies on accrual basis. Service tax is payable only when the value of service provided in a financial year is more than 10Lakh.This tax is not applicable in Jammu and Kashmir. Service tax before June 1 st was



12.36% but now at present it was 14% after June 1st. Education cess: It is a tax levied additionally on Basic Tax Liability. It was imposed just for meeting certain specific expenditures that is for providing sufficient schools and improving facilities in those schools. The rate was 2% of tax for Education cess and 1% tax for Higher Education cess. But this is now ineffective from June 1st because they would be subsumed in the Service Tax of 14% noted by the Central Board of Direct Taxes. Service tax was 12% and Education cess was at 3% of the basic tax for a total of 12.36%.

Difference between Form-16 and Form-16A:  There is lot of difference between Form-16 and Form-16A.Though there are lot of similarities between these two not only on name but in the origin too. Because both forms are for TDS certificate.  It is only for Employer and Employer basis i.e.., tax deducted at source from income that comes under the category named “SALARIES” which is defined in FORM 16. Form-16A is issued in TDS other than SALARIES. There are so many issues in which Form-16A is issued. 

There are Interest on dividends and securities and interest other than ‘interest on securities’.



Winning prize money from lottery, horse race, cross-words etc.



Payments made to contractors and sub-contractors, non-resident sportsman or association.



Insurance commission 44



Fees for professional or technical services



Payments in regard to the deposits made under National Savings Scheme



Income of foreign companies



Income from rent, selling of lottery tickets etc.



Payments in regards to the repurchase of units from Mutual Funds or UTI.

According to the latest news ITR (income tax returns) forms are expected to get uploaded on the income tax e-filing website as provided below.

Figure 1: web-Site of Income-Tax Department for E-filling  In case of Alstom, Form -16A is a certificate issued to a service provider by the service taker. It can be implicated to employer, employee also. Employer has to issue the form to employee. For example if a person is salaried individual,Form-16 is essential while filing tax returns .Here the service taker has to issue certificate to service provider by 31 stMay. If they delay they can be penalized.  It is the form which provides information on TAX DEDUCTED AT SOURCE (TDS). 45

 It contains two sections, in which one section contains details such as name, address, permanent account number(PAN)of Service taker and service provider., Tax deduction account number(TAN) and assessment year, i.e.., the year in which your tax liability is calculated for the income earned in the previous year are also incorporated. Further to these details it has summary of periodic TDS on income, on which it includes details on the amount of TDS, when it was cut, on what income and when it was deposited with the INCOME TAX DEPARTMENT.  The Customers who had to give TDS certificate is shown below. This data is collected from the Finance Share Service Team.  For these customers we have to send Invoice copy, Order copy and Request Letter.  This was the amount government will reimburse upon the issue of TDS certificate from the Customer. Impact of Goods and Service Tax (GST) GST will be in existence from 1 st April, 2016.Curretly Service Tax is currently levied at 14%, will be subsumed into GST. According to latest news GST rate will be pegged around 2526%.So,in the GST regime ,both the Centre and the States would levy tax on the supply of Services and the combined rate would be somewhat more than the present rate.

46

OBJECTIVE -2: TO STUDY ABOUT DOCUMENTATION ON ORDER AND GROSS MARGIN BOOKING Order/Contract is a contact signed between a seller and a buyer to supply a product or set of products and/or provide a service or a set of services to a customer within a specified time, and under specified quality, price and funding conditions. Service that we are doing is Post Warranty Services that is when the Product has been delivered we in Grid unit have to do the after maintaining services. As a part of Orders/Contract we do four activities:  We supply Spares.  We go to the site and do the Repair which is called Field Service.  When there is some new thing is coming, the required guidance to the customer for better performance and this activity is called RME(Renovation, Modernaization and Expansion)  Network Consultancy in which we give some specific support to the customer. Here we guide the customer whether they have to go Field Service or RME(Renovation, Modernaization and Expansion) Example (Recent Contracts/Orders): 

Alstom T&D India has orders worth more than RS. 10,000 crore for HVDC (High



voltage direct current) convertor transformers. Alstom T&D India has secured a Rs. 161 crore contract from Power Grid for upgrading



transmission substations at 14 sites across five Indian states So, here the customers are Power Grid Corporation OfIndia, State utilities and Private Generating Companies etc..,

Orders received are the commercial activity of the Business during the reporting period. The reporting period is nothing but the Financial Year. 

 Financial Year: Balance sheet and Income statement of companies across the globe are prepared for a



period of one year .This period is different for different States. In India It starts from 1st April and ends at 31st March. The Income Tax returns are filed and taxes for a company are usually paid in the next year after the end of the Financial

47

Year. This next year is called Assessment Year because in this year only the income is assessed to tax. They are reported as “Orders received (gross)” In TERENGA KPI which is Alstom Reporting System. The items which come under “ORDERS RECEIVED (GROSS)” are: a) b) c) d) e) f) g)

New Contracts Confirmation Of Options Scope Variation Orders Corresponding to: The second phase of the project Extension of the existing project Significant additional needs of the customer Variation of scope of work corresponding to a significant modification of the product delivered or service rendered

BOOKING PROCESS: Order booking must be recorded in the OPERATION INFORMATION SYSTEM-ALT@IS and in the Alstom Reporting system- TERENGA, in the month the contract comes into force. Alt@is: SAP Core Model – Finance. The Gross Margin associated to the order at booking stage is the “Current as Sold” margin. This Current as old margin should be updated with the Forex impact at the coming in to force of the Order During the execution of contract it is updated with :



 Price Variation orders and performance bonuses  Contract price adjustments  Foreign currency variation impacts  Penalties and liquidated damages. Alstom Grid Unit performs many projects of similar kind in which simultaneous orders booking entries in the different units are involved. So,clear and correct communication of

 

figures is key for effective & accurate accounting, forecasting and reporting. The Leading Unit (LU) will be the Grid Unit that has led the Order Process The Participating Unit (PU) will be the same Grid Unit that Participates in the execution of the contract.

48

LEADING UNIT: The responsibility of the leading unit is to lead the project at tender phase. Tender phase is nothing but a pre-construction stage of a project where a contractors services are purchased by a client to carry out the path construction work, and to plan ,manage ,monitor, coordinate control health and safety on site during the construction phase.

Figure 2: Flow Chart for tender process

This Phase includes: a) Preparation of Tender (contract) documents b) Selection and acquisition of a competent contractor c) Management of the tender process. Another responsibility of the Leading Unit is it has to coordinate the implementation of the Hedge when needed. Hedging in power contracts is nothing but “a type of contract used to establish a predetermined price that will be paid for given amount of contract regardless of what the actual market value of that Contract might be at that time. This hedging strategy should be coordinated with the Financial Controller or Project Controller belonging to the Leading unit. 49

Financial controller has to communicate to the all the units about theconfirmation of the coming into force of the order a) b) c) d) e)

Selling price of each partner(per unit and per currency) to which party (customer/partner) The month it has to be booked The Project Header The country of destination The validated Gross margin of each partner as per the tender

It is the responsibility of the Site Finance Controller/project Controller of Leading Unit to check whether the booking process is done regularly or not by the Participating Unit. So, that there is no need to rush on the last day of the month. Site finance controller also has the responsibility to put in place the correct process to ensure that all the versions of CURRENT FORECAST are properly updated in the system. Current Forecast: It is the last forecast validated in the last Project Review.it is the basis to recognize the Gross Margin on sales in the accounts. PARTICIPATING UNIT: After the instructions given by the Leading Unit, Participating unit has to book the order and the associated margin in their books. To book Participating Unit should be given Purchase order and it is the duty of Leading Unit to issue the Purchase Order promptly after coming in to force of the project. ORDERS CANCELLATION: 

In Financial Statements, the amount reported as “orders Cancellations is representative of orders or parts of orders which have been recorded in a previous financial year, but



cancelled in the current financial year. If they are recorded in the current financial year, the cancellation is netted with the initial amount recognized as “orders received ‘gross’”.

50

ORDERS ADJUSTMENTS: Order adjustments in Alstom Operating system are split in to 4 categories: a) Price variation orders and performance bonuses: There might be price adjustments in the contract value without any change in scope of work and there is a chance of issuing bonuses to the workers which are accepted by the customer. b) Contract price adjustments: Contract price adjustments represent the effects of contractual escalation clauses upon contract revenue between notification to proceed and closing date. c) Foreign Currency variation Impacts: There are currency fluctuations which are a natural outcome of floating exchange rate system that is the norm for most major economies. The exchange rate might get influenced by many factors .There might be inflation, market fluctuation, interest rate etc. So, there might be effect of foreign currency variation upon the revenues of contract denominated in foreign currency that are not hedged. As the group’s policy is to hedge all exposures above the equivalent of 100k Euro significant impact should arise from the measurement of contracts not hedged. d) Penalties and Liquidated damages: When the payment of penalties to the customer or the deduction of penalties from the customers payments are considered as probable, the order value has to be decreased by the expected amount of Penalties and the LD amount booked in Risk Analysis impact must be released. BUDGET ZERO: It is the forecast validated at the handover of the contract from the sales team to Project Team.IT must be validated by two teams and any deviation between as sold and Budget Zero must be documented and explained.

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OBJECTIVE 3 : TO STUDY ABOUT GST( GOODS AND SERVICE TAX): GST AROUND THE GLOBE:  

The first country to adopt GST is France in 1954 There are two types of GST systems. They are Dual and Unified. Large number of countries are following Unified GST System. Canada and Brazil follow a Dual System

 

where GST is levied by both ,Union and State Bodies There are more than 160 Countries around the world that are following GST/VAT New Country that is entering in to GST regime is Malaysia(last month)

52



The rates costs very high in Europe and Some parts in Africa .Generally in Countries around Asia –Pacific have low GST. For Example in Hungary it is 27%,Gambia it is 40%.The average rates in Asia Pacific Countries is around 10%.

Countries Implementing GST : N

Region

No.of

o

Countrie

1 2 3 4 5 6 7

s 7 19 53 7 44 11 19

ASEAN ASIA EUROPE OCEANIA AFRICA SOUTH AMERICA CARIBBEAN,CENT RAL AND NORTH

AMERICA 2) GST IN INDIA: For 14 years now we have been told by successive governments that goods and service tax will be a Game changer that will transform the economy, boost the GDP growth like no other reform has ever done .The long road to gst is already 4 years past the first dead line and much work remains both on bringing all states together on revenue model as well as the constitutional amendments that need to be passed in the parliament and 50% of state assemblies as well. GST:   

It simplifies the tax system GST tries to widen the tax base In the process of doing above things it automatically brings tax rates down

Three things GST is going to do: It is going to tax every economic activity at every stage of production at the same rate .For example you are the producer of steel and I produce spoons using that steel.For example you produce 100 /- worth of steel and I will convert that steel in to spoon.So, I pay 100 to the

53

producer of steel and additional 10rs as tax(say for example) so a total of 110 was paid to you and I add another 100 rs value to 110 rswoth so total it was 210 and again it was taxed 10% I..e..,21 rs we have to remember one point that I added a value of converting that steel in to spoon only 100 rs worth but the tax I ended up paying 21 rs So gst tries to do eliminate this different taxation at different stages of production .i get the 110 rs worth but what happens is I have rebatted the tax that I pay to you .so the net cost of steel is 100rs because that 10 rs which ill pay to you will be rebatted to me,wn I sbmitt my taxation.i added 100 rs worth of value for which 21rs tax I have paid but in that 10% is going to be rebatted.it is not only simplification but also effieciency improvement. True flawless GST would actually bring in all goods and all services rebating at every stage ,and every stage of production and get taxed at the same rate.

3) GST JORNEY: IN 2008:FEB 2008:Hon’ble Finance Minister announced introduction of GST from 1st April 2010 APRIL 2008: Empowered committee finalized reviews over GST and submitted report titled “A model and Road map for GST for India” IN2009: JULY 2009: FM announced commitment to introduce GST from 1st April 2010 NOV 2009: First discussion paper released by Empowered Committee(EC) 54

DEC 2009: Task force constituted by EC released its report IN 2010: FEB2010: Mentioned inn the speech of the Finance Minister GST to be introduced in April 2011 IN 2011: March 2011:The constitution 115th Amendment Bill introduced in LOKSABHA for levy of GST on all goods and services accept for the specified goods.Here constitution amendment is required because in India Federal system of tax operates where as central government and state government has to levy taxes.Centre has no right to levy tax on sale of goods and State has no right to levy tax on services. IN 2012: MARCH 2012:Drafting of model legislation for centre and state GST in concert with states under progress IN 2013: Four committees constituted by Empowered Committee of state finance ministers to deal with various aspects of work relating to the introduction of GST IN 2014: DEC 2014: The constitution 122nd amendment bill tabled in Loksabha ;Bill Passed on 6th May 2015 in Loksabha IN 2016: Proposed date for introduction of GST. 4) Existing Indirect taxes and Short comings:(Need For GST): Firstly everyone believes that Indian Indirect Tax system is complex.

55

TAX Cascading: Different Governments levy taxes which are not set up against each other and the tax base of the tax levied earlier is enquired in the value for charging the by the next level. Uncertainty in determining the nature of transaction: In many case especially Software industry we can find in law that vendors charging both Vat and Service tax on the sale of software

Lack of uniformity in provisions and in rates: 29 states have 29 different VAT laws.They have no harmonized schedule of commodities and rates .After 2005 rates have been narrowed down but still their aroused a situation where same commodity is taxed at different rate at different states Inefficiencies in tax administration and higher compliance costs: Because of the multiple taxation which were levied by centre and state there is inefficiency in tax administration which leads inevitably increase in the compliance costs.

5)Advantages of GST:  

Abolition of multiple types of taxes on goods and services Reduces effective rates of taxes to one or two floor rates. If CGST (Central Goods and service tax) and SGST(State Goods and Service Tax) the government will allow to levy band of rates for example if SGST rate is fixed at 12.5% then there will be band of rates

 

between 12.5% and 14% that states will be allowed to charge. Reduces compliance cost and increases voluntary compliance Removes Cascading effect of taxation and also distortion in the economy .There will



competitive edge for the Indian Goods and Services Enhances manufacturing and distribution efficiency, reduces cost of production of Goods



And Services ,Increase Demand, and production of Goods and Services. Gives competitive edge in international market 56

  

Lays rest to the need for the distinction of goods and services Reduces distortions by completely switching to the destination principle Facilitates investments decisions being made on purely economic concerns, independent

  

of tax considerations Expected to spur growth The GST implementation increased the Canadian GDP by 1.4%. In India, a similar kind of positive impact is expected .This means that gains of about 15 Billion Dollars annually. Discounting these flows to the modest 3% per annum, the present value of the GST works out to about half a trillion dollars

6) Improvements in Tax structure and administration: Over the past several years, significant progress has been made to improve the indirect tax structure, broaden the base and rationalize the rates to pave way for GST. 

Firstly there was a replacement of single point sales tax by VAT. The single point sales tax is levied on the first point of sale of goods or the last point of sale. But now it was



levied on each stage. The central sales tax which was levied when goods were sold from one state to another was originally used to charge at 4% but now it was brought down to 2%.When GST is



introduced it will be completely failed out Substantial expansion of service tax base by introduction of negative list regime of service tax i.e..,all the services which are other than those in the negative list will be

 

liable to service tax Introduction of place of provisions of services ,rules 2012 Electronic registration, payment and filling of VAT returns is prevailing now in not only central taxes but state taxes also.

7) Structure of GST: 

India is going to implement Dual GST Structure that comprises of Central GST which will consume all taxes which were levied under Central indirect taxes and State GST



that consumes all indirect taxes which were levied under State Indirect taxes. Once GST gets implemented we will have simple tax system that every transaction of goods and services if it happens with in a state for example if the transaction is 100/you would have over this 100/- two taxes one the central GST assume the rate to be 57

10% and assume state GST 10% we will have central GST and state GST applied on the transaction value but in the current system state tax is levied on transaction value      

and central tax GST-A destination based consumption tax on goods and services Both CGST and SGST to apply on supply on Goods and/or services CGST payable to central and SGST payable to state Cross-utilization of credits between CGST and SGST are not permitted Inter-state transaction to be covered under integrated GST(IGST)model IGST is nothing but sum of central GST and State GST .In the above example 20%



tax is levied by the central and pass on the state share of the consuming state. GST rate are not yet agreed by the centre and state governments ,while in 2010 -11 the central government proposed a total GST rate of 20% to start with which would



come down to 16% over the period of three years. Recent survey by Finance Body stated the GST rate should be 27%.But it is not



agreed by the Finance Minister The rate is going to be 20%+1%or2% .

8) Taxes to be submitted in GST

58

Note:  

Alcoholic beverages for human consumption are proposed to keep out of purview of GS. GST on petroleum products would be levied from a notified date recommended by the GST council. 59



Include Excise duty levied under Medicinal

and Toilet preparations (Excise

duty)Act,1955

9) Set off methodology and Formulation:  

Central GST and State GST are expected to be treated separately. The credit availed of central GST paid on Goods and Service received is expected to be

 

utilized only against the payment of central GST. The same principle is going to hold for state GST also. Cross utilization of input tax credit between the Central GST and the State GST would not be allowed.

Formulation of GST council: 

The president shall form the Goods and Service Tax council within 60 days from the date



of commencement of the constitution. Every decision of the GST council will be required to be taken at a meeting, by a

 

majority of not less than ¾ of the weighted votes of the members present and voting The vote of central government shall have a weightage of 1/3 of total votes cast The votes of all state governments taken together shall have a weightage of 2/3 of total

  

votes cast in that meeting 10) Roles and responsibilities of GST council: The GST council shall make recommendations to the union and states on: The taxes, cesses, and surcharge levied by the union ,the states and the local bodies which

 

may be subsumed in GST The goods and services that may be subjected to, or exempted from GST Model GST law, principles of levy, apportionment of IGST and the principle that govern



the place of supply The threshold limit of turnover below which goods and services may be exempted from GST. 60

  

  

The rate including floor rates with bands of GST. Any special rate or rates for a specified period, to raise additional resources during any natural calamity or DISASTER. Special provision with respect to states of o Arunachal Pradesh o Assam o Jammu and Kashmir o Manipur o Meghalaya o Mizoram o Nagaland o Sikkim o Tripura o Uttarakhand o Himachal Pradesh Any other matter relating to GST as the council may decide. Additional tax on interstate trade in goods: To compensate origin or manufacturing states ,center would levy taxes an additional 1% of tax over and above the IGST on supply of goods in the course of inter-state

    

transactions for a period of two years The GST council may recommend to extend the above period of levy The additional tax would be origin based ,and not destination based As per finance ministry press note credit of this additional tax would not be available Power to exempt goods from levy of such taxes shall be with Government of India Principles to determine the place of origin from where supply of goods takes place in the

 

course of inter-state trade will be formulated by the Parliament IT infrastructure Under GST: Goods and Service tax Network Special purpose vehicle (GSTN-SPV) has been set up to



create enabling environment for smooth introduction of GST GSTN-SPV will provide IT infrastructure and services to various stake holders including



the Centre and the States Strategic control over GSTN-SPV has been ensured with the Government due to the sensitivity of the role of GSTN-SPV and the information which would be available with



it GSTN-SPV has been incorporated as a not-for-profit ,non-government ,private limited company with 49%equity held by the Government and 51%equity held by the non-



government institutions. Roles and Responsibilities:61



GSTN-SPV would provide common PAN-based registration ,enable returns filing and



payments processing for all states on a shared platform Ensure integration of common GST portal with the existing tax administration systems of

  

the central/state governments and other stake holders Build efficient and convenient interfaces with tax payers to increase tax compliance Carry out research ,study best practices and provide training to the stake holders GSTN-SPV would earn its revenue by levying user charges on tax payers and tax authorities for availing its services

Potential Implications on different sectors: Manufacturing Sector: Sr.No Issue 1 Procurement

Present Scenario GST scenario  Inputs are purchased inter-state at a Set-of of IGST

2

paid should be concessional rate of 2% (CST)  No set-off is available of CST paid available  CST becomes a cost Excise duty is levied if new commodity comes in The taxable event

Manufacture

to existence

would

change

from manufacture to supply there by eliminating

the

separate 3

Distribution

incidence of tax. Manufacturers/dealers align their supply chains IGST to be paid to tax considerations and establish multiple on stocking points in distribution network

stock

transfer

,higher

No tax on stock transfer expect retention of working

capital

portion of VAT credit

needs The

distribution

framework would require a revisit -2%CST Vs 1% additional tax 62

Service sector: Sr.No 1

Issue Goods Service

Present Scenario GST Scenario Vs The distinction between Goods and Service Taxation is expected becomes important as centre can tax only to

become

simpler

services and states can tax only sale of provided goods and goods 2

Taxation Base

service

carry

same

rate of tax In case of certain works contracts (AMC The taxation base is contract)the aggregate of taxation base for expected to remain the purpose of VAT and Service tax exceeds below or equal to

3

Tax on Tax

10%

100%of

Vat on Service tax ?

value CGST and SGST are

-AMC software

levied only on the supply

4

Tax Rate

value

of

goods/services The tax rate has been stable at 12.36% now The combined

rate

proposed it to be increased to 14%/16%

5

Registration

transaction

CGST+SGST

is

expected

be

to

substantially higher The service tax law provided for centralized Multiple registrations registration

based on place of supply may necessary

Traders: Sr.no 1

Issue Present Scenario GST scenario Recovery of taxes paid on goods  Traders are not able Ability to recover all and services

to take credit of taxes paid on Goods service 

taxes

on and

additional tax at 1% service Procured Passing on of Excise duties paid

63

services,barring

on goods traded in in

or

that

of

countervailing duties

paid

on

import,is 2

Ware housing

cumbersome The location is determined Efficiencies in supply based

on

the

preferred chain –cost to serve

location for sale

levels to determine the shocking points and levels.

Post GST:

64

Why states are opposed to this: Biggest concern for the states is revenues. One of the things that people talk about is Central sales tax which are the major source of revenue for the states. If goods were sold on other states than manufacturing state can say that tax that can be collected is my tax, So often when the goods cross the border they will be checked and tax collected. So once you go to the VAT as it is charged at destination and it is happening in the other state .So, some states may lose revenue .The duty of central government is to collect it and give back to you but state are saying that how they can be assured that correct amount will be coming in to their treasury.

65

CHAPTER 5 FINDINGS & RECOMENDATION

TAXDEDUCTED AT SOURCE (TDS): Where the original TDS certificate is lost, the employee can approach the employer for issue of a duplicate TDS certificate. The employer may issue a duplicate cetificate on a plain paper giving the necessary details as contained in Form No. 16 (Relevant Rule-31(4)). However such a certificate has to be certified as duplicate by the deductor. Further the assessing officer before giving credit of the tax on basis of duplicate certificate is required to get payment certified from the assessing officer concerned and also obtain an indemnity bond from the assessee employee. In case of excess deduction of tax at source, claim of refund of such excess TDS can be made by the deductor. The excess amount is refundable as per procedure laid down for refund of TDS.

66

The difference between the actual payment made by the deductor and the tax deducted at source or deductible, whichever is more will be treated as the excess payment made. This amount is to be first adjusted against any existing tax liability under any of the Direct Tax Acts. After meeting such liability, the balance amount is to be refunded.

GOODS AND SERVICE TAX: For companies, the immediate challenge would be the integration of GST into their operations. Companies must now assess the impact of GST on their operations and pricing strategies. Although the mechanics of GST are relatively straightforward (that is output tax less than input tax), the challenge is in the details as companies must also consider the capability of their IT systems to cope with the demands of GST, the need to educate employees and customers as well as the impact on employee benefits. The Board of Directors must also be extra careful to ensure that pricing strategies are accurately modeled as a wrong decision could impact the company's performance.

RECOMANDATIONS: ALSTOM T&D is operating both services and manufacturing ,GST plays a major role in its operation. ALSTOM T&D MANUFACTURING:  In present scenario Inputs are purchased inter-state at a concessional rate of 2% (CST),but when GST comes in to picture Integrated Goods and Service tax will be coming in to existence  Presently Manufacturers(ALSTOM T&D) align their supply chains to tax considerations and establish multiple stocking points in distribution network. No tax on stock transfer expect retention of portion of VAT credit,but in GST- IGST 67

to be paid on stock transfer ,higher working capital needs.The distribution framework would require a revisit -2%CST Vs 1% additional tax ALSTOM T&D SERVICE:  Network Consultancy in which we give some specific support to the customer. Here we guide the customer whether they have to go Field Service or RME(Renovation, Modernization and Expansion)  The distinction between Goods and Service becomes important as centre can tax only services and states can tax only sale of goods but in GST Taxation is expected to become simpler provided goods and service carry same rate of tax  In case of certain works contracts (AMC contract)the aggregate of taxation base for the purpose of VAT and Service tax exceeds 10%,but in GST The taxation base is expected to remain below or equal to 100%of transaction value.  The tax rate has been stable at 12.36% now proposed it to be increased to 14%/16% but in GST the combined rate CGST+SGST is expected to be substantially higher

CONCLUSION:

 So,GST being the gamechanger it is going to simplify tax system and it will widen the tax base.In this process it is going to bring the tax rates down which will increase the profitability of the company.A part from the company point of view In India, a similar kind of positive impact is expected .This means that gains of about 15 Billion Dollars annually. Discounting these flows to the modest 3% per annum, the present value of the GST works out to about half a trillion dollars .

68

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