11TH ANNEXURE TO COST AUDIT REPORT – RECONCILIATION OF INDIRECT TAXES

This annexure is to be prepared for the Company as a whole and not for factory-wise, product wise, chapter heading-wise etc. All Products of the company attracting excise duty/service tax/VAT or any other state taxes is required to be considered for this annexure.

Figures under this annexure are to be given for one year only. Since the word “Assessable value” is applicable under the Excise Act, therefore it is suggested that the column “Assessable Value should be filled corresponding to excise duty only.

In case of service tax, cess & others and VAT, gross amount need not be shown, only the tax amount should be shown under the respective column.

11. Reconciliation of Indirect Taxes (Company as a whole)

Sr. No	Particulars	Assessable Value	Excise Duty	Service Tax	Cess & Others	VAT	Total
1	Total Clearances
1(a)	Domestic
1(b)	Export
1(c)	Stock Transfers (Net)
1(d)	Others, if any
1(e)	Total
2	Duties / Taxes Payable
3	Duties/Taxes Paid
3(a)	Cenvat/VAT Credit Utilised -Inputs
3(b)	Cenvat/VAT Credit Utilised –Capital Goods
3(c)	Cenvat/VAT Credit Utilised –Inputs Services
3(d)	Cenvat/VAT Credit Utilised –Others
3(e)	Total
3(f)	Paid through PLA/Cash
3(g)	Total/Duties /Taxes Paid
4	Duties/Taxes Recovered
5	Difference between Duties / Taxes Paid and Recovered
6	Interest / Penalty / Fines Paid

1.     Total Clearances – The word “clearances” includes the clearances of goods by way of domestic sales, export sales, (including SEZ sales), transfer to other units/factories of the same manufacturer, free supplies, stock transfers to the warehouses, depots or C&F agents, clearances 100% EOU, clearances of raw materials or capital goods as such, clearances of used capital goods, clearances of traded goods etc. where the intermediate products are cleared for outside sale/dispatch as well as consumed captively by the manufacturer, separate details are required to be furnished in such cases.

The Word “clearances” also includes the total services provided domestically and for export purpose, services received as a recipient of services from the Foreign Services provider, services provided to EOU, services provided to sister units/concerns situated within /outside India etc.

The value shown here should necessarily be the assessable value of goods/services.

These clearances can be tallied with Monthly ER-1 Return (Excise), Annual Financial Information Statement in ER-4 (Excise), Half Yearly ST-3 Return (Service Tax), Monthly/Annual MVAT Returns.

a.       Domestic :- The Value of the domestic clearances from factory include the clearances for local sale, inter state sale and clearances relating to captive consumption, clearances of raw material or capital goods as such, clearances of used capital goods, clearances of traded goods.

The word “domestic clearances” also includes the services provided to a local service recipient as service provider and recipient, services provided to a service recipient situated outside the state as a service provider and recipient and services provided to sister units/concerns situated within India.

b.      Stock Transfer (Net):- The value of the clearances relating to stock transfers include the clearances to depots/branches of the unit situated within/outside the state, transfers to the units/factories of the same manufacturer situated within/outside the state, stock transfers to the warehouses, depots or C&F agents etc. situated within/outside the state.

c.       Others, if any: - The clearances of goods and services not falling under any of the above sub-heads will fall under this head.

d.      Total: - It is the sum total of 1(a) + 1(b) + 1(c) + 1(d

2.     Total Duties/Taxes Payable – Excise duty payable will consist of clearances of goods for local sale, inter state sale, clearances relating to captive to captive consumption, clearances to depots/branches, clearances to other units for further use in manufacture of goods, stock transfers to warehouses & C&F agents, free issues, duty paid on clearances of inputs/capital goods as such, used capital goods, duty paid or reversed on account of manufacture of dutiable and exempted goods, duty paid on export under rebate, etc.

Service tax payable will consist of the services provided to the service recipient situated within / outside the state as service provider or service recipient, services provided to the sister units / concerns situated within / outside India, services received from the services provider situated outside India as a service recipient, tax paid or reversed on account of provision of dutiable and exempted services, etc.

Cess & Others payable will consist of the various cesses and other taxes leviable under the respective laws viz. education cess, secondary and higher education cess, other cesses and taxes, etc; levied by the same state or the other state.

VAT payable will consist of the value added tax levied and payable within the state for all the clearances taken place locally i.e. within the state or the intra state sale. This will specifically exclude the sales or clearances made to other states i.e. outside the state or inter state sale.

3.     Duties / Taxes Paid – It includes Cenvat/VAT credit utilized on inputs, capital goods, input services and other utilization , if any.

a.      Cenvat / VAT Credit Utilised – Inputs: - It refers to utilization of Cenvat credit or VAT credit on the inputs received in the factory.

The figure of Cenvat Credit on inputs can be tallied and taken from the Cenvat register maintained by the company (earlier known as RG23A Pt. II). Further, the figure of VAT Credit on inputs can be tallied and taken from the VAT register maintained by the company.

b.      Cenvat/VAT Credit Utilised – Capital Goods: - It refers to the utilization of Cenvat credit or VAT credit on the capital goods received in the factory.

The figure of Cenvat Credit on capital goods can be tallied and taken from the Cenvat register maintained by the company (earlier known as RG23c Pt. II). Further, the figure of VAT Credit on capital goods can be tallied and taken from the VAT register maintained by the company.

c.       Cenvat/VAT Credit Utilised – Input Services: - It refers to the utilization of Cenvat credit or VAT credit on the input services availed by the company. The figure of Cenvat Credit on input services can be tallied and taken from the Cenvat register maintained by the company (earlier known as RG23c Pt. II).  

d.      Cenvat/VAT Credit Utilised- Others: - It refers to the utilization of Cenvat credit or VAT credit, if any, from the items other than those mentioned above.

e.      Total: - This refers to the total of Cenvat/VAT Credit utilized on Inputs, Capital Goods, Input Services and others, if any. It is a sum total of 3(a) + 3(b) + 3(c) + 3(d).

f.        Paid through PLA/Cash :- This refers to the payment of Excise Duty, Service Tax, Cess& Others and VAT through debit in PLA account or deposit in to the PLA account or payment to the bank account by way of cheque or cash through the GAR-7 Challan or the challan for making the payment of VAT.

g.      Total Duties/Taxes Paid:- It will be a sum total of excise duty, service tax, VAT, Cess & Other taxes paid through PLA / Cash plus utilization of Cenvat Credit. It is the sum total of 3(e) +3(f).

4.     Duties/Taxes Recovered – It should be taken from Books of Account of the Company. It is necessary that the gross turnover or the gross billings should be duly accounted under various heads such as net sales, excise duty, sales tax, service tax, etc.

5.     Difference between Duties/Taxes Paid and Recovered – This refer to the amount of total duties/taxes paid and recovered. This may not match due to the following reasons –

                                                              i.      Excise duty element in stock of excise duty paid goods at depots, branches, and warehouse or with C&F agents. :- Here , the goods lying at depots, etc are duty paid goods wherein the goods have not been sold to the customers. Hence, the duty has not been recovered from the customers.

                                                            ii.      Excise duty/sales tax paid on free issues, samples, where the taxes the taxes are not the recovered from customers.

                                                          iii.      Services provided by the exporter on payment of service tax.

                                                          iv.      Excise duty /sales tax / Service tax / cess and other payments arising out of Order-in-Original or Order in Appeal, etc.

The amount of difference should be stated item wise viz. Excise Duty, Service Tax, Cess & Others and VAT.

It is the difference between 3(g) minus 4

6.     Interest/Penalty/Fines Paid – The fines, penalties, interest etc are not a payment of Excise Duty, Service Tax, Cess & Others and VAT. However, sometimes it is paid through PLA or Cash (Deposit in to the bank account by way of cheque or cash through challan) under the separate code as specified in the challan. In these circumstances, the amount should be identified and shown separately. This amount can be tallied from Monthly ER-1 Returns (Excise), Annual Financial Information Statement in ER-4 (Excise), Half Yearly ST-3 Return (Service Tax) and Monthly/Annual MVAT Return.

7.     Summary – The information required under this annexure will be very useful and help the companies to reconcile the Indirect Tax Records and the financial books. It will also help to minimize the litigation under the Indirect tax laws.

The information under this annexure will also be useful in the case of Valuation Audit under Section 14A and Cenvat Audit under Section 14AA of the Central Excise Act, 1944.

In case of EA 2000 Audits, CERA Audits, VAT Audits etc. similar information is invariably asked by the Auditors.

Annexure 11 (Reconciliation of Indirect Taxes) to the Cost Audit Report represents the information pertaining to various indirect tax laws for the Company as a whole viz. Excise Duty, Service Tax, Cess & Others and VAT. Hence, this annexure helps the companies in viewing the total picture of indirect taxes at a glance.

Sources : Journal “The Management Accountant”

New Service Tax Law w.e.f 01.07.2012

New Service Tax Law w.e.f. 01-07-2012

The Key Features of New System of Taxation are:

1. At the outset ‘service’ has been defined in clause (44) of section 65B of the Finance Act 2012.
2. Section 66B specifies the charge of service tax which is essentially that service tax shall be levied on all services provided or agreed to be provided in a taxable territory, other than services specified in the negative list.
3. The negative list of services is contained in section 66D of the Act.
4. Since provision of service in the taxable territory is an important ingredient of taxability, section 66C empowers the Central Government to make rules for determination of place of provision of service. Under these provisions the Place of Provision of Services Rules, 2012 have been made.
5. To remove some ambiguities certain activities have been specifically defined by description as services and are referred as Declared Services (listed in section 66E)
6. In addition to the services specified in the negative list, certain exemptions have been given. Most of the exemption has been consolidated in a single mega exemption for ease of reference.
7. Principles have been laid down in section 66F of the Act for interpretations wherever services have to be treated differently for any reason and also for determining the taxability of bundled services.
8. The System of valuation of services for levy of service tax and of availment and utilization of Cenvat Credits essentially remains the same with only incidental changes required for the new system of taxation.

WHAT IS SERVICE?

‘Service’ has been defined in clause (44) of the new section 65B and means –

Ø  Any activity

Ø  For consideration

Ø  Carried out by a person for another

Ø  And includes a declared service.

‘Service’ does not include-

Ø  Any activity that constitutes only a transfer in title of (i) goods or (ii) immovable properly by way of sale, gift or in any other manner (iii) a transfer, delivery or supply of goods which is deemed to be a sale of goods within the meaning of clause (29A) of Article 366 of the Constitution.

Ø  A transaction only in (i) money or (ii) actionable claim

Ø  A service provided by an employee to an employer in the course of the employment.

Ø  A service provided by an employee to an employer in the course of the employment.

Ø  Fees payable to a court or a tribunal set up under a law for the time being in force.

Check List to determine whether you are providing a “Service”

S. No.	Question	Answer
1.	Am I doing an activity (including, but not limited to, an activity specified in section 65E of the Act) for another person?	YES
2.	Am I doing such activity for a consideration?	YES
3.	Does this activity consist only of transfer of title in goods or immovable property by way of sale, gift or in any other manner?	NO
4.	Does this activity constitute only transfer, delivery or supply of goods which is deemed to be a sale of goods within the meaning of clause (29A) of Article 366 of the Constitution?	NO
5.	Does this activity consist only of a transaction in money or actionable claim?	NO
6.	Is the consideration for the activity in the nature of a service provided by an employee of such person in the course of employment?	NO
7.	Is such an activity in the nature of a service provided by an employee of such person in the course of employment?	NO
8.	Is the activity covered in any of the categories specified in Explanation 1 or Explanation 2 to clause (44) of section 65B of the Act.	NO

NOTE: If the answer to above questions is as per the answers indicated in ‘Answer’ column of the table above then YOU ARE PROVIDING A SERVICE.

Check List to determine whether service provided by you is “Taxable Service”:

S. No.	Question	Answer
1.	Have I provided or have I agreed to provide the service?	YES
2.	Have I provided or agreed to provide the service in the taxable territory?	YES
3.	Is this activity entirely covered in any of the services described in the negative list of services specified in section 66D of the Act?	NO

NOTE: If the answer to above questions is as per the answers indicated in ‘Answer’ column of the table above then YOU ARE PROVIDING A TAXABLE SERVICE.

source : Taxman's Service Tax  Book

Employees' Deposit Linked Insurance Scheme

EMPLOYEES’ BENEFIT SCHEMES - PART-3/3

Among various employees’ benefit schemes, Employees Provident Fund, Pension Fund and Deposit Linked Insurance Schemes are recognized as effective tools for making adequate financial provision to the employees in two contingencies Premature Death, while in service and Compulsory Retirement. The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter called the Act), which is umbrella legislation and ensures social security measures for the betterment of employees of the organized sector.

EMPLOYEES’ DEPOSIT LINKED INSURANCE SCHEME

Employees’ Deposit Insurance Scheme, 1976 (in short EDLI Scheme) is in the nature of an insurance scheme and is applicable to all establishments to whom Provident Fund and Miscellaneous Provisions Act, 1952 is applicable. The amount of insurance benefit is equal to the average balance in account of the deceased member in the Provident Fund during the last 12 months before his death, or during the period of membership, whichever is less. The benefit will be in accordance with age of the member and the contribution made by the employer on behalf of the deceased member, subject to ceiling of Rs. 1, 30,000. The amount is payable to the nominee of the member in the form of deposit in his/her saving bank account. 

ADMINISTRATION

The Central Board of Trustee constituted under the Provident Fund Scheme, 1952 is responsible for the administration of the EDLI Scheme. Since the Government has a financial stake in the Scheme and contributes towards the administration cost of the Scheme, it takes keen interest and monitors the administration of Scheme to see that the same is administered in an efficacious manner. The Regional PF Commissioners are responsible for speedy settlement of claims received by them.

MEMBERSHIP

The Scheme applies to all employees who-

i)             Are covered by the EPF Scheme, 1952 and

ii)            Would have been covered by the said scheme but for paragraph 27 of the Employees’ Provident Fund Scheme or the exemption granted to the establishment in which he is employed under Section 17 the Act.

CONTRIBUTIONS

a)   Contribution by Employer:

                      i.        At the rate of 0.50% of wage bill towards insurance premium.

                     ii.        One-fourth of the insurance premium towards administration of the Scheme.

b)   Contribution by the Central Government:

          The Central Government shall contribute towards the expenses, a sum equivalent to one-half of the contribution made by the employer.

The contribution of employer and the Central Government shall be credited by the respective Regional Provident Fund Commissioners to an account called the ‘Deposit Linked Insurance Account’ and all expenses to the cost of any benefit provided by the Scheme be met out of this account. The monies belonging to this account shall be invested in a manner prescribed in the rules relating to the Scheme.

EXEMPTION

Under Section 17 (2A) of the Act, an employer may seek exemption from making contribution to EDLI Scheme, if he/she provides the better insurance benefits to his/her employees than those provided by the Scheme. For this purpose, he/she may submit application to the Central Government seeking exemption from contributing to EDLI. The Central Government, after being satisfied that the Scheme of insurance offered by the employer is better than EDLI Scheme, may grant exemption. After obtaining exemption, the employer may resort to the alternative scheme in lieu of EDLI Scheme. Almost all insurance companies offer better group insurance schemes in lieu of EDLI Scheme.

Source: Student Company Secretary