|Despite the various reforms carried out in the past few years, the prevailing Indirect Tax regime in India is still in a state of evolution. The system is quite complex, with multi-layered levies both at the Central and State level.
In India, indirect taxes encompass every area of an Indian business. Generally, any transaction, whether in goods or services, attracts various indirect taxes. Indirect taxes are usually borne by the final consumer. Therefore, if a business entity fails to anticipate the applicability of an indirect tax and does not recover the same from its customer it becomes a cost to the entity and is a direct hit on the bottom line. Consequently, indirect taxes have a direct bearing on the costs, pricing policy, cash flows and profitability and ultimately the competitiveness of an organization. Hence, it becomes critical to evaluate the impact of various indirect taxes on any given transaction.
Presently in India, services attract service tax, manufacturing attracts excise duty, imports attract customs duty and sale of goods attract sales tax (value added tax). Service tax, excise duty and customs duty are levied by the Central Government and the value added tax is levied by the State Government.
The existing regime requires businesses to undertake careful upfront analysis of the tax costs involved in a transaction¸ ensure adequate backup documentation to support their tax positions and constantly explore opportunities for tax optimization. Further, as India is committed to move towards uniform Goods and Services Tax (GST) regime by July 2017, this needs to be factored in any significant tax approach developed at present.
PM ASSOCIATES Team of indirect taxes, with their wide-ranging experience and in-depth knowledge help clients in all of these aspects. The Firm provides advisory services in respect of GST, Value Added Tax (VAT)/Sales tax, Service tax, Custom and Excise duties and Foreign Trade Policy-related matters. The firm also assists its clients in making representations before the revenue authorities for obtaining tax concessions, reliefs and seeking clarifications at the respective Departments.