taxes relevant to transportation

7/30/2019 Taxes relevant to Transportation

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Taxes Relevant to

Transportation-Opportunities and

Challenges

BY:Akshay Heble 2012 D11

Prateek Aggarwal 2012 C39Richa Shukla 2012 D55


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Types of transportation Road

Rail

Water

Air

Pipeline


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CST:

Central sales tax(CST) is collected for trading of goods between two different statesor if the buyer and seller are from different states.

GST:

The Goods and Services Tax is a value added tax to be implemented in India. It willreplace all indirect taxes levied on goods and services by the central and stategovernment.

LBT:

Taxes on the entry of goods into a local area for consumption, use or sale therein.

OCTROI:

A local tax collected on various articles brought into district for consumption.

LST:

Local sales tax (LST) is collected from trading of goods within states.

VAT :

Terms


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Taxation on Rail Government provides only the driver and the engine

rest tankers have to be arranged by the company

itself.

Presently, only transport of goods in containers issubject to tax

Transportation of petroleum products, agriculture

produce, foodstuff, fertilisers, postal mail, relief

material etc. by vessel is not taxable.

Abatement Service tax is payable on 30% of

value on all goods transported by rail w.e.f. 1-10-

2012.


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Taxation on Road Road transportation is subjected to myriad levies/taxes (both central andstate).

Taxes and non taxes charges on road sector:

Taxes On The Vehicle Purchase:

Sales Tax/VAT Levied By The States,

Registration And Transfer Fees, Licence/Permit Fees,

Periodical Vehicle Tax (Also Called Road Tax).

Tolls,

Parking Fees,

Octroi,

Entry Tax ,

Lease Tax, And

LBT


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Taxation on Road Essentially the checks made at border posts aim to

ensure that:

Taxes in the State of destination paid on the goods

being carried

Trucks not overloaded

Trucks being operated safely

Trucks carrying valid papers.


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Taxation acts Laws Governing Access Control to National Highways

National Highways Act, 1956

National Highways Rules, 1957

The National Highways Authority of India, 1988

National Highways (Land and Traffic) Act, 2002

Highways Administration Rules, 2003. 26

Laws Governing Inter-State movement of goods

Central Sales Tax Act, 1956

Various State Sales Act

Various Local/Municipal Acts governing Octroi and Entry Tax

Laws Governing Inter-state movement of Vehicles

MV Act, 1988

The CMV Rules, 1989 (Amended in 1994, 2000 and in 2002)

Various State MVs Act, 1989


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Taxation on water Sea freight for goods from outside India to first customs station of clearance in

India is not taxable

Sea freight for goods from going outside the country is not taxable, since theplace of Provision of Service is outside India.

Ships or vessels less then 15 tones are not taxable

Service Tax is only payable when goods are transported from one port to another

in India.

Service Tax equivalent to 10% of the value of the services and Education cessequivalent to 2% of the service tax and Secondary and Higher Education cess

equivalent ot 1% of the service tax is payable.

Exemption - Transportation of petroleum products, agriculture produce, foodstuff,fertilizers, postal mail, relief material etc. by vessel within India is not taxable

Transport of goods by inland waterways is not taxable


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Taxation on Air Air freight for transport of goods from outside India

to first customs station of clearance in India is not

taxable.

Air freight for transport of goods sent outside fromIndia is not taxable, since per rule 10 of Place of

Provision of Service Rules, Place of Provision of

Service is outside India.

Air transport of goods within India is taxable.


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Taxation on Pipeline Transportation of goods, other than water, through

pipeline or conduit is generally employed to

transport petroleum and other petroleum products,

natural gas, LPG, chemicals, coal slurry and other

similar products.

The service tax is of 2% of the contract.


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Challenges A complicated and multi-layered tax regime is in place

which places several challenges on the logistics industry.

Sales taxes differ from state to state meaning significantdiseconomies of scale for trans-state logistics service

providers.

Inventory and distribution decisions are based on taxavoidance rather than operational efficiency. Accordingly,most manufacturers maintain warehouses in differentstates to evidence movement of goods from one

warehouse to another to save on the CST

This leads to higher movement of goods leading to anoffsetting of the gains.


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Challenges This leads to locking-up of high capital in inventory

The holding cost is also more due to increase in the

number of stores.

Considerable loss of time in transit for road freight inorder to pay such taxes

There is a disincentive to create large integrated

and modern warehouses.

Fees levied by carry-and-forward agents (CFAs) area burden. Access to credit continues to be a

challenge.


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Opportunities Under GST, the taxation burden will be divided equitably

between manufacturing and services, through a lowertax rate by increasing the tax base and minimizingexemptions.

Taxes like octroi, CENVAT, central sales tax, state salestax, entry tax, license fees, turnover tax etc will no longerbe present and all that will be brought under the GST.

GST is expected to unleash plethora of opportunities for

organized players.

The post-GST regime is in fact likely to offer many moreunseen opportunities for unorganized players to tieup/collaborate with established players.


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Opportunities The introduction of the GST in its current form is set to benefit

cash flow.

Physical working capital costs are likely to decrease as GST wouldbe paid at the time of sale or supply and not at the time ofmanufacture.

The GST is expected to do away with excise duty on manufacturing.

The GST will make management of cash flow much more efficient.

The GST would ensure equivalent taxes across all the states inIndia.

It will help create a tax neutral supply chain.

Efficiency of SCM will depend on the cost minimization of thefollowing costs.

Carrying and forwarding agency costs

Ware house fixed and variable costs

Depot fixed and variable costs


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Thank you

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