Audit & Accounts

1. In central excise, SSI units are units who are availing or eligible for availing SSI exemption up to 1.5 corers of its current year turnover as such unit turnover in the previous year does not exceed Rs. 4 corers. - required to file return in ER-3 format this is a returns of production, clearances and payment of excise duty
2. All other units are regular units - required to file return in ER-1 .
3. ER-6 is a monthly report relating to monthly return of receipt and consumption of each of Principal Inputs. Which is filed by those units whose duty payment in the current financial year going to be one corer or more and, such unit too required to file ER-5 information about principal inputs of an assesses and is filed in beginning of the financial year on or before 30th April.

4. Assesses who is required to submit ER-5 is also required to submit monthly return of receipt and consumption of each of Principal Inputs in form ER-6 to Superintendent of Central Excise by tenth of following month

5. Only those assesses who are required to submit ER-5 return are required to submit ER-6 return and such unit in most cases don’t fall under SSI hence they file ER-1.


SSI UNIT

Under Excise Govt. has given various concession to SSI unit to encourage their growth.SSI whose turnover was less than 4 CROR in previous year is a SSI in the next year.
They have option:-
First:- Up to 1.50 CROR turnover don’t pay excise duty as exempted just like income tax where if your income is Rs.2, 50,000/- you don’t need to pay tax. Excess over 1.50 corer turnover excise is payable.
Excise duty paid on Input good used for the production of Rs.1.50 CR turnover is not deductible.
Hence use this formula (Input Credit/Total Turnover)*1.50 CR and deduct this amount from “Input Tax Credit”.
Second Option:- Ignore the exemption of Rs.1.50 corers and pay same case VAT.
(Output*Excise duty Less Input credit till date.

Query:
We are calculating the Excise duty on basis of MRP less abatement 35% and we are selling the material less than MRP Rate.
In this case we are booking this invoice as
Rs. 77,794/- Rebate and discount will do any impact in tax liability.
and Same we are showing in balance sheet in P&L a/c and total amt is 89 lacs in FY 2013-2014 even this company is going in loss? Please provide your inputs.

Ans: Lets go through the below example I think your query will get solve. Discount to customer does not affect the excise duty liability.

Section 4A of Central Excise Act, 1944 provides special procedure for valuation of certain goods
on which MRP is maladroitly required to be printed.

1. Under the provision of Section 4A, central government prescribes the rate of rebate(Which in your case as per your mail is 35%. (You can too read notification for your knowledge) See notification no. 02/2006 CE(NT) dated 1/3/2006.

The procedure of valuation of calculation of central excise duty may be understood with the following
Example:
MRP is affixed on product "X" is Rs. 100/-.
Rate of Rebate is % in terms of notification no. 2/2006 (IN YOUR CASE 35%).
Rate of Excise Duty is 12% and Cess 3% (2% + 1%).
Rate of Sales Tax (VAT) is 3%.

Let Whole sale price of the product is Rs. 50 (even you sale the goods at Zero you have to paye the below calculated excise duty) with duties of excise and local taxes .
Now for the purpose of Excise duty the following steps should be taken:
1
MRP
Rs. 100
2
Less Rebate @ 35%
Rs. 35
3
Value on excise duty to be paid
Rs. 65 (value for excise)
4
Amount of Excise Duty of Rs. 65 @ 12.36%
Rs. 8.034

a. Basic Excise Duty @ 12% = Rs. 7.80
b. Education Cess @ 2% = Rs. 0.156 (7.80*2%)
c. SH Education Cess @ 1% = Rs. 0.078 (7.80*1%)

5
For the purpose of calculation of excise duty - actual sale price to be ignored.
6
Local taxes like sales tax shall be ignored
7
Any discount whether quantity discount / volume discount or performance discount shall be ignored
8
All other adjustments prescribed under section 4 shall be ignored as your company has opted MRP based valuation for excise duty.
9.
Provisions of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 shall be ignored (AS IT WILL NOT APPLICABLE IN YOUR CASE REASON VALUATION IS BASED ON MRP.

Query. # # We are paying freight to transport co and we are not utilized the credit of service tax or not paid 25% service tax under reverse charge mechanism. Please confirm is this rule applicable for mfg co?

Ans: Service tax on freight paid on goods/raw material etc. used for manufacturing the finished goods is eligible for input credit this does not fall under reverse charge mechanism.
# # # But in case of Goods sold by your company to your customer:
Service tax paid on freight is to be deposited by your company under reverse charge mechanism e. Aur ye payment (Output Tax –Input tax) se nahi hoga…you have to pay (Output tax-0) in the case of reverse charge mechanism.

2 Query. # # Kya freight ka 25% service tax pay karne ke liye service tax registration no lena parega ?

Ans: Yes,
Registration under service tax is required to be obtained by a Person who is liable to pay service tax.

3 Query. # # # Agar ham kisi party ko sale pe rebate and discount de rahe and duty pay kar rahe hai actual amt pe. Same we are showing in balance sheet in P&L a/c and total amt is 89 laces.
Kya ispe koi tax liability banti hai ?

Ans: Yes,

On manufacturing of goods we need to pay excise duty and selling of the same good we need to pay sale tax on sales value i.e. on invoice value.

Duty is payable on transaction value.

XYZ Dr. 100

To, Sales a/c 100

Rebate/discount Dr. 20

To, xyz 20



In this case excise is payble on Rs.100 and sales tax on (100+excise)

Or



Invoice value (100 less 20)=Rs.80



Xyz dr. 80

To, sales A/c 80



In this case excise is payable on rs 80 and sales tax is on (80+excise)