A

Project Report on

Direct and Indirect taxes

By

Manish Verma

MBA 1st Year

Board of Directors

At the helm of the entire operations is the experience and able direction of the people who make it all happen. Ranbaxy acknowledges their inspiring stewardship and indefatigable work.

Dr. Tsutomu UneChairman

Non Executive & Non Independent

Director

Mr. Arun SawhneyManaging Director

Mr. Takashi ShodaNon Executive &Non Independent

Director

Dr. Anthony H. WildIndependent Director

Mr. Rajesh V. ShahIndependent Director

Mr. Akhiro Watanabe

Independent Director

Mr. Percy K. ShroffIndependent Director

Introduction

Ranbaxy Laboratories Limited, India's largest pharmaceutical company, is an

integrated, research based, international pharmaceutical company, producing a wide range of quality, affordable generic medicines, trusted by healthcare professionals and patients across geographies. Ranked 8th amongst the global generic pharmaceutical companies, Ranbaxy today has a presence in 23 of the top 25 pharmaceutical markets of the world. The Company has a global footprint in 49 countries, world-class manufacturing facilities in 11 countries and serves customers in over 125 countries.

Ranbaxy was incorporated in 1961 and went public in 1973. For the year2008, the Company recorded Global Sales of US $ 1,682 Mn, reflecting a growthof 4%. The Company has a balanced mix of revenues from emerging anddeveloped markets that contribute 54% and 39% respectively. In 2008, NorthAmerica, the Company’s largest market contributed sales of US $ 449 Mn,followed by Europe garnering US $ 330 Mn. Business in Asia has been goingstrong with India clocking sales of around US $ 300 Mn with market leadership inseveral business segments, backed by strong brand-building skills.

In June 2008, Ranbaxy entered into an alliance with one of the largest Japanese innovator companies, Daiichi Sankyo Company Ltd., to create an innovator and generic pharmaceutical powerhouse. The combined entity now ranks among the top 15 pharmaceutical companies, globally. The transformational deal will place Ranbaxy in a higher growth trajectory and it will emerge stronger in terms of its global reach and in its capabilities in drug development and manufacturing.

Company profile

Ranbaxy Laboratories Ltd. is the largest pharmaceutical company in Indiaand one of the world’s top 100 pharmaceutical companies. Ranbaxy isspecialist in the preparation of generic drugs; Ranbaxy is also one of theworld top 10 in that pharmaceutical category as well, with India'sagreement to apply international patent law at the beginning of 2005,Ranbaxy has begun converting itself into a full-fledged research-based pharmaceutical company. A major part of this effort has been theestablishment of the company's own research and development center,which has enabled the company to begin to enter the new chemical entitiesNCE) and novel drug delivery systems (NDDS) markets. In November 2008, Daiichi Sankyo completed the acquisition of 63.92%shares of Ranbaxy and in the process infused. The coming together of Ranbaxyand Daiichi Sankyo is a path-breaking confluence that, in one sweep, catapults thenew, empowered entity to the status of the world's 15th largest pharmaceutical Company. Individually, the two pharmaceutical giants are formidable - one, India's

largest generics Company and the other, among the largest innovator companies inJapan.

Ranbaxy is a truly global operation, producing its pharmaceutical preparations inmanufacturing facilities in seven countries, supported by sales and marketingsubsidiaries in 44 countries, reaching more than 100 countries throughout theworld. The United States, which alone accounts for nearly half of allpharmaceutical sales in the world, is the company's largest international market,representing more than 40 percent of group sales. In Europe, the company'spurchase of RPG (Aventis) S.A. makes it the largest generics producer in thatmarket. The company is also a leading generics producer in the United Kingdomand Germany and elsewhere in Europe. European sales added 16 percent to thecompany's sales in 2004. Ranbaxy's other major markets include Brazil, Russia,and China, as well as India, which together added 26 percent to the group's sales.

Vision & Mission

The Indian pharmaceutical industry is at the center stage in the globalPharmaceutical arena and Ranbaxy is at the forefront in delivering the India centricadvantages to the advanced and developing countries of the world.

The Endeavour at Ranbaxy is to provide value. Value through pioneering work, research & development and quality pharmaceuticals across the globe. Ranbaxy keeps alive this Endeavour as it steps into the new millennium, and reaffirms its commitment to the environment, the people and a healthier future.

Ranbaxy Laboratories Limited has excelled in its endeavor in drug research and manufacture, providing quality products not only at par with global markets but also facilitating the same. Ranbaxy are committed to provide quality generics at affordable prices to thepatients worldwide with a view to help bring down the healthcare costs.Companies grow from strength to strength in the global generic space in the yearsto come. While the company continues to enhance the momentum of genericsbusiness in over 125 markets, they are also accelerating drug discovery programthrough collaborations and alliances.

Ranbaxy is driven by its vision to achieve significant business in proprietaryprescription products by 2012 with a strong presence in developed markets. TheCompany aspires to be amongst the Top 5 global generic players and aims atachieving global sales of US $5 Bn by 2012.

Company Strategies

For the year 2009, Ranbaxy has a clear strategy to harness its growth potential inemerging markets, rebuild the US business through a series of actions on productsand facilities; actualize significant revenue upsides through First-to-File and Day-1 launches strengthen the product / therapeutic pipeline and look for M&Aopportunities, complementing our geographic and therapeutic basket. Our focuswill be to resolve regulatory compliance issues and continue to strengthen cGMPacross all locations. Besides this, Ranbaxy and Daiichi Sankyo will identify keyprojects to realize synergies at both the front and back ends of the business,although, there will be much to contend with, considering that the industry isprojected to grow at around 5% in 2009.

Ranbaxy is focused on increasing the momentum in the generics business in its key marketsthrough organic and inorganic growth routes. The Company continues to evaluate acquisitionopportunities in India, emerging and developed markets to strengthen its business andcompetitiveness. Growth is well spread across geographies with focus on emerging markets.Ranbaxy has forayed into new specialty therapeutic segments like Bio-similars, Oncology,Peptides and Limuses. These new growth areas will add significant depth to the existing productpipeline.

Company Growth Consolidated net sales at Rs. 18,884 Mn, a growth of 14% (USD 431 Mn). Emerging markets portfolio achieves sales of Rs. 10,644 Mn, with a strong

growth of 20%; accounts for 56% of sales (USD 243 Mn). Developed markets sales grew by 9% to Rs. 7,089 Mn (USD 162 Mn); accounts for 38% of sales. Earnings before Interest, Tax, Depreciation & Amortization (EBITDA) for

the quarter are Rs. 1,440 Mn (8%). EBITDA for the year to date is Rs. 7,253 Mn reflecting a margin to sales of 14%. Gross margin on year to date basis maintained at 51% despite adverse

economic conditions this year. Over the current year there has been a consistent improvement in Working

Capital management with a result that the Company’s Gross Working Capital has reduced by 5%.

Competitors

The pharmaceutical industry is characterized by rapid advances in scientificknowledge and ability to discover new drugs. The industry is therefore led by largemanufacturers and marketers of drugs investing heavily in research &development,

having clinical testing, marketing and distributing capabilities. Some of the maincompetitors of Ranbaxy are:

•

Sun Pharmaceuticals Industries - It is No. 1 in India in specialty therapy

areas like psychiatry, neurology, cardiology, gastroenterology, diabetologyand respiratory.[.It has brands in 30 markets worldwide and also has ageneric presence in the U.S. with Caraco Pharm Labs, Sun PharmaceuticalIndustries Inc

•

Cipla - Cipla is a leader in the domestic retail pharmaceutical market. It also exports raw materials, intermediates, prescription drugs, over-the-counter products, and veterinary products to some 180 countries around the world. •

Glaxo smith Kline- It is one of the oldest pharma companies in India and

with a turnover of Rs. 1500 crore is one of the market leaders(market share)in India with a share of 6.2 per cent Its main portfolios consists of anti-invectives, dermatologicals and pain management drugs

•

Dr.Reddy’s Laboratories It is a global pharmaceutical company with it's headquarters in India and a presence in more than 100 countries. In India it the biggest drug maker by sales. Other competitors areActavis,Sandoz International GmbH; Teva

pharmaceuticals,RPG Enterprises, , East India Pharmaceutical Works Ltd, Concept Pharmaceuticals Ltd, Khandelwal Laboratories Ltd, Dabur India Ltd.

Life at Ranbaxy

A career at Ranbaxy means an opportunity for ample learning & growth. It 0ffersavenues to work across the globe along side the finest minds. The companyoffers a challenging assignment, a world class working environment,professional management, competitive salaries and stock options alongwith exceptional rewards.Opportunities

The global spread of Ranbaxy and the blazing growth in business provides ample opportunities for employees to build careers in various fields. Opportunities have never been a constraint for the deserving. The company believes in employee growth that goes beyond vertical movements and change in designations. Potential and performance are the pillars of career progression at Ranbaxy. A robust development process supports this. Managers will generally have the opportunity to live and work in different countries; such international experience will help them better understand our complex business and grow both personally and professionally

Salary and Benefits

Salaries and other benefits in Ranbaxy are comparable with the best in the industry and one can expect to be rewarded highly if the performance is consistently outstanding.

Group Life Insurance, Medical Insurance and Pension plans are a few examples of the benefits we provide to our employees and their dependents with adequate financial protection on long term basis.

Stock ownership

The ownership in business is fundamental to personal progression,company encourage you to take ownership of your investment

stock ownership is a part of the compensation for managers early in their careerat Ranbaxy you will see the business results straight in your pay slip.

Value and Activities

Corporate Social Responsibility (CSR)

As a global leader in pharmaceuticals Ranbaxy take pride not only in providingproducts that enable people to live healthier and fuller lives, but also in giving backto the society. At Ranbaxy, Corporate Social Responsibility and concern forEnvironment, Health and Safety are a part of the corporate DNA.Reaching out tothe underserved rural communities and helping them overcome their challenges iscentral to Ranbaxy's CSR philosophy.

Environment

As a socially responsible company, Ranbaxy has made an enduring commitment toconsistently set new benchmarks in environmental protection and workplace. TheCompany is also deeply aware of its responsibility to deploy clean and greentechnologies that help in providing a sustainable environment. This further buildsupon the already significant bond of trust and concern that it warmly shares withthe communities located in and around its operating facilities.

The Environmental Management System (EMS) at key API manufacturing facilities at Toansa and Mohali, in Punjab, went through the annual surveillance audit, by a leading external verifying agency both manufacturing facilitiesconformed to all audit specifications and continued to remain ISO14001 complaint.Notable progress was made towards achieving the defined environmentalobjectives, programs and long-term goals. For further improving the wastewatermanagement, an Agitated Thin Film Dryer and Plate type Ultra Filtration wereadded as incremental safeguards, at the Toansa API facility.

Health

Company always strives to make a meaningful impact on the quality of their livesby bringing preventive, promotive and curative healthcare services to theirdoorstep. Nearly three decades ago in 1979, Ranbaxy started its health careinitiatives in certain identified rural areas of Punjab. As the reach of the programgrew, the Ranbaxy Community Health Care Society (RCHS) was established in1994. A novel idea of providing mobile health care outreach service for the poorand underprivileged was initiated. The program today benefits nearly 2 lakh peoplein 77 rural and urban slum areas in Punjab, Haryana, Himachal Pradesh, MadhyaPradesh and Delhi. Today, six well equipped mobile health care vans with teams ofmedics and paramedics are actively engaged in the delivery of health care to ourtarget population in these states. The issues addressed include maternal-childhealth, family planning, reproductive health, adolescent health, health educationand AIDS awareness.

Safety

It is constant endeavour to scale up and better safety practices. A number ofinitiatives were undertaken to enhance workplace safety. The emergencypreparedness was ensured through regular tabletop exercises and mock drills at allour manufacturing facilities and R&D centres. At Toansa manufacturing facility,the 'Fire and Safety Risk Assessment' and the 'Hazardous Area Classification' wasreviewed by third party specialists. The National Safety Council also conductedexternal safety audits at Toansa and Mohali. A crossfunctional team of CorporateEHS, Engineering and Facility professionals along with an external specialist

further undertook external safety audits at the Corporate Office. Extensive safety

training programs were also conducted by internal and external specialists at all

manufacturing facilities, including those managed by contract.

EXECUTIVE SUMMARY

I,Manish Verma student of GRAPHIC ERA UNIVERSITY, Dehradun,

have completed summer training as a part of MBA programme of 45 days at

Ranbaxy laboratories limited Paonta sahib.

I have completed my training at finance department. My area of work was on

direct and indirect taxes .I undertook a unique, step-by-step methodology for

preparation of the report. Reference books, Ranbaxy internal portal, website

really help me to make this report valuable.

In this report first I have given the general information regarding the company.

It includes the history of company; its disinvestments, milestones, board of

directors, quality policy, financial position of the company, and the products.

In the second part, I have focused on my core project regarding the direct and

indirect taxes at Ranbaxy. In the end, the conclusion and the bibliography are

given. The report totally depends on the secondary data and it may be possible

that the data from which the report is made may not appear in the report

because some data is confidential for the company.

Manish Verma

DECLARATION

I,Manish Verma, hereby declare that the report on “Summer

Training” entitled “Direct and Indirect taxes” is a result of

my own work and my indebtedness to other work

publications, if any, have been duly acknowledged.

Place: Paonta Sahib

Date: 14/08/2011 ManishVerma

TDS

&

TCS

What is TDS?

TDS is Tax Deducted At Source.

When an employee is drawing a salary of Rs. 1,50,000, his employer is liable to deduct TDS (read Income Tax) on his salary part above Rs. 1,50,000 once the employee claims all his/her savings done through LIC, Insurance schemes, PPF, Children School Fees, EPF, House Loans etc.

At the end of the year, the employer issue TDS Certificate in the form 16A which employee submit with the Income Tax Return to the Income Tax department while filing ITR.

Assesses pays tax in the assessment year on income earned in previous year. Due to this rule the tax collection is delayed till the completion of the previous year. Even sometimes people conceal their income and the tax is not paid at all. In order to overcome these problems, government started to deduct some amount of tax from the amount which is receivable by the assessee. The amount of tax so deducted is called as "Tax Deducted At Source" or TDS in India.

AdvanceTax In some cases, the assessee is required to make a payment of advance tax. Such taxes paid in advance are called prepaid taxes.

Tax deduction is mainly done to reduce ones taxable income. In a way tax deductions can reduce the taxable income and thus provide tax relief.

Tax deducted in this manner needs to be deposited in the Government treasury and assigned to the Central Government, within a stipulated time period. Indian Government is adhering to the policy of TDS to broaden its tax bracket in the country. Income gained through several sources falls under the tax deduction at source or TDS scheme. Some of such income that is subjected

Salary. Interest. Rental fee. Interest on Securities. Insurance commission. Dividends from shares and UTI/Mutual Funds.

Commission and brokerage. Prize money won from lotteries, horse races, etc. Payments to non-resident sportsmen or sports associations. Commission on sale of lottery tickets. Fees for professional and technical services and the like. Compensation for compulsory acquisition. Income from units of an offshore fund. Income from foreign currency bonds or shares of Indian Companies

(unless specified as tax-free).

TDS rates for Financial Year 2010-11

Male Female Senior CitizenTax (%)

 For Income Between 0 to 1,60,000

 For Income Between 0 to 1,90,000

 For Income Between 0 to 2,40,000 0

 For Income Between 1,60,001 to 5,00,000

 For Income Between 1,90,001 to 5,00,000

 For Income Between 2,40,001 to 5,00,000

10

 For Income Between 5,00,001 to 8,00,000

 For Income Between 5,00,001 to 8,00,000

 For Income Between 5,00,001 to 8,00,000

20

 For Income above 8,00,001

 For Income above 8,00,001

 For Income above 8,00,001

30

     

Surcharge   0

Education Cess   3

For Example:--

If salary of an employee is 20,000 p.m. then 1,60,000 will be exempted from tax and his remaining salary i.e. 80,000 will be taxable.

2,40,000

- 1,60,000

80,000

TDS should be paid in 7th of the next month, If TDS is paid after 7th then interest will be charged, TDS certificate is issued to employee on quarterly basis, TDS is deducted either, At the time of payment or At the time of credit {whichever is earlier}

How to record journal entry for TDS on salary on quarterly basis?

DateParticular Lf

noDebit(Rs)

Credit(Rs)

1 Salary A/C. . . .. Dr 30,000

To TDS A/C 5,000

To salary payable A/C 25,000

(Due entry)

2 TDS A/C…. Dr 5,000

Salary payable A/C…. Dr 25,000

To Bank A/C 30,000

(Payment entry)

What is TCS?TCS is tax collected at source. When company sells its scrap then it collects tax from vendor it is TCS.

For Example

If company sells its scrap worth Rs 1oo and if TCS is 1% then company will collect Rs101 from vendor,

100 (Sale)

+ 1 (TCS)

101 (collected from vendor)

TCS is not collected on all scrap it depends on different products.

e-Payment

Income Tax DepartmentTax Applicable*(Tax Deducted/Collected At Source From)

(0020)COMPANY DEDUCTEES

(0021)NON-COMPANY DEDUCTEES

 

Challan No./

ITNS

281

Tax Deduction Account No*

Assessment Year*

Full Name*    

Flat/Door/BlockNo.

Name of premises/Building/ Village

Road/Street/Lane Area/Locality

City/District* State*

Pin Code *  

Email ID

Mobile No.  

Type Of Payment*

(200)TDS/TCS Payable by Taxpayer (400)TDS/TCS Regular

Assessment (Raised by I.T. Deptt.)

Nature Of Payment*

Bank Name*

Assessment Year

State

6CE - Scrap

Bank Name

SERVICE TAX

What is service tax?

The scheme of the taxation in India for long concentrated only taxation of goods whether it was excise duty or customs duty.

Only marginally the states used to levy some cess / surcharge etc. on water or electricity.

But the union government was constrained in the nineties to look for scope for taxation of service as the requirements of revenue for meeting various expenditure of the government.

Services are necessary adjunct to any distribution of goods primarily. Even otherwise there are many services which have no link with the manufacture / distribution of goods.

But services have a positive nexus with the growth and development the economy.

Roughly over 50% of the contribution to GDP in India comes from the service sector.

The Tax Reforms Committees recommended for the first time tax on services primarily as a measure of broadening the base of indirect taxes.

Even the expert group on Taxation of services constituted by the Government of India recommended that there should be a revenue generating tax reform & service sector was stated to be the engine if economic growth in number of growing economics.

List of the services:-

Sl. no. Nature of services Effective date1. Stock broker 1-7-19942. Telephone connection 1-7-19943. General insurance 1-7-19944. Paging service 1-11-1996

5. Advertising agency 1-11-19966. Courier service 1-11-19967. Consulting engineers 7-7-19978. Customs house agents 15-6-19979. Steamer agent 15-6-199710. Clearing and forwarding including consignment

agent16-7-1997

11. Manpower recruitment agency 7-7-199712. Air travel agency 1-7-199713. Mandap keeper 1-7-199714. Tour operator 1-9-199715 Rent-a-cub operator 16-7-199716 Architects 16-10-199817 Interior decorators 16-10-199818 Management consultants 16-10-199819 Practicing chartered accountants 16-10-199820 Practicing cost accountants 16-10-199821 Practicing company secretaries 16-10-199822 Real estate agents/ real estate consultants 16-10-199823 Credit rating agencies 16-10-199824 Private security agencies 16-10-199825 Market research agencies 16-10-199826 Underwriting agencies 16-10-199827 Photography services 16-7-200128 Convention services 16-7-200129 Scientific and technical consultancy services 16-7-200130 Consulting services 16-7-200131 On-line information and data-based access 16-7-200132 Insurance auxiliary service 16-7-200133 Authorized service stations of motor car 16-7-200134 Broadcasting services 16-7-200135 Sound recording 16-7-200136 Leased circuit 16-7-200137 Port services 16-7-200138 Telex services 16-7-200139 Facsimile services 16-7-200140 Video tape production agency 16-7-200141 Telegraph services 16-7-200142 Banking and other financial services 16-7-200143 Beauty parlors relating to beauty treatment 16-8-200244 Cable operators 16-8-200245 Cargo handling excluding service provided in 16-8-2002

relation to export cargo and passenger baggage46 Storage and warehouse 16-8-200247 Event management 16-8-200248 Fashion designing 16-8-200249 Rail travel agent 16-8-200250 Dry cleaning service 16-8-200251 Life insurance including insurance auxiliary

services relating thereto16-8-2002

52 Banking and financial service provided by a body corporate other than a banking company, including non-baking financial services

16-8-2002

53 Commercial training or coaching services 1-7-200354 Technical testing and analysis and technical

inspection and certification1-7-2003

55 Commissioning and installation service 1-7-200356 Maintenance and repair services 1-7-200357 Business auxiliary services 1-7-200358 Internet cafes 1-7-200359 Franchise services 1-7-200360 Repair if light motor vehicles by authorized

service stations1-7-2003

61 Forex brokers 1-7-200362 Business exhibition service 10-9-200463 Airport services 10-9-200464 Goods transport agency 10-9-200465 Transport of goods by air 10-9-200466 Survey and exploration of mineral 10-9-200467 Opinion poll services 10-9-200468 Intellectual property services other than copy

right10-9-2004

69 Forward contract services 10-9-200470 Pandal or shamiana service 10-9-200471 Outdoor catering services 10-9-200472 TV and radio program production 10-9-200473 Construction, repair, alteration or similar services

in respect of commercial building and civil structure

10-9-2004

74 Travel agents 10-9-200475 Transport of goods through pipeline or other

conduit16-6-2005

76 Site preparation and clearance, excavation, earth moving and demolition services

16-6-2005

77 Dredging services of rivers, ports, harbors and backwater

16-6-2005

78 Survey and map making other than by government

16-6-2005

79 Cleaning services other than in relation to agriculture

16-6-2005

80 Membership of clubs or association 16-6-200581 Packing services 16-6-200582 Mailing list compilation and mailing 16-6-200583 Construction of residential complexes having

more than 12 residential houses 16-6-2005

84 Registrar to an issue 1-5-200685 Share transfer agent 1-5-200686 Automated teller machine operations or

management 1-5-2006

87 Recovery agent 1-5-200688 Sale of space or time for advertisement, other

than in print media1-5-2006

89 Sponsorship services provided to any body corporate

1-5-2006

90 Transport of passengers embarking on international journey by air other than in economy class

1-5-2006

91 Transport of goods on containers by rail provided by any person other than government

1-5-2006

92 Business support services 1-5-200693 Auctioneer’s services other than in relation to

auction of property under direction of a court of law

1-5-2006

94 Public relation service 1-5-200695 Ship management services 1-5-200696 Internet telephony services 1-5-200697 Transport of persons by cruise ship 1-5-200698 Credit card, debit card or other card related

services1-5-2006

99 Services in relation to the execution of woks contracts

1-6-2007

100 Renting of immovable property for use in the course of business

1-6-2007

101 Services in relation to the execution of works contracts

1-6-2007

102 Development and supply of content service for 1-6-2007

use of telecom service providers103 Asset management including portfolio

management and all forms of fund management1-6-2007

104 Design services 1-6-2007105 Telecommunication services 1-6-2007106 Services provided in relation to information

technology software for use in business 16-5-2008

107 Services provided in relation to management of investment under VLIP scheme

16-5-2008

108 Services provided by recognized stock exchange in relation to securities

16-5-2008

109 Services provide by commodity exchanges in relation to sale or purchase of any goods

16-5-2008

110 Services provided by a processing and clearing house in relation to securities / goods / forward contracts

16-5-2008

111 Services provided in relation to supply of tangible goods without transferring right of possession and effective control of goods

16-5-2008

112 Internet telecommunication services 16-5-2008113 Transport of good through rail 1-9-2009114 Transport of coastal goods, gods transported

through inland water / national waterways1-9-2009

115 Legal consultancy services 1-9-2009116 Cosmetic and plastic surgery services 1-9-2009

REGISTRATION

Single Service Multiple Service

One Premise Multiple Service One Premises Multiple Service

Centralized Independent Single Multiple CentralizedIndependent

A/C & A/C & Brand Brands A/C & A/C & Billing Billing Name Names Billing Billing

Single Centralized Independent Single Multiple Centralized Independent

Reg. Reg. Reg. Reg. Reg. Reg. Reg.

PROCEDURE FOR REGSTRATION OF SERVICE TAX:-

1. FORM: the application should be submitted in form no ST-1.

2. TIME LIMIT: WITHIN THE 30 DAYS FROM THE DATE ON WHICH-

a. service tax is levied, orb. Business is commenced, whichever is later.

3. SUBMISSION: the application should be submitted to the Superintendent of Central Excise or such other person notified by the Central Government having jurisdiction over the place of business of the service provider.

4. DOCUMENT TO BE ENCLOSED:

GENERAL CENRALISED REGISTRATION

a) Proof of address.b) Copy of Permanent

Account Number (PAN) card or PAN allotment letter.

c) Articles of association and memorandum of association (for companies).

d) Copy of partnership deed (for partnership firms).

e) In case of professionals like CA’s, CS, etc. who are members of professional institutes and have been granted certificate of practice, a copy of such certificate may also be attached.

f) Extract of board resolution authorizing any of the directors / employees of the company to sign, deal and comply with service tax provisions.

a) Residential address of the proprietors / partners.

b) Name and address of the “authorized signatory”

c) Address and telephone nos. of the premises / office where centralized accounting / billing is being carried out.

d) Proof of address of the premises / office sought to be centrally registered.

e) PAN / TAN No. of the assesses.

f) Whether the application is on the basis of Centralized billing or centralized accounting system.

g) List of taxable services / services to be rendered.

h) List of branches, offices or premises of the assesses along with postal addresses, e-mail addresses and telephone numbers.

i) Information whether recoveries are affected through credit / debit notes.

j) previous year’s audited balance sheet, if any

k) Reasons for seeking centralized registration.

5. Certificate Of Registration:a) The Jurisdictional Superintendent of Central Excise, after due

verification of the application, will issue the certificate of registration in FORM ST-2 within 7 days from the date of receipt of the application.

b) If the registration certificate is not granted within 7 days, the registration applied shall be deemed to have been granted. [Rules 4(5)].

c) Where the application for registration submitted by the assesses contains more than one taxable service, the Certificate of registration shall also indicate details of all taxable services provided by him.

What is service tax code number:-

1. SCT is a 15 digit alpha numerical code obtained by the service provider on an application made to Jurisdictional Superintendent of the central excise.

2. It is a combination of Permanent Account number (PAN) + alpha code (ST) + Numeric code Example: AABCC5588K-ST-001.

3. SCT code will be allotted within 3 working days from the date of application in the prescribed format by the Assistant Commissioner / Deputy Commissioner.

4. It is mandatory to quote the STC number on all documents relating to service tax.

5. In respect of e-filling of service tax returns, STC is referred to as STP code without which e-filling is not possible.

Checklist for validation of vendor service tax invoice:-

Sr. No.

Particular

1 Pre printed / computer generated / typed serial No. and date. Invoice serial number should not contain any alpha-prefix/alpha-suffix, e.g. 113-

A, 1134-A/1. It should be purely numerical.2 Name, address and the registration no. of the service provider3 The name and address of the person/company receiving taxable service.4 Description and category of taxable service provided.5 Value of taxable service provided, with abatements applicable, if any,

with relevant notification No. and date / declaration, for the same.6 Rate of the service tax and amount payable.7 Rate of Education cess / SHE cess & amounts payable [ should be shown

separately]8 Bill should be raised from the office of the service provider for which

service tax registration is obtained.9 Corrections in the bill / invoice / challan, if any, should be made neatly

under the signature of a person who has signed the invoice. Use of correction fluid is not permitted.

10 Location / plant where service is rendered need to be indicated. 11 Copy of existing service tax registration certificate of the service

provider must be on our record. (and fresh copy of registration to be demanded in case of addition of a new service category)

12 It is noticed that many service providers are raising bills claiming abatement for the rate of service tax. claim of abatement warrants certain declaration in the service provider’s invoice stating that specified credit have not been availed by them,

13 Invoice need to be original copy on Letter Head of service provider if invoices are not pre-printed. Invoice on plain paper is not a valid document.

14 Period of service to be mentioned in the invoice. It should be a month of from to date or quarterly, half yearly, yearly, as the case may be.

Journal entries of service tax (Example)Sr. no. Particular Debit

(Rs.)Credit(Rs.)

1 When the service received:-

Professional service a/c…………………………………………………………………. Dr. To Provision for liabilities for service a/c………………………………..

100100

2. Provision for liabilities for service a/c……………………………………………. Dr. To vendor a/c………………………………………………………………………… To TDS a/c………………………………………………………………………………

1009010

3 Service tax receivable a/c………………………………………………………….... Dr.Education cess receivable a/c……………………………………………………... Dr.Secondary and higher secondary education cess receivable a/c……. Dr. To vendor a/c…………………………………………………………………………… To TDS liabilities a/c (10%)………………………………………………………..

10.2.1

9.271.03

4 Vendor a/c……………………………………………………………………………..……… Dr. To bank a/c………………………………………………………………………………

99.2799.27

5 TDS liabilities a/c……………………………………………………………………………. Dr. To bank a/c………………………………………………………………………………….

1.031.03

Excise Duty

CENTRAL EXCISE DUTY-1944

INTRODUCTION

An excise or excise tax (sometimes called an excise duty) is a type of taxCharged on goods produced within the country (as opposed to customsDuties charged on goods from outside the country). It is a tax on theManufacture of excisable good.Typical examples of excise duties are taxes on tobacco, alcohol andGasoline.

Definition

The New Oxford English Dictionary says the same thing: "a tax levied onCertain goods and commodities produced or sold within a countryAnd on licenses granted for certain activities

APPLICABILITY OF EXCISE DUTYAs per section 3 of Central Excise Act (CEA) excise duty is levied if: -

If There is a good,1. Goods must be moveable2. Goods are marketable3. Goods are mentioned in the central excise tariff act (CETA).

Goods are manufactured in India. Therefore we can say that excise duty is not levied on:

1) Services such as doctors treating the patients, accountants preparingThe accounts, in these cases service tax are levied.

2) Immovable goods such as roads, bridges and buildings.

3) Non-Marketable goods, i.e., goods for which no market exists, e.g.Melted iron ore at 1600 degree Celsius.

4) Goods that are not mentioned in CETA; and

5) Goods manufactured or produced out of India. If production orManufacture is in special economic zone then no excise duty is levied

VALUE ADDED TAX

(VAT)

Introduction CENVAT" means Central Value Added Tax. Earlier it was known as

MODVAT. CENVAT is introduced to remove the cascading effect

As the stages of production and sales continue, each subsequent

purchaser has to pay tax again and again on the duty paid material. By

this process cost of product goes on increasing until it reaches to the

ultimate consumer.

By this scheme, manufacturer, 1st stage dealer, 2nd stage dealer can take

the credit commonly called as CENVAT Credit on  "duty paid" on raw

material or the eligible inputs for the payment of duty on final products.

For this purpose Government has prescribed CENVAT Credit Rules,

2002

W.e.f. 10.9.2004 New CENVAT Credit Rules, 2004 has been introduced

vide which has superseded CENVAT Credit Rules, 2002.

This new cenvat credit rules,2004 has introduced inter sectoral credit

scheme.

    Conditions for allowing CENVAT credit.-

The CENVAT credit in respect of inputs may be taken immediately on

receipt of the inputs in the factory of the manufacturer:

The CENVAT credit in respect of capital goods received in a factory at

any point of time in a given financial year shall be taken only for an

amount not exceeding fifty per cent. of the duty paid on such capital

goods in the same financial year.

The balance of CENVAT credit may be taken in any financial year

subsequent to the financial year in which the capital goods were

received in the factory of the manufacturer, if the capital goods, other

than components, spares and accessories, refractories and refractory

materials and goods falling under heading No. 68.02 and sub-heading

No. 6801.10 of the 1ST Schedule to the Tariff Act, are in the possession

and use of the manufacturer of final products in such subsequent years.

Illustration. - A manufacturer received machinery on April 16,

2001 in his factory. CENVAT of two lakhs rupees is paid on this

machinery. The manufacturer can take credit up to a maximum of

one lakhs rupees in the financial year 2001-2002, and the balance in

subsequent years.

The CENVAT credit in respect of the capital goods shall be allowed to a

manufacturer even if the capital goods are acquired by him on lease, hire

purchase or loan agreement, from a financing company.

The CENVAT credit in respect of capital goods shall not be allowed in

respect of that part of the value of capital goods which represents the

amount of duty on such capital goods, which the manufacturer claims as

depreciation under section 32 of the Income-tax Act, 1961( 43 of 1961).

Restriction on Credit Capital Goods- Upto 50% Cenvat amount is to be availed in Current

financial year.

Balance 50% credit to be availed in next financial Year.

Capital Goods acquired in Office premises is not eligible for credit.

Capital Goods are used exclusively for exempted product not eligible

for credit.

The Cenvat Credit can be allowed only to the extent II stage dealer and

not beyond that.

Material Send for the job work must be received within 180 days or

required to pay duty.

Direct delivery of inputs to sub contractor - credit allowed only after

receipt of material.

Documents and accounts .-

The CENVAT credit shall be taken by the manufacturer on the basis of any

of the following documents, namely.

An invoice

A manufacturer for clearance

Inputs or capital goods from his factory or from his depot or from

the premises of the consignment agent of the said manufacturer or

from any other premises from where the goods are sold by or on

behalf of the said manufacturer.

Inputs or capital goods as such.

An importer.

An importer from his depot or from the premises of the

consignment agent of the said importer if the said depot or the

premises, as the case may be, is registered in terms of the

provisions of Central Excise (No. 2) Rules, 2001.

A bill of entry.

The manufacturer or producer taking CENVAT credit on inputs or

capital goods shall take all reasonable steps to ensure that the inputs or

capital goods in respect of which he has taken the CENVAT credit are

goods on which the appropriate duty of excise as indicated in the

documents accompanying the goods, has been paid.

On the strength of a certificate given by a person with whose

handwriting or signature he is familiar; or

On the strength of a certificate issued to the manufacturer or the

supplier, as the case may be, by the Superintendent of Central Excise

within whose jurisdiction such manufafactory or the supplier has his

place of business, 

And where the identity and address of the manufacturer or the supplier

is satisfied on the strength of a certificate, the manufacturer or producer

taking CENVAT credit shall retain such certificate for production before

the proper officer on demand.

Journal entries of excise duty

SR. NO

PARITICUARS DEBIT CREDIT

1. Inventory a/c……………………………………………………………….. Dr. To provision for liabilities for material a/c……………..

100100

2 Provision of liabilities for material a/c…………………………… Dr. To vendor a/c…………………………………………………………

100100

3. Assume excise duty is 8 % (for inputs)RG 23A input receivable a/c……………………………………………. Dr.RG 23A Edu. cess receivable a/c……………………………………… Dr.RG 23A SHE cess receivable a/c………………………………………. Dr. To vendor a/c

(for capital goods)RG 23C capital goods receivable a/c……………………………… Dr.RG 23C Edu. cess receivable a/c…………………………………….. Dr.RG 23C SHE cess receivable a/c……………………………………. Dr.Capital credit receivable a/c………………………………………….. Dr. To vendor a/c

8.16.08

4.08.044.12

8.24

8.24

4. Vendor a/c ……………………………………………………………………. Dr. To bank a/c………………………………………………………………

108.24108.24

Utilization of credit on discharge of liabilities

Sr no.

Particular Debit Credit

1 CenVAT payable (basic)CenVAT Edu cess payable a/cCenVAt SHE cess payable a/c To Service tax receivable a/c To Education cess receivable a/c To Sec. and higher sec. edu. cess receivable a/c To RG 23A input receivable a/c To RG 23A Edu. cess receivable a/c To RG 23A SHE cess receivable a/c To Bank / cash a/c

20.0000.0400.02

10.0000.2000.1008.0000.1600.0802.06

MERITS OF EXCISE DUTY

Central excise revenue is the biggest single source of revenue for the Government of India. The Union Government tries to achieve different socio-economic objectives by making suitable adjustments in the scope and quantum of levy of Central Excise duty. The scheme of Central Excise Levy is suitably adapted and modified to serve different purposes of price Control, sufficient supply of essential commodities, industrial growth, and Promotion of small scale industries and like Authority for collecting the Central Excise duty.

Article 265 of the Constitution of India has laid down that both levy and Collection of taxes shall be under the authority of law. The excise duty is levied in pursuance of Entry 45 of the Central List in Government of India Act, 1935 as adopted by entry 84 of List I of the seventh Schedule of the Constitution of India. Charging section is Section 3 of the Central Excises and Salt Act, 1944.

Limitations of the excise duty

Critics of excise tax - such as Samuel Johnson, above - have interpretedAnd described excise duty as simply a government's way of levying further and unnecessary taxation on the population. The presence of "refunds of duty" under the UK's list of excisable activities has been used to support this argument, as it results in taxation being implemented on persons even where they would normally be exempt from paying other types of taxes – hence why they are getting the refund in the first place.

ACKNOWLEDGEMENT

With profound gratitude I wish to my sincere thanks to personnel, Mr. Arpan Chakrabarti Sir who provided me the opportunity to work with esteemed Ranbaxy laboratories Ltd. Paonta Sahib (H.P).I am highly obliged to Mr. Joginder Salaria sir (Finance Manager), under whose supervision I was able to accomplish the task of achieving Master’s dissertation by providing his valuable time, guidance and suggestion.A special thanks to Mr. Gurpreet Singh sir for his valuable support and encouraging mentality from the first day till final stage of the training.I am also thankful to Mr. M. Bahuguna Sir and Mr. Praveen Bansal sir for providing me all the necessary guidance and selfless helping during whole course of the training. My heartiest thankful to all my team members Mr. Chander Shekhar Sharma, Mr. Rajeev Verma. Mr. M. Sharma, Mr. Virender Rana, Mr. Ramesh Thakur, Vinay Bahuguna and Mr. Sunil Gulaeria, Mis Neha for giving me their valuable time to understand the system and to work with them.

An overview of India Pharma sector

The Indian Pharmaceutical Industry today is in the front rank of India’s science-based industries with wide ranging capabilities in the complex field of drug manufacture and technology. It ranks very high in the third world, in terms of technology, quality and range of medicines manufactured. From simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now made indigenously.

Playing a key role in promoting and sustaining development in the vital field of medicines, Indian Pharma Industry boasts of quality producers and many units approved by regulatory authorities in USA and UK. International companies associated with this sector have stimulated, assisted and spearheaded this dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world.

Growth Scenario in 2010India's pharmaceutical industry is now the third largest in the world in terms

of volume. Its rank is 14th in terms of value. Between September 2008 and

September 2009, the total turnover of India's pharmaceuticals industry was

US$ 21.04 billion. The domestic market was worth US$ 12.26 billion. This was

reported by the Department of Pharmaceuticals, Ministry of Chemicals and

Fertilizers. As per a report by IMS Health India, the Indian pharmaceutical

market reached US$ 10.04 billion in size in July 2010. A highly organized

sector, the Indian Pharma Industry is estimated to be worth $ 4.5 billion,

growing at about 8 to 9 percent annually.

Taxation

Direct Tax Indirect Tax

Income Tax Wealth Tax Excise CST Vat Service Tax

Income tax

An income tax is a tax levied on the income of individuals or businesses (corporations or other legal entities). Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or profit tax. Individual income taxes often tax the total income of the individual (with some deductions permitted), while corporate income taxes often tax net income (the difference between gross receipts, expenses, and additional write-offs).

Types

Personal

A personal or individual income tax is levied on the total income of the individual (with some deductions permitted). It is often collected on a pay-as-you-earn basis, with small

corrections made soon after the end of the tax year. These corrections take one of two forms: payments to the government, for taxpayers who have not paid enough during the tax year; and tax refunds from the government for those who have overpaid. Income tax systems will often have deductions available that lessen the total tax liability by reducing total taxable income. They may allow losses from one type of income to be counted against another. For example, a loss on the stock market may be deducted against taxes paid on wages.

CorporateCorporate tax refers to a direct tax levied on the profits made by companies or associations and often includes capital gains of a company. Earnings are generally considered gross revenue minus expenses. Corporate expenses related to capital expenditures are usually deducted in full (for example, trucks are fully deductible in the Canadian tax system, while a corporate sports car is only partly deductible) over their useful lives by using percentage rates based on the class of asset they belong to.

Accounting principles and tax rules about recognition of expenses and revenue will vary at times, giving rise to book-tax differences. If the book-tax difference is carried over more than a year, it is referred to as a deferred tax. Future assets and liabilities created by a deferred tax are reported on the balance sheet.

PayrollA payroll tax generally refers to two kinds of taxes: employee and employer payroll taxes. Employee payroll taxes are taxes which employers are required to withhold from employees' pay, also known as withholding, pay-as-you-earn (PAYE) or pay-as-you-go (PAYG) tax. These withholdings contribute to the payment of an employee's personal income tax obligation; if the payments exceed this obligation, the employee may be eligible for a tax refund or carryforward to future periods.

Employer payroll taxes are paid from the employer's own funds, either as a fixed charge per employee or as a percentage of each employee's pay. Payroll taxes often cover government social insurance programs, such as social security, health care, unemployment, and disability. These payments do not count toward the income taxes of employees and employers, but are normally deductible by the employer as a business expense.

Inheritance

The inheritance tax, estate tax and death duty are the names given to various taxes which arise on the death of an individual. In international tax law, there is a distinction between an estate tax and an inheritance tax: the former taxes the personal representatives of the deceased, while the latter taxes the beneficiaries of the estate. However, this distinction is not universally recognized. For example, the "inheritance tax" in the UK is a tax on personal representatives, and is therefore, strictly speaking, an estate tax.

Capital gains tax

A capital gains tax is the tax levied on profits from the sale of capital assets. In many cases, the amount of a capital gain is treated as income and subject to the marginal rate of income tax.

In an inflationary environment, capital gains may be, to some extent, illusory. If prices in general have doubled over five years, then selling an asset for twice the price it was purchased at five years earlier represents no gain at all. Partly to compensate for such changes in the value of money over time, some jurisdictions, such as the United States, give a favorable capital gains tax rate based on the length of holding. European jurisdictions have a similar rate reduction to nil on certain property transactions that qualify for the participation exemption. In Canada, 20–50% of the gain is taxable income. In India, Short Term Capital Gains Tax (arising before one year) is 10% [15 % from F.Y 2008-09 as per Finance Act 2008] flat rate of the gains and Long Term Capital Gains Tax is nil for stocks and mutual fund units held one year or more, provided the sale of shares involved payment of the Securities Transaction Tax, and 20% for any other assets held three years or more.

Wealth tax

A wealth tax is generally conceived of as a levy based on the aggregate value of all household holdings actually accumulated as purchasing power stock (rather than flow), including owner-occupied housing; cash, bank deposits, money funds, and savings in insurance and pension plans; investment in real estate and unincorporated businesses; and corporate stock, financial securities, and personal trusts.