Unit – IV

Corporate Tax Planning

Tax Planning
Tax planning can be defined as an arrangement of one’s financial and economic
affairs by taking complete legitimate benefit of all deductions, exemptions, allowances
and rebates so that tax liability reduces to minimum.

Direct Taxes
Direct taxes are those which a person pays directly from his income, wealth, or
estate. It is paid after the income or benefit reaches the han1ds of the person, which are
Income tax, wealth tax, corporate tax and gift tax.

Indirect Taxes
Which are not directly charged from the persons, which are collected in the form
of excise duty, customs duty and sales tax.

Taxable Turnover
It means the turnover on which a dealer shall be liable to pay tax as determined
after making such deductions from his total turnover and in such manner as may be
prescribed.

Tax Avoidance
Tax avoidance is reducing or negating tax liability in legally permissible ways and
has legal sanction. Tax avoidance is sound law and certainly not bad morality for
anybody to so arrange his affairs in such a way that the brunt of taxation is the minimum.
This can be done within the legal framework even by taking help of loopholes in the law.

Tax Evasion
All methods by which tax liability is illegally avoided are termed as tax evasion.
Tax evasion may involve an untrue statement knowingly, submitting misleading
documents, suppression of facts, not maintaining proper accounts of income earned (if
required under law), omission of material facts on assessment.

Tax Planning Vs. Tax Management

Tax Planning Tax Management
The objective of tax planning is to The objective of tax management is to comply
reduce the tax liability to the with the provisions of law.
minimum.
Tax planning is futuristic in its Tax management relates to past (i.e., assessment
approach. proceedings, rectification, revision, appeals etc.),
present (filing of return of income on time on the
basis of updated records) and future (corrective
action).
Tax planning is very wide in its Tax management has a limited scope, i.e., it deals
coverage and includes tax with specific activities such as filing of returns of
management. income on time, drafting appeals, deduction of tax
at source on time, updating records from time to
time, etc.
The benefits arising from tax As a result of effective tax management, penalty,
planning are substantial particularly penal interest, prosecution, etc., can be avoided.
in the long run.

Tax Avoidance Vs. Tax Evasion

Tax Avoidance Tax Evasion
Any planning of tax which aims at reducing All methods by which tax liability is
tax liability in legally recognised illegally avoided is termed as tax evasion.
permissible ways, can be termed as an
instance of tax avoidance.
Tax avoidance takes into account the Tax evasion is an attempt to evade tax
loopholes of law. liability with the help of unfair means/
methods.
Tax avoidance is tax hedging within the Tax evasion is tax omission.
framework of law
Tax avoidance has legal sanction Tax evasion is unlawful and an assessee
guilty of tax evasion may be punished under
the relevant laws.
Tax avoidance is intentional tax planning Tax evasion is intentional attempt to avoid
before the actual tax liability arises payment of tax after the liability to tax has
arisen
Causes of Tax evasion
1. Multiplicity of tax laws
2. Complicated tax laws
3. Higher rate of taxation
4. Inadequate information as to sources of tax revenue
5. Investment in real property
6. Ineffective tax enforcement
7. Deterioration of moral standard
Remedies for evasion
1. Through overhauling of tax laws
2. Reduction in tax rates
3. Replacement of sales tax & excise duties
4. Tax on agricultural income
5. Maintenance of proper accounts
6. Introduction of expenditure tax
7. Tightening of tax enforcement
Types of tax planning

There are four types of tax planning open to a business.

ILLEGAL LEGAL
Advance tax
Tax evasion No tax planning Basic tax planning
planning
Tax bills reduced by Tax bills reduced by
5%-20% 50% – 100%

(1) Tax evasion

All methods by which tax liability is illegally avoided are termed as tax evasion.
Tax evasion may involve an untrue statement knowingly, submitting misleading
documents, suppression of facts, not maintaining proper accounts of income earned (if
required under law), omission of material facts on assessment.

(2) No tax planning

This is what many businesses do by default. They simply complete their tax
returns and send them off to the taxman, having taken no prior action to arrange their
affairs in such a way to legally pay less tax.

(3) Basic tax planning

Most businesses do this since it is what most of the accountants advising them are
good at. Basic tax planning such as incorporating the business, taking dividends rather
than salaries and timing when they spend money can often reduce tax bills by 5% to 20%.

Various Basic methods of Tax Planning as follows :

a) Short Term Tax Planning: Short range Tax Planning means the planning thought
of and executed at the end of the income year to reduce taxable income in a legal way.

b) Long Term Tax Planning: Long range tax planning means a plan at the beginning
or the income year to be followed around the year. This type of planning does not help
immediately as in the case of short range planning but is likely to help in the long run ;

c) Permissive Tax Planning : Permissive Tax Planning means making plans which
are permissible under different provisions of the law, such as Planning of taking
advantage of different incentives and deductions, planning for availing different tax
concessions etc.

d) Purposive Tax Planning: It means making plans with specific purpose to ensure
the availability of maximum benefits to the assessee through correct selection of
investment, making suitable programme for replacement of assets, varying the residential
status and diversifying business activities and income etc.

(4) Advanced tax planning: Historically this has really only been available to the richest
entrepreneurs. Indeed it has helped them become even richer as it can reduce tax bills by 50% to
100%. In recent years this has changed, and now all good accountants (including One
Accounting) can access a range of advanced tax planning solutions on behalf of their clients.
 Central Sales Tax Act 1956 (CST Act 1956)

Central Sales Tax (CST): It a tax on Inter-state sale of goods, where the buyer and seller
are in different state. CST will be chargeable under the CST Act, 1956 passed by Central
Govt. in parliament.

Scope of CST
1. To regulate or determine the sales in case of interstate trade or commerce
2. To levy tax on sale of goods in the course of Inter-state trade
3. To declare certain goods to be of special importance in the course of Inter-state
trade.
4. To specify the restrictions and conditions in respect of Inter-state trade

Sale
Sale means transfer of property in goods by one person to another in the course of
business for cash, deferred payment or other valuable consideration and includes:
 Transfer of property in goods
 Work contract
 Hire purchase
 Right to use
 Supply of goods by unincorporated association
 Supply of food as part of any service

Dealer: Any person carrying on the business of buying, selling or distributing goods
directly or indirectly for cash, deferred payment, commission or any remuneration.
 Business: Any trade, commerce or manufacture with or without a profit motive
 Sale: Transfer of property from one person to another for a valuable consideration.
 Goods: All materials, articles, commodities except newspapers, shares, money,
claims
 Rate: As prescribed in the Act.

Essential elements of sale:

• Goods should be transferred
• General property in good should be transferred
• Price must be paid
• There must be a seller and a buyer
• There must be a valid consent of both buyer and seller
Declared Goods [Section 2(C)]
It includes those goods which are considered to be of special importance in
interstate trade or commerce under section 14.Some of these goods is –
 Cereals  Cotton  Jute  Pulses
 Coal  Crude Oil  Oilseeds  Sugar

Goods [section 2(d)]

This includes all material articles or commodities and all kind of movable
property excluding newspapers, actionable claims, stocks, shares, and securities.
If newspapers are sold as scrap then, it will be charged to central sales tax if it is
an inter- state sale.

Important Features of this Act

1. It extends to the whole of India.
2. Every dealer who makes an inter-state sale must be a registered dealer and a
certificate of registration has to be displayed at all places of his business.
3. There is no exemption limit of turnover for the levy of central sales tax.
4. Under this act, the goods have been classified as:
• Declared goods or goods of special importance in inter-state trade or commerce
and
• Other goods.
The rates of tax on declared goods are lower as compared to the rate of tax on
goods in the second category.
5. The tax is levied under this act by the Central Government but, it is Collected by
that state government from where the goods were sold. The tax thus collected is
given to the same state government which collected the tax. In case of union
Territories the tax collected is deposited in the consolidated fund of India.

6. The rules regarding submission of returns, payment of tax, appeals etc. are not
given in the act. For this purpose, the rules followed by a state in respect of its
own sales tax law shall be followed for purpose of this act also.

7. Even though the central sales tax has been framed by the central government but,
the state governments are allowed to frame such rules, subject to such notification
and alteration as it deem fit.

Scope of CST
1. To regulate or determine the sales in case of interstate trade or commerce
2. To levy tax on sale of goods in the course of Inter-state trade
3. To declare certain goods to be of special importance in the course of Inter-state
trade
4. To specify the restrictions and conditions in respect of Inter-state trade
Principles for determining Inter-State Sales Tax
The Sale or purchase
 Occasions the movement of goods from one state to another or
 Is effected by a transfer of documents to the title of goods during the movement
of goods from one state to another
Exceptions to CST
 Sale of electric energy
 Sale to an exporter for the purpose of export (penultimate sale)
 Subsequent sale:
a) To registered Dealer or b) To Govt.
Types of Goods
 Declared goods or goods of special importance: These are goods mentioned U/S
14 of CST (e.g.. Cereals, Coal, Cotton etc)
 Undeclared goods
Central Sales Tax rates
Types of goods Sale to Govt. Sale to regd. dealer Sale to un regd. dealer
Declared goods 0% or State sales tax 0% or State sales tax rate, TWICE the general sales
rate, whichever is whichever is lower. Form: C tax rate. (8%)
lower. Form: D
Undeclared goods 5% - 28 % 5% - 28 % 5% - 28 % or sales tax
whichever is less

Penalties
 Penalties in the form of prosecution/ fine U/S 10
 Penalties in lieu of prosecution U/S 10
 Seller or buyer: Imprisonment of 6 months or fine
 Purchaser: Fine up to 1 ½ times the tax

Forms
Form C: The sale is from one registered dealer to another registered dealer
Form D: The sale is from one registered dealer to the Government

Form E-I: This form is filled by the dealer who affects the first sale under the
Inter-State trade or commerce.
Form E-II: This form is filled by the dealer who affects the subsequent sale
under inter–state trade or commerce.
Incidence of CST
CST will be imposed/ levied on Inter-state sale of goods. It means a sale of goods
shall be taken place in the course of Inter-state trade of commerce.

Example 1: (Case I)

TISCO –Bihar Dealer – Maharastra

Here, dealer to delivery from TISCO factory (Bihar) as per delivery order after
payment. This process is an Inter-state trade.

Example 2: (Case II)

Buyer ‘B’ in state of
Seller ‘A’ in state of Tamilnadu
Andhra Pradesh

Here, ‘A’ (Seller) sends goods to ‘B’ to the state Andhra Pradesh, if goods moved
from Tamilnadu to Andhra Pradesh by booking the goods in the name of ‘B’ is an Inter-
state sale.

Example 3: (Case III)

A’s agent in B in Andhra
Seller ‘A’ in state of Tamilnadu Pradesh
Andhra Pradesh

Here, ‘A’ (Seller) agrees to sell goods to ‘B’, but goods are booked by ‘A’ from
the state Tamilnadu and send to Andhra Pradesh in his own name. Agent of ‘A’ receives
the goods in the state Andhra Pradesh and supplied to ‘B’. In is an Intra-state sale not an
Inter-state sale

Example 4: (Case IV): If ‘B’ comes to State Tamilnadu and purchases the goods from
‘A’ and takes the goods to the state on his own name, it is also an Intra-state sale.

In case of Inter-State trade/ Sale/ Commerce, the following conditions should be

satisfied:

1. Movement of Goods from one state to another

a. There should be a sale
b. There should be movement of goods from one state to another
c. There should be physical movement of goods
d. It is immaterial in which state the property (Ownership) of goods passes to the
buyer
e. Sale can be either before the movement or after the movement of goods
 f. Mode of transfer is immaterial. It may be aircraft, rail, ship, post, motor
vehicle, etc.
g. Sale is not a Inter-state sale, if movement of goods are not related to contract
for sale
h. If movement of goods starts from one state and ends in the same state is not an
Inter-state trade. Even if during transit goods passes through other state.
2. Transfer of Document of Title of goods
Inter-state sale by transfer of document of title to goods during one state to
another.

Document of title of goods: When the goods are handed over to carrier, the
carrier gives a receipt to the seller. The seller sends the receipt to the buyer
then the buyer gets delivery of goods on submission of that receipt to the
carrier.
The receipt of carrier is called document of tile of goods. It may be,
a. Lorry receipt (LR) in case of transport by road
b. Railway receipt (RR) in case of transport by rail
c. Bill of Lading (BoL) in case of transport by sea
d. Airway bill (AWB) in case of transport by air.

Transfer of document is a symbolic delivery of goods to the buyer. It carries

with its full ownership of goods. Delivery of document of title is also an Inter-
state sale, liable for CST.

*Stock transfer/ Branch transfer/ Depot transfer – is not an Inter-state sale.

Incidence of Central sales tax in different situations

Declared goods Undeclared goods
Rate of tax Rate of tax
Sale to Government on Lower of 0% or lower of 5% – 28% or local
Form D local sales rate sales rate
Sale to registered dealer of Lower of 0% or Lower of 5% – 28% or local
specified goods on Form C local sales rate sales rate
Tax free goods in state Nil Nil
Notified reduced rate on Notified rate Notified rate
Form C and D
Other sale Twice the local 10% or local sales tax
sales tax rate whichever is higher
Procedure for registration of dealers
1. Dealers who can apply
 Turnover of business exceeds Rs 20lakhs (Limit is Rs 10 lakhs for the North
Eastern States).
 Any dealer intending to start a business
 Casual dealer
 Every dealer registered under the CST act
 Dealer residing outside the state but carrying business inside the state
 Every agent of a non-resident dealer
 Every factor, broker, commission & Del-credere agent, auctioneer/other mercantile
agent
2. Application for registration
 An application in Form D should be filled
 It should be submitted to Registering authority
 A demand draft should be enclosed for the amount specified by the authority
3. Documents to b e enclosed with Form D
 2 recent passport size photographs
 Identity to prove his existence like passport/family card/bank pass book/driving
license/VAO certificate
 Copy of MOA and AOA in case of company
 Copy of Partnership deep in case of partnership
 Form XI of TNGST act signed by applicant and manager
 Form A showing the estimated turnover for the year
4. Security money
 The Registering authority may demand security equal to 50% of the tax due as
estimated
 In all cases Rs.2500/- has to be collected by way of security at the time of new
registration
5. Issue of registration certificate
 The commissioner issues certificate within 7days
 If no notice been made with ref to the application within 20 days the dealer is
deemed to be registered
 Registration certificate should be renewed every yr. by paying 500 before 31st
march without penalty.
 Collection of tax by registered dealer
 The registered dealer may collect the tax by issuing a bill in respect of every sale,
in duplicate
 One copy of the bill should be retained by the dealer to be checked by officials

Amendment (Modification) to certificate of registration

 Where the dealer has altered the name, place and nature of business
 Where the dealer has changed the class or classes of goods in which he carries on
 his business
 Where there is change in ownership in business and Cancellation of registration
 Under section 21(4) when he proves that his turnover in each of the 2 consecutive
years immediately preceding the application was less than Rs.75000
 Cancellation or amendment by the prescribing authority
 Cancellation by the authority due to failure on the part of dealer to pay tax or
penalty, declaration of false information, failure to provide security etc.,

Duties of a registered dealer

 Shall keep at the place of business, the certificate of registration, books of
accounts.
 Shall notify the registering authority about the change in place of business
 Shall send bill of sale or delivery note or such documents along with the goods
 Shall furnish the returns before the due dates prescribed

VALUE ADDED TAX (VAT)

VAT is a tax on turnover and is added at every stage of manufacture or process,

based on the value added at each stage.

VAT may be defined as “a tax to be paid by the manufacturers or traders of

goods and services on the basis of value added by them”.

It is not a tax on the total value of the commodity being sold but on the value
added to it by the manufacturer or trader. They are not liable to pay tax on the entire
value of the commodity. But they have to pay the tax only on the Net value added by
them in the process of production or distribution.
In this tax, the seller will collect the tax only on the value added by him towards
his produced goods by excluding the tax on purchase paid by him. The VAT is payable
by seller who is termed as a ‘dealer’.

The VAT works on the principle that when raw material passes through various
manufacturing stages and manufactured product passes through various distribution
stages, tax should be levied on the ‘Value Added’ at stage and not on the gross sales
price.

Basically, VAT is multi-pint tax, with provision for granting set off (Credit) of the
tax paid at the earlier stage. Thus, tax burden is passed on when goods are sold. This
process continues till goods are finally consumed. Hence, VAT is termed as
‘Consumption type’ tax with ‘destination principle’. VAT works on the principle of ‘tax
credit system’.
Scope of VAT: the following transactions are subject to VAT
 The supply of goods and provision of services with a place of supply in India;
 The import of goods into India;
 Intra-Community acquisition of goods in India by a taxable person;
 The supply of goods or services specified in the India VAT Act, if the taxable
person has opted for taxation of those.

Cascading effect of tax

In modern production technology, raw material passes through various stages and
processes continues till a final product emerges. This product then goes to distributor/
wholesaler, who sells it to retailer and then it, reaches the ultimate consumer. If tax is
based on selling price of a product, the tax burden goes on increasing as raw material and
final product passes from one stage to other.

The Output of the 1st manufacturer becomes input for 2nd manufacturer who
carries out further processing and supply it to 3rd manufacturer. This process continuous
till the final product emerges. If a tax base is on the selling price of the product, the tax
burden goes on increasing as raw material and final product passed one stage to other.

Each subsequent purchaser has to pay tax again and again on the material that has
already suffered tax. This is called cascading effect. This VAT scheme permits
manufacturers to obtain complete reimbursement of excise duty/ sale tax paid on the
component or raw materials used as input in the manufacturing of final products.

Example: Manufacture ‘A’ supplies his output to ‘B’ at Rs.100. Thus, ‘B’ gets the
material at Rs.110, inclusive of tax @ 10%. He carries out further processing and sells his
output to ‘C’ at Rs.150. While calculating his cost, ‘B’ has considered his purchase cost
of materials as Rs.110 and added Rs.40 as his conversion charges. While selling product
to ‘C’, ‘B’ will charge tax again @10%. Thus ‘C’ will get the item at Rs.165 (150+10%
tax). In fact, ‘Value added’ by ‘B’ is only Rs.40 (150-110). As stages of production
and/or sales continue, each subsequent purchaser has to pay tax again and again on the
material which has already suffered tax. Tax is also paid on tax. This is called Cascading
effect.

At VAT, VAT = Tax base (Value added by them) x Rate of Tax

= Rs.110 – 10 = 100 (Less sales tax paid on RM)
= 100 + 40 (Processing charge) = Rs.140, rate of tax is 10%
Therefore, 140 + (140x10/100)
= 140 + 14 = Rs.154.
Method of Calculation of VAT
Purchase Price Rs.100
Tax paid during purchase Rs.10 (Input tax)
Selling price Rs.150
Tax collected during resale Rs.15
Input tax credit (Tax paid during purchase) Rs.10
VAT payable (Out tax – Input tax) Rs.5
Total tax collected by Government Rs.10
(At the time of purchase by dealer – Rs.10, At the time of resale
by the dealer – Rs.5)
Total tax (Rs.10+5) Rs.15

Details With Sales Tax With VAT

A B A B
Purchases price - 110 - 100
(with 10% input tax)
Value added 100 40 100 40
Sub total 100 150 (100+10+40) 100 140
Add Tax @ 10% 10 15 10 14
Total Sales price 110 165 110 154
Assume A & B are manufacturers. Tax revenue with Sales Tax Rs.25, with VAT Rs.14

Explanation:
1. ‘B’ will purchase goods from ‘A’ @ Rs.110, which is inclusive of duty of Rs.10.
2. Since, ‘B’ going to get credit of duty of Rs.10, he will not consider this amount
for his costing.
3. He will charge conversion expense of Rs.40 and sell his goods at Rs.140.
4. He will charge, 10% tax and raise invoice of Rs.154 to ‘C’ (140 + tax @ 10%)
5. In the invoice prepared by ‘B’, duty shown will be Rs.14. But, ‘B’ will get credit
of Rs.10 paid on the Raw material purchased by him from ‘A’.
6. Thus, effective duty paid by ‘B’ will be only Rs.4.
7. ‘C’ will get the goods at Rs.154 and Not at Rs.165, which he would have got in
absence of VAT.
8. Thus, in effect, ‘B’ has to pay duty only on Value Added by him.

Practical implications of VAT

1. Goods purchased from unrecognized dealer, VAT cannot be imposed
2. VAT is tremendous paper work and record keeping
3. VAT system can work only if record keeping is proper and reliable
4. Bogus (Fake) Invoices on which tax credit is availed
5. Acquisition fraud (missing trade fraud) is possible – ‘A’ dealer imports goods and
makes sale within the country. The dealer collects the tax from innocent buyer.
‘A’ does not pay tax (collected from buyer) to the Govt.
6. Carousel (round about) fraud – ‘A’ imports goods without tax. He sells goods to
‘B’ and charge VAT. ‘B’ avails credit of tax shown by ‘A’ in his Invoice.
 Advantages of Value Added Tax (VAT)
 Revenue to the Government under the VAT system will be constant as it is a
consumption-based tax.
 VAT ensures better tax compliance and tax evasion is reduced to the extent possible
due to its catch up effect.
 Revenue earned by the government via VAT is huge as it is a low tax rate that is
applied to the consumption of goods.
 The VAT can be monitored and administered in an easier way compared to other
taxes prevailing.
 It is considered as a neutral tax as it levied on all types of business.
 VAT laws and rules are very transparent and the tax is collected over various stages
in smaller parts.
 The VAT is levied on the value-added on each stage and not on the total price, so
there is no cascading effect.
 There are the number of taxpayers under the VAT system as it is levied on various
stages, and all the end consumers pay the tax on consumption irrespective of their
income.
 The advantage to the government is that even for the goods which remaining in
stock either with the distributor or retailer the government receives part of the tax.

Disadvantages of Value Added Tax (VAT)

 The VAT is a little complicated as the identification of value-added in each stage is
not an easy job.
 Implementation of VAT across the billing system can be expensive.
 The VAT can be considered effective, only when the end consumers are aware of
the tax system otherwise tax evasion is possible.
 The Manufacturer and distributors have to pay tax in advance as the payment of tax
cannot be postponed till the goods are sold to end-users.
 End consumer doesn’t gain or lose anything in the VAT system as there is no credit
for them.
 Since VAT is a tax on the expense, this tax is regressive in nature, and it affects the
poor more than rich as they spend more proportion of their income.
Different modes of computation of VAT (Or) Methods of Calculating VAT

Addition method – this method is based on the identification of value added, which can be estimated
by summation of all the elements of value- added(i.e. wages ,profits , rent and interest). This is in line
with the income method of calculating national income. The chief drawback of this method is that it
does not require matching of invoices in order to check tax evasion.

Subtraction method – the subtraction method estimates value added by means of difference between
outputs and inputs.this is also known as product approach and has further variants in the way
subtraction is attempted from among (a) direct subtraction method (b) intermediate subtraction method
Direct subtraction method is equivalent to a business transfer tax whereby tax is levied on the
difference between the aggregate tax-exclusive value of sales and aggregate tax-exclusive value of
purchases. Intermediate subtraction method is based on deduction of the aggregate tax-inclusive
value of purchases from the aggregate tax-inclusive value of sales and taxing the difference between
them.

Tax- credit method – under tax credit method, the tax on inputs is deducted from the tax on the sales
to arrive at the VAT payable by dealer. The indirect subtraction method entails deduction of tax on
inputs from tax on sales for each tax period.

2 Marks

1. What is Tax planning?

Arrangements of financial activity.
2. Write the objectives of Tax planning-
Save the hard labour of the tax payer and enjoy the fruits of his income and wealth,
Reduction of tax liability, Minimization of litigation, Productivity investment.
3. Define Tax Evasion-
Evade their tax liability.
4. Define Tax Avoidance-
Minimize or adjusting the account with in the four corners of tax law.
5. What do you mean by Onus of Proof?
Duty of the tax assesse to produce all relevant fact.
6. Define Input Tax-
 Payable by a registered dealer in the course of business, on the purchase of any goods made
from a registered dealer.
7. Define Output tax-
Tax charged or chargeable under this act by a registered dealer in respect of sale of goods
in the course of his business
8. What are the various types of dealers?
 TOT dealer
 VAT dealer
 Exempted dealer
9. Write various types of sales Tax-
Single point sales tax- tax imposed at only one point between production and sales
Multiple point Tax levied at all stages of commodity
10. How will you determine sales tax?
Rate of tax * Aggregate of sales
-----------------------------------------------
100
11. Write varius types of registration- Voluntary – Dealer whose turnover exceed Rs30,000
and who deals multiple point tax goods can apply voluntary registration.
Compulsory- Turnover is more than Rs. 50,000
12. Define- Octroi
Toll or tax levied at the gates of a city on articles brought to the city

13. Explain the elements of Sale.

 Transfer of property in goods
 Two parties
 Consideration
 Valid consent of both parties


14. Define Zero tax company.

Company is showing book profits and declaring dividends to share holders but they were not
paying income tax

21. Define ad valorem duty.

 Levy of octroi either on specific basis or advalorem
 It is based on value of articles
 Types – Low advalorem- less cost articles
 High advalorem- high cost articles

22. Explain the issues towards implementation of VAT.

1. Tax is collected at each stage of sale when there is a value addition to the goods
2. Several taxes are still not covered under VAT
3. CST will be eliminated over a period of time
4. Tax is only on value added items