Legal & Taxes

WARNING: The following information is subject to change as and when Government frames / modifies new / existing laws. Wayfarerr is NOT RESPONSIBLE for any consequences arising out of action taken based on the following information. NOT UPDATED REGULARLY. For information purposes ONLY.

 

First time Selling ?

First time and Small scale Sellers NEED NOT WORRY about the taxes in the initial stages as the tax laws provides exemption upto a certain level of sales, before you come under the Tax & Regulatory net. As your business grows on Wayfarerr, we will be SOON providing you with end to end Guidance Services for entrepreneurs.

 

Legal, Regulatory & Taxes - End to End Guidance Services

At Wayfarerr we are planning to introduce a single window system for entrepreneurs like you to start, operate and grow your business at peace, by leaving the rest to us. Until then, keep yourselves updated on the latest Legal Regulations & Tax Slabs by referring to Government websites or by contacting professionals like Chartered Accounts near you, just like you do when you have setup a bustling business for yourselves.

 

Wayfarerr's Tax Obligations

Wayfarerr.com is a business enabler and the contents of the website is entirely crowd sourced and crowd initiated. Wayfarerr provides Information Technology services for Sellers to list their products and services on the website and facilitates Buyers to purchase these listed products and services from their convenient locations. Wayfarerr.com also helps in smooth conduct of these transactions by providing backend support in co-ordination, payment receipt and payout services.

Wayfarerr DOES NOT SELL OR WAREHOUSE PRODUCTS & SERVICES listed on the website. The Goods / Products and Services sold on Wayfarerr.com is entirely owned / sourced / provided / shipped by the Seller directly from his / her location to the Buyer, for which Wayfarerr.com collects the payment from the Buyer and transfers it to Seller, after the succesful completion of the entire transaction as promised by the Seller, minus the small percentage of TRADING FEE charged by Wayfarerr.com for the services rendered for facilitating this Buyer-Seller business interaction. 

Therefore, Wayfarerr.com is liable ONLY for service tax laws governing the trading fee charged to the Seller, for the services provided by the website. On the other hand, Seller is responsible for adhering to tax laws governing the sale of the products and services listed and sold by them.

 

Seller's Tax Obligations

Difference of Taxability:

Service Tax is a form of indirect tax imposed only on services provided. From the point of view of a layman, providing services means assistance in any work, taking up of any work on behalf of others, any professional assignment or rendering intangible benefits to others.
VAT (Value Added Tax) is a form of indirect tax imposed only on goods sold within a particular state, which essentially means that the buyer and the seller needs to be in the same state. Only when tangible goods and products are sold, VAT can be imposed.
CST (Central Sales Tax) is a form of indirect tax imposed only on goods sold from one state to another state, which particularly takes into account that the buyer and the seller needs to be in two different states.

 

Governing Act:

Service Tax is governed by Finance Act, 1994. It was then when the finance minister brought in taxes on services rendered to reduce the degree of intensity of taxation on manufacturing and trade without forcing the government to compromise on the revenue needs. Service tax does not have any specific act to govern its stipulations.
VAT (Value Added Tax) is governed by respective state Acts. Every state has a separate and distinct VAT act reserved for their state.
CST (Central Sales Tax) is governed by Central Sales Tax Act, 1956. This tax is governed by a single central act, though the chargeability is state specific.

 

Registration under Act: When Compulsory?:

Service Tax registration is a function of gross turnover. Once the turnover of the assessee crosses a threshold limit of Rs 9 lacs, the service provider is required to get itself registered under the law, and compulsorily required to charge service tax on services provided once the turnover crosses Rs 10 lacs.
VAT (Value Added Tax) registration is compulsory for dealers having turnover exceeding Rs 5 lacs (or increased limit of Rs 10 lacs in some states). On registration, such dealer is allotted a unique 11 digit TIN (Taxpayer’s Identification Number).
CST (Central Sales Tax) registration is not dependent on amount of turnover. Simply put, registration of dealer becomes compulsory once he affects an inter-state sale.

 

Due Dates of Returns:

Service Tax returns are due half-yearly shown as under:
April – September: 25th October.
October – March: 25th April.
VAT (Value Added Tax) returns are due on 20th of the succeeding month following the relevant month i.e. For June, 2012, the due date of VAT return is 20th July, 2012.
CST (Central Sales Tax) returns due date are exactly similar to VAT return due dates i.e. 20th of the succeeding month following the relevant month.

 

Rate of Charge:

Service Tax The present rate is 14 %, which is leviable on all services except those captured in Negative List(the list comprising of 17 specific services which are exempt from service tax).
VAT (Value Added Tax) do not have any uniform rate. The VAT Rates in India will differ based on the type of goods and from State to State. Therefore, it is important for the Entrepreneur to be conversant with the State’s regulation with respect to VAT. However, VAT Rates in India can be divided into three main categories, which are common for many states:

VAT Exempted Category / NIL VAT Rate:
In many states, items that are sold by the unorganized sector in natural or unprocessed format and basic goods for the poor are listed under the VAT exempted category. Some of the items that may be VAT exempt in many state include: aids used by handicapped persons, glass or plastic bangles, condoms, firewood, khadi, salt, etc.,

1% VAT Rate:
In many states, 1% or 2% VAT Rate is applied for precious stones, precious metals like silver, gold and platinum, bullions, jewellery, etc.,

4% or 5% VAT Rate:
Many states have adopted a VAT Rate of 4% or 5% for a large number of basic necessity goods. Some of the goods included in this category in many of the States include coffee, coir, cotton, edible oils, medicines, drugs, agricultural implements, etc.,

General VAT Rate:
In addition to the above VAT Rates, many states also have other levels of VAT based on the Goods. Very high VAT Rate of over 20% is usually levied for goods such as imported liquor, cigarettes, etc., Many states also have a General VAT Rate of around 12.5% which is meant as a catch-all for goods not falling in any of the listed category. This category of goods not falling in any of the other category are usually taxed at 12.5% or 13.5% or 14% depending on the State.
CST (Central Sales Tax)

rate varies with situations. Unlike Service Tax and VAT, neither CST has any uniform rate, nor is the rate solely dependent upon the category of goods. The underlying info will elaborate the applicability of CST rates.

Nature of Goods

Sale to Govt. on submission of ‘D’ Form

Sale to registered dealer for resale/use in manufacture on submission of ‘C’ Form

Sale in any other case

Declared Goods

4% or State Sales Tax(or VAT), whichever is lower

4% or State Sales Tax(or VAT), whichever is lower

2 * VAT rate

Other Goods

4% or State Sales Tax(or VAT), whichever is lower

4% or State Sales Tax(or VAT), whichever is lower

10% or State Sales Tax(or VAT), whichever is lower

 

Point of Taxation OR Chargeability:

Service Tax is charged at the time of rendering services, in normal circumstances. However, there may be a situation where service tax is charged before rendering services or after completion of service. The important thing to note here is the timing of chargeability and the rate of chargeability. Chargeability arises when services are rendered, while the rate is determined at the time of payment by service receiver. Suppose when services are rendered, the rate is 10.3% on such services. However, when the receiver makes payment, the rate is 12.36%. So, the applicable rate is 12.36%.

On a different note, suppose when services are rendered, the service was under exempt category. However, when the receiver makes payment, the rate is 12.36%. In that case, the applicable rate is Nil, since chargeability did not arise at the time of rendering services, the services being exempt at that time.
VAT (Value Added Tax) follows a different practice of chargeability, where fulfilment the following conditions generate chargeability:
•Existence of ‘goods’
•Sale of ‘goods’
•Within the state i.e. both the buyer and seller should be situated in the same state.
CST (Central Sales Tax) runs parallel with VAT conditions, when it comes to chargeability, except the third condition. The difference is as follows:
•From one state to another i.e. the buyer and seller should be situated in two different states.

 

Time of Payment / Deposit of Tax:

Service Tax

Assessee

Duration of Payment

Time of Payment

Individual, Sole Proprietorship or Partnership or LLPs

Quarterly

If tax paid electronically: 6th of the month following the quarter, for manual payment, 5th of the month following the quarter.

Any other assessee

Monthly

If tax paid electronically: 6th of the month following the relevant month, for manual payment,  5th of the month following the relevant month.


Service Tax for quarter/month ended 31st March: Payable by 31st March itself

VAT (Value Added Tax) is payable by 15th of the succeeding month following the relevant month i.e. For June,2012, the due date of VAT payment is 15th July,2012.
CST (Central Sales Tax) is payable by 20th of the month following the relevant month. i.e. For Oct,2012, the due date of VAT payment is 20th Nov,2012.

 

Valuation Method:

Service Tax

is leviable on the value of services rendered. Such value will be calculated under the following situations in the manner prescribed below:

Case

Value

Where provision of service is for a consideration in money

Gross amount charged by the service provider for such services

Where provision of service is for a consideration partly consisting of money

Estimated monetary value of services under prevalent market conditions

Where provision of service is for a consideration which is unascertainable

Service Tax (Determination of Value) Rules, 2006

VAT (Value Added Tax) carries state-to-state varied valuation methods for computing sale price. However, the valuation method laid down for CST can be approximately applied for sale value determination on which VAT is chargeable.
CST (Central Sales Tax) would be levied on the sale price which would include the following :
•CST (whether or not shown separately)
•Excise Duty (whether or not shown separately)
•Cost of Packing Material
•Packing Charges
•Bonus Discount or Incentive bonus for additional sales effected by the dealer
•Insurance Charges
•Dharmada Charges