A Guide to Investment in India’s Mineral Sector ___________
MINERAL TAXATION REGIME Overview of Indian tax law The principal taxes applicable in India to mining include the following: • •
Indirect taxes, including customs duties, cenvat, service tax, and State VAT; Direct taxes, consisting mainly of the corporate income tax and minimum alternate tax; and taxes on extraction of resources
Direct and indirect taxes are common to all industries, and are of a kind found in other international jurisdictions. Similarly, the taxes on extraction of resources are also not unique to India. However, the impact of a tax on an industry in general, and mining in particular, is contingent upon the manner in which it is levied.
Indirect Taxes Indirect taxes are applicable to activities ranging from manufacturing to final consumption. Such activities include distribution, trading and imports of goods, as well as services. In India, the principal indirect taxes are the Central excise (Cenvat), customs, the State VAT (levied by the State governments), and the service tax (levied by the Centre). Additionally, other indirect taxes such as entry tax and octroi are also levied by State governments and municipalities but their incidence on the mining sector is limited. Excise duty Excise duty or Cenvat is levied on the manufacture of goods within India and is governed by the Central Excise Act, 1944 (‘Excise Act’). The rates of excise duty are as determined in the Central Excise Tariff Act, 1985 (‘CETA’) read with the relevant Schedules and notifications. The general excise duty rate is 14%, which has been reduced to 8% under the fiscal stimulus package announced by the Centre early 2009. The general rate of excise comes to 8.24 % including 3% cess. Minerals are classified under Chapter 26 of the CETA. Minerals are generally exempt from excise duty vide specific exemption notifications. This exemption is based on the
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