Indirect Tax

Indirect Tax: complete guide

Introduction

Indirect taxes are taxes collected on the supply, import or export of goods and services rather than on income. They are usually added to the price paid by the customer and collected by the business, which then pays them to the government. In India, the main indirect taxes today are the Goods and Services Tax on domestic supplies and imports, and customs duty on goods brought into or taken out of the country. Alongside these, a few older levies continue in limited areas, such as central excise on certain petroleum products and tobacco, and state VAT or sales tax on petroleum products and alcoholic liquor for human consumption, which remain outside GST.

Indirect tax affects pricing, cash flow and margins directly. Because the tax is charged on each transaction, an error in the rate, classification, valuation or place of supply repeats itself across every invoice until it is caught. A small mistake can therefore grow into a large exposure over a few years. At the same time, a well-managed indirect tax position can free up working capital through input tax credit, refunds, duty exemptions on exports, and schemes for special economic zones and export-oriented units.

Indirect tax work also involves a long tail of legacy matters. Disputes under the pre-GST regime, such as service tax, central excise and state VAT, are still being heard by adjudicating authorities, appellate tribunals and courts. Businesses continue to receive GST notices for earlier years under sections 73 and 74 of the Central Goods and Services Tax Act, 2017, and customs authorities raise questions on classification, valuation and exemption claims on past imports. Each of these needs a response grounded in the law that applied at the time.

Our indirect tax practice brings together chartered accountants, tax professionals and advocates who work across GST, customs, foreign trade incentives and legacy taxes. We advise on transactions, review your compliance, handle refunds and represent you before the authorities in notices, adjudication and appeals. Because the work varies so much from one business to another, we quote for each engagement after understanding your needs. Indirect tax laws change frequently through notifications, circulars and court rulings, and we check the current position at every stage.

Who Needs It

Indirect tax support is relevant to a wide range of businesses, including:

• Manufacturers and traders dealing with classification of goods, multiple GST registrations, e-way bills, inverted duty structures and input tax credit on capital goods.
• Importers who need help with customs classification, valuation, related-party import valuation, exemption notifications, anti-dumping and safeguard duties, and the clearance process.
• Exporters of goods and services who want to claim refunds of input tax credit or integrated tax, use export promotion schemes, and handle documentation such as letters of undertaking and shipping bills.
• Units in special economic zones and export-oriented units, which have their own rules on supplies, duty benefits and compliance.
• Service providers, including IT, consulting, financial services and online businesses, dealing with place of supply, export of services, reverse charge on imports of services, and online information and database access services.
• Real estate developers and contractors facing questions on works contracts, development rights, joint development agreements and credit restrictions.
• E-commerce operators and sellers, dealing with tax collection at source, platform-level tax liability for certain services, and multi-state registrations.
• Businesses with legacy disputes under service tax, central excise, customs or state VAT that are still pending before authorities or tribunals.
• Businesses facing audits, investigations or show cause notices from GST or customs authorities.
• Groups planning restructuring, where mergers, demergers, business transfers and change in constitution have indirect tax consequences.

Key Benefits

• Coverage across indirect taxes. One team handles GST, customs, foreign trade schemes and legacy taxes, so issues that cut across them are seen together.
• Correct positions on rates and classification. We help you apply the right tariff heading, service code and rate, reducing the risk of short payment or overcharging customers.
• Improved cash flow. We identify unclaimed credit, eligible refunds, duty exemptions and deferment options that release working capital.
• Lower dispute risk. Regular reviews and documented positions reduce the chance of notices, and make it easier to respond when they arrive.
• Effective representation. When disputes arise, we prepare replies, appear in personal hearings and file appeals before the appropriate authorities.
• Support for imports and exports. We help structure import and export flows to use available exemptions and schemes while meeting their conditions.
• Planning for changes. When rates, exemptions or procedures change, we assess the impact on your pricing, contracts and systems.
• Clear documentation. Written opinions, reconciliations and filing records support your position with auditors, investors and the authorities.

GST and customs together. On imports of goods, customs duty and integrated GST are both collected at the time of clearance, and the integrated tax paid can usually be claimed as input tax credit. Classification under the customs tariff also drives the GST rate. Errors in one often show up in the other. Handling both together avoids inconsistent positions, for example where goods are classified one way for customs and another way for GST.

Advisory, compliance and litigation. Indirect tax work falls into three broad areas. Advisory decides the correct treatment before a transaction. Compliance makes sure returns, payments, refunds and records follow that treatment. Litigation deals with disputes once the department questions a position. Many businesses need all three at different times, and we tailor the engagement to what you need now.

Eligibility and Legal Requirements

Any business that deals with indirect taxes, whether registered under GST, importing or exporting, or facing a legacy dispute, can engage us. The work is governed by a number of laws, including:

• The Central Goods and Services Tax Act, 2017, the state and union territory GST Acts, and the Integrated Goods and Services Tax Act, 2017, with the rules, rate notifications and circulars issued under them.
• The Customs Act, 1962 and the Customs Tariff Act, 1975, covering import and export duties, valuation rules, exemption notifications, anti-dumping and safeguard duties, and clearance procedures.
• The Foreign Trade (Development and Regulation) Act, 1992 and the Foreign Trade Policy, under which export promotion schemes, authorisations and the importer exporter code are administered.
• The Special Economic Zones Act, 2005 and its rules, for units and developers in special economic zones.
• The Central Excise Act, 1944, which continues to apply to certain petroleum products and tobacco products outside GST.
• The Finance Act, 1994 (service tax) and the state VAT laws, for legacy matters relating to periods before GST and for goods still outside GST.

Key procedural points include:

• Time limits for notices. GST notices for tax not paid or short paid must be issued within the time limits in the law, which differ depending on whether fraud, wilful misstatement or suppression is alleged.
• Pre-deposit for appeals. Appeals before GST and customs appellate authorities generally require a pre-deposit of a percentage of the disputed tax, as specified in the law.
• Appellate structure. GST appeals lie first to the appellate authority and then to the GST Appellate Tribunal. Customs and legacy excise and service tax appeals lie to the Commissioner (Appeals) and then the Customs, Excise and Service Tax Appellate Tribunal.
• Records. Businesses must keep records for the periods required under each law, which is generally several years after the relevant return or transaction.

Indirect tax laws, rates and procedures change often. We check the provisions applicable to the specific period and transaction at the time of advice or filing.

Step-by-Step Guide

1. Initial consultation. We understand your business, the indirect taxes that apply, and the issue or goal, such as a notice, a refund, a new import flow or a compliance review.
2. Scope definition. We agree the scope of the engagement, the periods involved, the deliverables and the timeline.
3. Document collection. We request the relevant contracts, invoices, returns, import and export documents, notices and orders.
4. Fact analysis. We map the flow of goods, services and money, and identify the points at which indirect tax applies.
5. Legal research. We study the Acts, rules, notifications, circulars and court decisions relevant to your issue and the period involved.
6. Findings and options. We share our findings, the options available, and the risk and cost attached to each.
7. Action. Depending on the engagement, we prepare filings, refund applications, replies to notices, advance ruling applications or appeals.
8. Representation. Where needed, we appear before the officers, adjudicating authorities or appellate authorities on your behalf.
9. Implementation support. We help you update invoices, systems, contracts and internal processes to reflect the agreed position.
10. Closure and review. We share final documents and orders, explain the outcome and next steps, and set up periodic reviews if you want ongoing support.

Documents Checklist

General business documents:

• GST registration certificates and importer exporter code, where applicable
• Constitution documents of the business
• Product and service list with descriptions and current rates applied

For GST matters:

• GST returns for the relevant period, including annual returns and reconciliation statements
• Sales and purchase registers and ledgers
• Copies of invoices, credit notes and debit notes
• E-way bill and e-invoice records, where applicable

For customs matters:

• Bills of entry and shipping bills
• Commercial invoices, packing lists and bills of lading or airway bills
• Purchase contracts with overseas suppliers, and related-party agreements where applicable
• Technical literature for goods under classification dispute
• Exemption certificates or licences used for duty benefits

For refunds:

• Export documents and proof of realisation of export proceeds
• Statement of input tax credit and inverted duty computation
• Bank account details for refund credit

For disputes and litigation:

• Copies of all notices, show cause notices, orders and earlier replies
• Audit reports or investigation summonses, if any
• Payment challans for any tax or pre-deposit paid

For legacy taxes:

• Returns, assessments and orders under service tax, excise or VAT for the disputed period
• Records of transition of credit into GST, where relevant

How Long It Takes

Timelines depend on the nature of the work:

• Advisory on a specific issue: usually one to two weeks after we receive complete facts and documents.
• Compliance review or health check: typically two to six weeks, depending on the number of registrations, the period and the volume of data.
• Refund applications: preparation takes about one to two weeks. The department's processing follows the time limits in the law, and can be longer if deficiency memos or queries are issued.
• Reply to a show cause notice: we aim to file within the time allowed in the notice, often thirty days, after detailed review.
• Appeals and tribunal matters: these can take months or years depending on the authority's schedule.

We agree a timeline for each engagement and keep you updated at each stage. Delays usually arise from incomplete records or documents spread across different teams or periods.

Pricing

Pricing for Indirect Tax services is Custom, because each engagement is different. We quote after reviewing your matter.

The quote depends on:

• The type of work, such as advisory, compliance review, refund, notice reply or litigation
• The taxes and laws involved, such as GST, customs, foreign trade schemes or legacy taxes
• The number of registrations, locations and periods covered
• The volume of transactions and documents to be reviewed
• The stage and complexity of any dispute, and whether hearings or appeals are needed

Our quote sets out the scope, the deliverables, the timeline and the professional fee before any work begins. Taxes, interest, penalties, pre-deposits and any government fees for applications or appeals are payable at actual.

Common Mistakes to Avoid

• Treating customs and GST separately. Different classifications for the same goods under customs and GST create inconsistencies that the department can use against you.
• Assuming exemptions apply automatically. Most exemption notifications and export schemes have conditions, such as end-use, documentation or export obligation. Missing a condition can lead to recovery of duty with interest.
• Ignoring related-party valuation. Imports from related parties and supplies between related persons have special valuation rules that must be followed.
• Missing refund time limits. Refund claims must be filed within the time allowed in the law, generally two years from the relevant date under GST. Late claims are rejected.
• Not responding to audit observations. Audit findings that are not addressed promptly often turn into show cause notices.
• Paying under protest without recording it. Where you pay disputed tax, it should be recorded as paid under protest or as pre-deposit, as appropriate, so that the payment is linked to your appeal.
• Missing appeal deadlines. Appeals must be filed within the time allowed, with the required pre-deposit. A missed deadline can make the demand final.
• Overlooking goods outside GST. Petroleum products and alcoholic liquor are subject to excise and state taxes, and their interaction with GST credit needs care.

What Happens After

Once the engagement is complete, the next steps depend on the type of work:

• Advisory work leads to changes in invoicing, rates, contracts and systems, which we help implement.
• Compliance reviews lead to corrective actions, such as amendments in returns, payment of shortfalls with interest, or claims of missed credit.
• Refunds are tracked until the refund order is issued and the amount is credited, and we respond to any deficiency memo or query.
• Notice replies are followed by personal hearings and an adjudication order. We review the order and advise on acceptance or appeal.
• Appeals continue through the appellate structure, with stay applications where needed.
• Ongoing support can be set up through periodic reviews or a retainer, so that new issues are handled as they arise.

Keep all records, contracts, invoices and correspondence for the periods required under each law, since indirect tax matters can be reopened within the time limits allowed.

FAQs

What does indirect tax cover in India today?

It mainly covers GST on domestic supplies and imports, and customs duty on imports and exports. Certain products, such as some petroleum products, tobacco and alcoholic liquor, are still subject to central excise or state taxes outside GST.

Why is your pricing custom for this service?

Indirect tax work varies widely, from a single classification question to multi-year litigation. We quote after understanding the scope, so the fee reflects the actual work involved.

Can you help with customs classification of imported goods?

Yes. We review the goods, their composition and use, the customs tariff and explanatory notes, and relevant rulings, and advise on the correct classification and the duty and GST that apply.

Do you handle old service tax and excise disputes?

Yes. We handle pending legacy disputes under service tax, central excise and state VAT, including replies, hearings and appeals before the authorities and tribunals.

Can you help exporters get GST refunds?

Yes. We prepare and file refund applications for unutilised credit on exports made under a letter of undertaking, or for integrated tax paid on exports, and follow up until the refund is processed.

What should I do if I receive a GST show cause notice?

Share it with us as soon as possible. We review the allegations, the period and the time limits, prepare a detailed reply with documents, and represent you at the hearing.

Do I need to pay anything before filing an appeal?

Most indirect tax appeals require a pre-deposit of a percentage of the disputed tax, as set out in the law. We calculate the amount and help you make the payment correctly.

Can you advise special economic zone units?

Yes. We advise on supplies to and from special economic zones, duty benefits, procedural compliance and the GST treatment of such supplies.

Can you review our indirect tax compliance for past years?

Yes. A compliance review looks at returns, credit, rates and documents over a period and identifies errors and exposure, with steps to correct them.

Do you advise on anti-dumping and safeguard duties?

We advise on whether such duties apply to your imports, the rates and conditions in the relevant notifications, and the documentation needed.

How do you handle restructuring for indirect tax?

We review the transfer of registrations, credit, pending refunds and liabilities, and the tax treatment of the transfer itself, so the restructuring does not leave gaps.

Can you appear before GST and customs authorities?

Yes. Our team appears in personal hearings and represents clients before adjudicating and appellate authorities, subject to the rules on who may appear before each forum.

Can I get ongoing indirect tax support?

Yes. Many businesses prefer a periodic arrangement that covers advisory questions, reviews and notices as they come up.

How do you keep up with changes in indirect tax law?

Our team tracks notifications, circulars and court decisions regularly, and we check the current position before giving advice or filing.

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