Tata: Value Added Tax and Long-term Capital Gains Essay

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You should identify the key drivers in the environment that are relevant to TATA and support your analysis by providing references of your research. The conclusion should discuss why these drivers are so important to TATA and how they are responding to them.
Identifying Environmental Influences – PESTEL Analysis

Political
Taxation Policy
Taxes on corporate income
Companies and residents in India are taxed on their worldwide income arising from all sources in accordance with the provisions of the Income Tax Act. Non-resident corporations are essentially taxed on the income earned from the business connection in India or from other Indian sources. A corporation is deemed to be resident in India if it is incorporated in India or if it’s control and management is situated entirely in India.

Domestic corporations are subject to tax at a basic rate of 35% and a 2.5% surcharge. Foreign corporations have a basic tax rate of 40% and a 2.5% surcharge. In addition, an education cess at the rate of 2% is payable is also charged. Corporates are subject to wealth tax at the rate of 1%, if the net wealth exceeds RS 1.5m

Domestic corporations have to pay dividend distributions tax at the rate of 12.55 however, such dividends receives are exempt in the hands of recipients.

Corporations also have to pay for Minimum Alternative Tax at 7.5% ( plus surcharge and education cess) of book profit as tax, if the payable as per regular tax provisions is less than 7.5% of its book profits.

Tax is payable on capital gains on sale of assets.

Long-term Capital Gains Tax is charged if
• Capital assets are held for more than three years and
• In case of shares, securities listed on a recognized stock exchange in India, units of specified mutual funds, the period for holding is one year.

Long-term capital gains are taxed at a basic rate of 20%. However, long-term capital gains from sale of equity shares or units of mutual funds are exempt from tax.

Short-term capital gains are taxed at the normal corporate income tax rates. Short-term capital gains arising on the transfer of equity shares or units of mutual funds are taxed at a rate of 10%.

Long-term and short-term capital losses are allowed to be carried forward for eight consecutive years. Long-term capital losses may be offset against taxable long-term capital gains and short-term capital losses may be offset against both long term and short-term taxable capital gains.
Sales Tax/VAT
Sales tax is levied on the sale of movable goods. Most of the Indian States have replaces Sales tax with a new VAT from April 1,2005. VAT is imposed on goods only and not services and it has replaced sales tax. Other indirect taxes such as excise duty, service tax etc,. are not replaces by VAT. VAT is implemented at the State level by State Governments; VAT is applied on each stage of sale with a mechanism of credit for the input VAT paid.

• 0% for essential commodities
• 1% on bullion and precious stones
• 4% on industrial inputs and capital goods and items of mass consumption
• All other items 12.5%
• Petroleum products, tobacco, liquor etc., attract higher VAT rates that vary from State to State

A Central Sales Tax at the rate of 4% is also levied on inter-State sales and would be eliminated gradually.

Municipal/Local Taxes

• Octori/entry tax: - Some municipal jurisdictions levy octori/entry tax on entry of goods

Privatisation / Deregulation policies
Privatisation Policy
Deregulation Policy
Environment Legislation
THE ELECTRICITY ACT, 2003
This act seeks to create a framework for the power sector de
Health and Safety regulation
Factories Act
To ensure cleanliness of the workplace
Make effective arrangement for treatment and disposal of waste and effluent
Make suitable and effective provisions for adequate ventilation
Maintain temperatures to secure reasonable comfort for workers
Remove any dust or fumes from the workplace which may be
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