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WHY SERVICE TAX. International Trend Services catching attention Indian GDP has 54% coming from services Commodities groaning under tax burden Milking services yields large Revenue. SERVICE TAX & CONSTITUTION. Service not defined Article 246 read with Union List Residual entry no 97 - PowerPoint PPT Presentation
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WHY SERVICE TAXWHY SERVICE TAX
• International Trend
• Services catching attention
• Indian GDP has 54% coming from services
• Commodities groaning under tax burden
• Milking services yields large Revenue
SERVICE TAX & CONSTITUTIONSERVICE TAX & CONSTITUTION
• Service not defined
• Article 246 read with Union List
• Residual entry no 97
• New entry no 92 – C covers taxes on services
• Constitution amendment in 2003
SOME UNIQUE ASPECTS OF SOME UNIQUE ASPECTS OF SERVICE TAXSERVICE TAX
• Tax payable only on payments received
• Self adjustment of excess tax
• Centralized Registration
• Cenvat Credit across goods and services
• Bi – Annual Returns
SERVICE TAX LEGAL SERVICE TAX LEGAL FRAMEWORKFRAMEWORK
• Finance Act 1994 as amended
• Service Tax Rules 1994
• Service Tax Valuation Rules 2006
• Cenvat Credit Rules 2004
• Export of Services Rules 2005
CONTD.CONTD.
• Import of Services Rules 2006
• Service Tax Advance Rulings Rules 2003
• Registration of special category of persons Rules 2005
• The Works Contract Rules 2007
REGISTRATIONREGISTRATION
• Threshold limit of Rs 10 lacs
• Tax not payable till payments received cross 9 lacs , with reference to previous year
• Single Registration for all services
• Centralized Registration
IMPORTANT FORMSIMPORTANT FORMS
• ST – I application for Regn
• ST – 2 Regn certificate
• ST – 3 Return
• ST-3A Provisional assessment
• ST – 4 Appeal to commissioner ( Appeals)
CONTD.CONTD.
• ST 5 Appeal to CESTAT
• ST 6 Memorandum of Cross Objection
RULES OF CLASSIFICATIONRULES OF CLASSIFICATION
• Specific definition preferred
• Test of essential character for composite services
• Service brought into the tax net earlier than the other
VALUATIONVALUATION
• New section 67
• Value should be fullest consideration
• Otherwise Valuation Rules to apply
• Comparison with similar service
• Finding out cost of provision of service
CONTD.CONTD.
• Provision for rejection of value by Departmental Officers
• SCN & PH necessary
• Speaking order
• Rule 5 and the concept of pure agent
• Expenditure of pure agent excluded
CONDITIONS FOR PURE AGENTCONDITIONS FOR PURE AGENT
• Service provider as the pure agent
• Of the recipient of the service
• Payments to third party by agent
• Recipient to receive and use the goods and services procured by the agent
• Recipient to be liable to pay third party
CONTD.CONTD.
• Recipient authorizes service provider to make payment to third party
• Recipient has knowledge of transactions with third party – supply and payment
• Agent’s payments to be invoiced separately on recipient
CONTD.CONTD.
• Invoicing of recipient in this should be at actual
• Service provided as agent should be in addition to own services being provided
• Agency contract essential
• Agent not to use the goods and services procured and provided
CONTD.CONTD.
• Agent should not hold any title to the goods and services so provided
• Should receive only actual payments to the extent of costs incurred
Problem areas in service tax Problem areas in service tax valuationvaluation
• Deduction of cost of reimbursable expenses
• Exclusion of the cost of value of materials consumed in providing service
• Interpretation of the notification no 12/2003 dated 20-6-2003
• Case studies :
• Photography service and Tyre retreading
Continued-----Continued-----
• Cum – Tax Value
• Commissioner of service tax, Bangalore Vs Prompt and Smart security – 2008 ( 9 ) STR ( Tribunal- Bangalore )
• Malabar Management services Vs Commissioner of service tax, chennai -2008 ( 9 ) STR ( Tri- Chennai )
Continued----Continued----
• Excludability of the cost of materials in the assessable value in the operation of power plants
• CMS ( India ) Operations & Maintenance co pvt ltd Vs Commissioner – 2007 ( 7 ) STR 369 ( TRI)
• Covanta Samalpatti operating co pvt Ltd- 2008 ( 10 ) STR 133 ( Tri )
Case studies on certain problem Case studies on certain problem servicesservices
• Consulting Engineer service :
• Technology transfer and royalty payments
• Indivisible contracts
• Ratio of the Daelim case
• Goods Transport Agency service
• Works contract service
Continued-----Continued-----
• Management , maintenance and repair service:
• Maintenance of computer software
• Renting out of immovable property service
• Residential construction service
Service tax creditService tax credit
• Capital goods used for providing output service
• It includes motor vehicles registered in the name of service provider, namely:
• Courier agency
• Tour operator
• Rent a Cab scheme operator
• Cargo handling agency
continuedcontinued
• Goods transport agency
• Outdoor caterer
• Pandal and shamiyana contractor ( caterer )
continuedcontinued
• INPUTS:
• All goods except light diesel oil, HSD and petrol, used for providing output service
• Or used in or in relation to the manufacture of final products or any other purpose, within the factory of production
continuedcontinued
• INPUT SERVICE• Any service --------• Used by a provider of taxable service for
providing an output service, or• Used by a manufacturer, whether directly
or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal
continuedcontinued
• And includes services used in relation to---
• Setting up
• Modernization
• Renovation
• Repairs ---
• Of a factory,
• Premises of service provider
continuedcontinued
• Or an office relating to such factory or premises,
• Advertisement
• Sales promotion
• Market research
• Storage upto the place of removal
• Procurement of inputs
continuedcontinued
• Activities relating to business such as ----
• Accounting
• Auditing
• Financing
• Recruitment and quality control
• Coaching and training
• Computer networking
continuedcontinued
• Credit rating
• Share registry
• Security
• Inward transportation of inputs or capital goods
• Outward transportation upto the place of removal
Export of servicesExport of services
• Exempt , subject to conditions
• Services in relation to immovable property
• Services partly performed in India and partly abroad
• Services in relation to business or commerce abroad, where the recipient of the services is located abroad and in case
continuedcontinued
• Such recipient has commercial establishment or an office in India, the order for such service is made from any of his office or commercial establishment abroad.
• All services are to be provided from India and used outside India
• Payment in convertible foreign exchange
Import of servicesImport of services
• Services criteria same as for export of services
• Reverse charge
• Imported services not to be treated as output services
• Implications of the above
Service tax refund/ rebateService tax refund/ rebate
• Self adjustment
• Section 11B cash refund
• Refund under Rule 5 of CCR 2004
• Rebate under form ASTR 1
• Rebate under form ASTR 2
• Bar of unjust enrichment
continuedcontinued
• Refund claim through credit notes
• Case laws:
• Mafatlal Industries Vs union of India
• L&T sargeant Lundy Ltd vs CCE, Vadodara
Important procedures in service tax Important procedures in service tax lawlaw
• Provisional assessment and interest liability
• Input service distributor
• Advance payment and self adjustment
• Payment of amount in lieu of service tax in works contract service
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