SERVICE TAX PROPOSALS SEMINAR ON FINANCE BILL,2015 Organized by Nashik Branch of WIRC OF ICAI Presented by RAJIV LUTHIA "After the government takes enough

SERVICE TAXPROPOSALS

SEMINAR ON FINANCE BILL,2015

Organized byNashik Branch of WIRC OF

ICAI

Presented by

RAJIV LUTHIA

"After the government takes enough to balance the budget, the taxpayer has the job of budgeting the balance."

ECHO………..• A recipe that will transform the

country….Vishal Sikha…CEO Infosys

• Sabka vikas…a great start to a long linning…Anil Ambani…Chairman Reliance Group

• Fiscal Arithmetic now seems to be credible….Madhu Kela..Reliance Capital

7th March,2015 CA RAJIV LUTHIA 2

RUMBLES...............• Registration procedure simplified

• Preservation of Records in electronic form

• Alignment of abatement for transport of goods by Rail, road & vessel

• Penalty reduced substantially u/s 76 & 78

• Time Limit to take cenvat credit increased from 6 months to 1 year

• Partnership firm and Proprietorship firm eligible for Advance Ruling.


TAX KICK SCORES A………………….. GOAL

TUMBLES.................• Hike in Rate of service tax to 14%

• Additional “Swacch Bharat Cess” @ 2% on value of taxable service

• Services provided to Government related to construction etc. Made liable to tax.

• Withdrawal of many exemptions such as transport of goods by rail/road, performing artists etc.


CHANGES EFFECTIVE

FROM 1ST MARCH,2015


Not. 42/2012 RESCINDED……………… ….

[Not. 3/2015]

• Exemption granted of the service provided by a commission agent located outside India to an exporter of Goods located in India, is now rescinded.

• Amendment made in line with the amendment w.e.f. 1st October,2014 in definition of “intermediary” under PPSR,2012

• Extended the scope of services provided by intermediary to “supply of goods”, whereby place of provision of service is of the service provider i.e. outside the taxable territory.


• Rule 4(9) inserted in STR,1994………… Order No. 1/2015 prescribed conditions, safeguards and procedure………

– Application in ST-1– PAN Mandatory– Email ID & Mobile no. to be submitted to department by existing

assessee also up to 30th April,2015.– Registration in 2 days– No requirement for signed RC– Prescribed documents to be submitted in 7 days of filling ST-

1…… by registered post/speed post– AC/DC has power to revoke RC in certain situations…… after

giving applicant opportunity to represent


SIMPLIFICATION IN PROCEDURE OF ST REGISTRATION ….. Not. 5/2015 W.E.F. 1st March,2015

On global

road


AUTHENTICATION BY DIGITAL SIGNATURE: •Rule 4C under STR,1994 inserted•any invoice, bill or challan issued

under Rule 4A or consignment note issued u/r 4B •may be authenticated by means of a digital signature subject to conditions, safeguards & procedure to be prescribed by CBEC.

PRESERVATION OF RECORDS IN ELECTRONIC FORM: • Rule 5(4) under STR,1994 inserted •records required to be maintained u/r 5 may be preserved in electronic form & every page of the record so preserved shall be authenticated by means of digital signature subject to conditions, safeguards & procedure to be prescribed by CBEC.

Services Involving “AGGREGATOR”…..

• ST Rule 2(aa) “aggregator” means a person,– who owns & manages web based software application; & – by means of the application and a communication device,

enables a potential customer to connect with persons providing service of a particular kind

– under the brand name or trade name of the aggregator

• Rule 2(bca) defines brand name or trade name


Services Involving “AGGREGATOR”..contd• Person liable to pay ST for the services provided by

Aggregator….Rule 2(1)(d)(i)(AAA) of STR,1994– Aggregator himself….– If no physical presence in the taxable territory , person

representing him– If no representative also, then he shall appoint a person to

pay ST on his behalf

• 100% of the service tax is to be paid by the aggregator of the service, in respect of any service provided or agreed to be provided by a person involving an aggregator in any manner.

[Amendment in Notification 30/2012 ……………….Notification 7/2015 ]


ADVANCE RULING [NOT.9/2015]• “Resident firm” is notified as a person who can seek AAR.• “Firm” shall have the meaning assigned to it in section 4 of the

Indian Partnership Act,1932, and includes-– the LLP as defined in clause (n) of sub-section (1) of the

section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009); or

– LLP which has no company as its partner; or– the sole proprietorship; or– One Person Company.

• “Sole Proprietorship” means an individual who engages himself in an activity as defined u/s 96A (a) of the FA,1994.

• “One Person Company” means as defined u/s 2(62) of the Companies Act,2013.

• “Resident” shall have the meaning assigned to it u/s 2(42) of the IT Act,1961 in so far as it applies to a resident firm.

7th March,2015 11

CENVAT CREDIT RULES,2004 [NOT.6/2015-CE(NT)] CONDITION FOR AVAILING CENVAT CREDIT

• Vide 3rd /6th proviso to Rule 4(1) inserted w.e.f. 1st September,2014 ….. provided that the manufacturer or the service provider shall not take CENVAT Credit in respect of inputs/input service after 6 months of the date of issue of any eligible document.

• The proviso is amended to extend the time period from 6 months to 1 year.


CENVAT CREDIT RULES,2004Rule 6 : REVERSAL OF CENVAT CREDIT IN CASE OF TAXABLE EXEMPTED GOODS MANUFACTURED : •Explanation 1 inserted to Rule 6(1) …..

– exempted goods or final products as defined in rule 2(d) and 2(h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory.

•Explanation 2 ….. value of non-excisable goods for the purposes of this rule, shall be

– the invoice value – and where such invoice value is not available, such value shall

be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made there under

•Mumbai CESTAT….S.D.Fine Chem Ltd [(2012) 27 STR 106 ]……. CCR, 2004 covers only those goods which are “excisable” at the first place. Non excisable goods cannot be treated as “exempted goods”.


EXCISE DUTY ON NON-EXCISABLE

CENVAT CREDIT RULES,2004RECOVERY OF CENVAT WRONGLY TAKEN : ( RULE 14)


BUT NOT UTILIZED AND UTILIZED

Recovery shall be as provided u/s 11A or 73 of CE Act / Finance Act

respectively

Recovery shall be as provided u/s 11A &

11AA or 73 & 75 of CE Act / Finance Act

respectively

CENVAT CREDIT RULES,2004

MANNER OF UTILIZATION OF CENVAT CREDIT BALANCE•For this Rule, credits taken during month shall be deemed to have been taken on the last day of the month and the utilisation thereof shall be deemed to have occurred in the following manner: -

– Opening balance of month has been utilised first; – credit admissible during month has been utilised next; – credit inadmissible taken during month has been utilised

thereafter.”.


CHANGES EFFECTIVE

FROM 1ST APRIL,2015


Amendment in Not. 31/2012 …………..

W.E.F. 1st April,2015 [Not. 4/2015] • Exemption to the GTA services provided for transport of

export goods by road from the place of removal to an ICD-inland container depot, CFS- container freight station, a port or airport

• Scope widened to include “Land Customs Station”


Not. 6/2015..New entries in MEGA EXEMPTION

• Entry 2(ii) Services provided by way of transportation of a patient in an ambulance by any person are now exempted.

• Entry 43 Services by operator of Common Effluent Treatment Plant by way of treatment of effluent are now exempted

• Entry 44 Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of said fruits or vegetables are now exempted;


• Entry 45 Services by way of admission to a museum, national park, wildlife sanctuary, tiger reserve or zoo are now exempted;

• Entry 46 Service provided by way of exhibition of movie by an exhibitor to the distributor or an association of persons consisting of the exhibitor as one of its members; are now exempted;


Not. 6/2015….. W.E.F. 1st April,2015…new entries in MEGA EXEMPTION

• Entry 12 (a) / (c) / (f) OMITTED : Construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration services provided to Government a local authority or a governmental authority

– a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession

– a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;

– a residential complex predominantly meant for self-use or the use of their employees or other persons


Not. 6/2015….. W.E.F. 1st April,2015…EXEMPTION WITHDRAWN

• Entry 14 (a) : Exemption to Services by way of construction, erection, commissioning, or installation of original works pertaining to an airport, port withdrawn.

• Entry 16 amended : Exemption to services provided by an artist by way of a performance in folk or classical art forms of (i) music,(ii) dance, (iii) theatre, restricted to the consideration charged for such performance upto Rs. 1 Lakh. – The above exemption not applicable if service provided

as Brand Ambassador.

• Entry 20(i) / 21(d) amended : Exemption provided to transportation of goods by Rail / Road restricted to milk, salt and food grain including flours, pulses and rice , instead of all foodstuff, Tea, coffee, jaggery, sugar, milk products, edible oil.


Not. 6/2015….. W.E.F. 1st April,2015…EXEMPTION WITHDRAWN

Services Provided by Mutual Fund Agent ….W.E.F. 1st April,2015

• Entry 29(c) of Mega Exemption Notification 25/2012 omitted [Not. 6/2015] ………….Services provided by Mutual Fund Agent to a Mutual Fund or asset management company

• Person liable to pay ST in relation to service provided or agreed to be provided by a mutual fund agent or distributor to a mutual fund or asset management company, the recipient of the service…………Rule 2(1)(d)(i)(EEA) of STR,1994 [Not. 5/2015]

• Extent of ST payable by recipient of service = 100% …………….Amendment in Not. 30/2012 [Not.7/2015]


Services Provided by Selling/Marketing Agent of Lottery Tickets….W.E.F. 1st April,2015

• Entry 29(e) of Mega Exemption Notification 25/2012 omitted [Not. 6/2015] ………….Services provided by selling or marketing agent to a distributor or selling agent of lottery tickets.

• Person liable to pay ST in relation to service provided or agreed to be provided by a selling / marketing agent to a lottery distributor selling agent, the recipient of the service…………Rule 2(1)(d)(i)(EEB) of STR,1994 [Not. 5/2015]

• Extent of ST payable by recipient of service = 100% …………….Amendment in Not. 30/2012 [Not.7/2015]


Tax Regime gets closer to GST

REVERSE CHARGE [NOT. 7/2015] SERVICES OF MANPOWER SUPPLY & SECURITY:

• Presently, Service Tax in respect of services by way of Manpower Supply or Security rendered by any individual, HUF or partnership firm including AOP, located in the taxable territory to a business entity registered as body corporate, located in the taxable territory, service tax is required to be discharged by both Service Provider & Service Receiver in the ratio of 25% & 75% respectively.

• The said provisions are amended to provide for 100% of the

tax to be paid by the service recipient only.

7th March,2015 24

AMENDMENTS IN ABATEMENT NOTIFICATION 26/2012……………… W.E.F. 1st APRIL,2015 [Notification 8/2015]


Nature of Services Proposed Amendment Erstwhile Provision

Transport of goods by rail---70% abatement

Condition : No Cenvat Credit has been taken on inputs, input services, capital goods

No such condition

Transport of passengers, with or without accompanied belongings by air

Same as above Same as above

Transport of passengers by air, with or without accompanied belongings

Economy Class : Abatement @ 60% Other than economy class : Abatement @ 40%

No such bifurcation of class of tickets

Services of GTA in relation to transportation of goods.

Abatement @ 70%, taxable 30%

Abatement @ 75%, taxable 25%


Nature of Services Proposed Amendment Erstwhile Provision

Services provided in relation to chit

Abatement omitted --

Transport of goods in a vessel

Abatement @ 70%, taxable @ 30%

Abatement @ 60%, taxable @ 40%


Uniformity in the abatement rates for all the modes of transport services i.e. by rail, road, vessel

FM reiterates his promise for rolling out GST w.e.f 1st April, 2016

CENVAT CREDIT RULES,2004 [NOT.6/2015-CE (NT)]CONDITIONS FOR ALLOWING CENVAT OF SERVICES FALLING UNDER PARTIAL REVERSE CHARGE :

•Presently, credit is allowed only after making payment of value of input service along with service tax.

• Amendment…. Credit shall now be allowed of the of the extent of service tax payable by service receiver , after such service tax is paid.


ADHURA KAAM PURA HUA….!!!

Last year’s above amendment for credit of

services under full reverse charge extended to partial

reverse charge.

CHANGES EFFECTIVE

FROM ENACTMENT

OF BILL


SERVICES RENDERED TO RBI:

• Section 66D (b) covers services by the RBI under the ambit of Negative List.

• A view was being taken that services rendered by banks as an agent of RBI are also covered under the Negative List and hence not liable to Service Tax

• An illustration is inserted in this Section 66F to clarify that banks providing agency service to or in relation to services of RBI, are liable to pay Service Tax on the agency services so provided


TAX ON REIMBURSEMENT OF EXPENSES:• Hon’ble Delhi High Court - Intercontinental Consultants &

Technocrats Pvt. Ltd. Vs UOI (2012) TIOL 966 (WP) – Rule 5 (1) of the Service Tax (Determination of Value) Rules, 2006

which provides for inclusion of the expenditure or costs incurred by the service provider in the course of providing the taxable service in the value for the purpose of charging service tax is ultra vires Section 66 and 67 of the Finance Act, 1994 and travels much beyond the scope of those sections.

• To overcome this decision and to clarify the intention of levying Service Tax on reimbursement of expenses,

Explanation to Section 67 is amended to provide that “consideration” includes any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed


PENALTIES FOR REASONS OTHER THAN FRAUD, COLLUSION

7th March,2015 32

Present Provision u/s 76

In case of failure to pay ST, penalty is payable :

Rs.100/- per day of default; or1% of Service Tax pm

whichever is higher subject to 50% of the Service Tax payable.

Post Amendment

Said penalty is reduced to 10% of ST

No penalty , if ST & interest paid within 30 days of the service of notice u/s 73(1)

If ST & interest paid within 30 days of order u/s 73(2), then penalty reduced to 25% of penalty, provided the same is paid within 30 days

Where there is modification in amount by CCE(A), tribunal or court, penalty is also modified & benefit of reduced penalty also available , provided it is paid within 30 days of the receipt of order.

PENALTIES FOR REASONS OF FRAUD, COLLUSION , ETC

7th March,2015 33

Present Provision u/s 78

Where Tax has not been levied/paid/short levied/short paid or erroneously refunded by reasonsFraudCollusionWillful-misstatementSuppression of facts etc.

Penalty = 100% of ST.

True & complete details of transaction available in specified records, penalty reduced to 50% of ST

Post Amendment

Penalty reduced to 15% , if ST & interest paid within 30 days of the service of notice u/s 73(1)

If ST & interest paid within 30 days of order u/s 73(2), then penalty reduced to 25% of penalty, provided the same is paid within 30 days

Where there is modification in amount by CCE(A), tribunal or court, penalty is also modified & benefit of reduced penalty also available , provided it is paid within 30 days of the receipt of order.

• Section 80 providing that no penalty shall be imposable U/s.76 or 77 if the assessee provides that there was reasonable cause for the said failure is OMITTED

• TRANSITORY PROVISIONS (78B):• Service Tax has not been levied/paid/short levied/short paid or

erroneously refunded and no notice has been served U/s.73(1) or under the proviso thereto, before the enactment of Finance Bill,2015; or

• Service Tax has not been levied/paid/short levied/short paid or erroneously refunded and a notice has been served U/s. 73(1) or under the proviso thereto, but no order has been passed U/s.73(2), before the enactment of Finance Bill,2015.


TOWARDS AIM OF …………………………………..“MINIMUM GOVERNMENT, MAXIMUM GOVERNANCE”

APPEAL TO APPELLATE TRIBUNAL:• Section 86 amended to provide that no appeal shall lie before the

Appellate Tribunal where an order, relating to a service which is exported, has been passed by Commissioner (Appeals) U/s. 85 and matter relates to grant of rebate of service tax on input services, or rebate of duty paid on inputs, used in providing such service.

• Such order shall be dealt with in accordance with the provisions of Section 35EE of the Central Excise Act, 1944 which provides for revision by Central Government.

• All appeals filed before the Appellate Tribunal in respect of above

matters, after Finance Act, 2012 came into force and pending before it up to the date of enactment of Finance Bill,2015, shall be transferred and dealt with in accordance with the provisions of section 35EE of the Central Excise Act, 1944.


CHANGES EFFECTIVE

FROM DATE TO BE

NOTIFIED


• Hike in Service Tax Rate from 12% to 14%

• Additional Swachh Bharat Cess @ 2% also levied as Service Tax on all or any of the taxable services on the value of such services making effective levy of 16%.

• Amendment in section 66D(a) (negative List) : services rendered by Government – sub-clause (iv) is amended to omit the term “support

services”…..– Any service rendered by Government, other than covered

under sub - clauses (i) to (iii) rendered to business entities would be outside the purview of Negative List and hence would be liable to Service Tax.

– Consequently, the definition of “support services” U/s.65B (49) is omitted.


Pay a Little more to eat,

ride & fly

PROCESS AMOUNTING TO MANUFACTURE: • Presently, “any process amounting to manufacture or

production of goods” is covered under Negative List U/s.66D (f) hence not liable to Service Tax.

• The said entry is amended to exclude manufacture or

production of alcoholic liquor for human consumption.

• Consequently, the definition of “process amounting to

manufacture or production of goods” U/s.65B (40) is amended to omit the reference of “alcoholic liquors for human consumption”.


It is not Big, But it’s Full a BANG

ENTRY TO ENTERTAINMENT EVENT & AMUSEMENT FACILITY

• Presently, Section 66D (j) covers “admission to entertainment events or access to amusement facilities” within the ambit of Negative List. The said entry is omitted.

• Consequently, the definitions of “amusement facility” U/s.65B (9) & “entertainment event” U/s.65B (24) are omitted.

• Simultaneously, Entry No.47 inserted to grant exemption to services by way of right to admission to,-

– exhibition of cinematographic film, circus, dance, or theatrical performance including drama or ballet;

– recognised sporting event; – award function, concert, pageant, musical performance or any

sporting event other than a recognised sporting event, where the consideration for admission is not more than Rs 500 per person.”.


SERVICES OF CHIT • Section 65B (23A) is inserted to define “foreman of chit fund”

read with Section 2(j) of the Chit Funds Act,1982 means the person who under the chit agreement is responsible for the conduct of the chit and includes any person discharging the functions of the foreman under section 39.

• Explanation 2 to Section 65B(44) defining “Service” is amended to provide that the expression “transaction in money or actionable claim” shall not include “any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out by a foreman of chit fund for conducting or organising a chit in any manner”.

• The above amendment is brought to reverse the decision of Hon’ble Delhi High Court in the case of Delhi Chit Fund Association Vs UOI (2013) 32 Taxmann.com 332


CHANGE IN RATES OF SERVICE TAX UNDER COMPOSITION SCHEMES…:


Description of Service

Existing Rate Revised Rate

Air Travel Agents 0.6% of basic fare in case of domestic bookings

0.7%

1.2% of basic fare in case of international booking

1.4%

Life Insurance 3% of premium in 1st year

3.5%

1.5% of premium in subsequent years

1.75%

CHANGE IN RATES OF SERVICE TAX UNDER COMPOSITION SCHEMES:




Forex Broking & Money Changing

Where gross amount of currency exchanged is upto Rs.1 Lacs, 0.12% of gross amount subject to a minimum tax of Rs.30/-.

0.14% subject to minimum Rs.35/-

Where gross amount of currency exchanged is between Rs.1,00,001/- & Rs.10 Lacs, Rs. 120 + 0.06% of gross amount of currency exchanged in excess of Rs.1,00,000/-.

Rs.140/- + 0.07%

Rs. 660 + 0.012% of gross amount of currency exchanged in excess of Rs.10,00,000/- subject to a maximum tax of Rs. 6,000/-.

Rs.770/- + 0.014% subject maximum of Rs.7,000/-

CHANGE IN RATES OF SERVICE TAX UNDER COMPOSITION SCHEMES:




Distributor or selling agent of lottery

Rs. 7,000 on every Rs. 10 Lakh (or part thereof) of aggregate face value of Lottery tickets printed by the organising State for a draw if the lottery or lottery scheme is one where the guaranteed prize payout is more than 80%

Rs.8,200/-

Rs. 11,000 on every Rs. 10 Lakh (or part thereof) of aggregate face value of Lottery tickets printed by the organising State for a draw if the lottery or lottery scheme is one where the guaranteed prize payout is less than 80%

Rs.12,800/-

IN NUTSHELL


Budget for GROWTH

& COMPETITIVENESS

-

FM Fires up MAKE IN INDIA

engine


R. J. Luthia & AssociatesChartered Accountants

Ph : 2564 1553/2569 4989Email: [email protected]

Documents

SERVICE TAX PROPOSALS SEMINAR ON FINANCE BILL,2015 Organized by Nashik Branch of WIRC OF ICAI Presented by RAJIV LUTHIA "After the government takes enough