©Tharun Raj · 2012. 8. 29. · ©Tharun Raj SERVICE TAX 2 SERVICE TAX Constitutional Validity: According to Article 246 of the constitution, parliament has exclusive power to make

©Tharun Raj SERVICE TAX

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©Tharun Raj

www.tharunraj.com | [email protected]

CA - IPCC SERVICE TAX


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SERVICE TAX Constitutional Validity:

According to Article 246 of the constitution, parliament has exclusive power to make laws with respect to any

of the matters enumerated in List I of the seventh schedule to the constitution referred to as “union list”. In

terms of Article 268A, Tax on services shall be levied by government of India. With the enactment of Finance

Act, 1994 the central government derived its authority from the residuary Entry No. 97 of the union list for

levying tax on services.

Structure of Law

For every Act, there will be Rules, notifications, circulars, judicial pronouncement. Why? -- In order to

support the Act.

Act – Contains the detailed provisions which are to be complied with as a Citizen of India

Rules – Are meant only for the purpose of carrying out the purposes of the provisions of the Act and it should

be read in such a way as to make it in accordance with the main object contained in the Act.

Notifications – It is not practicable to approach parliament and seek its approval for every minor change.

Therefore parliament delegates some powers to other authorities to issue notifications for those changes and

also every change should be notified. A notification has to be published in official Gazette, which is then made

available to public. The notification comes into effect on the day it is published in official Gazette.

Trade circulars/Trade notices – Are issued to clarify the views of the government in respect of any Act, rules or

notifications. They do not have any legal force.

Orders – Orders with respect to tax may be issued either by CBEC or by Central government. Orders have been

issued by the CBEC from time to time to define jurisdiction of officers.

Any Act, Rule, Notification or order which is not according to constitution is Void and illegal.

INTRODUCTION:

Meaning of Service “Service” means useful result/product of labour, which is intangible. It is a

value addition which can be felt but cannot be seen. However usage of some goods during the course

of providing service would not mean that there is no service. The predominant factor should be

considered.

It is an

Indirect tax

levied under Section 66 of the Finance Act, 1994 (No separate Act)

@ 12% + EC & SHEC (w.e.f 1/4/2012)

On the value of taxable services

Provided (or) to be provided

By a service provider.

The following 4 conditions must be satisfied for levy of service tax

1) There must be two parties (service provider & service Recipient )

Sources of any law

Act Rules NotificationsCirculars or

Office lettersTrade

NoticesOrders


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2) The Service must be provided by the Service provider for some consideration

3) Such service should be a taxable service

4) The taxable event should be triggered

Who is Service provider?

Any person who provides taxable service

Meaning of person:

Individual, HUF, Firm, AOP, BOI, Company, co-op society, charitable institutions, Central (or) State

Government. [w.e.f 1/4/2012, Partnership firm includes limited liability partnership (LLP)]

Service Recipient: Any person who is receiving taxable service provided by a service provider.

Taxable Service: A Service appearing under sec 65(105) of the Finance Act

Scope of Service tax law: Applies to whole of India except the state of Jammu and Kashmir. If service

provider is in the state of Jammu and Kashmir and provides services outside the state, service tax shall

be imposed on such services.

India includes “Territorial waters” (i.e., Upto 12 Nautical miles from the base line).

India includes the installations, structures and vessels located in the continental shelf of India and exclusive economic zone (i.e. upto 200 nautical miles from base line) of India, (only) for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof (w.e.f. 27-2-2010)

TAXABLE EVENT

The event on happening of which duty liability is attracted

Date of entering into contract for providing service

Provision of service, if the service is not taxable on the date of entering into contract

THE TAXABLE EVENT IS FOR ATTACHING LIABILITY BUT SERVICE TAX IS PAYABLE AS PER POINT OF TAXATION RULES,

In service tax “Levy” and “Collection” are two different events. The taxable event discusses the levy of service

tax on happening of an event known as provision of service and previously, the collection is on the date of

receipt of money by service provider from service recipient. But with the introduction of Point of Taxation

Rules, 2011 the levy changes according to the various situations. The relevant date for determining the rate of

service tax shall be the point of taxation (Rule 5B of ST Rules, 1994).


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When “Invoice” must be issued? – Rule 4A of Service tax Rules, 1994 (Latest Amendment)

Point of taxation Rules, 2011

Discussion on various dates mentioned in the rules

Time limit for issuance of invoice/bill/challan

In case of

a) Banking company

b) FI (incl. NBFC)

c) Body corporate or person providing "Banking and other financial Services"

Within 45 days from the date of completion of Service

If payment received beforecompletion of service, then within 45 days from the date of receipt

of any payment

In case of others

Within 30 days from the date of completion of Service

If payment received before completion of service, then within 30 days from the date of receipt

of any payment

Date of provision of service/ Date of completion of Service

The date on which service has been

actually provided by the service provider

Date of issuing invoice

The invoice may be issued prior to provision of service also. Sometimes proforma

invoice may be given before provision of service and

thereafter final invoice shall be given

Date of receipt of payment

Payment can be received for service provided or to

be provided. In case of service to be provided,

such payment received is termed as "Advance"

When service tax shall be payable (Determination of point of taxation)

Situation (i)

On all the above mentioned dates,

there is no change in the rate of service tax

a) Normal Service

b) Continuous supply of service

Rule 3

Situation (ii)

There is change in the rate of service tax

and that change in rate is after the date

of provision of service

Rule 4(a)

Situation (iii)

There is change in the rate of service tax and that change in rate is

before the date of provision of service

Rule 4(b)

Situation (iv)

Special Cases

Rule 5, 6, 7, 8


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Different situations and the point of taxation in each situation.

Date of Completion of service (note 1)

Date of Invoice Date of payment received

Situation (i)(a) THE RATE OF DUTY IS SAME ON ALL THE DATES – Normal Service

(i) If payment is received before issuing invoice. (i.e. Advance) [See note 4 below]

POT

(ii) If Invoice is issued within 30 or 45 days from the date of completion of service

POT

(iii) If Invoice is not issued within 30 or 45 days from the date of completion of service

POT

Situation (i)(b) CONTINUOUS SUPPLY OF SERVICE [See note 2 for meaning]

Same as situation (i) except that deeming fiction regarding the COMPLETION OF SERVICE [See note 3 below]

Situation (ii) CHANGE IN RATE AFTER THE DATE OF PROVISION OF SERVICE

POT shall be EARLIER of these 2 dates [See note 5 below]

Situation (iii) CHANGE IN RATE BEFORE THE DATE OF PROVISION OF SERVICE [See note 6 below]

Special Cases

A service becomes taxable for the first time and such date

falls in, before or after the above mentioned

dates

Rule 5

In case reverse charge and

transactions with associated enterprises

Rule 7

In case of payments

pertaining to copyrights, trademarks

Rule 8

Determination of Point of taxation

by best judgement

Rule 8A


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(i) If invoice and payment received before change in rate

POT shall be EARLIER of these 2 dates

(ii) In a case other than (i) above POT shall be LATER of these 2 dates

Situation (iv) WHEN A SERVICE BECOMES TAXABLE FOR THE FIRST TIME [Amended]

(i) If invoice is issued and payment is received before the new service becomes taxable

NO TAX PAYABLE

(ii) If invoice is issued within 30 or 45 days after the new service becomes taxable but payment is received before

NO TAX PAYABLE

(iii) If invoice not issued within 30 or 45 days after the new service becomes taxable but payment is received before (or) If invoice is issued before but payment is received after.

POT

(iv) If both invoice and payment date falls after the new service becomes taxable


Situation (v) REVERSE CHARGE POT (If payment is not made to SP within

6 months from invoice date)

POT (If payment is

made to SP within 6 months from Invoice date)

Situation (vi) TRANSACTIONS WITH ASSOCIATED ENTERPRISES (Where person providing service is outside India) [The liability to pay duty is on the service recipient]

Date of credit in the books of service recipient or date of payment,

whichever is earlier

Situation (vii) Payments pertaining to copyrights and trademarks


Determination of Point of taxation by best judgment – Rule 8A [Latest Amendment]

When POT cannot be determined as per the rules,

For non availability of information related to date of invoice or date of payment or both,

The Excise officer may require the assessee to produce accounts, documents or other evidence as the

officer may deem necessary.

The excise officer after taking into account the above information and after considering the effective

rate of tax shall pass an order in writing, for service tax payable.

Such order shall be passed only after giving an opportunity of being heard to the assessee.

Notes to above table:

1. Meaning of completion of Service Not only completion of physical part of providing service but

also the completion of all other auxiliary activities that enable the service provider to be in a position

to issue the invoice [This is the Acid Test]. Such auxiliary activities could include activities

like measurement, quality testing etc which may be essential pre-requisites for identification

of completion of service. However such activities DO NOT INCLUDE flimsy or irrelevant grounds for

delay in issuance of invoice. – Circular No. 144/13/2011.

2. Meaning of “Continuous supply of Service” MEANS any service which is to be provided or to be

provided continuously or on recurrent basis, under a contract, for a period exceeding 3 months with

the obligation for payment periodically from time to time. (or)

Services notified by central government as continuous supply of service, irrespective of the period.

Following services are notified by central government for this purpose

Telecommunication service

Commercial or industrial construction

Construction of residential complex

Internet telecommunication service


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Works contract service.

3. Date of completion of provision of service in case of continuous supply of service in case of

continuous supply of service, where the provision of whole or part of the service is determined

periodically on the completion of an event in terms of a contract, which requires the receiver of

service to make any payment to service provider, the date of completion of each such event specified

in the contract shall be deemed to be the date of completion of provision of service.

4. POT in case where payment upto 1,000 received in excess of the invoiced amount when a service

provider receives a payment upto 1,000 in excess of amount indicated in invoice, the POT to the

extent of such excess amount, shall be

a) Date of receipt of payment (or)

b) Date of invoice or date of completion, whichever is earlier.

The service provider can choose either (a) or (b) above as POT. [This is a facilitation provided to

service providers in telecommunications, credit card business who regularly receive minor excess

payments from their customers]

5. As the service is provided before the change in rate, the intention of the department is to collect old

rate. Due to this reason, the POT shall be earlier of Invoice date or payment received date.

6. In this case as services are provided after the change in rate, the intention of the department is to

collect new rate. Due to this reason, the POT shall be later of Invoice date or payment received date.

But, in case where all the events fall before the change in rate, the tax shall be payable as per the old

rate (Earlier of two dates or later of two dates is not relevant ,as on both the dates the prevailing rate

is old rate)

Grace period of 4 days, when there is a change in effective rate of tax or when a service is taxable for the

first time:

When there is change in effective rate of tax, if the payment is credited into the bank account before

change in effective rate of tax then old rate shall be applicable. Otherwise, tax shall be payable on the

basis of new rate. But, there is a grace period of 4 days provided in Rule 2A of POT rules, 2011 i.e. if

payment is credited within 4 days from the change in rate of tax then old rate shall be applicable.

Otherwise, new rate is applicable.

When a service is taxable for the first time, if the payment is credited into the bank account before

such service becomes taxable, and then old rate shall be applicable. Otherwise, tax shall be payable

on the basis of new rate. But, there is a grace period of 4 days provided in Rule 2A of POT rules, 2011

i.e. if payment is credited within 4 days from the date when service becomes taxable for the first time

then old rate shall be applicable. Otherwise, new rate is applicable.

Meaning of "Date of payment" as per Rule 2A of POT rules, 2011 (w.e.f 1/4/2012)

For the purpose of rule 4 and rule 5

Date of credit into the bank account of service provider

For the purpose of other rules

Date on which payment received is entered in books of account (or) Date of credit into the bank account, which

ever is earlier


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Illustration:

Since the rate of service tax has been changed from 10% to 12% w.e.f 1/4/2012, In case where service has

been provided before 1/4/2012 and the cheque or demand draft etc., has been received upto march 31st

,2012,

applicable rate of service tax would be 10% provided cheque/demand draft is credited in the bank account by

April 4th

, 2012. Otherwise, new rate of 12% will be applicable.

Reason for insertion of Rule 2A:

In the following two cases, Date of payment received shall be the point of taxation:

i. Change in rate after the date of provision of service and payment is received before issuance of

Invoice.

ii. Change in rate before the date of provision of service and invoice, payment is received before such

date (POT shall be earlier of date of invoice and Date of payment received)

The service provider may enter into his books of accounts that payment has been received before the change

in effective rate of tax, there by the services will be taxable at old rate even though the actual payment may be

received after the change in effective rate of tax. [This is so, because date of payment received is the point of

taxation]

Case Studies on Point of taxation Rules, 2011:

Case Study-1

X ltd. is in the business of providing Management consultancy services. Determine

the point of taxation and due date of payment of service tax in the following cases

and provide reasons supporting your answer.

Case Date of

completion of

Provision of

service

Date of Invoice Date of receiving the

payment or advance as

the case may be.

(a) 10/4/2012 20/4/2012 30/4/2012

(b) 10/4/2012 15/5/2012 30/4/2011

(c) 10/4/2012 20/4/2012 Date of entry in books:

17/4/2012

Date of actual credit to

bank A/C: 15/4/2012

(d) 10/4/2012 16/5/2012 5/4/2012 (part) and

25/4/2012 (Remaining)

(e) 15/8/2012 For advance – 2/8/2012

(for `10,000)

For completion of service

– 30/8/2012 (for

`15,000)

1/7/2012 – Advance

received

(f) 15/8/2012 No Invoice has been

raised (Value = `25,000)

1/7/2012 – Advance

received for `10,000

(g) Not yet

provided

5/8/2012 31/7/2012

(h) Not yet

provided

Not raised 31/7/2012

Case Point of Taxation Due date of payment

of service tax

Reason

(a) 20/4/2012 5/5/2012 The invoice is issued within 30 days from the

date of completion of service. So the date of

issue of invoice shall be the point of taxation.

(b) 10/4/2012 5/5/2012 As Invoice not issued within 30 days from the

date of completion of service, the date of

completion of service shall be the point of


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taxation.

(c) 15/4/2012

(Advance)

5/5/2012 1. If payment is received before issuing invoice

then the date of receipt of payment shall be

the point of taxation. (The said amount is

advance)

2. Date of receipt of payment as per Rule 2A

means the date of entry of payment in books

of account or date of actual credit to bank

A/c, whichever is EARLIER

(d) For first part –

5/4/2012

(Advance)

For next part –

10/4/2012

5/4/2012

(For the entire sum)

1. If payment is received before issuing invoice


the point of taxation.

2. For the balance amount as invoice is not

issued within 30 days from the date of

completion of service, the point of taxation

shall be the date of completion of service.

(e) For `10,000 –

1/7/2012 and

For `15,000 –

30/8/2012.

For `10,000 –

5/8/2012 and

For `15,000 –

5/9/2012.



the point of taxation. Non issuance of invoice

within 14 days from the date of receipt of

payment (In case of advance) is a procedural

lapse and penalty shall be levied. But, it will not

have any impact in point of taxation.

2. For the balance amount as invoice is issued

within 14 days from the date of completion of

service, the point of taxation shall be the date

of issuance of Invoice.

(f) For `10,000 –

1/7/2012 and

For `15,000 –

15/8/2012

For `10,000 –

5/8/2012 and

For `15,000 –

5/9/2012.




2. For the balance amount as invoice is not

issued, the point of taxation shall be the date

of completion of service.

(g) 31/7/2012 5/8/2012 If payment is received before issuing invoice


the point of taxation (Whether or not the

invoice is issued within 30 days).

(h) 31/7/2012 5/8/2012 If payment is received before issuing invoice



Case study-2

Jain & Associates, a partnership firm imported certain taxable services

valuing 20 lakhs. The services were provided on 10/5/2012. An advance of

5 lakhs (towards value) was paid by the firm on 15/4/2012 and another

advance of 6 lakhs (towards value) was paid by the firm on 1/5/2012. The

provision of service was complete on 15/5/2012, and invoice for the balance

amount if received on that date. Jain & Associates paid immediately the

balance amount in order to avoid foreign exchange fluctuations.

Determine the point of taxation and due date of payment of tax. Assume

that Jain & Associates are not eligible for exemption under fourth proviso

to rule 6(1) of Service tax Rules, 1994.

Jain & Associates, being the recipient of service, is the person liable to pay service tax as notified

under sec. 68(2) of the Finance Act, 1994.


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As per Rule 7 of POT rules, 2011, in case of persons required to pay service tax as per sec. 68(2),

the POT shall be the date on which payment is made. However, where the payment is not made

within 6 months from the date of Invoice, the point of taxation shall be the date of Invoice.

In the present case, the invoice must be issued by the person located outside India and the

amount is either paid before the date of Invoice or immediately on the date of invoice, so the

point of taxation shall be the “Date of payment” made by service recipient located in India.

Point of Taxation Due date of payment

of service tax

Reason

15/4/2012

(for 5 lakhs)

5/7/2012 For the advance payment made towards value of 5 lakhs,

the date of making payment by the service recipient shall

be the point of taxation.

1/5/2012

(for 6 lakhs)

5/7/2012 For the advance payment made towards value of 6 lakhs,



15/5/2012 5/7/2012 For the balance consideration towards value of 9 lakhs,



The payment in this case has been made within 6 months

from the date of invoice.

Case study-3

(POT in case of continuous supply of Service) Sahil Ltd. entered into a contract with

Singla Ltd. for construction of a new building to be used primarily for the purpose of

commerce or industry for a total consideration of ` 300 lakh on July 01, 2012. The said

services fall within the purview of “commercial or industrial construction services”. The

initial booking amount of `30 lakh was billed and received on the date of contract itself.

It was further agreed that `120 lakh, `70 lakh and `80 lakh would be received on

completion of 50%, 75% and 100% of the construction work of the building as certified

by the Chartered Engineer. Determine the point of taxation in respect of each of

following stages of completion with the help the relevant details furnished there under:

Stage % of

completion

Date of

completion

Date of issuance

of Invoice

Date of payment

of stipulated

amount

I 50% 15/Aug/2012 10/Sep/2012 29/Sep/2012

II 75% 20/Sep/2012 25/Oct/2012 25/Oct/2012

III 100% 30/Nov/2012 11/Dec/2012 07/Dec/2012

Since “commercial or industrial construction services” have been notified as continuous supply of service for

the purpose of the Point of Taxation Rules, 2011, rule 6 becomes applicable in the instant case. According to

rule 6, in case of continuous supply of services, point of taxation will be determined in the following manner:-

Stage Point of Taxation in

the given case

Reason

I 10/Sep/2012 In case invoice is issued within 30 days from the completion of

milestone for payment and payment is received after invoice,

point of taxation is the date of invoice.

II 20/Sep/2012 In case the invoice is NOT issued within 30 days from the

completion of milestone for payment and payment is received on

or after completion of such milestone, point of taxation is date

of completion of milestone for payment

III 7/Dec/2012 In case the invoice is issued within 30 days from the completion

of milestone for payment and advance payment is received

before invoice, point of taxation is date of receipt of payment

to the extent of such advance

Further, the point of taxation for the initial booking amount is July 01, 2012 as the date of issuance of invoice

as well as date of payment is same.



Case study-4

(POT in case of new Services) A newly introduced service becomes taxable with effect

from 01.05.2012. Determine in each of the following independent cases whether service

tax is leviable in accordance with Point of Taxation Rules, 2011?

Case Time of Issuance of Invoice as well

as Amount of Invoice

Time of receipt of payment as well

as amount of Payment received

(a) 25.04.2012 for `1,00,000/- 26.04.2012 for `1,00,000/-

(b) 25.04.2012 for ` 1,00,000/- 26.04.2012 for `60,000/-

(c) 25.04.2012 for `60,000/- 26.04.2012 for `1,00,000/-

(d) 25.04.2012 for ` 2,00,000/- 20.04.2012 for `2,00,000/-

(e) 24.05.2012 for `2,00,000/- 30.04.2012 for ` 2,00,000/-

(f) 5.06.2012 for `2,00,000/- 30.04.2012 for `2,00,000/-

According to Rule 5 of Point of Taxation Rules, 2011 the taxability and POT in each case is as follows:

Case Position of

taxability

Point of taxation Reason

(a) Not taxable Not applicable As Invoice is issued and payment to that extent is

received before the service becomes taxable,

service tax not leviable.

(b) `60,000 – Not

taxable &

`40,000 - Taxable

Date of receipt of

payment

As only part payment to the extent of `60,000/-

has been received before such service becomes

taxable, the said amount is not taxable. In other

words, `40,000/- received after such service

become taxable [i.e. after 01.05.2012] will be

subject to service tax at the rate prevailing on the

date of receipt of payment.

(c) `60,000 – Not

taxable &

`40,000 – Not

taxable, if invoice

issued within 30

days from 1/5/2012

`40,000 – Taxable,

if invoice not issued

within 30 days from

1/5/2012

If invoice for `40,000

not issued within 14

days from 1/5/2012

then POT is

26/4/2012

Not-taxable to the extent of `60,000/- because

to that extent the invoice is issued before such

service become taxable and payment also received

before such service becomes taxable.

The balance `40,000 is received before the service

becomes taxable but invoice not yet issued. If the

invoice is issued within 30 days from the date when

service is taxable for the first time, then no

service tax leviable and if invoice is not issued

within 30 days then service tax payable and POT

shall be the date of receipt of payment

(d) Not taxable Not applicable As both invoice and payment date falls before the

date when service becomes taxable.

(e) Not taxable Not applicable As the payment has been received before the

service becomes taxable and invoice is issued

within 30 days from the date when service

becomes taxable.

(f) Taxable 30/4/2012 If Invoice not issued within 30 days from the date

when service becomes taxable, then the tax shall

be payable and Point of taxation shall be “The date

of Receipt of payment”. [In such a case even

though the service is not taxable on the date of

receipt of payment, the service tax shall be

payable for a small procedural lapse i.e. not issuing

invoice on time – Department clarification required

here!!!]



Case study-5

(POT in case of new Services) Certain services have become taxable for the first time

on 1/6/2012. The following details are furnished by a service provider in respect of

services for the financial year 2012-13. You are required to compute the amount of

service tax @ 12.36%:

Bill No. Value of

Service

Date of

actual

provision of

service

Date of

issue of

Invoice

Date of

payment as

per Rule 2A

Remarks, if

any

A-1 11,00,000 1/4/2012 12/4/2012 1/5/2012 Nil

A-2 12,00,000 1/5/2012 15/5/2012 31/5/2012

7/6/2012

Received

`10,50,000

Received

`1,50,000

A-3 25,50,000 31/5/2012 14/6/2012 31/5/2012 Nil

A-4 40,00,000 1/6/2012 15/6/2012 25/6/2012 Nil

A-5 30,00,000 31/5/2012 5/7/2012 31/5/2012 Nil

According to Rule 5 of Point of Taxation Rules, 2011 the taxability and POT is as follows:

Bill

No.

Position of

taxability

Amount taxable Point of taxation Reason

A-1 Not taxable 0 Not applicable As Invoice is issued and payment to that

extent is received before the service

becomes taxable, service tax not

leviable.

A-2 `10,50,000 – Not

taxable &

`1,50,000 –

Taxable

`1,50,000 Date of receipt of

payment i.e.

7/6/2012

As only part payment to the extent of

`10,50,000/- has been received before

such service becomes taxable, the said

amount is not taxable. In other words,

`1,50,000/- received after such service

become taxable [i.e. after 01.06.2012]

will be subject to service tax at the

rate prevailing on the date of receipt of

payment.

A-3 Not taxable 0 Not applicable The payment has been received prior to

1.6.2012 and the invoice has been issued

within 30 days from the date when such

service is taxed for the first time.

Hence, the service is not taxable and

service tax is not leviable.

A-4 Taxable `40,00,000 Date of receipt of

payment i.e.

25/6/2012

As the payment is received after the

service becomes taxable. The invoice

may be issued within 30 days from the

date of taxability of service for the

first time, but it is not relevant in the

present case.

A-5 Taxable `30,00,000 Date of recipt of

payment i.e.

31/5/2012

As the payment has been received

before the service becomes taxable and

invoice is not issued within 30 days from

the date when service becomes taxable.

Total Value of taxable

services

`71,50,000

Tax @ 12.36% `8,83,740



Case study-6

(Service provided after change in rate) A service provider has provided a taxable service

on 5/8/2012 and there is a change in tax rate w.e.f 1/8/2012. When the tax shall be

payable in the following cases?

(a) Date of Invoice is on 31/7/2012 and Date of receipt of payment is on 1/9/2012

(b) Date of Invoice is on 26/7/2012 and Date of receipt of payment is on 31/7/2012

(c) Date of Invoice is on 5/8/2012 and Date of receipt of payment is on 26/7/2012

Case Point of

Taxation

Due date of

payment

Reason

(a) 1/9/2012 5/10/2012 When the service is provided after change in rate and Invoice is

issued before change in rate and payment is received after

change in rate, the point of taxation shall be the date of Invoice

or date of receipt of payment whichever is later.

(b) 26/7/2012 5/9/2012 As both Date of Invoice and receipt of payment are prior to

change in rate, even though service is rendered after the change,

POT shall be the date of Invoice or date of payment whichever is

earlier.

(c) 5/8/2012 5/9/2012 Though payment has been received prior to the date of change,

date of invoice is the POT (Whichever is later). Though service

tax at old rate was paid on 5-8-2012 for the amount received on

26/7/2012, while raising invoice on 5/8/2012 new rates have to

be applied and differential service tax to be paid on 5/9/2012

Liability to pay service tax:

Section 68 provides that “Service provider” is liable to pay service tax.

But in the following cases, as per sec. 68(2), a notified person (whether such person is service provider or not)

is liable to pay service tax (this is popularly known as “Reverse charge”) and accordingly the person liable to

pay service tax must register under service tax. The said taxable services for reverse charge are notified by

central government.

Taxable Service Person liable to pay service tax

1. Telecommunication Service a) The Director General of Post and Telegraphs, or b) The chairman cum MD of MTNL, Delhi, or c) Any other person who has been granted license by the central govt.

2. General Insurance service The insurer or reinsurer providing such service

3. Insurance auxiliary service by an insurance agent

Any person carrying on the general insurance business or the life insurance business in India.

4. Import of Service u/s 66A The recipient of such service.

5. Goods transport agency service (GTA)

Consignor or Consignee (Who pays the freight) – If such consignor or consignee is a factory/company/statutory corporation/registered society/cooperative society/dealer under excise/body corporate/registered firm. Goods Transport agency – In other cases (Eg: In case of normal parcels sent by individuals from one location to other location)

6. Business auxiliary service w.r.to distribution of mutual fund by distributor/agent

The Mutual Fund/Asset Management Company (AMC) receiving such service.

7. Sponsorship service The body corporate of firm, located in India, who receives such service

Note: In all the above cases the small service provider exemption is not available.



Issues in Taxable Event and Point of Taxation Rules, 2011:

Issue-1: What if Service recipient does not pay service tax?

The liability to pay service tax is on the service provider. With the introduction of POTR, 2011, the service provider is liable to pay service tax when the services are deemed to be provided as per the said rules. The concession from payment of service tax is not available in case of Bad debts – Departments clarification. Therefore, if service recipient fails to pay service tax or service charges, the service provider should pay service tax out of his pocket. But in case where service tax is payable on “Receipt of payment basis”, then the above provision or circular is not applicable and hence, the service provider will not pay service tax as he didn’t receive any amount from the service recipient. Therefore, if no payment is received then service tax not required to be paid.

Issue-2: What if Service tax has been paid (based on receipt of advance) but the service has been cancelled and not provided?

Such service tax paid can be taken as credit (i.e. CENVAT credit) and used for payment of future liabilities. The amount already received shall be either paid back to the client or his account shall be credited with such amount.

Issue-3: What if Service tax has been paid (based on receipt of advance or issue of invoice) on a particular value, but the service recipient has paid only lesser amount?

Such excess service tax paid can be taken as credit (i.e. CENVAT credit) and used for payment of future liabilities. The amount not received shall be credited back to the client’s account. If the client has paid the entire amount in advance but later renegotiates and a lesser payment is agreed, in such cases also, the same treatment can be adopted (i.e. Taking credit of excess service tax paid and refunding the excess money received to client).

Issue-4: Mr. X, a subcontractor provided services to Mr. Y, the main contractor. Is X required to pay service tax on the value of taxable services provided by him?

CBEC has clarified that a subcontractor is also a taxable service provider. His services are taxable even if these are used by main service provider for completion of his work. Service tax is leviable on any taxable services provided, whether or not the services are provided by a person in his capacity as a sub contractor and whether or not such services are used as input services. – Circular No. 96/7/2007; Reference Code: 999.03

Issue-5: A club allows its space to be used by its member for a function by constructing a mandap. The department demanded service tax as this service falls under ‘Mandap keeper service’. Is the department’s contention correct?

Explanation to Sec. 65(105) – Taxable Services includes any taxable service provided by any unincorporated association/body to its members. Hence, such unincorporated person shall be liable to pay service tax on the taxable services provided by it. In this case the club is liable to pay service tax. [This is an exception to the principle of mutuality that a person cannot provide service to himself]

Issue-6: Two independent companies “Renault” and “Nissan” are players in automobile industry. They do not provide services on principal to principal basis. They have entered into an agreement to share revenue/profits/risks by starting a new entity M/s. Renault Nissan (Joint venture) which emerges as a distinct entity separate from its constituents. Such joint



venture provides services to “Renault” and “Nissan” and also to third parties. Is M/s. Renault Nissan, being an unincorporated entity liable to pay service tax on the taxable services provided by it?

Explanation to Sec. 65(105) – Taxable Services includes any taxable service provided by any unincorporated association/body to its members. Hence, such unincorporated person shall be liable to pay service tax on the taxable services provided by it. As per the above explanation M/s. Renault Nissan, even if unincorporated, is a separate person for the purpose of service tax. The transactions between such joint venture and independent entities will be taxable service and liable to service tax. If the arrangement between two companies does not result in separate entity and the transaction is on principal to principal basis, tax is leviable either on Renault or Nissan as per the nature of transaction. Source: CBE&C circular No. 148/17/2011

Issue-7: The definition of person includes State & Central government. So, if the government provides any services for a fee, is it required to pay service tax?

If the Sovereign/ Public authorities (i.e. Agencies constituted/Set up by government) perform functions and duties which are statutory in nature, then these are not taxable services. But if these authorities provide any non – statutory services i.e. activities in the nature of trade or commerce, those will be liable to service tax. Following are some of the services in statutory nature:

RTO issuing fitness certificate Factories inspector inspecting factories Certification of film by Central Board of Film Certification (CBFC)

Source: CBE&C Circular No. 89/7/2006 & 96/7/2007; State of MP V. CCE; Kerala state Electricity Board V. CCE.

Issue-8: An employee provides services to employer for a consideration known as ‘Salary’. Is employee required to pay service tax?

A distinction must be made between “Contract of Services” and “Contract for Services”. In ‘Contract of Service’, the person availing service can order or require what is to be done and how it is to be done. The relationship between service recipient and service provider in this case is ‘Employer and Employee’ or ‘Master and Servant’. In ‘Contract for Service’, the person availing service cannot order what is to be done and how it is to be done. Eg. Lawyer–Client or Doctor–Patient relationship. Service tax is payable when there is ‘Contract for Services’ and not when there is ‘Contract of Services’ Source: CBE&C, vide letter No. 324/2008; S.Maruthappan V. CCE.

Issue-9: In case of Build-Operate-Transfer (BOT) and Build-Own-Operate-Transfer (BOOT) arrangement, a person collects toll charges from the users of vehicles plying on the roads laid down by such person under the said arrangement. Whether, the toll fee paid by the users, for using the roads, is liable to service tax?

Meaning of “Toll Fee” – Toll is a fee paid by the users of roads, including those roads constructed by a special purpose vehicle (SPV) created under an agreement between NHAI/state authority (PPP Model, BOT or BOOT) Constitutional validity of levy on toll fee – ‘Tolls” is a matter enumerated in List II (State list), in the seventh schedule to the constitution and the same is not covered under any of the taxable services at present.



As per circular No. 152/3/2012,

Tolls collected by SPV under PPP model is collection by SPV on its own account and not on behalf of the person who has made the land available for construction of road and it is not covered by any of the taxable services at present and hence not taxable under service tax.

However, if SPV engages an independent entity to collect toll from users on its behalf and a part of toll collection is retained by that independent entity as commission or is compensated in any other manner, service tax liability arises on such commission or charges, under business auxiliary service.

Meaning of SPV - Further, an SPV formed as a result of agreement between NHAI or state authority, cannot be considered as an agent of the NHAI. Renting, leasing or licensing of vacant land by the NHAI or state authority to an SPV for construction of road and such construction do not attract service tax.

From the following information explain the treatment to be adopted in case of

service tax as laid down under Point of taxation Rules, 2011.

An invoice has been raised for Rs. 1,00,000 with service tax of Rs. 10,300 and the

same has also been paid to the government’s account. But the client has paid only

Rs. 80,000 in full and final settlement.

When a client has paid the lesser amount, the excess service tax paid to the government can be taken as

credit and can be utilized for any other tax payment.

In the present case, the amount of Rs. 80,000 received shall be treated as gross amount inclusive of

service tax and the amount of service tax shall be 80,000 X 10.3/110.3 = Rs. 7,470

Excess amount to be taken as CENVAT credit = Rs. 10,300 – Rs. 7470 = Rs. 2830.

The service provider has to issue a credit note for Rs. 30,300 (i.e. 1,10,300 – 80,000)

Value of taxable service [Sec. 67]

If service is provided for a

consideration in money

Gross amount charged by service provider. [Sec. 67(1)(i)]

If service is provided for a

consideration not wholly or partly in

Money

Such amount in money, with the addition of service tax charged, as is

equivalent to the consideration. [Sec. 67(1)(ii)]

Note: The amount should be always considered as inclusive of tax

and the tax should be calculated accordingly.

If Consideration is not ascertainable Service tax valuation rules,2006 shall apply. [Sec. 67(1)(iii)]

Mr. Krishna, Cost Accountant rendered taxable service to Bharathi cement

Ltd. In this regard the company M.D Jagan sent 200 cement bags free of

cost, for the house construction of Mr. Krishna. Explain how the value of

taxable service will be determined in this case. Will your answer be different

if the service had been rendered free of charge?

Bharathi cements Ltd. Has given 200 bags of cement as consideration for services provided by Mr.

Krishna. The fees would have settled by book adjustment. The value of the said cement bags has t o be

Service tax on "Tolls"

Tolls collected by SPV on its own account

Not liable to Service tax

Tolls collected by an independent entity on

behalf of SPV

Liable to service tax under "Business auxiliary service"



taken as the value of taxable services inclusive of service tax. If the service is rendered free of charge

then no service tax is payable as free services are not taxable.

Service tax Valuation Rules:

Rule 3(a): Gross amount charged by service provider for providing SIMILAR service

Rule 3(b): If the above in not ascertainable, EQUIVALENT money value of such consideration, which should not

be less then cost of provision of such services

Rule 4: Central Excise officer has power to “REJECT” the value” and can “SPECIFY” the value adopted by him

through a show cause notice and after providing an opportunity of being heard, he will “DETERMINE” the

value of taxable service.

The Central Excise officer can do so only if he is reasonably satisfied that the value determined by the

service provider is not in accordance with the provisions of Act or Rules.

Inclusions/ Exclusions in value: [Rule 5]

Expenditure incurred in the course of providing taxable Service by a service provider is includible

(Whether shown separately in invoice or not).

If amount charged by service provider includes value of goods and materials sold, the value of

material has to be excluded. Notification 12/2003-ST.

Expenditure (or) Cost incurred as pure agent by service provider is Excluded

(a) The service provider acts as a pure agent of the recipient of service when he makes payment

to the third party.

(b) The recipient of service is liable to make payment to the third party.

(c) The recipient of service authorizes the service provider to make payment on his behalf.

(d) The recipient knows that the goods and services for which payment has been made is

provided by the third party.

(e) The payment made by the service provider on behalf of the recipient of service has been

separately indicated in the invoice issued by the service provider to the recipient of service;

(f) The service provider recovers from the recipient of service only such amount as has been

paid by him to the third party; and

(g) The goods or services procured by the service provider from the third party as a pure agent

of the recipient of service are in addition to the services he provides on his own account.



The following illustrations will clarify the provision:

Octroi/ entry tax amount paid by Clearing & Forwarding Agent, CHA or transporter on behalf of owner

of goods/ Principal

Customs duty, dock dues, demurrage, transport charges etc., paid by Customs house agent on behalf

of clients.

Ticket charges paid by Travel agent and recovered from his customer.

Reimbursement of godown, salary and loading/ unloading expenses by principal to C&F Agent.

Case studies on valuation:

Case Study-1

A contracts with B, an architect for building a house and B’s fees is fixed

at Rs. 3,00,000. During the course of providing the taxable service, B

incurs expenses such as telephone charges, air travel tickets, hotel

accommodation, etc., totaling Rs. 50,000 to enable him to effectively

perform the provision of services to A. Compute the service tax liability of

B.

Expenditure incurred in the course of providing taxable service or for providing taxable service should

be included. These payments are not incurred on behalf of service recipient.

So, expenses such as telephone charges, air travel tickets, hotel accommodation, etc., should be

included in the value of taxable service.

Service tax = 3,50,000 X 12.36/112.36 = 38,501 (Assumed that value is inclusive of service tax)

Case study-2

Mr. Y, an architect, finds a client Mr. A who needs services of architect as

well as interior decorator. Mr. A asks Mr. Y to find an interior decorator

on his behalf, decide the terms of his engagement and also his

remuneration, make payment to him on his (Mr. A’s behalf) and provide a

consolidated bill, showing relevant break-ups, to him (Mr. A). Mr. Y finds a

interior decorator Mr. Z, whose remuneration is fixed at Rs. 2,00,000

(inclusive of all taxes). Mr. Y charges Rs. 8 lakhs towards the value of

taxable service provided by him. Compute the amount of service tax to be

charged in the bill by Mr. Y if –

(a) the bill amount includes Rs. 2,00,000 additional towards the cost of

interior decorator; or

(b) the bill amount includes Rs. 2,50,000 additional towards the cost of

interior decorator.

A person is said to be pure agent and acting on behalf of service recipient, only if he charges to the

service recipient the actual amount paid by him on behalf of service recipient. The amount collected

from service recipient for acting as pure agent is excluded from the value of taxable service.

If he charges to service recipient an amount of profit, then the amount so collected from

service recipient, though for acting on behalf of service recipient is includible in the value of taxable

service.

(a) In this case, the service provider acts as pure agent to service recipient and hence, the amount

received for payment made on behalf of service recipient is not included in value.

Value of taxable service = Rs. 8,00,000

Service tax payable = 8,00,000 X 12.36/112.36 = 88,003

(b) In this case, the service provider is not acting as pure agent on behalf of service recipient and

hence, the amount received for payment made on behalf of service recipient is included in value.

Value of taxable service = Rs. 8,00,000 + Rs. 2,50,000 = Rs. 10,50,000

Service tax payable = 10,50,000 X 12.36/112.36 = 1,15,504

Case study-3 X contracts with Y, a real estate agent to sell his house and thereupon Y

gives an advertisement in television costing Rs. 5 lakh. Y billed Rs. 15



lakh to X including charges for Television advertisement, showing them

separately in invoice. Mr. Y says that the value of taxable service in his

case is Rs. 10 lakh only, as he acted as pure agent of Mr. X while taking

advertisement. Compute service tax to be billed.

Value of taxable service = 15 lakhs.

The advertising service is an input service for the real estate agent in order to enable or facilitate

him to perform hisThe service provider didn‟t act as a pure agent for the payment of 5 lakhs as the

payment is made in order to provide the service and it is not paid on behalf of service recipient.

Service tax (If 15 lakhs is inclusive of tax) = 15,00,000 X 12.36/112.36 = 1,65,005

Service tax (If 15 lakhs is exclusive of tax) = 15,00,000 X 12.36/100 = 1,85,400

Case study - 4

Anoos beauty parlor charges Rs. 1,00,000 from a client for providing beauty

treatment service, the breakup of the bill is as follows:

Labour and facility charges Rs. 60,000

Value of cosmetics and toilet preparations consumed

in providing the service Rs. 30,000

Value of cosmetics and toilet preparation sold to the client Rs. 10,000

Compute the amount of service tax to be charged from the client

Goods consumed for providing service should be included and goods sold along with service are to be

excluded from the value of taxable service

Value = 60,000 + 30,000 = Rs. 90,000

Rules for valuation in case of specified services

Works contract Services – Rule 2A

Valuation in case of Works Contract – Covered under Rule 2A and it is as follows:

Gross amount charged for the works contract XXX

Less: Value of transfer of property in goods involved in the execution of said works contract

(XXX)

Value of works contract service on which service tax is payable XXX

The gross amount charged shall not include VAT/ sales tax paid on transfer of property in goods

involved in the execution of said works contract.

Value of works contract service shall include

i. Labour charges for execution of works.

ii. Amount paid to a sub-contractor for labour & Services.

iii. Charges for planning, designing and architect’s fees.

iv. Charges for obtaining on hire (or) otherwise, machinery and tools used for the execution of

works contract.

v. Cost of consumables such as water, electricity, fuel used in execution of works contract.

vi. Cost of establishment of the contractor relatable to supply of labour & services, and

Works contract Service provider

Provides services

Use goods for providing services

Service Recipient



vii. Other similar expenses relatable to supply of labour & services, and

viii. Profit earned by the service provider relatable to supply of labour and services.

Banking and other Financial Services – Rule 2B

A Notification No. 2/2011 has been issued to insert Rule 2B in Service tax (Determination of value) Rules,

2006. It specifies the valuation of service w.r.to purchase or sale of foreign currency, including money

changing.

(A)

Note: Ignore +ve/ -ve

(B)

(C)

Value of taxable service

Purchase or sale of Indian currency

When currency exchanged from or to Indian rupees

Eg: Purchased $ against `. Sold $ against `

When RBI refernce rate is available

(A)

When RBI reference rate is not available

(B)

Purchase or sale of other currency

When currency exchanged from or to a currency other than Indian

rupee.

Eg: Purchased $ against €. Sold €against ¥

(C)

Lower of

Purchased currency converted into ` using RBI

reference rate X 1%

Sold currency converted into ` using RBI

reference rate X 1%



Illustrations on valuation under Rule 2B:

Mr. Sinha, an exporter received 10,000 $ from an importer in U.S. He approached

SBI for Indian Rupees (`). The Direct quote in the bank is `/$ = 45-46. RBI

reference rate for $ is ` 45.5 for that day.

What is the value of taxable service?

The exchange rate relevant in the present case is 1 $ = ` 45, as bank is buying $ from exporter.

As per Rule 2B of service tax (Determination of value) Rules, 2006, in case of purchase or sale of Indian

currency and when RBI reference rate is available,

Value = (45 – 45.5) X 10,000 = ` 5000 (Ignore +ve/-ve)

Mr. Murthy, an importer has GBP obligation of 1,000 £. He approached SBI for

U.K £. The Direct quote in the bank is `/£ = 68-70. RBI reference rate for GBP

for that day is ` 69.

What is the value of taxable services?

The exchange rate relevant in the present case is 1 £ = ` 70, as bank is selling £ to importer.


currency and when RBI reference rate is available,

Value = (70 – 69) X 1,000 = ` 1000 (Ignore +ve/-ve)

Mr. Murthy, an importer has GBP obligation of 1,000 £. He approached SBI for

U.K. £. The Direct quote in the bank is `/£ = 68-70. RBI reference rate for GBP

for that day is not available. What is the value of taxable services?

The exchange rate relevant in the present case is 1 £ = ` 70, as bank is selling £ to importer.


currency and when RBI reference rate is not available,

`/$ = 45 - 46

Bid = 45

Bank $ buying rate

Ask = 46

Bank $ selling rate

`/£ = 68 - 70

Bid = 68

Bank £ buying rate

Ask = 70

Bank £ selling rate

`/£ = 68 - 70

Bid = 68

Bank £ buying rate

Ask = 70

Bank £ selling rate



Value = 70 X 1,000 X 1% = ` 700

The Cross currency quote for $ and £ in a Yes Bank Ltd. is £/$ = 0.6 – 0.65. A

trader has exchanged £ for 10,000 $. How many £ will he obtain and what is the

value of taxable services provided by Yes bank Ltd. to the trader? On that date

the RBI reference rate for `/$ is 45.5 and `/£ is 70.5.

The exchange rate relevant in the present case is 1$ = £ 0.6, as bank is buying $ from the trader.

No. of £ obtained = 10,000$ X £0.6/$ = £ 6,000.

As per Rule 2B of service tax (Determination of value) Rules, 2006, in case of purchase or sale of other

currency and the currency exchanged is other than Indian currency, the value of taxable service shall be

as follows:

Purchased currency by bank = $

Purchased currency converted into ` using RBI reference rate = 10,000 $ X ` 45.5/$ = ` 4,55,000

Purchased currency converted into ` X 1% = ` 4,550

Sold currency by bank = £

Sold currency converted into ` using RBI reference rate = 6,000 £ X ` 70.5/£ = ` 4,23,000

Sold currency converted into ` X 1% = ` 4,230

Lower of ` 45,500 and ` 42,300 shall be the value of taxable service i.e. ` 4,230

Case study-5

Mr. Ram who has entered into a rollover contract approached NDBC Bank

for selling US$ 35,000 at the rate of `49 per $. RBI reference rate for

US$ is `49.50 at that time. However, rate of exchange declared by

CBEC for the day is `50.50 per US$. Calculate the value of taxable

service? (RTP – May 2012)

Value of taxable service = (49.50 – 49) X 35,000

= ` 17,500

Composition Scheme under Service tax:

Air travel agent – rule 6(7)

The person liable for paying the service tax in relation to the services provided by an air travel agent, instead of

paying service tax at normal rate has the option to pay amount as follows:

£/$ = 0.6 - 0.65

Bid = 0.6

Bank $ buying rate

Ask = 0.65

Bank $ selling rate

Lower of

Purchased currency converted into ` using RBI

reference rate X 1%

Sold currency converted into ` using RBI reference

rate X 1%



a) @ 0.6% of the basic fare in the case of domestic bookings, and

b) @ 1.2% of the basic fare in the case of international bookings, of the passage for travel by air, during

any calendar month or quarter, as the case may be.

Note: The option once exercised shall apply uniformly in respect of all the bookings of passage for travel by air

made by him and shall not be changed during a financial year under any circumstances.

Life Insurance - Rule 6(7A) (Amended w.e.f 1/4/2012)

This scheme shall be applicable, where amount of gross premium allocated for investment or savings on behalf of policy holder is not intimated to the policy holder at the time of providing service: For the first year of the policy Service tax @ 3% of the gross amount of premium charged For the subsequent year of the policy Service tax @ 1.5% of the gross amount of premium charged

Sale/purchase of foreign currency including money changing amended – Rule 6(7B) (Amended w.e.f 1/4/2012)

Person liable to pay service tax in relation to purchase or sale of foreign currency, including money changing, provided by a foreign exchange broker, including an authorised dealer in foreign exchange or an authorized money changer has the option to pay an amount at the following rates instead of paying service tax @ 12% - Notification No. 26/2011

For an amount Service tax shall be calculated at the rate of

Upto ` 100,000 0.12 % of the gross amount of currency exchanged or ` 30 whichever is higher

Exceeding ` 1,00,000 and upto ` 10,00,000

` 120 + 0.06 % of the gross amount of currency exchanged (Exceeding ` 1,00,000)

Exceeding ` 10,00,000 ` 660 + 0.012 % of the gross amount of currency exchanged (Exceeding ` 10,00,000) or ` 6,000 whichever is lower

Note: the person providing the service shall exercise such option for a financial year and such option shall not be withdrawn during the remaining part of that financial year.

Optional Composition Scheme for Distributor or Selling Agents of Lotteries – Rule 6(7C) (Amended w.e.f 1/4/2012)

The distributor or selling agents rendering the taxable service of promotion, marketing or organising/assisting in organising lottery can discharge their service tax liability in the following manner instead of paying service tax @10% - Notification No. 49/2010

Where the guaranteed lottery prize payout is > 80%

` 7000/- on every `10 Lakh (or part of ` 10 Lakh) of aggregate face value of lottery tickets printed by the organising State for a draw.

Where the guaranteed lottery prize payout is < 80%

` 11000/- on every ` 10 Lakh (or part of ` 10 Lakh) of aggregate face value of lottery tickets printed by the organising State for a draw.

Note: 1. In case of online lottery, the aggregate face value of lottery tickets will be the aggregate value of

tickets sold. 2. The distributor/selling agent will have to exercise such option within a period of one month of the

beginning of each financial year. The new service provider can exercise such option within one month of providing the service.

3. The option once exercised cannot be withdrawn during the remaining part of the financial year. 4. For the financial year 2010-11, the distributor or selling agent will have to exercise such option by

07.11.2010.



Comment: In all the above composition schemes, the rate is duty specified is excluding EC and SHEC; therefore EC and SHEC payable even on the composition rates accordingly.

Issues in Valuation:

Issue-1: Who has to determine the value?

Rule 3 of valuation rules makes it clear that Value of taxable service shall be determined by “Service provider”

Issue-2: Are free services liable to service tax?

No, Service tax is not leviable on free services. The following case laws will clarify the issue. ‘No service tax is payable if SIM cards are given free as bonus’ – Bharati cellular Ltd. ‘An assessee, who was a stock broker, didn’t charge brokerage in respect of certain transactions. It was held that Sec. 67 does not have any deeming provision and hence service tax is not leviable’ – Chandravadan Desai V. CCE The above treatment is applicable only when there is really free service and not when its cost is recovered through different means.

Issue-3: TVS motors sells 2 wheelers to customers through dealers with a free service during warranty period. In case of services to motor vehicles, though the service is termed as ‘free service’, actually the amount is paid to service provider (i.e. automobile dealer) by the manufacturer of automobile (i.e. TVS motors). The dealer didn’t pay service tax on the ground that he didn’t receive money from customers (i.e. Service recipient) but from a third party (i.e. Manufacturer). Is the dealer’s argument correct?

The words used in sec. 67 are “charged for such service provided or to be provided by him” but it does not specify that the amount should be ‘charged’ to service receiver. Thus, the charge may be to anyone. It is not necessary that ‘charge’ should be only to receiver of service. Even if amount is ‘charged’ to some other person and not to receiver of service, service tax will become payable. Though the customer gets service free, it is not free service and would be taxable.

Issue-4: TAX O KEY Ltd. appointed Mr. Giridharan as its statutory auditor and paid amount to hotel and travelling agency for the accommodation and travelling expenses of auditor. The service provider (i.e. auditor) does not include the said amount paid by the company in the value of taxable services provided and argued that he didn’t receive that amount from the service recipient and it is directly paid by it to hotel and travelling agency. Is the treatment adopted by auditor correct?

As per Sec. 67, amount need not be ‘charged’ by service provider. Money paid to third party on behalf and for the purpose of service provider is includible in the value of taxable services provided by service provider. Definition of ‘consideration’ also makes it clear that consideration need not be received by the service provider himself.

Issue-6: Whether the payment made by service recipient to service provider, not in relation to service is includible in the value of taxable service?

No, as laid down in the following cases. (i) CKP Mandal V. CCE Facts:

CKP Mandal, who was a mandap keeper entered into contract with other contractor. The contract is for giving the contractor exclusive rights for rendering services of

catering and decoration to the hirer of community hall. Any other contractor was not to be allowed to provide these services to the hirer of

community hall.



The contractors had given donation of Rs. 8.35 lakhs to the appellants (CKP Mandal) as contribution to corpus fund.

Issue: The department demanded duty from CKP Mandal on the ground that it has received Rs. 8.35 lakhs for the contract (i.e. Sale of rights). Decision: The court held that the amount received was not in relation to service of mandap provided by CKP mandal and hence tax is not required to be paid on this amount.

(ii) Cultural Society of Angamally V. CCE It was held that amounts received as donation and public/ government grants for activities of society are not related to services provided by society. These are excludible from taxable value for charging service tax.

Whether Donations and grants-in-aid received by a Charitable Foundation imparting free livelihood training to the youth liable to service tax? Circular No.127/09/2010

It has been clarified that donations and grants-in-aid received from different sources by a Charitable Foundation imparting free livelihood training to the poor and marginalized youth, will not be treated as ‘consideration’ received for such training and thus not subjected to service tax under ‘commercial training or coaching’ service.

Donation or grant-in-aid is not specifically meant for a person receiving such training or to the specific activity, but is in general meant for the charitable cause championed by the registered Foundation.

There is no relationship other than universal humanitarian interest between the provider of donation/grant and the trainee.

Conclusion: In such a situation, service tax is not leviable, since the donation or grant-in-aid is not linked to specific trainee or training.

Issue-7: Hotel Marudhar palace charges 10% of the bill amount as service charges and department has asked them to pay service tax on it. The assessee has submitted that the amount @ 10% collected from customers is subsequently disbursed among the staff; therefore it is not part of their income and cannot be included in the gross amount charged by them. Examine the case?

The charge should be for taxable service provided or to be provided. Thus, if any other amount is charged which is not for taxable service provided or to be provided, service tax is not payable on such charge. The 10% service charge which was later distributed as tips to employees. It was held that tax is payable on gross amount charged to customer and hence would include this ‘service charge’ also. – Hotel Mela plaza V. CCE

Exemptions under Service tax:

The exemptions are granted by Central Government by issuing ‘Exemption notification’ through

official gazette.

While examining the applicability of service tax, the interpretation beneficial to assessee would be

preferred.

Therefore the decision as to availement of exemption should consider the effect of non eligibility of

CENVAT credit on availing the exemption.

Tax management under service tax – CENVAT credit V. Exemptions

Have you ever thought of decision making in Indirect taxes. Yes, we can call it as Tax management.

Referring a tax book and explaining provisions to the client is the order of yesterday, and today’s

order is to analyze, interpret and plan the taxes of our client and they are also expecting the same



from us.

Availing CENVAT credit and availing exemption are mutually exclusive.

If exemption is availed, then the balance in CENVAT credit cannot be utilized and gets lapsed

The analyst has to make proper judgment of availing exemption by comparing with non availement of

CENVAT credit.

The analytical table for analysis of availement of exemption is as follows:

Option (i) Option (ii)

Avail CENVAT credit and not

to avail Exemptions

Avail Exemption but don’t

avail CENVAT credit

Value of taxable service before exemption

10,00,000 10,00,000

Less: Exemption (say 50%) N.A (5,00,000)

Value of taxable services after exemption

10,00,000 5,00,000

Gross service tax payable @ 10.3% on above

1,03,000 51,500

Balance in CENVAT credit (assumed)

80,000 80,000

Can the CENVAT credit be utilized for payment of gross service tax

Yes No, as exemption is availed

Computation of Net service

tax payable:

Gross service tax payable 1,03,000 51,500

Less: CENVAT credit (80,000) (nil)

Net Service tax payable 23,000 51,500

Decision: It is advisable to choose option (i) as the net service tax payable is low.

Correction – 1: If the balance in CENVAT credit is Rs. 20,000

Analysis:


Avail CENVAT credit

and not to avail

Exemptions

Avail Exemption but

don’t avail CENVAT

credit

Computation of Net service tax payable:




Decision: It is advisable to choose option (ii) as the Net service tax payable is low.

Correction – 2: If the balance in CENVAT credit is Rs. 60,000

Analysis:


Avail CENVAT credit and

not to avail Exemptions

Avail Exemption but don’t

avail CENVAT credit

Computation of Net service tax payable:






Decision: It is advisable to choose option (i) as the Net service tax payable is low.

The Indifference point for availing exemption (or) CENVAT credit is as follows:

Indifference point = Gross service tax payable by not availing exemption (-) Gross service tax payable by

availing exemption.

Balance in CENVAT credit Decision Reason

< Indifference point Avail exemption As the benefit of exemption is more than CENVAT credit balance

= Indifference point Avail CENVAT credit As availing CENVAT credit leads to decrease in the cost of production and thereby cost to consumer will be reduced (Other factors prevail here)

> Indifference point Avail CENVAT credit As the benefit of exemption is less than CENVAT credit balance

Tax Management under Service Tax – Normal Payment Vs. Notification No. 12/2003 Vs.

Abatement

When the contract of service includes material and labour elements, i.e. when the gross amount charged for a

service includes the payment received for services and payment received for transfer of property in goods and

the amount received is not separable, then the following 3 Options are available for payment of Service Tax:

Option (i) Normal Payment

Option (ii) Notification No.

12/2003

Option (iii) Abatement for Specified

Services under Notification No. 1/2006

What is the Value of Taxable service under Sec. 67

Gross amount charged for services as well as transfer of property in goods

Gross amount charged for services as well as transfer of property in goods (-) Value of materials sold

Gross amount charged for services as well as transfer of property in goods (-) % Abatement specified in the Notification

Computation of Net Service tax payable

Gross Service Tax payable Above Value X ST rate Above Value X ST rate Above Value X ST rate

Less: CENVAT Credit on “Inputs”

(XXX) N.A N.A

Less: CENVAT credit on “Input Services”

(XXX) (XXX) N.A

Less: CENVAT credit on “Capital Goods”

(XXX) (XXX) N.A

Net Service Tax payable XXX XXX XXX

Note: In case of Notification No. 12/2003, The CENVAT credit on Inputs consumed for providing service is

available but CENVAT credit on Inputs used for Sale, not available.

General Exemptions applicable for all services:

1) Service provided by any person to U.N (or) International organization: The International organisation is declared by the central government in terms of Section 3

of United Nations (Privileges and Immunities) Act, 1947. There are 23 organizations which are so declared.



2) Exemption with respect to Services provided to developer (or) units of SEZ – Notification No. 17/2011

FAQ’s On Services provided to SEZ:

1. What are authorized operations? These are a list of services approved by approval committee of SEZ, which the units in SEZ (or)

Developer should obtain.

2. With whom the refund claim should be filed? The refund claim should be filed with Jurisdictional

AC/DC who will issue STC to SEZ unit (or) Developer.

The form for Refund is Form A-2.

3. What is the time limit for filing refund claim? Within 1 year from the actual date of payment of

service tax. The period of 1 year can be extended by

AC/DC.

4. How to file refund claim? With the Form A-2 accompanied by list of approved

services, documents for having paid service tax and a

declaration.

5. As the service tax is paid by units in SEZ (or) developer of SEZ. Can the CENVAT credit be availed? No, CENVAT credit is not available with respect to

services received in relation to authorized operations

in SEZ.

6. In some cases, under reverse charge the recipient of service is liable to pay tax. Whether for the services received by SEZ under such reverse charge, the SEZ is exempted? Yes, SEZ is exempt from paying service tax in such cases.



7. Will the entire amount paid as service tax available for refund, where the services are partly consumed in SEZ and partly out of SEZ?

Total turnover means the sum total of the value of: (i) All output services and exempted services provided, including the value of services exported; (ii) All excisable and non-excisable goods cleared, including the value of the goods exported; (iii) Bought out goods sold, during the period to which the invoices pertain and the exporter claims the facility of refund under this notification. Turnover of SEZ Unit means the sum total of the value of:- (i) Final products exported, (ii) Output services exported during the period of which the invoices pertain and the exporter claims the facility of refund under this notification.

8. If SEZ provides services to a person in DTA, what is the position of developer (or) units in SEZ, in that

case? SEZ units providing taxable services to any person for consumption in DTA (or) providing any taxable

service which is otherwise not exempt, are liable to pay service tax.

3) Exemption to small service providers: a) To whom exemption is available?

Any person who is in the business of providing taxable services.

b) When exemption is available?

Previous Year Current Year

Aggregate value of taxable services provided

≤ 10 lakhs (Not exceeding Rs. 10 lakhs)

Exemption available

Aggregate value of taxable services provided

> 10 lakhs Exemption not available

c) What is the period of Exemption? During the current year only. (For every subsequent year, the aggregate value of taxable services

provided during the previous year relevant to that subsequent year has to be considered)



d) What is the Amount of Exemption? During the current year, service tax is exempt to the extent of aggregate value not exceeding Rs.

10 lakhs (i.e. Upto 10 lakhs). “Aggregate value not exceeding Rs. 10 lakhs” means the sum total

of value of taxable services charged in the first consecutive invoices during the financial year (i.e.

Upto 10 lakhs of services provided and invoice issued)

e) Is this exemption compulsory? No, it is an option for the service provider. The service provider may opt out of the exemption

and pay service tax as per the normal provisions.

f) When this exemption not available? Taxable services provided by a person under a brand name or trade name, whether

registered or not, of another person. In case of Reverse charge.

g) What are the consequences of availing small service provider exemption? The CENVAT credit with respect to inputs & input services used for providing output

service, which are covered under the exemption is not available. The credit is available as and when service provider starts paying service tax.

The CENVAT credit with respect to capital goods received during the period, when exemption is availed, is not available.

An amount equivalent to CENVAT credit with respect to inputs lying in stock or in process on the date of availing exemption must be reversed.

The balance CENVAT credit lying unutilized on that date shall be lapsed.

4) Services provided to foreign diplomatic mission or consular post: Service provided by ANY PERSON to diplomatic agents (or) career consular officer posted in foreign diplomatic mission (or) consular posted in India (The above service may be either for personal are (or) for the use by family members)

5) Services of Indian News Agency:

Taxable services provided in relation to online information and data base access or retrieval services and business auxiliary services provided by any Indian news agency are exempt. – Notification No. 13/2010 Note: The exemption is available only if such news agency is notified and setup solely for collection and distribution of news.

6) Service provided to any person, by any other person for transmission of electricity 7) Service provided to any person,

For distribution of electricity.

Whether renting of electricity meter by a service provider rendering the service of transmission

or distribution of electricity is covered under the above exemption?

Circular No. 131/13/2010.

It is a general practice among electricity transmission (TRANSCO)/ Distribution companies (DISCOM)

to install electricity meters at the premises of the consumers to measure the amount of electricity

consumed and “Hire charges” are collected periodically

Supply of electricity meters for hire being an essential activity having direct and close nexus with

transmission and distribution of electricity, the same is covered under the exemption.

by

A distribution licencee

A distribution franchisee

Any other person authorized to distribute power



General exemption based on service providers:

1)

2)

3)

4) Exemptions to Reserve Bank of India:

No service tax on taxable service provided or to be provided TO ANY person BY RBI

Under Reverse charge, if RBI is required to pay service tax, then the entire amount is exempt

from payment of service tax.

In respect of Import of services u/s 66A by RBI, it is not liable to pay service tax.

Technology Business Incubator (TBI)

Science and Technology Entrepreneurship

Park (STEP)

Technology Business Incubator (TBI)

Science and Technology Entrepreneurship

Park (STEP)

Recognized by National Science and

Technology Entrepreneurship

Development Board (NSTEDB)

Provides services

Any Person, is exempt

Provided, it should furnish the requisite information as specified to the

Jurisdictional AC/DC and should furnish the prescribed information before

30th

June of each financial year.

Entrepreneur in TBI/STEP Enters into an agreement with TBI/STEP as

an incubatee, to enable himself to develop

and produce hi-tech and innovative

products. Provides services

Any Person, is exempt

Provided, total business turnover during previous year does not exceed

(i.e. ≤) 50 lakhs. This exemption is available for a period of 3 years from the

date on which such entrepreneur enters into agreement.

Any Person

Provides services

Person holding authorization rights to exhibit

cinematograph film, is exempt

In relation to delivery of the content of the cinematograph film, and That the content of such film, being in ditized form after its

encryption, is transmitted directly to a cinema theatre for exhibition through the use of satellite, microwave or terrestrial communication line and not by physical means including CD & DVD.



5) Exemption w.r.to booking of accommodation in a hotel

Tour operator/Booking agency located outside India is the service provider providing services to

Hotel located in India. This is a case of import of services and Hotel, being service recipient is liable to

pay service tax but as per exemption notification No. 14/2008, the said services are exempt and

Hotel receiving services is not liable to pay service tax.

6) Exemption w.r.to following specified services provided to GTA in relation to providing of GTA

service:

Business auxiliary service

Business support services

Cargo handling services

C&F Agent services

Manpower recruitment or supply agency service

Packing activity services

Storage and warehousing services

Supply of tangible goods for use services.

Specific Concessions under Notification No. 1/2006 and as amended

Taxable service Services provided in relation to

Abatement

(i) Banking and other Financial services

Chits 30% of the gross amount charged

(ii) Business auxiliary service Jobwork in relation to cycles, cycle rickshaws and hand operated sewing machines

30% of the gross amount charged

(iii) Construction of complex If cost of land is included 75% of the gross amount charged

If cost of land not included 67% of the gross amount charged

(iv) Commercial or Industrial construction service

All 67% of the gross amount charged

(v) Outdoor catering service All 50% of the gross amount charged

(vi) Erection, Installation and commissioning


(vii) Mandap keeper service All 40% of the gross amount charged

(viii)Tour Operator Services Package Tours 75% of the gross amount charged

Arranging or booking of accommodation

90% of the gross amount charged

Other cases 60% of the gross amount charged

(ix) Rent a cab operator All 60% of the gross amount charged

(x) Pandal or shamiana service All 30% of the gross amount

(xi) Convention services All 40% of the gross amount charged

Books accommodation

on behalf of the client

Customer

(Located outside

India)

Tour Operator/

Booking agency

(Located outside

India)

Hotel

(Located in India) Makes request to

book accommodation

on his behalf

Agent of Hotel, which

is located in India

Pays commission

for the services

provided as agent



(xii) Transportation of goods by rail All 60% of the gross amount charged

(xiii) Transportation of coastal goods All 25% of the gross amount charged

(xiv) Restaurant service All 70% of the gross amount charged

(xv) Short term accommodation service


Case study - 1

A partnership firm, gives the following particulars relating to the services

provided to various clients by them for the half year ended on 30-9-2012:

1. Total bills raised for `8,75,000 out of which bill for `75,000 was raised on

an approved International Organization and payments of bills for `1,00,000

were not, received till 30/9/2012.

2. Amount of `50,000 was received as an advance from XYZ Ltd. on

25/9/2012 to whom the services were to be provided in October, 2012.

You are required to work out the:

a. taxable value of services

b. Amount of service tax payable.

Assume that partnership firm in the present case is not eligible for SSI

exemption but is eligible to pay service tax as per fourth proviso to rule 6(1)

of ST rules, 1994.

Total bills raised `8,75,000

Less: Value of exempted services (75,000)

Less: Amount not received (1,00,000)*

Add: Advance received `50,000

Taxable value of services `7,50,000

Service tax payable @ 10.3% `77,250

*As per the fourth proviso to rule 6(1) of ST rules, 1994 an Individual or Firm has the option to pay

service tax on the basis payment received upto `50 lakhs of services provided during the current year, if

it is eligible to do so. In the present case, as the value of services provided does not exceed `50 lakhs upto

30/9/2012, the firm will pay service tax on receipt basis. Accordingly, an amount of `1,00,000 not received

is not taxable during the relevant quarter but will be taxable in that quarter when such amount is received.

Case study - 2

An unregistered “service provider” provides following details in respect

of taxable services provided during the financial year 2012-13:

Date Particulars Amount

30.6.2012 Advance received from a

customer

`1,00,000

30.9.2012 Part payment received against

a bill of Rs. 9,50,000 raised

on a customer

`5,00,000

31.12.2012 Money received against

taxable services provided

during December 12

`3,00,000

31.1.2013 Taxable services rendered

during Jan 13

`1,00,000

31.3.2013 Taxable services rendered

during March 13

`2,00,000

The service tax provider complies with the provisions of registration

and collection of service tax as per service tax laws. He gets

registered during the year. He received the money against the bills

raised during the month of January and March 2013. Compute the

service tax liability of service provider for the year 2012-13

considering service tax @ 12.36%. Assume that fourth proviso to rule



6(1) of ST rules, 1994 is not applicable in this case. In the all the

above cases invoices were issued within 30 days from the date of

completion of service.

Service provider whose aggregate value of taxable service in a financial year exceeds `9 lakh is

required to make an application for registration within a period of 30 days from the date of exceeding

the limit– Notification 27/2005

In given question, since the service provider is not registered in preceding financial year

2007-08, it implies that his aggregate value of taxable services (i.e. Services provided or billed)

during 2011-12 was less than `9 lakh. Consequently, he is eligible for exemption available to small

service providers in financial year 2012-13.

A small service provider is entitled to exemption upto an aggregate value of taxable services

of `10 lakhs. Aggregate value means, the sum total of value of taxable services charged in the first

consecutive invoices issued or required to be issued, during the financial year.

Thus, the value of taxable services and service tax payable thereof after considering exemptions is as

follows:

30/6/2012 Advance received (Invoice required to be issued) `1,00,000

30/9/2012 Bill raised for services provided `5,00,000

31/12/2012 Services provided and invoice required to be issued `3,00,000



Total value of taxable services provided `12,00,000

Less: Small service provider exemption `10,00,000

Amount liable to service tax `2,00,000

Service tax payable @ 12.36% ` 27,720

Case study - 3

Mrs. PQR Ltd. a provider of taxable services, received the following amounts

during 2012-13 towards the value of taxable services (before tax)


10.5.2012 Sums received out of that billed in the last

financial year

`1,00,000

15.9.2012 Services provided, sums billed and received `6,00,000

10.12.2012 Services provided, sums billed and received

(Wholly exempt services)

`50,000


(person liable to pay service tax is the

recipient of service i.e. person other than

M/S PQR Ltd.)

`60,000


(Services provided under the brand name of

others)

`40,000


Service tax is 10.3%. Compute service tax payable during the financial year

2012-13 claiming small service provider exemption, if any, available and also

determine whether M/S. PQR Ltd. is eligible for exemption during 2013-14?

Given that the value of taxable services provided during 2011-12 was `9 lakhs.

Since the value of taxable services provided by M/s. PQR Ltd. during 2011-12 was 9 lakhs i.e. not exceeding

10 lakhs, hence, M/s PQR Ltd. is eligible for small service provider exemption during 2012-13 upto the

aggregate value of taxable services not exceeding 10 lakhs, which is as follows:


10.5.2012 Exemption available on the basis of invoices raised or to be raised

during the financial year. Since, the invoices were raised in the last

year; there is no question of taxability and exemption during the

current year.

0

15.9.2012 Services provided, billed and received `6,00,000



10.12.2012 These services are already exempted under other notifications

hence not considered for small service provider exemption

(exemption can be availed only when there is taxability)

0

11.3.2013 In case of service tax payable under reverse charge as per sec.

68(2), small service provider exemption is not available. Accordingly

the said amount of 60,000 is taxable in the hands of PQR Ltd. being

recipient of service [This amount is considered separately]

N.A

30.3.2013 The small service provider exemption shall not apply also to taxable

services provided by a person under a brand name or trade name,

whether registered or not, of another person. Accordingly the said

amount of 40,000 is taxable in the hands of PQR Ltd. [This amount

is considered separately]

N.A


Total `11,00,000

Less: Small service provider exemption ` (10,00,000)

Taxable value of services `1,00,000

Computation of Service tax payable by M/s. PQR Ltd.:

Taxable value of services after claiming SSP exemption `1,00,000

Value on which service tax payable as per sec. 68(2) ` 60,000

Services provided under the brand name of others ` 40,000

Total ` 2,00,000

Service tax payable = 2,00,000 X 12.36% ` 24,720

Case study - 4

ABC, a unit in SEZ, received services as covered u/s 65(105) from various

service providers in relation to authorized operations in SEZ during the month

April, 2012. At the time of making payment, service provider asks it to pay

tax. However, it argues that service tax is not applicable on taxable services

provided to it. The following details are furnished for the month April 2012:

(i) Value of taxable services wholly consumed within SEZ = `6,00,000

(ii) Value of taxable services not wholly consumed within SEZ but exclusively

used for authorized operations in SEZ = `7,00,000

(iii) Value of taxable services shared between SEZ units and DTA units =

`8,00,000

(iv) Value of taxable services used wholly for DTA units = `3,00,000

(v) Export turnover of SEZ unit = `1,00,00,000

(vi) Total turnover = `1,60,00,000

(vii) Service tax rate = 12.36%

Compute the amount payable as service tax by M/s. ABC along with incentives

available to it by way of exemption/refund/CENVAT credit for the month

assuming that all conditions are complied with.

The taxability of an SEZ unit under Service tax is as follows:

Value of taxable services, which are exempted ab-intio (i.e. without refund route) as per Notification No.

17/2011:

Value of taxable services wholly consumed within SEZ = `6,00,000

Value of taxable services, which are exempted by way of refund as per Notification No. 17/2011:

1. Value of taxable services not wholly consumed within SEZ but exclusively used

for authorized operations

`7,00,000

2. Value of taxable services shared between SEZ units and DTA units `8,00,000

Value of taxable services, which are not exempted as per Notification No. 17/2011:

Value of taxable services used wholly for DTA units = `3,00,000

Computation of service tax payable and refund available:



Service tax payable Refund available

Services exclusively used for authorized operations but

not wholly consumed.

`7,00,000 X 12.36%

= `86,520

`86,520

Shared services between SEZ unit and DTA unit

[Proportionate refund available = Service tax X Export

turnover/Total turnover]

`8,00,000 X 12.36%

= `98,880 98,880 X

1,00,00,000

1,60,00,000

= `61,800

Services wholly used for DTA `3,00,000 X 12.36%

= `37,080

N.A

Total `2,22,480 `1,48,320

The amount of service tax paid, which is not available as refund is available as CENVAT credit to the DTA

unit which can be utilized for payment of Excise duty on finished goods or service tax on output services.

Total CENVAT credit available = (98,880 – 61,800) + 37,080 = `74,160

Procedures under Service tax:

Registration [Section 69 read with Rule 4 of ST Rules, 1994]

Who? Every person liable to pay service tax (Including Importer of service)

How? Application for registration in FORM ST-1 along with

copy of PAN

Affidavit declaring the commencement of services

Proof of RESIDANCE

Constitution of applicant

In Case of Individual – Passport Size photograph

In case of partnership – Partnership deed

In case of corporate assessee – MOA,AOA

When? If the services to be provided are taxable services:

Within 30 days from the date of commencement of the business of providing taxable service

If the services to be provided are not taxable service:

Within 30 days from the date on which the levy of service tax is brought into force in respect

of the relevant services

With

Whom?

Superintendent of central excise under whose jurisdiction the premises falls

…………………After 7 days

From ST-2, Certificate of registration will knock your door, which is granted by superintendent Of Central

Excise

Special Points:

If a person is providing more than one taxable service, he may make a single application. He

should mention in the application all the taxable services provided by him – CBE&C circular No.

97/8/2007.

If registration is not granted within 7 days, it is deemed to have been granted – Circular No.

72/2/2004.

No official fees for registration payable [But the charges may range from Rs.2,000 to Rs.5,000,

depending upon assessees need and officer’s greed!!!]

There is no prescribed procedure to obtain duplicate registration certificate in case of loss of

registration certificate. [Normally it is given unless the officer is nasty!!!]

Form ST-2 bears a registration number called Service Tax code (STC). It is a 15 digit number

First 10 digits – PAN



Next 2 digits – Word “SD”

Next 3 digits – System generated alphanumeric Serial numbers.

Change in information has to be informed in form ST-1 to jurisdictional AC/DC within 30 days of

such change

Cancellation / surrender of Registration – When assessee ceases to carry on the activity for

which he is registered

Surrendered to Superintendent of central Excise

All dues must be paid

Issues in Registration

1) A person is providing service from more than one premises (or) offices

2) A person Receives services, for which he is liable to pay service tax in more than one

premises or offices

---- In the above two cases

Note: Centralized registration will be granted by Commissioner in whose jurisdiction the premises falls.

Application will be made to AC/DC which will be forwarded to Commissioner.

3) In case of transfer of business, a fresh registration must be obtained by transferee within 30

days from the date of transfer.

4) There is a small service provider, who in providing taxable service, when he should register?

- within 30 days from the date when aggregate value of taxable service exceeds 9

lakhs in the financial year

Invoice/Bill/Challan [Rule 4A of ST Rules, 1994]:

Every person providing taxable service shall issue an invoice/bill/challan

Time limit for issue of invoice/bill/challan – within 14 day from the completion of such taxable

service or receipt of any payments towards the value of such taxable service.

Air ticket to be considered a valid invoice/bill/challan under rule 4A - Notification No.39/2010

In case of aircraft operation services, the ticket (in any form, including electronic form whatever may be the name) showing the name of the passenger, description of the journey and the amount of service tax collected would be deemed to be the invoice/ bill /challan for the purposes of the rule.

The ticket would be a valid invoice/ bill /challan even if it does not contain registration number of the service provider or the classification of the service received or address of the service receiver.

Comment: As the invoice must be issued within 14 days from the date of completion of service, it would be an additional burden on the part of the air travel service provider. So, with this amendment the ticket is sufficient to make it as invoice bill or challan as per rule 4A of service tax rules, 1994.

Maintenance of Records [Rule 5 of ST Rules, 1994]:

Every Assessee shall furnish to the superintendent of CE the following records in duplicate at the time of filing

return for the first time and these records should be preserved atleast for a period of 5 years immediately

after the financial year to which such records relate.

Centralized Registration can be made.

Provided, Centralized billing/accounting

system is located for such service

Separate Registration for each premise can

be made.

When no Centralized billing/accounting

system exists



(i) All records prepared or maintained by assessee for accounting transactions with regard to

(a) providing of any service, whether taxable or exempted

(b) receipt or procurement of input services and payment for such input services

(c) receipt, purchase, manufacture, storage, sale, or delivery, as the case may be, in regard

of inputs and capital goods

(d) other activities, such as manufacture and sale of goods, if any

(ii) All other financial records maintained by him in the normal course of business

Note: The records including computerized data, as maintained by an assessee in accordance with the various

laws in force from time to time shall be acceptable.

This rule does not cast any burden to maintain additional records. Whatever records maintained under income

tax, company law, VAT etc., are acceptable. The list is to be submitted only once. Audit team shall give prior

intimation to assessee along with list of documents required for scrutiny – CBEC letter No. 137/26/2007

Scrutiny of records [Rule 5A of ST Rules, 1994]:

Who has power of scrutiny? Officer authorized by commissioner Audit party deputed by commissioner Comptroller and Auditor general of India

What are the records which may be demanded for scrutiny?

(a) The records as listed in Rule 5 (b) Trial balance or its equivalent (c) Income tax audit report (U/S 44AB of IT Act)

What is the time limit for furnishing the records?

Within 15 working days from the day when the demand for records is made, or Within such further period as may be allowed by such officer or audit party.

Payment of service tax [Rule 6 of ST Rules, 1994]

Time limit for payment of Service tax – Rule 6(1) specifies the time limit for payment of service tax in the

month or quarter as the case may be, in which service is deemed to be provided as per the point of taxation

rules, 2011.

In case of Export of services, such month or quarter as the case may be shall be considered when “Payment for

services provided is received”, provided consideration is received within the time specified by RBI. [Latest

Amendment]

How tax should be paid

By GAR-7 challan

With the bank approved by CBE&C

By CENVAT credit Account (using the balance

standing at the end of the relavent month)

By cheque

Date of presentation of cheque is treated as date

of payment

Electronically through internet banking

Who has paid service tax of 10 lakhs or above in preceding

financial year either in cash or through CENVAT credit or both.



Note: For the Month of March and Quarter ending March the due date shall be MARCH 31

st

What if Service Provider pays excess amount of service tax in order to avoid interest and penalty for late

payment?

As per Rule 6(4B), The EXCESS payment can be utilized for the payment of service tax for the subsequent month liability but subject to a condition that the excess amount paid should not be on account of interpretation of law, taxability, classification, valuation or applicability of any exemption notification.

Special provisions w.r.to Individuals/Firms for payment of Service tax – Fourth Proviso to Rule 6(1) [Latest Amendment]

Individuals/Firms, paying service tax on quarterly basis have the option as follows:

Upto `50 lakhs of taxable services provided in the current year Service tax shall be payable on

“Date of Payment received basis”

Above `50 lakhs of taxable services provided in the current year Service tax shall be payable on

“Point of taxation basis”

The above benefit of option is available provided, the aggregate value of taxable services provided

from one or more premises is `50 lakhs during the previous year (Note: the above benefit is available

for the current year provided condition is satisfied for the previous year)

Illustration

Mr. Sinha, a service provider engaged in installation services, provided

services as follows:

Services Provided Payment Received

April, 2012 `20 lakhs nil

May, 2012 `10 lakhs `20 lakhs

June, 2012 `20 lakhs `10 lakhs

July, 2012 `10 lakhs `20 lakhs

Mr. Sinha has a practice of raising invoice immediately on the date of

completion of service. Therefore, for the services provided in the month

of April, May and June the invoices were raised in the respective months.

Based on the given information, advice Mr. Sinha as to due date of

payment of tax and tax payable thereon. Assume that Mr. Sinha cannot

avail SSI exemption during the current year and tax rate as 12.36%

In case of Individual/Firm, the due date of payment of tax is within 5th/6th from the end of

quarter during which the point of payment of tax arises.

As per fourth proviso to Rule 6(1), In case of Indivudal/Firm, the tax upto `50 lakhs of services

provided shall be payable on “Date of payment received basis” and tax on above `50 lakhs of services

provided shall be payable on “Point of taxation basis”.

In the present case, aggregate value of taxable services provided during the quarter ended June,

2012 is `50 lakhs and as per fourth proviso to Rule 6(1), the tax shall be payable on “Payment received

When tax should be paid

Individual,

Firm

Normal Payment

5th of the month following the

quarter

E- Payment


quarter

Any other assessee

Normal Payment


month

E- Payment


month



basis”. Hence, payment received for the quarter ending June, 2012 is `30 lakhs.

Therefore, tax payable = `30,00,000 X 12.36/112.36 = `3,30,011

Due date of payment of tax = 5th/6th July,2012 as the case may be.

What if, Fourth proviso to Rule 6(1) is not applicable?

If invoice is issued within 30 days from the date of completion of service, the point of taxation shall

be the date of invoice. In the present case, it is given that invoice is raised immediately on completion

of service. Therefore, point of taxation for the services rendered in the month of April, May and

June is the respective months.

Amount taxable for the quarter ending June, 2012 = `20 lakhs + `10 lakhs + `20 lakhs = `50 lakhs.

Therefore, tax payable = `50,00,000 X 12.36/112.36 = `5,50,018

Due date of payment of tax = 5th/6th July, 2012 as the case may be.

Comment: There is only timing difference with respect to payment of tax due to this proviso.

Primafacie, it may appear that there is a saving, but actually not the case as the tax on `20 lakhs not

taxable in this quarter shall be taxed in the next quarter.

Returns under service tax [Rule 7 of ST Rules, 1994]:

Who should submit ---------> All assesses

Whom to submit --------- ---> Superintendent of Excise

From ----------------------> ST-3 by Normal assessee (Or ST-3A by Input service Distributor)

No of copies ------------------> Three (Triplicate)

Duration ----------------------> Half- yearly

Due date of return -----------> 25th

of next month following the half year

If due date is public holiday , return field on Succeeding working day

Copies of GAR-7 Challan, by which service tax was deposited should be submitted along with return

W.e.f October 2011, as per Notification No. 43/2011, every service tax assessees is required to electronically file ST3 returns.

In case where assessee had opted for provisional assessment, a memorandum in form ST-3A shall be submitted.

A single return is sufficient, if a service provider provides more than one taxable service

Service tax return has to be field , even if, the Service provider has not provided any service (i.e. nil return)

Revised Return : Within 90 days from the date of submission of Original return [Rule 7B]

Fee for delay in filling the return – Sec. 70(1):

Delay of

Beyond 30 days from

the due date

Beyond 15 days but upto

30 days from due date 15 days from the

due date

Rs. 1,000

Rs. 1,000 + 100 for every

day, subject to a maximum

of Rs. 20,000

Rs. 500



Assessment [Sec. 70]:

Self Assessment – The service provider himself shall assess the tax due and shall furnish the return to the

superintendent and pay the tax accordingly.

Provisional Assessment – Service provider apply to the department in FORM ST-3A for this assessment if he is

not able to estimate the tax amount correctly. However, the service provider has to provide an undertaking for

bearing the final liability once the final assessment is completed.

Best Judgment Assessment [Sec. 72] – If any person liable to pay service tax, (a) Fails to furnish the return

under section 70 or (b) Having made a return, fails to assess the tax in accordance with the provisions;

The Central Excise Officer, may require the person to produce such accounts, documents or other evidence as

he may deem necessary and after taking into account all the relevant material which is available or which he

has gathered, shall by an order in writing, after giving the person an opportunity of being heard, make the

assessment of the value of taxable service to the best of his judgment and determine the sum payable by the

assessee or refundable to the assessee on the basis of such assessment.

Interest and Penalties:

Sec. 73A – An amount if service tax collected in excess of the service tax assessed or determined, must pay the

amount so collected immediately to the credit of central government. This provision ensures that the service

provider does not collect excess amount from the recipient of service in the name of service tax.

Further, where any person who has collected any amount, which is not required to be collected, from any

other person in any manner as representing service tax, such person should also immediately pay the amount

so collected to the credit of central govt.

Description Amount Special points

Interest on excess amount

collected from recipient of

service. (Sec. 73B)

If value of taxable services

provided in a FY or during PY >

60 lakhs Simple int. @ 18% p.a


provided in a FY or during PY ≤


Excess amount together with

interest shall be payable and

interest calculated only on excess

amount

•The assessee may make request in writing to AC/DC giving reasons for payment of ST on provisional basis

Request to AC/DC

•AC/DC on receipt of such request may allow payment of service tax on provisional basis on such value as specified by him.

Grant of permission by AC/DC •Filing a statement giving

details of the difference b/n ST deposited and liable to be paid for each month accompanying the half yearly return

Filing FORM ST-3A



Interest on delayed payment of

service tax (Sec. 75)


provided in a FY or during PY >



provided in a FY or during PY ≤


Calculated

From – First day after due date

To – Date of payment of defaulted

amount

IMPORT OF SERVICES (Sec. 66A)

The words used are “Services provided from outside India and received in India” in the Act, instead of “Import

of services”.

The above is known as “Import of service” and under the provisions of ‘Reverse charge’, the service recipient

in India is required to register and is liable to pay service tax.

The Import of service rules, 2006 determine whether a service is ‘Import of service’. The rules classify all

taxable services into four categories.

Rule 3(i) – Services in relation to immovable property situated in India

Following are some of the services covered under this category

Architect

Auction of Immovable property

Interior decorator

Renting of immovable property

Rule 3 (ii) – Service atleast partly performed in India

Following are some of the services covered under this category

Air travel agent

Services

In relation to Immovable property

To be performed in India

Received by recipient located in India

Which will never be treated as Import of

service

Person who has permanent

establishment outside India

Person who has his permanent

address (or) usual place of

residence outside India

Person who has his place of

business outside India

Person who has his place of

business in India


establishment in India


address (or) usual place of

residence in India

Provides services and

Received by



Beauty treatment

Dry cleaning

Management, Maintenance or repair

Rule 3(iii) – Services received by recipient located in India for use in business or commerce

Note: A person who does not have place of business in India may provide services relating to booking of

accommodation of hotel in India, to a customer outside India. This service is exempt vide notification No.

14/2008. Thus, hotel in India is not required to pay service tax under reverse charge method.

Services which will never be treated as ‘Import of service’

Following two services

(i) Air transport of passengers embarking for International travel and

(ii) Transport by crusie ships

Will not be treated as Import of service under any situation. In such cases, service tax is charged from service

provider in India

FAQ’S ON IMPORT OF SERVICE:

1. Can the Importer of service utilize CENVAT credit for payment of service tax with respect to import

of service tax?

As per Rule 5 of Import of service rules, 2006 CENVAT credit cannot be utilized for payment of service

tax by the service receiver while paying tax where he is liable under reverse charge method.

2. Can the importer of service avail CENVAT credit with respect to service tax paid on import of

service?

Yes, the credit can be availed with respect to service tax paid on Import of service.

The service receiver is eligible to avail CENVAT even if he is liable to pay the same under

relevant rules (of reverse charge) – Jindal steel & Power V. CCE and Vijay Television V. CST

3. Mr. Mahesh is suffering from a physiological disease. He consulted a physician in U.S through web

chat. The physician provided the treatment and charged Rs. 10,000. Is Mr. Mahesh liable to pay

service tax?

No, Sec. 66A(1) states that where the recipient of service is an individual and such service received by

him is for personal use, such services will not be taxable.

However, if he receives such service in India for business or commercial purpouse, it will be

taxable.

4. Microsoft Inc. (U.S) provides software solutions to State Bank of India (SBI), for which it charges Rs.

9,50,000 to SBI. Microsoft has an office in India and the U.S office asks SBI to pay amount to Indian

office. SBI didn’t pay service tax on the ground that it has paid amount in India and the provision of

reverse charge does not apply. Is SBI’s contention correct?

If a service provider has office in India as well as in foreign country, the service will be treated as

provided from foreign country, if service is provided from that country.

In the present case, as service provided from U.S office, it is treated as Import of service and SBI,

though paid amount in India is liable to pay service tax.



5. Infosys (U.K) provides services to Infosys (India), for which U.K establishment charged 1,500£ to

Indian establishment. The department demanded duty from Infosys (India). Is Infosys (India) liable

to pay service tax?

As per Sec. 66A(2), where a person is carrying on a business through a permanent establishment in

India and through another permanent establishment in a country other than India, such permanent

establishments shall be treated as separate persons.

If the establishment in India receives a taxable service from its establishment abroad, it will be a

‘taxable service’ and tax will be payable by Indian establishment.

In the present case Infosys (India) is liable to pay service tax.

EXPORT OF SERVICES

The above is known as Export of services, provided

Situation (i): Such taxable services are provided in relation to immovable property situated outside India.

Situation (ii): Such taxable services are performed outside India. If partly performed in India and partly

performed outside India, then treated as performed outside India.

‘Perform’ means physical performance of service. For example, sending test report from India to a foreign

customer will not be performance of service. However if some part of technical testing is done in india and

some part abroad, it will still be treated as export of service.

Testing was done in India and test report was sent outside india. It was held that testing and analysis done in

India has no value unless it is delivered to clients. Hence, testing service eligible even if only test report sent

outside India – CST V. BA Research India (2010) (CESTAT) [conflicting judgment]

Situation (iii): Such taxable service is provided for

Issue:

Service Provider

(Located in India)

Service Recipient

(Located outside India)

Provision of

Taxable services

Business (or) Commerce Any other Purpose

Considered as

Export Only

when

Provision of such service is

made to a recipient located

outside India

Provision of such service is made to a

recipient located outside India at the time of

provision of such service

Service Provider

(Located in India)

Service Recipient

(Located outside India)

Service Recipients

commercial establishment

located in India

Order (1)

Order (2)



If the order for provision of service comes from service recipient (or) any of its commercial establishment

outside India, then only it is treated as export of service.

In the above figure Order (1) is correct but Order (2) is not treated as Export of service.

Note: In all the above situations, 2 conditions are to be satisfied

a. Service provided from India (Ommited)

b. Payment for service provided is received in convertible foreign exchange

Export of Service Rules, 2005

Rule 3: For identifying whether the services are exported or not, the services are grouped broadly into three

categories. Further 2 services are excluded from all the three categories, which are never treated as export of

services.

Category Basis of Categorization Conditions

I Based on situation of immovable property pertaining to which services are provided

In order to make services falling under this category as Export of services, the immovable property must be situated outside India.

II Based on the place of performance of services

In order to make service falling under this category as Export of services, the place of performance (Full/Part) must be outside India.

III Based on the situation of recipient of service

Services provided in relation to Business or commerce: Treated as Export if recipient is located outside India. Eg: Business Auxiliary Service: Procuring the orders from companies in

India and delivering the order to foreign exporter

Services provided to a company abroad in relation to customer care services of their customers in India.

Services provided not in relation to Business or commerce: Treated as export if the recipient is located outside India at the time of receipt of such service.

Rebate in respect of Export of taxable services:

Rebate of 100% of service tax and Education cess on taxable services exported to any country other than Nepal and Bhutan

Rebate of 100% of duty paid on excisable inputs (or) service tax and Education cess paid on input services used for export of taxable services to any country other than Nepal and Bhutan

Conditions & Limitations

1 Exported in terms of Export of service rules, 2005 and payment there of is received in convertible

foreign exchange

2 The service tax and Education cess is paid on table services exported

Excise duty/service tax and Education cess have been paid on inputs/input services

3 The above amount in (2) is Rs. 500 or more

4 If services are not exported, the above rebate shall be recverable along with interest



5 N.A No CENVAT credit has been taken on inputs/input services

Procedure

Step 1

N.A

Provider of taxable service should file a declaration with AC/DC describing the taxable service intended

to be exported and description of inputs/input services, their quantity and value required

Step 2

N.A AC/DC will verify and may call for samples and will

accept

Step 3

N.A Service provider shall obtain inputs/input service

under an invoice/bill/challan

FORM : ASTR - 1, along with FORM : ASTR - 2, along with

(a) Documentary evidence of payment of service tax and Education cess

Documentary evidence of payment of service tax and Education cess

(b) Declaration that the services are exported Declaration that the services are exported

(c) Documents evidencing such export Documents evidencing such export

(d) N.A Invoice/bill/challan for inputs/input services

Jurisdictional Assistant commissioner (AC)/ Deputy commissioner (DC) Jurisdictional AC/DC

After being satisfied AC/DC will sanction Rebate (whole/part)


47

Taxable Services applicable to Nov 2012 exams:

Section

65(105)

Taxable Service Service Provider Service

Recipient

In relation to Exemptions Special points

(s) Practicing CA services “Practicing CA”

Member of Institute and

holding COP

Any Person Services in his professional

capacity in any manner

POT not applicable upto 50

lakhs of invoices issued or to

be issued as per fourth

proviso to Rule 6(1) of ST

rules, 1994

CA providing coaching

service in his individual

capacity is covered under

„Commercial coaching or

training service‟

(m) Mandap Keeper‟s

Services

“Mandap Keeper”

Person who allows

temporary occupation of

a mandap for a

consideration for

organizing official, social,

business or marriage

function.

Any Person Use of Mandap in any

manner

The facilities in relation

to such use &

The services provided as

a caterer

When a mandap is in the

precincts of a religious place

(i.e. a temple), then the

amount charged is exempted.

Abatement = 40%, if the

charges includes amount

charged for catering services.

Halls, rooms let out by a

hotel or a restaurant for a

consideration for specified

functions is covered under

mandap keeper service.

Renting of premises by

art galleries for exhibition

of art and artifacts is not

liable for service tax.

(zzc) Commercial Training or

coaching Services

“Commercial coaching or

training centre” Any

Institute or

establishment providing

commercial coaching for

imparting skill, knowledge,

lessons on any subject or

field other than sports,

with or without issuance

of a certificate and

includes tutorials.

Any Person Commercial coaching or

training

Institute providing service,

which is essential part of a

course or curriculum of any

other institute leading to

issuance of certificate

Vocational training institute

or recreational training

institute not being a computer

training institute.

Exemption to services

provided by a vocational

training provider extended to

“Modular employable skill

courses” provided by it as per

Notification No. 23/2010

Pre-school coaching and

training leading to grant of a

certificate or diploma or

--> Donation or grant in aid

is not treated as

consideration as it is not

specifically meant for a

person receiving such

training or to the specific

activity, but is in general

meant for the charitable

cause.



degree or any educational

qualification which is

recognized by any law in force

(zzzze) Information Technology

Software Services

Any Person Any Person “Information technology

software” MEANS any

representation of instructions,

data, sound or image, including

source code and object code,

recorded in a machine readable

form, and capable of being

manipulated or providing

interactivity to a user, by

means of computer or an

automatic data processing

machine or any other device or

equipment.

On the amount of

packaged/canned software, if

excise duty/customs duty is

paid then service tax is

exempted.

[See note below]

Consultancy service,

covering both hardware and

software consultancy is

covered under consulting

engineers services.

(g) Consulting Engineers

Services

“Consulting engineer”

Professionally qualified

engineer or body

corporate or firm.

Any Person Advice, consultancy or

technical assistance in any

manner in one or more

disciplines of engineering.

Amount of R&D cess paid

under R&D Cess Act, 1986

towards transfer of

technology is exempted from

service tax.

Architect not covered

under consulting engineer

Consulting engineer

includes self employed

professionally qualified

engineer, whether or not

employing others for

assistance and is liable to

service tax.

(zzo) Business Exhibition

Services

“Organizer of a business

exhibition” Who takes

in charge of conducting

an exhibition

Exhibitor Business exhibition

Means an exhibition to

MARKET, PROMOTE,

ADVERTISE, and

SHOWCASE any product

or service.

Holding a business

exhibition outside India

Display of Customer

goods in shops or shopping

centre to select and

purchase would not attract

service tax.

(za) Scientific and Technical

Consultancy Services

Scientist

Technocrat

Science institution or

organization

Any Person Advice, consultancy,

scientific assistance or

technical assistance in any

manner in one or more



Technology institution

or organization

disciplines of science or

technology.

(zzh) Technical Testing and

Analysis Services

Technical testing and

analysis agency

Any Person Technical testing and

analysis Physical,

Chemical, Biological, Clinical

testing and analysis is

covered.

Testing or analysis in

relation to human beings or

animals

Services provided by a

clinical research organisation

for development of new drugs,

vaccines and herbal remedies.

Services provided by state

owned or district laboratory in

relation to water quality

Services provided by

central or state seed testing

laboratory or agency.

Dutiability of “Packaged/Canned SOFTWARE” under Indirect taxes

Assessment of packaged/Canned software – where affixation of Retail Sale Price (RSP) is mandatory under the Legal Metrology Act, 2009

Packaged or Canned Software MEANS a software developed to meet the needs of variety of users, and which is intended for sale or capable of being sold off the shelf. Eg:

Kaspersky antivirus, Microsoft office 2010, Tally, Mac OS etc.

Under Central Excise Under Service Tax Under Customs Act

When the said

duties shall be

levied?

Manufacture and sale of packaged/

canned software

Providing the right to use packaged/Canned software Import of packaged/canned software

Covered under? Notification No. 30/2010 - CE Notification No. 53/2010 - ST Circular No. 15/2011

What is the value

for the purpose

of levy?

MRP based valuation u/s 4A:

MRP declared on the package

including the value of licences (i.e.

Right to use

Less: Abatement @ 15%

If Excise Duty or Customs duty is paid on packaged/ canned

software manufactured domestically or imported then,

On the service of providing the right to use the packaged or

canned software under „information technology software services‟

is fully exempt.

Basic Customs Duty shall be payable and for

the purpose of calculation of CVD u/s 3(1),

the value shall be as determined u/s 4A.



Assessment of packaged/Canned software – where affixation of Retail Sale Price (RSP) is NOT mandatory

Under Central Excise Under Service Tax Under Customs Act

When the said

duties shall be

levied?

Manufacture and sale of

packaged/ canned software

Providing the right to use packaged/Canned software Import of packaged/canned software

Covered under? Notification No. 14/2011 - CE Sec. 65(105) of Finance Act, 1994 Notification No. 25/2011 - Cus

What is the

value for the

purpose of levy?

Transaction value u/s 4:

Transaction Value at the time of

sale

Less: value representing

consideration for transfer of

right to use such

packaged/canned software.

Service tax would be charged under the category of

information technology software service on the value

representing consideration for transfer of right to use such

packaged/canned software.

Basic Customs Duty shall be payable and

for the purpose of calculation of CVD u/s

3(1), the value shall be as determined u/s 4.

END OF SERVICE TAX

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