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UNION BUDGET 2012-13
SERVICE TAX PROPOSALS
__ March, 2012
Analysis and Impact
Constitutional
Framework
Constitutional Framework...
Taxes levied by Central Government and State Government(s)
Authority to levy a tax is derived from the Constitution of India
Which allocates power to levy various taxes between the Centre and State
Article 265 of the Constitution which states that "No tax shall be levied or collected except by the authority of law”
Article 246 of the Indian Constitution, distributes legislative powers including taxation, between the Parliament of India and the State Legislature
Schedule VII enumerates use of three lists
List - I Where only the parliament is competent to make laws
List - II Where only the state legislature can make laws
List - III Where both the Parliament and the State Legislature can make laws upon concurrently
3
...Constitutional Framework
Union List State List Concurrent List
• Income Tax
• Custom Duty
• Excise Duty
• Corporation Tax
• Service tax
• Central Sales Tax
• Stamp duty in respect
of bills of exchange,
cheques, promissory
notes, etc
• Taxes on lands and
buildings
• Excise duty on
alcoholic liquor etc
• Entry tax
• Sales Tax
• Tolls
• Luxury Tax
• Stamp duty in respect
of documents other
than those specified in
the provisions of List I
• Stamp duties other
than duties or fees
collected by means of
judicial stamps, but
not including rates of
stamp duty
4
Constitutional Framework...
Extract of the Finance Minister Speech
“The life of a Finance Minister is not easy. Various players,
including policy makers, politicians, agriculturists and business
houses, participate in the making of the economy. When
everything goes well with the economy, we all share in the joy.
However, when things go wrong, it is the Finance Minister who is
called upon to administer the medicine. Economic policy, as in
medical treatment, often requires us to do something, which, in the
short run, may be painful, but is good for us in the long run. As
Hamlet, the Prince of Denmark, had said in Shakespeare’s
immortal words, “I must be cruel only to be kind.”
With this reminder, let me now turn to the tax proposals....
5
Headlines
Tax Rates
Service Tax – raised from 10% to 12%
GST – no definitive time-line for introduction
Provision of Service Rules / Place of Supply Rules introduced for comments
Harmonization of Service Tax and Excise Duty regimes – Common Tax Code proposed
GST Network to be operational from August, 2012 in the words of the Finance Minister
Negative list approach to tax services proposed to be introduced – 17 categories of services covered in the negative list
Settlement Commission provisions extended to Service Tax cases
Ordinary limitation period under Service Tax law increased to 18 months
6
Service Tax proposals
8
Service Tax Net Widened
8
Change in Approach
Selective taxation Negative list approach9
Current approach
Focuses on selective taxation of services
Negative list approach
Defining what a service is; and
Tax all services except some specifically defined services which
are kept outside the purview of the tax
Taxation of services comprehensive with some specific exemptions
Taxable
Services
Exempt
Services
Current Provisions Vs Proposed Provisions
Section 65 - Definitions
Section 65A - Classification
Section 66 – Charging Section
Section 66A – Charging Section
in case of import of services
New Section 65B proposed
New Section 66F proposed
New charging Section 66B
proposed
Current Provisions under
Finance Act
The following provisions will
cease to exist from a date to be
notified after enactment of the
Finance Bill
Provisions under Finance Bill
10
Charging section r.w. Provision of
Service Rules r. w. Notification
No. 15/2012 - ST
The following provisions will
come into force from a date to
be notified after enactment of
the Finance Bill
Service Tax Proposals...
New charging section 66B proposed to be introduced
Service Tax at 12% on
all services
other than those in the negative list
provided or agreed to be provided in the taxable territory by one
person to another
Section 65B(34) defines „Negative List‟
Means the services which are listed in Section 66D
Section 66D – Negative list not liable to Service tax
„Taxable territory‟ has been defined in Section 65B(52)
Means the territory to which the provisions of Chapter V of the
Finance Act, 1994 apply i.e. whole of India excluding the State
of Jammu and Kashmir („J&K‟) 11
…Service Tax Proposals...
„India‟ is defined in Section 65B(27) to mean –
(a) the territory of the Union as referred to in clauses (2) and (3) of article 1 of the Constitution;
(b) its territorial waters, continental shelf, exclusive economic zone or any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976;
(c) the seabed and the subsoil underlying the territorial waters;
(d) the air space above its territory and territorial waters; and
(e) the installations, structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof;
„Non-taxable territory‟ is defined in Section 65B(35) as the territory other than the taxable territory
The exclusion of J&K from the definition of taxable territory would render J&K a non-taxable territory. Services provided to persons in such territory may thereby by liable to Service tax under the reverse charge mechanism
12
…Service Tax Proposals...
Place of Provision of Services Rules proposed to determine whether services provided within taxable territory
Definition of the term “service” introduced for the first time
Section 65B(44) defines „Service‟ to mean
Any activity
Carried out by a person for another
For consideration
And includes a declared service
„Service‟ does not include –
any activity that constitutes merely a transfer in title of goods or immovable property by way of sale, gift or in any other manner; or
a transaction in money or actionable claim;
any service provided by an employee to an employer in the course of the employment;
fees payable to a Court or a tribunal established under any law for the time being in force
13
…Service Tax Proposals
Explanations –
This section does not apply to
Functions of Members of the Parliament, the State Legislative, Panchayats, Municipalities and other local authorities who receive any consideration in performing the functions of that office as such members
Duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity
the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or State Governments or local authority and who is not deemed as an employee before the commencement of this section
Unincorporated associations or a body of persons and member thereof shall be treated as distinct persons
Establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons
Person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory
TRU letter clarifies that „deemed sales‟ as per Art. 366(29A) of the Constitution are also included within the term „sale‟
Negative List of Services...
Sr.
No.
Description of services which are not liable to Service Tax
1. Services by Government or a local authority (excluding certain specified
services)
2. Services by the Reserve Bank of India
3. Services by a foreign diplomatic mission located in India
4. Services relating to agriculture (only certain specified services covered)
5. Trading of goods
6. Any process amounting to manufacture or production of goods. “Process
amounting to manufacture or production of goods" has been defined as a
process on which duties of excise are leviable under section 3 of the CE Act,
1944 or any process amounting to manufacture of alcoholic liquors for
human consumption on which duties of excise are leviable under any State
Act
7. Selling of space or time slots for advertisements other than advertisements
broadcast by radio or television. „Advertisement‟ has been specifically
defined.
8. Service by way of access to a road or a bridge on payment of toll charges
...Negative List of Services...
Sr.
No.
Description of services which are not liable to Service Tax
9. Betting, gambling or lottery. The term „betting or gambling‟ has been
specifically defined.
10. Admission to entertainment events or access to amusement facilities.
11. Transmission or distribution of electricity by an electricity transmission or
distribution utility. The term „electricity transmission or distribution utility‟ has
been specifically defined.
12. Services by way of pre-school education, higher secondary school
education, education as a part of a curriculum for obtaining a qualification
recognised by any law and vocational education course.
13. Services by way of renting of residential dwelling for use as residence. The
term „renting‟ has been specifically defined.
14. Services by way of extending deposits, loans or advances in so far as the
consideration is represented by way of interest or discount or inter se sale or
purchase of foreign currency amongst banks or authorised dealers of foreign
exchange or amongst banks and such dealers
...Negative List of Services
Sr.
No.
Description of services which are not liable to Service Tax
15. Service of transportation of passengers, with or without accompanied
belongings, by a stage carriage; railways in a class other than first class or
an air-conditioned coach; metro, monorail or tramway; inland waterways;
public transport, other than predominantly for tourism purpose, in a vessel of
less than fifteen tonne net; and metered cabs, radio taxis or auto rickshaws
16. Services by way of transportation of goods by road, by an aircraft or a
vessel from a place outside India to the first customs, or by inland
waterways (subject to certain exceptions)
17. Funeral, burial, crematorium or mortuary services including transportation of
the deceased.
...Negative List of Services…
Changes brought in the Revised Negative List as compared to
the proposed list issues prior to the Budget
Services, the scope of which are expanded
Services provided by the Government, Judiciary, the RBI and
Regulatory bodies
Services in relation to agriculture and animal husbandry
Services removed from the earlier list but exemption provided
Services by UN, international bodies, diplomatic missions etc.
Services provided by non-profit entities in matters relating to public
and social welfare activities
excluding education and health
Including charitable fund raising events, sponsorship to charitable events and voluntary donations to charity
Supply of goods carriage to persons engaged in the business of transportation of goods
Copyright services- amended
Services of independent journalists, PTI and UNI for providing news-amended
...Negative List of Services
Services removed
Religious services
Services provided by political parties recognized by the Election
Commission of India
Other changes
Renting of personal dwelling for residential use – the threshold limit
has been removed
Health services amended – Services provided by clinical
establishments except in relation to fitness, weight reduction
programmes, health check up and cosmetic or plastic surgery
List of Declared Services...
Sr. No. Description of services which are declared services
1. Renting of immovable property. The levy of Service tax on “renting of immovable
property” is presently pending before the Supreme Court in Home Solutions Retails
(India) Ltd vs. Union of India [2011-TIOL-103-SC-ST]
2. Construction of a complex, building, civil structure or a part thereof, including a
complex or building intended for sale to a buyer (subject to certain specified
exceptions)
The Hon‟ble Bombay High Court in Maharashtra Chamber of Housing Industry and
Another vs. Union of India and Others [2012-VIL-15-BOM-ST] and Punjab &
Haryana High Court in G S Promoters vs. Union of India [2011 (21) STR 100
(P&H)] has upheld the levy of Service tax under the present Entry
3. Temporary transfer or permitting the use or enjoyment of any intellectual property right
4. Development, design, programming, customisation, adaptation, upgradation,
enhancement, implementation of information technology software
„Declared Service‟ is defined in Section 65B(22)
Means any activity carried out by a person for another person for
consideration and declared as such under Section 66E
Section 66E – List of declared services
...List of Declared Services
Sr. No. Description of services which are declared Services
5. Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or
to do an act
6. Transfer of goods by way of hiring, leasing, licensing or in any such manner without
transfer of right to use such goods
7. Activities in relation to delivery of goods on hire purchase or any system of payment
by installments
8. Service portion in the execution of a „Works Contract‟
‘Works contract’ has been defined in Section 65B(54) to mean a contract wherein
transfer of property in goods involved in the execution of such contract is leviable to
tax as sale of goods and such contract is for the purpose of carrying out construction,
erection, alteration of any building or structure on land or for carrying out any other
similar activity or a part thereof in relation to any building or structure on land.
9. Service portion in an activity wherein goods, being food or any other article of human
consumption or any drink (whether or not intoxicating) is supplied in any manner as a
part of the activity
Sr.
No.
Description of service in respect of which exemption from payment of Service Tax
is proposed to be granted
1. Services provided to the United Nations or a specified international organization
2. Health care services by a clinical establishment, an authorised medical practitioner…
3. Services by a veterinary clinic in relation to health care of animals or birds
4. Services by an entity registered under Section 12AA of the IT Act ie charitable activities.
5. Services of- (a) renting of precincts of a religious place meant for general public; or (b)
conduct of any religious ceremony.
6. Services provided to any person other than a business entity by -
(a) an individual as an advocate; or (b) a person represented on and as arbitral
tribunals.
7. Services of technical testing or analysis of newly developed drugs, including vaccines
and herbal remedies, on human participants by a clinical research organization...
8. Services by way of training or coaching in recreational activities relating to arts, culture
or sports.
Exempted Services...
22
Sr.
No.
Description of service in respect of which exemption from payment of Service Tax
is proposed to be granted
9. Services provided-
(a) to an educational institution by way of catering under any centrally assisted mid – day
meals scheme sponsored by Government; (b) to or by an institution in relation to
educational services, where the educational services are exempt from the levy of Service
Tax, by way of transportation of students or staff (c) to or by an institution in relation to
educational services, where the educational services are exempted from the levy of
service tax, by way of services in relation to admission to such education.
10. Services provided to a recognised sports body by-
(a) an individual as a player, referee, umpire, coach or manager for participation in a
tournament or championship organized by a recognized sports body;
(b) another recognised sports body;
11. Services by way of sponsorship of tournaments or championships organised,-
(a) by a national sports federation, or its affiliated federations…
(b) by Association of Indian Universities, Inter-University Sports Board, School Games
Federation of India, All India Sports Council for the Deaf, Paralympic Committee of India,
Special Olympics Bharat;
(c) by Central Civil Services Cultural and Sports Board;
(d) as part of national games, by Indian Olympic Association; or
(e) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme;
23
...Exempted Services...
Sr.
No.
Description of service in respect of which exemption from payment of Service Tax
is proposed to be granted
12. Services provided to the Government or local authority by way of erection, construction,
maintenance, repair, alteration, renovation or restoration of -
(a) a civil structure .. meant predominantly for a non-industrial or non-commercial use;
(b) a historical monument, archaeological site or remains of national importance...
(c) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an
art or cultural establishment;
(d) canal, dam or other irrigation works;
(e) pipeline, conduit or plant for (i) drinking water supply (ii) water treatment (iii)sewerage
treatment or disposal; or
(f) a residential complex predominantly meant for self-use or the use of their employees
or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said
Finance Act;
13. Services provided by way of erection, construction, maintenance, repair, alteration,
renovation or restoration of,-
(a) road, bridge, tunnel, or terminal for road transportation for use by general public;
(b) building owned by an entity registered under section 12AA of the Income tax Act,
1961(43 of 1961) and meant predominantly for religious use by general public;
(c) pollution control or effluent treatment plant, except located as a part of a factory; or
(d) electric crematorium;
24
...Exempted Services...
Sr.
No.
Description of service in respect of which exemption from payment of Service Tax
is proposed to be granted
14. Services by way of erection or construction of original works pertaining to,-
(a) airport, port or railways;
(b) single residential unit otherwise as a part of a residential complex;
(c) low- cost houses up to a carpet area of 60 square metres per house in a housing
project approved by competent authority empowered under the „Scheme of Affordable
Housing in Partnership‟ framed by the Ministry of Housing and Urban Poverty Alleviation,
Government of India;
(d) post- harvest storage infrastructure for agricultural produce including a cold storages
for such purposes; or
(e) mechanised food grain handling system, machinery or equipment for units processing
agricultural produce as food stuff excluding alcoholic beverages;
15. Temporary transfer or permitting the use or enjoyment of a copyright covered under
clause (a) or (b) of sub-section (1) of section 13 of the Indian Copyright Act, 1957 (14 of
1957), relating to original literary, dramatic, musical, artistic works or cinematograph
films;
16 Services by a performing artist in folk or classical art forms of (i) music, or (ii) dance, or
(iii) theatre, excluding services provided by such artist as a brand ambassador
17. Services by way of collecting or providing news by an independent journalist, Press Trust
of India or United News of India. 25
...Exempted Services...
Sr.
No.
Description of service in respect of which exemption from payment of Service Tax
is proposed to be granted
18. Services by way of renting of a hotel, inn, guest house, club, campsite or other
commercial places meant for residential or lodging purposes, having declared tariff of a
room below rupees one thousand per day or equivalent;
19. Services provided in relation to serving of food or beverages by a restaurant, eating joint
or a mess, other than those having the facility of air-conditioning or central air-heating in
any part of the establishment, at any time during the year and which has a license to
serve alcoholic beverages;
20. Services by way of transportation by rail or a vessel from one port in India to another of
the 9 specified varieties of goods.
21. Services provided by a goods transport agency by way of transportation of fruits,
vegetables, eggs, milk, food grains or pulses, or where gross amount charged on a
consignment transported in a single goods carriage does not exceed Rs. 1,500; or
where gross amount charged for transportation of all such goods for a single consignee
in the goods carriage does not exceed Rs. 750
22. Renting of motor vehicles to State transport undertaking meant to carry more than twelve
passengers and to a goods transport agency, a means of transportation of goods.
26
...Exempted Services...
Sr.
No.
Description of service in respect of which exemption from payment of Service Tax
is proposed to be granted
23. Transport of passengers by-
•air embarking or terminating in an airport located in the state of Arunachal Pradesh,
Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Baghdogra
located in West Bengal; or
•a contract carriage for the transportation of passengers, excluding tourism, conducted
tour, charter or hire
24. Services by way of motor vehicle parking to general public excluding leasing of space to
an entity for providing such parking facility
25. Services provided to the Government or a local authority by way of -
(a) repair of a ship, boat or vessel;
(b) effluents and sewerage treatment;
(c) waste collection or disposal;
(d) storage, treatment or testing of water for drinking purposes; or
(e) transport of water by pipeline or conduit for drinking purposes
26. Services of general insurance business provided under specified schemes
27. Services provided by an incubatee up to total business turnover of Rs. 50 lakh in an FY,
subject to the following conditions: (a) total business turnover had not exceeded Rs. 50
lakh in the preceding FY and
(b) 3 years has not lapsed from the date of entering into agreement as an incubatee 27
...Exempted Services...
Sr.
No.
Description of service in respect of which exemption from payment of Service Tax
is proposed to be granted
28. Service by an unincorporated body or an entity registered as a society to own members
by way of reimbursement of charges or share of contribution
(a) as a trade union;
(b) for the provision of exempt services by the entity to third persons; or
(c) up to an amount of Rs. 5000 per month per member for sourcing of goods or services
from a third person for common use of its members in a housing society or residential
complex
29. Services by the following persons in respective capacities -
(a) a sub-broker or an authorised person to a stock broker;
(b) an authorised person to a member of a commodity exchange;
(c) a mutual fund agent or distributor to mutual fund or asset management company for
distribution or marketing of mutual fund;
(d) a selling or marketing agent of lottery tickets to a distributer or a selling agent;
(e) a selling agent or a distributer of SIM cards or recharge coupon vouchers; or
(f) a business facilitator or a business correspondent to a banking company or an
insurance company in a rural area;
28
...Exempted Services...
Sr.
No.
Description of service in respect of which exemption from payment of Service Tax is
proposed to be granted
30. Carrying out an intermediate production process as job work in relation to specified goods
31. Services by an organiser to any person in respect of a business exhibition held outside
India
32. Services by way of making telephone calls from:
(a) departmentally run public telephones;
(b) guaranteed public telephones operating only for local calls; or
(c) free telephone at airport and hospitals where no bills are being issued
33. Services by way of slaughtering of bovine animals
34. Services received from a service provider located in a non- taxable territory by: (a) the
Government, a local authority or an individual in relation to any purpose other than industry,
business or commerce; or
(b) an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for the
purposes of providing charitable activities.
29
...Exempted Services
Classification – Section 66F
Concept of „composite service‟ under Section 65A has been replaced by „bundled service‟
New Section proposed to be introduced, setting out principles governing specified description of services or bundled services
Reference to a service shall not include reference to a service used in providing such main service
For services capable of differential treatment for any reason based on its description, the most specific description to be preferred over a more general description
In case of a bundled service i.e. when provision of one service is combined with element(s) of other service(s), taxability is to be determined as under
If various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character
If various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in the highest liability of Service Tax
30
Other Provisions…
Ambit of the definition of „money‟ expanded
„Money‟ as defined in Explanation to Section 67(b) proposed to be
omitted
Section 65B(33) proposed to be introduced
Indian legal tender, bill of exchange and electronic remittances
included
Any similar instrument when used to settle an obligation or exchange
with Indian legal tender of another denomination shall be deemed to
be money
Date of determination of rate of tax, value of taxable service and
rate of exchange
New section 67A proposed to be introduced
Rate or value in force as applicable, at the time when the taxable
service has been provided or agreed to be provided
31
…Other Provisions…
Payment of Service tax
A new proviso is proposed to be added to Section 68(2)
Central Government is empowered to notify service and Service Tax
payable by the person, who is liable to discharge Service Tax under
the Act
Provisions relating to Special Audit
Provisions relating to special audit as contained in Section 14AA
of Central Excise Act, to be made applicable to Service Tax
New Section 72A proposed
Comprehensive powers for conducting Service tax audit
Scope of Section 72A – Also covers cases where
Chief Commissioner has reasons to believe that operations of any
person liable to tax, are spread out in multiple locations and it is
not possible or practical to obtain a true and complete picture of
his accounts from the registered premises32
…Other Provisions…
Provisions relating to recovery of Service Tax
Section 73 - Period for issuance of demand extended to 18
months from 12 months
New sub-section proposed to be added to Section 80 vide which
no penalty shall be imposable on the assessee, as of 6th March,
2012, for failure to pay Service Tax under the taxing entry for
“Renting of Immovable Property Service”, provided that the
amount of Service Tax along with applicable interest is paid
within a period of 6 months from the date on which the Finance
Bill, 2012 receives assent of the President
This is in the nature of an amnesty provision
Provisions relating to settlement of cases introduced for Service
Tax cases
33
…Other Provisions…
New sub-section proposed to be added to Section 80 vide which
no penalty shall be imposable on the assessee, as of 6th March,
2012, for failure to pay Service Tax under the taxing entry for
“Renting of Immovable Property Service”, provided that the
amount of Service Tax along with applicable interest is paid
within a period of 6 months from the date on which the Finance
Bill, 2012 receives assent of the President
This is in the nature of an amnesty provision
Provisions relating to settlement of cases introduced for Service
Tax cases
Statutory period for filing appeals amended
Proposed amendment to Section 85, whereby, period of filing
Appeal to Commissioner (Appeals) reduced to two months
Extension of 1 month may be granted for sufficient cause 34
…Other Provisions
Proposed amendment to Section 86, for period of filing Appeal to
the Appellate Tribunal
Period for Appeal by the Department increased to four months
Period for Appeal by the Assessee continues to be three months
Provisions relating to revision mechanism as available in
Central Excise proposed to be introduced in Service Tax
Provisions relating to prosecution proposed to be amended
such that any person who knowingly evades the payment of
Service Tax can be prosecuted
Proposed provision covers any act (which may be construed to be
intentional evasion) as against the specific acts presently covered
under the provision
35
Exemptions with retrospective effect
Services in relation to repair of roads proposed to be exempted for the period commencing from June 16, 2005 to July 27, 2009
Services of Management, Maintenance or Repair in relation to non-commercial Government buildings are proposed to be exempted from June 16, 2005
Services in relation to common facility set-up for treatment and recycling of effluents and solid waste discharged by associations or cooperative societies, which facilities are set up with financial assistance from the Central or State Government, are proposed to be exempted from June 16, 2005 under the taxing entry of “Club or Association Services”
Refund is proposed to be granted of the Service Tax collected which would not have been so collected had the above exemptions been in force at all material times
36
Amendments to
Service tax Rules
Amendment to Service tax Rules...
LLP has been included in the definition of partnership firm
Provisions relating to invoices
Time period for issuance of invoice increased from 14 days to 30 days from date of provision of services
For Banking Company invoice has to be issued within 45 days
Payment of Service tax on receipt basis for Small Service providers
Individuals and partnership firms whose aggregate value of taxable services provided from one or more premises is Rs. 50 lakhs or less in the previous financial year
Have the option to pay Service Tax on receipt basis
Adjustment of excess amount paid under Rule 6(4B)
Monetary limit of Rs. 2 lakhs and intimation to jurisdictional Superintendent has been omitted
38
…Amendment to Service tax Rules...
Service tax payment by life insurance company
Option to pay Service Tax @ 3 % in the first year and 1.5 % in the
subsequent years of the premium charged from policy holder
Service tax payment by dealers in foreign exchange
Rate increased to 0.12% for currency exchanged upto Rs. 1 lakh,
subject to minimum amount of Rs. 30
Rs. 120 and 0.06% for currency exchanged between Rs. 1 lakh to
Rs. 10 lakh
Rs. 550 and 0.1% for currency exchanged above Rs. 10 lakh
subject to maximum of Rs. 6,000/-
Service tax payment by dealers selling lottery tickets
Rate increased from Rs. 6,000/- to Rs. 7,000/- and the maximum
rate has been increased from Rs. 9000/- to Rs. 11,000/-
39
…Amendment to Service tax Rules
Adjustment of excess amount paid under Rule 6(4B)
Monetary limit of Rs. 2 lakhs and intimation to jurisdictional
Superintendent has been omitted
Service tax payment by life insurance company
Option to pay Service Tax @ 3 % in the first year and 1.5 % in the
subsequent years of the premium charged from policy holder
Service tax payment by dealers in foreign exchange
Rate increased to 0.12% for currency exchanged upto Rs. 1 lakh,
subject to minimum amount of Rs. 30
Rs. 120 and 0.06% for currency exchanged between Rs. 1 lakh to
Rs. 10 lakh
Rs. 550 and 0.1% for currency exchanged above Rs. 10 lakh
subject to maximum of Rs. 6,000/-
40
…Amendment to Service tax Rules
Service tax payment by dealers selling lottery tickets
Rate increased from Rs. 6,000/- to Rs. 7,000/- and the maximum
rate has been increased from Rs. 9000/- to Rs. 11,000/-
Simplified filing of returns
A simplified one page common return for Central Excise and
Service Tax has been placed for comments and feedbacks
Simplified format for obtaining registration
A common simplified registration format for Central Excise and
Service Tax has been placed for comments and feedback
41
Other provisions
Other provisions...
Works contract composition rate increased from 4% to 4.8%
Rule 2A is amended to include another method for
determination of the value of taxable services involved in
execution of a works contract
Where works contract is for… Value of the service portion shall be…
(i) execution of original works forty percent of the total amount charged
for the works contract
(ii) execution of original works and the gross
amount charged includes the value of land
twenty five per cent of the total amount
charged including such gross amount
(iii) works contracts, other than contracts for
execution of original works, including
contracts for completion and finishing
services such as glazing, plastering, floor and
wall tiling, installation of electrical fittings
sixty percent of the total amount charged
for the works contract
43
…Other provisions
„Total amount‟ is the sum total of gross amount and the value of all goods and services supplied free of cost for use in or in relation to the execution of works contract, under the same contract or any other contract and, in case of (ii) in the table above, including the value of land charged as a part of the total consideration
„Original works‟ means
all new constructions
all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable
Person liable for payment of Service tax – Section 68(2)
As per Notification 15/2012 dated 17.03.2012, in respect of services provided under works contract, ST shall be payable
50% by the Service provider
50% by the Service recipient44
Abatement of Service tax...
Abatement has been provided for following services subject to
conditionsSl.
No.
Services Proposed %
of abatement
Conditions
1. Financial leasing services,
including equipment leasing
and hire purchase
10 Applies to amount forming or
representing as interest
2. Transport of goods by rail 30
3. Transport of passengers by
rail
30
4. Supply of food or articles of
consumption for function at
premises such as hotel etc
70 No CENVAT credit of goods
classifiable under chapter 1 to 22
of CETA. Consideration is sum
total of gross amount and value of
all goods, excluding VAT, free of
cost under the same or any other
contract
5. Transport of passengers by
air
40 No CENVAT credit of inputs and
capital goods
...Abatement of Service tax...
Sr. No. Service Proposed % Condition
6. Renting of hotels,
inns, guest houses,
clubs, campsites etc
60 No CENVAT credit of inputs and
capital goods
7. Transport of goods
by road by Goods
Transport Agency
25 No CENVAT credit of inputs, input
services and capital goods
8. Services provided in
relation to chit
70 No CENVAT credit of inputs, input
services and capital goods
9. Renting of any motor
vehicle to carry
passengers
40 No CENVAT credit of inputs, input
services and capital goods
10. Transport of goods
in a vessel from one
port in India to
another
50 No CENVAT credit of inputs, input
services and capital goods
46
…Abatement of Service tax
Sr.
No.
Service Proposed
%
Condition
11. (i) Services provided
by a tour operator in
relation to a package
tour
25 No CENVAT credit of inputs, input
services and capital goods
The bill is inclusive of charges for such
tour
(ii) Services provided
by a tour operator in
relation to a tour,
solely for arranging or
booking
accommodation for
any person in relation
to a tour
10 No CENVAT credit of inputs, input
services and capital goods
Invoice indicates that charges are
toward accommodation
Invoice should include cost of such
accommodation apart from the service
charges for arranging or booking
accommodation for any person
(iii) Services, other
than (i) and (ii) above,
provided by a tour
operator in relation to
a tour
40 No CENVAT credit of inputs, input
services and capital goods
Invoice indicates that amount charged
in the bill is the gross amount charged
for such a tour
47
Point of Taxation
Rules, 2011
Amendment to Point of Taxation Rules...
Definition of “Continuous supply of service” amended to include any service provided or to be provided on a recurrent basis, for a period exceeding three months with the obligation for payment periodically or from time to time
Recurrent basis has not been defined
Rule 6, in respect of continuous supply of service omitted and merged with Rule 3 – determination of point of taxation
Rule 4 and Rule 5 dealing with change in effective rate of tax and introduction of new services is made applicable to continuous supply of services as well
Small advances received upto Rs. 1000 by telecommunication, credit cards etc –
Service provider has option to determine the Point of Taxation as the date of invoice/ completion of service, instead of date of payment
49
…Amendment to Point of Taxation Rules
„Date of Payment‟ defined under Rule 2A
In normal circumstances, date of payment as the earlier of the
dates on which the payment is
entered in the books of accounts or
credited to the bank account of the person liable to pay tax except in
certain specified cases
As per the new rule in case of change in effective rate of tax or a
new levy between the above two dates, the date of payment shall
be the date of actual credit in the bank account, if the amount is
credited through a banking instrument more than four working
days after the date of such change
„Best Judgment‟ provision inserted – Rule 8A
To ascertain the point of taxation by way of „best judgment‟ by the
Central Excise Officer where the taxpayer is unable to submit the
details regarding the date of payment or date of invoice or both 50
CENVAT Credit
Rules, 2004
Amendments to CENVAT Credit...
Definition of “Capital goods” and “Input Services” has been liberalised
“Capital goods”
Definition extended to cover “motor vehicles other than those falling
under tariff headings 8702, 8703, 8704, 8711 and their chassis”
Similar amendment made for motor vehicles used for specified services
Credit in respect of components, spares and accessories of motor
vehicles which are capital goods for the assessee allowed
“Input service”
Specified services relating to motor vehicles have been reduced to cover
only
„rent-a-cab services‟ and „supply of tangible goods services‟ insofar as
they relate to a motor vehicle which is not capital goods, and
„general insurance services‟ and „repair, reconditioning, restoration of
motor vehicle services‟ (except when used by a manufacturer in relation
to a motor vehicle manufactured by him, or a general insurance service
provider in respect of a motor vehicle insured / reinsured by him) 52
Amendments to CENVAT Credit...
20% credit restriction for providers of „life insurance services‟
and „management of investment under ULIP services‟ has been
deleted
New provisions relating to availment and utilisation of CENVAT
Credit
A new enabling rule has been substituted in relation to refunds of
CENVAT credit for exporters of goods and services
Refund is to be calculated in the ratio of export turnover from
goods and services to total turnover
Ratio is applied to the net CENVAT credit which is the credit of
inputs and input services less any reduction under Rule 3(5C)
Export turnover for goods is the value of goods cleared during the
relevant period, and exported
Export turnover for services is based on the services completed
during the relevant period 53
…Amendments to CENVAT Credit...
„Export service‟ has been separately defined and is to be
determined per the Export Rules, but irrespective of whether
payment has been received
Value of services is to be determined per Rule 6(3) and Rule
6(3A)
Total turnover is the sum of turnover from all excisable goods
cleared (exempted, dutiable or exported), all services provided
and any inputs removed as such
Refund is not available if benefit of drawback / rebate has been
availed
New refund scheme applies to export made on or after 01.02.2012
Refunds under the old rule may be claimed within 1 year from the
commencement of the new rule
54
…Amendments to CENVAT Credit...
Amendments to existing provisions relating to availment and
utilisation of CENVAT Credit
CENVAT Credit on Capital Goods removed as such (effective
from 17.03.2012)
CENVAT credit shall be paid on the depreciated value of the goods
(per the rates provided) or the transaction value, whichever is greater
CENVAT Credit in respect of inputs and capital goods will also be
allowed where inputs are delivered at a location other than the
premises of the service provider
Service provider opting not to maintain separate books of
accounts - Rule 6(3)
Rate at which payment is to be made has been increased from 5% to
6% of the value of exempted goods and services
The same applies to services exempted on condition that no credit of
inputs and input services have been taken
55
…Amendments to CENVAT Credit
Distribution of credit of Service Tax by an ISD has been restricted
(i) to the respective unit where the service is used wholly by that unit
(ii) to being carried out on a pro rata basis (per the turnover) of units
to which the service relates
Units are defined to include registered and unregistered premises of
manufacturers and service providers. Turnover is to be calculated per
the procedure prescribed for the new refund scheme.
Documents for availing credit have been amended to include
Challans evidencing payment
Interest provision has been amended
Payment of interest required only when CENVAT credit is both
taken and utilized wrongly
56
Place of provision of
Service Rules, 2012
Place of Provision of Service Rules, 2012…
An important component of the proposed changes is the
introduction of the Place of Provision of Services Rules, 2012,
which have been released for comments and feedback
Draft Guidance Paper-B has also been issued
The new rules will determine the place where a service shall be
deemed to be provided
The Place of Provision of Services Rules, 2012 will replace
the „Export of Services, Rules, 2005‟ and
„Taxation of Services (Provided from outside India and received in
India) Rules, 2006
58
…Place of Provision of Service Rules, 2012…
Basic philosophy - Service should be taxed in the jurisdiction of
its consumption
Rules Place of provision
Default Rule Service shall be deemed to be provided where the receiver is
located
Rule 4 - Performance
based services
Services provided “in respect of goods that are made physically
available, by the receiver to the service provider, in order to provide
the service” e.g. repair, reconditioning, or any other work on goods,
storage and warehousing etc.
Remote location by electronic means – place where goods are
situated at the time of provision of service
Services provided in conjunction with supply of goods under another
contract e.g. erection & commissioning
Services entirely or predominantly in the physical presence of
individual receiver. E.g. cosmetic or plastic surgery, beauty
treatment etc.
Rule 5 – Location of
immovable property
Services directly in relation to immovable property, where
immovable property (land or building) is located
…Place of Provision of Service Rules, 2012…
Rules Place of provision
Rule 6 – Services
relating to Events
Place where event is held (admission to, or organization of, a cultural,
artistic, sporting, scientific, educational, entertainment event, or a
celebration, conference…or any other similar event, and of services
ancillary to such admission)
Rule 7 - Part
performance of service
Service under Rules 4,5,6 provided at more than one location,
including a location in taxable territory, place of provision shall be the
location in the taxable territory where the greatest proportion of the
service is provided
Rule 8 – Provider as
well as receiver is
located in Taxable
territory
Location of Receiver – covers a situation where the place of provision
of service provided in taxable territory may be determinable to be
outside taxable territory, in terms of application of one of the earlier
Rules, but service provider, as well as service receiver, are located in
taxable territory
TRU - Where both provider and recipient located outside India , there
is no mechanism to collect tax
Rule 9 – Specified
services
Place of service provider. E.g. banking or financial company to
account holders, Telecommunication services, Online information and
database access etc.
…Place of Provision of Service Rules, 2012…
Rules Place of provision
Rule 10 – Place of
provision of a service of
transportation of goods
Is the place of destination of goods, except in the case of services
provided by GTA for transportation of goods by road, in which case place
of provision is location of the person liable to pay tax (as determined in
terms of rule 2(1)(d) of Service tax Rules, 1994.
Rule 11 – Passenger
transportation services
Place where the passenger embarks on the conveyance for a continuous
journey. Continuous journey means – journey for which single ticket issued
or more than one ticket or invoice has been issued for the journey, by one
service provider, or by an agent on behalf, at the same time, and there is
no scheduled stopover in the journey
Rule 12 – Service
provided on board
conveyances (aircraft,
vessel, rail or roadways
bus)
Examples – onboard services of movies/music/video/ etc. etc. albeit only
when provided against a specific charge, and not supplied as part of fare.
The place of provision during the course of passenger transport operation
is the first scheduled point of departure of that conveyance for the journey
Rule 13 – Power to
notify services or
circumstances
In order to prevent double taxation or non-taxation of the provision of a
service, or for the uniform application of rules, Central Government shall
have power to notify any description of service or circumstances in which
the place of provision shall be place of effective use and enjoyment of a
service.
Rule 14 – Order of
application of Rules
Moe than one Rule - Rule that occurs later among the rules that merit
equal consideration
…Place of Provision of Service Rules, 2012
Liability to pay Service tax
Service provider
Service recipient where service provider located outside India and
place of provision of service is in taxable territory
Mumbai1502, A Wing, Dalamal Towers, Nariman Point, Mumbai 400 021
Phone: + 91 22 6636 7000, Fax: + 91 22 6636 7172, Email: [email protected]
Delhi405-406, 4th Floor, World Trade Centre, Barakhamba Lane, New Delhi 110 001
Phone: + 91 11 4152 8400, Fax: + 91 11 4152 8404, Email: [email protected]
Ahmedabad801, Abhijeet III, Mithakali Six Roads, Ellisbridge, Ahmedabad-380 006
Phone: +91 79 6605 4480 / 8, Fax: +91 79 6605 4482, Email: [email protected]
PuneSuyog Fusion, 7th Floor, No.1, 97 Dhole Patil Road, Nr. Ruby Hall Clinic, Pune 411 001
Tel:+91 20 4146 7400 / 02 Fax:+91 20 4146 7499