A Knowledge Workshop-Presentation IV dated 14th July,2012

Corporate Knowledge FoundationCorporate Knowledge Foundation

PresentsPresentsA Knowledge WorkshopA Knowledge Workshop

OnOn““New Regime of Service Taxation in India”New Regime of Service Taxation in India”

Conducted byConducted byDr. Sanjiv AgarwalDr. Sanjiv Agarwal

FCA, FCSFCA, FCS

Saturday,Saturday,1414thth July,2012 July,2012New Delhi © Dr. Sanjiv AgarwalNew Delhi © Dr. Sanjiv Agarwal

Corporate Knowledge FoundationCorporate Knowledge Foundation

Session IV Session IV

Other Legislative and Procedural Other Legislative and Procedural AmendmentsAmendments

Other Legislative and Other Legislative and Procedural AmendmentsProcedural Amendments

This Presentation CoversThis Presentation Covers • Abatements Abatements • Reverse ChargeReverse Charge• Revision Authority Revision Authority • Settlement of Cases Settlement of Cases • Other amendments Other amendments

AbatementsAbatements

• Besides full exemption to 39 categories of services vide Besides full exemption to 39 categories of services vide Notification No. 25/2012-ST dated 20.06.2012Notification No. 25/2012-ST dated 20.06.2012

• Earlier there were a number of exemption notifications that Earlier there were a number of exemption notifications that prescribed the abatements for various categories of services prescribed the abatements for various categories of services (including 1/2006)(including 1/2006)

• Abatements merged into a single Notification No 26/2102 - Abatements merged into a single Notification No 26/2102 - ST dated 20/6/12 ST dated 20/6/12

• Valuation rules contain abatement for Works Contract and Valuation rules contain abatement for Works Contract and Supply of Food ServicesSupply of Food Services

Specific AbatementsSpecific Abatements

Sl. No.Sl. No. Description of taxable serviceDescription of taxable service Tax Percent-Tax Percent-

ageage

ConditionsConditions

1 1 Financial leasing services including Financial leasing services including

equipment leasing and hire purchase equipment leasing and hire purchase

10 10 Nil Nil

2 2 Transport of goods by rail Transport of goods by rail ( now exempt till ( now exempt till

30.9.2012) 30.9.2012)

30 30 NilNil

3 3 Transport of passengers, with or without Transport of passengers, with or without

accompanied belongings by rail ( now accompanied belongings by rail ( now

exempt till 30.9.2012) exempt till 30.9.2012)

30 30 NilNil

4 4 Supply of food or any other article of human Supply of food or any other article of human

consumption or any drink, in a premises, consumption or any drink, in a premises,

including hotel, convention center, club, including hotel, convention center, club,

pandal, shamiana or any place specially pandal, shamiana or any place specially

arranged for organizing a function arranged for organizing a function

70 70 CENVAT credit on any CENVAT credit on any goods goods

classifiable under chapter 1 classifiable under chapter 1

to 22 of the Central Excise to 22 of the Central Excise

Tariff Act, 1985 has not been Tariff Act, 1985 has not been

taken under the provisions taken under the provisions

of the CENVAT Credit Rules, of the CENVAT Credit Rules,

2004. 2004.


5 5 Transport of passengers by air, with Transport of passengers by air, with

or without accompanied belongings or without accompanied belongings

40 40 CENVAT credit CENVAT credit on inputs or capitalon inputs or capital goods, goods,

used for providing the taxable service, has used for providing the taxable service, has

not been taken under the provisions of the not been taken under the provisions of the

CENVAT Credit Rules, 2004. CENVAT Credit Rules, 2004.

6 6 Renting of hotels, inns, guest Renting of hotels, inns, guest

houses, clubs, campsites or other houses, clubs, campsites or other

commercial places meant for commercial places meant for

residential or lodging purposes residential or lodging purposes

60 60 Same as above. Same as above.

7 7 Transport of goods by road by Transport of goods by road by

Goods Transport Agency Goods Transport Agency

25 25 CENVAT credit on CENVAT credit on inputs, capital goods inputs, capital goods

and input servicesand input services, used for providing the , used for providing the

taxable service, has not been taken taxable service, has not been taken under under

the provisions of the CENVAT Credit the provisions of the CENVAT Credit

Rules, 2004. Rules, 2004.

8 8 Services provided in relation to chit Services provided in relation to chit 70 70 Same as above. Same as above.


9 9 Renting of any motor vehicle designed Renting of any motor vehicle designed

to carry passengers to carry passengers


10 10 Transport of goods in a vessel from one Transport of goods in a vessel from one

port to another port to another


11 11 Tour operatorTour operator services services

(i) provided by a tour operator in relation (i) provided by a tour operator in relation

to a package tour to a package tour

25 25 (i) CENVAT credit on (i) CENVAT credit on inputs, inputs,

capital goods and input services,capital goods and input services,

used for providing the taxable used for providing the taxable

service, has not been taken under service, has not been taken under

the provisions of the CENVAT the provisions of the CENVAT

Credit Rules, 2004. Credit Rules, 2004.

(ii) The bill issued for this (ii) The bill issued for this

purpose indicates that it is purpose indicates that it is

inclusive of charges for such a inclusive of charges for such a

tour. tour.

(ii) provided by a tour (ii) provided by a tour

operator in relation to a operator in relation to a

tour, solely arranging or tour, solely arranging or

booking accommodationbooking accommodation

10 10 (i) CENVAT credit on (i) CENVAT credit on inputs, capital inputs, capital

goods and input services,goods and input services, used for used for

providing the taxable service, has providing the taxable service, has

not been taken under the provisions not been taken under the provisions

of the CENVAT Credit Rules, 2004. of the CENVAT Credit Rules, 2004.

(ii) The invoice, bill or challan issued (ii) The invoice, bill or challan issued

indicates that it is towards the indicates that it is towards the

charges for such accommodation. charges for such accommodation.

(iii) This exemption shall not apply (iii) This exemption shall not apply

in such cases where the invoice, bill in such cases where the invoice, bill

or challan issued by the tour or challan issued by the tour

operator, in relation to a tour, only operator, in relation to a tour, only

includes the service charges for includes the service charges for

arranging or booking arranging or booking

accommodation for any person and accommodation for any person and

does not include the cost of such does not include the cost of such

accommodation. accommodation.


(iii) Services, other than (iii) Services, other than

services specified above in services specified above in

(i) or (ii) (i) or (ii)

40 40 (i) CENVAT credit on (i) CENVAT credit on inputs, capital inputs, capital

goods and input services,goods and input services, used for used for

providing the taxable service, has providing the taxable service, has

not been taken under the provisions not been taken under the provisions

of the CENVAT Credit Rules, 2004. of the CENVAT Credit Rules, 2004.

(ii) The bill issued indicates that the (ii) The bill issued indicates that the

amount charged in the bill is the amount charged in the bill is the

gross amount charged for such a gross amount charged for such a

tour. tour.


12.12. Construction of a complex, Construction of a complex, building, civil structure or a part building, civil structure or a part thereof,thereof, intended for a sale to a intended for a sale to a buyer, wholly or partly except buyer, wholly or partly except where entire consideration is where entire consideration is received after issuance of received after issuance of completion certificate by the completion certificate by the competent authority competent authority

25 25 (i) CENVAT credit on (i) CENVAT credit on inputs inputs used for providing the taxable used for providing the taxable service hasservice has not been taken not been taken under the provisions of the under the provisions of the CENVAT Credit Rules, 2004.CENVAT Credit Rules, 2004.

(ii) The value of land is included (ii) The value of land is included in the amount charged from the in the amount charged from the

service recipient. service recipient.


Changes in Reverse Changes in Reverse Charge MechanismCharge Mechanism

W.e.f. 1.7.2012 a new scheme of taxation is being brought into W.e.f. 1.7.2012 a new scheme of taxation is being brought into effect whereby the liability of payment of service tax shall be both on effect whereby the liability of payment of service tax shall be both on the service provider and the service recipient (Notification No. 30/ the service provider and the service recipient (Notification No. 30/ 2012 dated 20.6.2012 )2012 dated 20.6.2012 )

The extent to which tax liability has to be discharged by the service The extent to which tax liability has to be discharged by the service receiver specified in the notification.receiver specified in the notification.

Credit of tax paid by service recipientCredit of tax paid by service recipient

The credit of tax paid by the service recipient under partial reverse The credit of tax paid by the service recipient under partial reverse charge would be available on the basis on the tax payment challancharge would be available on the basis on the tax payment challan

Reverse Charge Mechanism under Reverse Charge Mechanism under various various servicesservices

Sr.NoSr.No Description of ServiceDescription of Service ServiceService providerprovider Service receiverService receiver

1.1. Services provided by an insurance Services provided by an insurance agent to any person carrying on agent to any person carrying on insurance businessinsurance business

NilNil 100%100%

2.2. Services provided by a goods Services provided by a goods transport agency in respect transport agency in respect of transportation of goods by roadof transportation of goods by road

NilNil 100%100%

3.3. Services provided by way of Services provided by way of sponsorshipsponsorship

NilNil 100%100%

Reverse Charge Mechanism Reverse Charge Mechanism under various under various servicesservices

4.4. Services provided by an arbitral tribunalServices provided by an arbitral tribunal NilNil 100%100%

5.5. Services provided by individual advocate Services provided by individual advocate or a firm of advocates by way of legal or a firm of advocates by way of legal servicesservices

NilNil 100%100%

6.6. Services provided by Government or Services provided by Government or local authority by way of support services local authority by way of support services excluding,- excluding,- (1)(1) renting of immovable property, renting of immovable property, (2)(2) postal services postal services (3)(3) transport of goods / passengers transport of goods / passengers (4)(4) air craft or vessel air craft or vessel

NilNil 100%100%

Reverse Charge Mechanism under Reverse Charge Mechanism under various various servicesservices

7.7. Hiring of Motor Vehicle Hiring of Motor Vehicle (a) renting of a motor vehicle (a) renting of a motor vehicle designed to carry passengers designed to carry passengers on on abated valueabated value to any person not to any person not engaged in the similar line of engaged in the similar line of businessbusiness(b) renting of a motor vehicle (b) renting of a motor vehicle designed to carry passengers designed to carry passengers on non on non abated valueabated value to any person who is to any person who is not engaged in the similar line of not engaged in the similar line of businessbusiness

NilNil

60%60%

100 %100 %

40%40%

8.8. Services provided by way of supply Services provided by way of supply of manpower for any purposeof manpower for any purpose

25%25% 75 %75 %

Reverse Charge Mechanism under various Reverse Charge Mechanism under various servicesservices

9.9. Services provided in service portion in Services provided in service portion in execution of works contractexecution of works contract 50%50% 50%50%

10.10. Services provided by any person who Services provided by any person who is located in a non-taxable territory is located in a non-taxable territory and received by any person located in and received by any person located in the taxable territorythe taxable territory

NilNil 100%100%

Appeal before Commissioner Appeal before Commissioner (Appeals)(Appeals)

Time Period for Appeal Time Period for Appeal

Prior to 28.5.2012Prior to 28.5.2012 (sub-section 3)(sub-section 3)

To appeal within three months from date of communication of To appeal within three months from date of communication of order appealed against order appealed against

Period of 3 months can be extended by further 3 months (total 6 Period of 3 months can be extended by further 3 months (total 6 months) by Commissioner (Appeals)months) by Commissioner (Appeals)

Condonation of delay/ extension beyond 3 months is beyond the Condonation of delay/ extension beyond 3 months is beyond the power of Commissioner (Appeal)power of Commissioner (Appeal)

to be contd……….to be contd……….

Appeal before Commissioner Appeal before Commissioner (Appeals)(Appeals)

w.e.f. 28.5.2012 (sub-section 3A)w.e.f. 28.5.2012 (sub-section 3A)

To appeal within two months from date of communication of To appeal within two months from date of communication of

order passed after 28.05.2012 order passed after 28.05.2012

Period of 2 months can be extended by further 1 month (total 3 Period of 2 months can be extended by further 1 month (total 3 months) by Commissioner (Appeals)months) by Commissioner (Appeals)

Condonation of delay/ extension beyond 1 month is beyond the Condonation of delay/ extension beyond 1 month is beyond the power of Commissioner (Appeal)power of Commissioner (Appeal)

Revision MechanismRevision Mechanism

Introduced by Finance Act, 2012Introduced by Finance Act, 2012

Section 35EE of Central Excise Act, 1944 made applicable to Service Section 35EE of Central Excise Act, 1944 made applicable to Service Tax w.e.f. 28.05.2012 Tax w.e.f. 28.05.2012

All appeals against Commissioner (Appeals) orders lied before All appeals against Commissioner (Appeals) orders lied before Tribunal prior to 28.05.2012.Tribunal prior to 28.05.2012.

Like Excise, in Service Tax also, revision authority shall hear matters Like Excise, in Service Tax also, revision authority shall hear matters relating to –relating to –

Cenvat Credit Cenvat Credit Rebate of Exports Rebate of Exports

to be contd……..to be contd……..

Revision MechanismRevision Mechanism

Revision by Central Government (Joint Secretary in MOF)Revision by Central Government (Joint Secretary in MOF)Revision application to be heard and order passedRevision application to be heard and order passedOrder may be annulled or modifiedOrder may be annulled or modifiedMinimum amount of dispute Rs. 5000Minimum amount of dispute Rs. 5000To be filed within 3 months of communication of orderTo be filed within 3 months of communication of orderRevision can be sought by CCE/ assesseeRevision can be sought by CCE/ assesseeCentral Government can also Central Government can also suo motosuo moto revise reviseNo provisions for appeal against revisionary orderNo provisions for appeal against revisionary orderOnly remeady is writ Jurisdiction Only remeady is writ Jurisdiction Quasi judicial proceedingsQuasi judicial proceedings

Settlement Provisions in Settlement Provisions in Service TaxService Tax

Introduced by Finance Act, 2012 w.e.f. 28.5.2012Introduced by Finance Act, 2012 w.e.f. 28.5.2012

Sections 31, 32 and 32A to 32P of Central Excise Act, 1944 made Sections 31, 32 and 32A to 32P of Central Excise Act, 1944 made

applicable to Service Tax (section 83 of Finance Act, 1994) applicable to Service Tax (section 83 of Finance Act, 1994)

Service Tax (Settlement of Cases) Rules, 2012 notified (N.No. Service Tax (Settlement of Cases) Rules, 2012 notified (N.No.

16/2012-ST dated 28.05.2012)16/2012-ST dated 28.05.2012)

Objective to encourage quick settlement of disputes and save Objective to encourage quick settlement of disputes and save

business from prosecution / penalties business from prosecution / penalties

Principal bench at Delhi (benches at Mumbai, Calcutta, Chennai) Principal bench at Delhi (benches at Mumbai, Calcutta, Chennai)

Benefits of SettlementBenefits of Settlement

Quick settlement of disputes to avoid prolonged litigation Quick settlement of disputes to avoid prolonged litigation

A one time tax evader or an un-intending defaulter can make clean A one time tax evader or an un-intending defaulter can make clean his affairs through Settlementhis affairs through Settlement

Any defaulting person can admit his guilt, pay taxes with applicable Any defaulting person can admit his guilt, pay taxes with applicable interest and avoid further liabilitiesinterest and avoid further liabilities

Settlement Commission can grant waiver/ reduction of penalty, fine Settlement Commission can grant waiver/ reduction of penalty, fine or interest or interest

Settlement Commission can grant immunity from prosecution to Settlement Commission can grant immunity from prosecution to assessee, its directors and partnersassessee, its directors and partners

Settlement of CasesSettlement of Cases

Any assessee can approach the Settlement Commission Any assessee can approach the Settlement Commission The proceedings / cases should be pending with aggregate amount The proceedings / cases should be pending with aggregate amount of more than Rs 3 lakh involved of more than Rs 3 lakh involved Application to Settlement Commission should be made with Application to Settlement Commission should be made with prescribed fee and in prescribed formprescribed fee and in prescribed formApplication once made, can not be withdrawnApplication once made, can not be withdrawnApplication can be made by any assessee including directors or Application can be made by any assessee including directors or partners of firmspartners of firmsApplication can also be filed by two or more Application can also be filed by two or more

assessees and joint / co - noticeesassessees and joint / co - noticeesproceedings or case must be pending before the adjudicating proceedings or case must be pending before the adjudicating authority on the date of application. authority on the date of application. A show cause notice should have been issuedA show cause notice should have been issued

Settlement of CasesSettlement of Cases

Application must make full and true disclosures before the Application must make full and true disclosures before the Settlement Commission which is the very basis of settlement.Settlement Commission which is the very basis of settlement.

Issues relating to recovery of Cenvat credit can also be taken up Issues relating to recovery of Cenvat credit can also be taken up before the Settlement Commissionbefore the Settlement Commission

Cases involving only penalty or cases which are pending before Cases involving only penalty or cases which are pending before court or Appellate Tribunal shall not be entertained by the court or Appellate Tribunal shall not be entertained by the Settlement Commission.Settlement Commission.

Cases involving interpretation of classification and valuation can not Cases involving interpretation of classification and valuation can not

be taken up by Settlement Commissionbe taken up by Settlement Commission . .

Retrospective AmendmentsRetrospective Amendments

• Special provision for exemption in certain cases relating Special provision for exemption in certain cases relating to management etc of roads (Section 97) to management etc of roads (Section 97)

• Special provision for exemption in certain cases relating Special provision for exemption in certain cases relating to management etc of non-commercial Government to management etc of non-commercial Government buildings (Section 98) buildings (Section 98)

• Exemption to club & association including cooperative Exemption to club & association including cooperative societies for projects meant for treatment of effluents / societies for projects meant for treatment of effluents / solid waste w.e.f. 16.6.2005 (Section 145) solid waste w.e.f. 16.6.2005 (Section 145)

Place of Provision of Services Rules, 2012 Place of Provision of Services Rules, 2012 (Section 66C)(Section 66C)

These rules are primarily meant for persons who deal in cross-border services and These rules are primarily meant for persons who deal in cross-border services and state of Jammu and Kashmir.state of Jammu and Kashmir.

The service providers operating within India from multiple locations, without The service providers operating within India from multiple locations, without

having centralized registration and services that are wholly consumed within a having centralized registration and services that are wholly consumed within a SEZ, to avail the outright exemption will find them useful in determining the SEZ, to avail the outright exemption will find them useful in determining the precise taxable jurisdiction. precise taxable jurisdiction.

What is the place of provision of servicesWhat is the place of provision of services

Performance based services – Location of performancePerformance based services – Location of performance

Immovable property related services – Location of immovable property.Immovable property related services – Location of immovable property.

Services relating to events – Location of event held.Services relating to events – Location of event held.

Place of Provision of Services Rules, Place of Provision of Services Rules, 2012 (Section 66C)2012 (Section 66C)

Services provided at more than one location – Location in the taxable territory where Services provided at more than one location – Location in the taxable territory where the greatest proportion of service is provided. the greatest proportion of service is provided.

Services where both service provider and receiver are located in the taxable territory – Services where both service provider and receiver are located in the taxable territory – Location of service receiverLocation of service receiver

Specified services – Location of service provider.Specified services – Location of service provider.

Goods transportation services – Place of destination of goods. (In GTA Service – Location Goods transportation services – Place of destination of goods. (In GTA Service – Location of the person liable to pay taxof the person liable to pay tax

Passenger Transportation service – Place were the passenger embarks. Passenger Transportation service – Place were the passenger embarks.

Services provided on board a conveyance – Location of first scheduled point of Services provided on board a conveyance – Location of first scheduled point of departure.departure.

Amendment in Valuation Rules Amendment in Valuation Rules (Notification 24/2012 dated 06.06.2012)(Notification 24/2012 dated 06.06.2012)

Determination of value of service portion in the execution of Determination of value of service portion in the execution of a worksa works contract (rule-2A)-contract (rule-2A)-

1.1. Value of works contract service – Value of works contract service – [Gross amount charged [Gross amount charged lessless the value of property in goods the value of property in goods

transferred in the execution of works contract] transferred in the execution of works contract]

2. Where the value has not been determined as above, the 2. Where the value has not been determined as above, the person liable to pay tax on the service portion involved in person liable to pay tax on the service portion involved in the execution of the works contract shall determine the the execution of the works contract shall determine the service tax payable in the following manner, namely-service tax payable in the following manner, namely-

Service Tax Rules - Changes effective Service Tax Rules - Changes effective from 01.04.2012from 01.04.2012

Invoice to be issued within 30 days (earlier 14 days)Invoice to be issued within 30 days (earlier 14 days)

In case of Banking & Financial Services – Invoice within 45 daysIn case of Banking & Financial Services – Invoice within 45 days

No Invoice for minor receiptsNo Invoice for minor receipts-- If an amount upto Rs.1, 000/- is received in excess of the amount If an amount upto Rs.1, 000/- is received in excess of the amount indicated in the invoice and the provider has opted to determine indicated in the invoice and the provider has opted to determine Point of Taxation based on the option in Point of Taxation Rules, Point of Taxation based on the option in Point of Taxation Rules, no invoice is required to be issued.no invoice is required to be issued.

Service Tax Rules - changes effective Service Tax Rules - changes effective from 01.04.2012from 01.04.2012

Self adjustment of excess tax paidSelf adjustment of excess tax paid Excess amount can be adjusted without any monetary limits provided Excess amount can be adjusted without any monetary limits provided

excess payment is not on account of interpretation of law, taxability, excess payment is not on account of interpretation of law, taxability, classification, valuation or applicability of any exemption Notification. classification, valuation or applicability of any exemption Notification. (Rule 6 (4A))(Rule 6 (4A))

Small service providers to pay tax on receipt basisSmall service providers to pay tax on receipt basis In respect of individual / firms whose value of taxable services from In respect of individual / firms whose value of taxable services from

multiple locations is Rs.50 lakhs or less in the previous financial year multiple locations is Rs.50 lakhs or less in the previous financial year option available to pay tax upto Rs.50 lakhs in the current financial year option available to pay tax upto Rs.50 lakhs in the current financial year based on receipt of payment.based on receipt of payment.

Amendments in Finance Act, 1994- Amendments in Finance Act, 1994- changes effective changes effective from 28.05.2012from 28.05.2012

Special audit in service tax (Section 72A)Special audit in service tax (Section 72A) If Commissioner has reasons to believe that tax payer If Commissioner has reasons to believe that tax payer

has failed to declare the correct value of service, has failed to declare the correct value of service, taken CENVAT by fraud, services in multiple locations taken CENVAT by fraud, services in multiple locations etc, he can order special audit by CA/CWA even if it etc, he can order special audit by CA/CWA even if it is already audited under any other law.is already audited under any other law.

THANK YOU THANK YOU

FOR FOR

YOUR YOUR

PRECIOUS TIMEPRECIOUS TIME

AND AND

ATTENTIONATTENTION

Dr. Sanjiv AgarwalDr. Sanjiv Agarwal

FCA, FCS, JaipurFCA, FCS, Jaipur

[email protected]@gmail.com

[email protected]@gmail.com

Education

A Knowledge Workshop-Presentation IV dated 14th July,2012