by ca yash dhadda, jaipur compliances under service tax raipur branch of circ of icai saturday, 30...

BY CA YASH DHADDA , JA IPUR

COMPLIANCES UNDER SERVICE TAX

RAIPUR BRANCH OF CIRC OF ICAI

Saturday, 30th May, 2015

COMPLIANCES IN SERVICE TAX

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CHANGE IN RATE OF SERVICE TAX

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Date of ImplementationSwachh Bharat Cess ** (vide Ch VI of Finance Bill 2015) = 2%** on all or any Taxable Services (Not Notified Yet) © Dhadda & Co

Point of Difference Till 31-5-2015

From 1-6-2015 (Noti-14/2015-ST)

Rate of Service Tax (Sec 66B) 12 % 14%

Swachh Bharat Cess **(vide Ch VI of Finance Bill 2015)

Nil 2%** on all or any Taxable Services

Education Cess(vide FA 2004)

2% Nil

Secondary & Higher Education Cess(vide FA 2007)

1 % Nil

Effective Rate of ST 12.36% 14%

SWACHH BHARAT CESS

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Issues:1. Shall SBC be applicable on all services?

2. It will be applicable on taxable value of services or on value of taxable service?

3. Will is be available as CENVAT Credit?

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Chapter VI Clause 117(2) : There shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Swachh Bharat Cess, as service tax on all or any of the taxable services at the rate of two per cent. on the value of such services for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto.

W E L C O M E C H A N G E S

EASING REGISTRATION

EASE OF DOING BUSINESS

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Order No 1/2015-Service Tax w.e.f 01.03.2015Procedure for filing of registration applications for SINGLE PREMISES,

File the application online on(ACES) websitewww.aces.gov.in in Form ST-1. (PAN mandatory for registration except for Government Deptt )

-On successful filing of complete application, registration would be granted online in 2 days. -Applicant would be enabled to pay tax with such online registration. -Downloaded Registration from ACES shall be valid reg.

Self attested copy of specified documents to be submitted within 7 days of filing of ST-1 in concerned Division for verification purpose.

DOCUMENTS RQEUIRED

• Copy of the PAN Card of the proprietor or the legal entity registered.

• Photograph and proof of identity of the person filing the application

• Document to establish possession of the premises to be registered

• Details of the main Bank Account.

• Memorandum/Articles of Association/List of Directors.

• Authorisation by the Board of Directors/Partners/Proprietor Business transaction numbers obtained from other Government departments or agencies© Dhadda & Co 8

PRECAUIONARY ALSO SUBMIT

• A brief note about the nature of business.

• A list of documents & records to be maintained.

• A brief note about the exemptions to be claimed.

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WHO IS LIABLE FOR REGISTRATIONR

eg

istr

ati

on

Person Liable to pay Service Tax

Person providing a taxable service and aggregate value of taxable service in a F.Y.

has crossed Rs 9 lacs

Input Service Distributer

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Section 69 read with Rule 4 of Service Tax Rules

TYPES OF REGISTRATION

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Single Premise Registration

Centralized Registration

Input Service Distributer

ISSUES:

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1. Whether category of service under which service recipient is liable to pay tax is to be mentioned in the RC of Service Tax?

2. A service provider is providing a service which is exempt under service tax is registration mandatory ?

3. An individual receives commission in Individual name and rent in name of its proprietorship concern. Should it take a single registration for same?

Yes, same has to mentioned. Else service tax return for that category cannot be filed.

No.

It should take separate registration for proprietorship concern and Individual.

ISSUES:

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1. Whether declaration is to be submitted of not crossing turnover of Rs 9 lacs or not claiming SSI Exemption?

2. Whether audited financial statements are compulsorily required to be submitted?

3. If registration granted, tax deposited and later registration is revoked? Whether adjustment of tax in new registration code shall be allowed?

No such requirement envisaged in list of documents required for verification purposes. Hence not required.

No such requirement envisaged in list of documents required for verification purposes. Hence not required.

Currently there is no such mechanism existing

TIME LIMIT FOR ISSUING RC

- Except Single Premise Registration:• 7 days from date of making application

-What if RC is not issued within 7 days?• Deemed Registration

- Practical Issue- Payment of Service Tax?• Not possible due to e-payment being mandatory.

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REGISTRATION

• Amendment in Certificate• Changes must be informed within 30 days• Intimation in writing to jurisdictional AC or DC.

• Transferability of Certificate• Non- Transferable

• New Certificate is must in following situations :• Proprietorship concern is changed to partnership concern and vice

versa• Proprietorship concern is changed to company• Where business is inherited• Division of HUF• Merger or Demerger• Sale or lease of business

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SURRENDER OF REGISTRATION

• Surrender of Certificate• If ceased to provide taxable service• An online application along with letter and last filed returns

• What is to be done before Surrender?• Pay all taxes and File all returns

• Situation for Surrender of Certificate• Value of Taxable service is less than 9 Lakhs• Closure of Business• Merger with another entity.

Can department ask for an affidavit at time of surrender?It is not mentioned anywhere in the statue. But practically they do ask for it.

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• Periodicity of payment

• Due date of payment

Category of assessee Periodicity of payment

In case of Individual, proprietorship, partnership firm, LLP

Quarterly

Other assessees Monthly

Payment is to be made electronically only

6th of next month/ next month of the quarter

In case month/quarter ending 31st March

31st March

PAYMENT OF SERVICE TAX

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IS SERVICE RECEIVER LIABLE TO PAY ST TO SERVICE PROVIDER?

• BHAGWATI SECURITY SERVICES (REGD.)• Versus

• UNION OF INDIA

• 2013 (31) S.T.R. 537 (All.)• Reimbursement of Service Tax - Security services provided

by petitioner to BSNL under agreement - Petitioner deposited Service Tax with the Government and applied before respondent for reimbursement of Service Tax which was denied on the ground that same was not contemplated in the agreement - Service Tax is statutory liability - Statute is imposing the tax upon the person to whom service is being provided and the service provider is merely a collecting agency - Respondent No. 2 directed to make reimbursement of Service Tax to petitioner. [paras 5, 7]

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POINT OF TAXATION-SPECIFIC CATEGORIES

• Point of taxation is the date of payment for individuals and partnership firms (including LLP) up to a turnover of Rs 50 Lac in a financial year provided the taxable turnover did not exceed this limit in the previous financial year.

• The point of taxation in respect of the persons required to pay tax as recipients of service shall be the date on which payment is made.

• where the payment is not made within a period of three months of the date of invoice, the point of taxation shall be determined as if this rule does not exist.

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PAYMENT UNDER SPECIFIED CODES

• Circular No. 165/16/2012-S.T., dated 20-11-2012.

• Post Negative Lit Regime also, Service Tax has to be paid under Specific Code as mentioned in the circular.

• Reason:• For Statistical Purpose of Department.• For deciding Abatements/Exemptions/Taxability.

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ISSUES

• Service Tax is paid under Wrong accounting Code? Will it be treated as valid tax paid?

• Commissionerate of Service Tax -I Trade Notice No. 21/13-14-ST-I, Dated: March 11, 2014 (Mumbai)

• Can be rectified as the assessee should inform Deputy Commissioner (Technical], in writing along with copy of Service Tax payment Challan and by giving information in a prescribed format.

• Service Tax is paid under Wrong assessee Code? Will it be treated as valid tax paid?

• No. It shall be treated as Service Tax not paid.

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SSI EXEMPTION

No requirement to pay Service Tax in CY upto Rs 10 lacs

• If

In previous F.Y. Value of taxable service provided

is less than Rs 10 lacs• and

Service not provided under a Brand Name

& CENVAT not availed till exemption is claimed.

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ISSUES

Nature of Service Works Contract Service

Total amount received in Current Year

27 lacs

Total amount received in Previous Year

24 lacs

Abatement 60%

Value on Service Tax levaible 40%

Is SSI exemption available in this case ?

Yes, Because under Determination of Value Rules 2006, the taxable value for the purpose of service tax is value after abatement.

Mechanism : PY = 24*40% = 9.6 Lacs = Value of Taxable Service CY = 27*40% = 10.8 Lacs – 10 Lacs = 80000 = Taxable Value© Dhadda & Co 23

ISSUES

Nature of Service Construction Service

Total amount received in Current Year

45 lacs

Total amount received in Previous Year

37 lacs

Abatement 75%

Value on Service Tax levaible 25%

Is SSI exemption available in this case ?

No, because under Notification 26/2012-ST, the taxable value does not change. Only conditional exemption is provided.

Mechanism : PY = 45-10 = 35 *25% = 8.75 lacs (ST payable on this value) CY = 37*25% = 9.25 Lacs (ST payable on this value)© Dhadda & Co 24

ISSUE (SSI EXEMPTION VS CO-OWNERSHIP)

• Mr. Raj Kishore, Mrs. Raj Kishore, Mr. Anil Kishore and Ms. Reeta Kishore are co-owners of a property which has been let out to a bank. The total monthly rent is ` 3,00,000/- per month. In terms of the agreement the tenant agrees that he is paying the rent to all the four co-owners but through a single cheque to Mr. Raj Kishore. Raj Kishore also agrees that he is collecting the rent for himself as well as for and on behalf of the other three owners. The cheque is banked in a specific bank account where automatic transfer instructions are given and the respective rents are transferred to the other account holders. All four claim the basic threshold exemption. The Department wants to levy tax on the entire rental by taking a position that an association of persons has been created. Advise.

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INVOICES- RULE 4A & 4B

Every person providing taxable service shall

not later than 30 days from date of completion or receipt of payment

Issue Invoic

e

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CONTENTS OF INVOICE Such invoice/bill/challan shall be serially numbered and

shall contain the following:

• The name, address and the registration no. of such person;

• The name and address of the person receiving taxable service;

• Description and value of taxable service provided or agreed to be provided ; and

• The service tax payable thereon.

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RULE 4C OF SERVICE TAX RULES 1994

DIGITAILY SIGNED INVOICES Authentication by digital signature-

(1)Any invoice, bill or challan issued under rule 4A or (2)consignment note issued under rule 4B may be authenticated by means of a digital signature.

Benefit : CENVAT Credit shall be allowed on basis of such invoices.

RULE 5 OF SERVICE TAX RULES 1994: RECORDS

Records as required under Rule 5 may be preserved in electronic form and every page of the record so preserved shall be authenticated by means of a digital signature.

FILING OF RETURN

• Every assessee shall submit half yearly return in ST3 form electronically.

• Last date for filing return is 25th of the next month following the particular half year.

• Penalty for non filing/late filing of returnPeriod of Delay Penalty

Upto 15 days Rs. 500/-

More than 15 days but upto 30 days

Rs 1,000/-

More than 30 days

Rs. 1,000/- + Rs 100/- per day for every day from the 30 days till the date of filing of the return (Maximum Penalty can be Rs 20,000/-)

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REVISION OF RETURN – RULE 7B

• A return in ST-3 to correct a mistake or omission within a period of 90 days from the date of submission of return under rule 7.

Explanation: Where an assessee submits a revise return the relevant date for the purpose of recovery of service tax under section 73 of the act shall be date of submission of such revise return.

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RETURN NOT FILED/LATE FILED

• Whether penalty can be waived under Rule 7 of STR

• It is late fees or penalty?

• It is required to be paid at time of filing of return?

• Is it required to be paid when return is not filed

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NO SERCVICE TAX LIABILITY-RETURN

• Is return compulsorily required to be filed in case of NIL tax liability?

• Rule 7C (Proviso) of STR provides a waiver, if satisfactory reason is provided by assessee

• Kolkata Tribunal Decision in case of Suchak Marketing (36 STR)

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STRINGENT COMPLIANCE

INTEREST RATE ON LATE PAYMENT OF SERVICE TAX

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N/No.: 12/2014 w.e.f. 01/10/2014 – Rule 6

To encourage prompt payment of service tax, it is being proposed to introduce interest rates which would vary on the extent of delay. Simple interest rates per annum payable on delayed payments under section 75, are prescribed as follows:

Extent Of Delay

Simple interest rate per annum

Up to six months 18%

More than six months & up to one year

18% for first six months, and 24% for the period of delay beyond six months

More than one year 18% for first six months, 24% for second six months, and 30% for the period of delay beyond one year

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PENALTIES UNDER SERVICE TAX

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Section 76

Section 77

Section 78

Section 80-Bonafide belief has been Scrapped

SECTION 77-PENALTIES

Contravention Amount of penalty

Penalty for failure to take registration [Sec. 77 (1)(a)]

Upto Rs 10,000/-

Penalty for failure to keep books of accounts [Sec. 77 (1)(b)]

Upto Rs 10,000/-

Penalty for failure to furnish information/produce document/appear before officer [Sec.77 (1)(c)]

Extend to Rs 10,000/- or Rs 200/- per day (Which ever is higher)

Penalty for failure to pay the tax electronically[Sec. 77 (1)(d)]

Upto Rs 10,000/-

Penalty for issuance of invoice with incorrect details [Sec. 77 (1)(e)]

Upto Rs 10,000/-

Penalty for contravention of rules and provisions of act for which no penalty is specified elsewhere [Sec. 77(2)]

Upto Rs 10,000/-

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RATIONALIZING PENALTY PROVISIONS

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Section 76 Section 78

Cases where Service Tax is not paid due to reasons other than fraud or collusion or wilful mis-statement orsuppression of facts or contravention with the intent to evade payment of service tax.

Cases where Service Tax is not paid due to reasons of fraud or collusion or wilful mis-statement or suppression of facts or contravention with the intent to evade payment of service tax

Maximum Penalty = 10% of Service Tax Amount

Maximum Penalty = Penalty leviable100% of Service Tax Amount (Shall always be demanded as 100% of tax)

Minimum Penalty= NIL, if service tax and interest is paid within 30 days of service of notice.

Minimum Penalty= 15% of Service Tax Amount, if service tax + interest + 15% of Service Tax as penalty is paid within 30 days of service of notice.

RATIONALIZING PENALTY PROVISIONS

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Section 76 Section 78

Reduced Penalty = 25% of Penalty imposed by CE officer if:• Service Tax +• Interest +• 25% of Penalty imposed is paid within 30 days from receipt of order of Central Excise Officer.

Reduced Penalty = 25% of Service Tax demanded by CE officer if:• Service Tax +• Interest +• 25% of Service Tax demanded is paid within 30 days from receipt of order of Central Excise Officer.

At Appellate forums, if service tax demand is modified, the penalty will also be modified accordingly.

At Appellate forums, if service tax demand is modified, the penalty will also be modified accordingly.

Benefit of reduced penalty against appellate orders shall be available like above.

Benefit of reduced penalty against appellate orders shall be available like above.

TRANSITION PROVISION FOR PENALTY

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SECTION: 78B

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New Sec 76 and 78 shall be

applicable to cases where

No SCN has been Served before date of enactment

of FA 2015

SCN has been served but no order ha been passed before date of enactment

of FA 2015

Old Sec 73(4A) shall be applicable

to cases where

SCN has been Served before date of enactment

of FA 2015

SCN has been served but no order ha been passed

before date of enactment of FA 2015

OMMISSION OF SECTION 80

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SECTION 80: Penalty not to be imposed in certain cases.

EXISTING PROVISION[(1)] Notwithstanding anything contained in the provisions of section 76, [ or

section 77], no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was

reasonable cause for the said failure.

IMPLICATIONNow, in following cases benefit of reasonable cause cannot be taken

• Failing to take registration when required or fails to pay tax.• Fails to keep, maintain or retain books of account and other documents.• Fails to furnish information, produce documents, appear against summons• Fails to pay tax electronically, through internet banking• Fails to issue correct or complete invoice or fails to account for invoice• General Failure not specified in any specific provision

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BONA FIDE BELIEF STILL VAILD ?

• CEMENT MARKETING CO. OF INDIA LTD. Versus ASSISTANT COMMISIONER OF SALES TAX

1980 (6) E.L.T. 295 (S.C.)• Amounts and Returns - False return - A return cannot be false

unless there is an element of declaration. • - If the assessee entertained belief that he was not liable to include the

amount of freight in the taxable turnover, it could not be said to be mala fide or unreasonable nor it can be dubbed as frivolous contention taken up merely for the purpose of avoiding liability to pay tax. What the law requires is that the assessee should not have filed a false return. A return cannot be said to be `false’ unless there is an element of deliberation in it. It is true that where the incorrectness of the return is claimed to be due to want of care on the part of assessee and there is no reasonable explanation forthcoming from him for such want of care, the court may in a given case infer deliberateness and the return may be treated as a false return. But, where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to brand the return as a `false return’ inviting penalty. [para 5]

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CERTAIN PROVISIONS OF EXCISEAPPLICABLE TO SERVICE TAX

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SECTION: 35F of Central Excise Act, 1944.

NEW PROVISIONSection 35F of the Central Excise Act is now being substituted with a new section

which prescribes a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both, for filing appeal before the Commissioner (Appeals)

or the Tribunal at the first stage and 10% of the duty demanded or penalty imposed or both, for filing the second stage appeal before the Tribunal. The amount of predeposit payable would be subject to a ceiling of Rs.10 Crore. All

pending appeals/stay applications would be governed by the statutory provisions prevailing at the time of filing such stay applications/appeals. When the amended section 35F in the Central Excise Act comes into force, it would, mutatis mutandis,

apply to service tax by virtue of section 83 of the Finance Act, 1994.

IMPLICATIONMandatory pre deposit is required for appeal to appellate authority.

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ISSUE

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PRE DEPOSIT ?

• What does the word “or” means?

• Can assessee pay only tax demanded and apply for grant of waiver ?

• Whether it is 7.5% at Cx (A) and 17.5% at CESTAT?

• What if the amount is not deposited with appeal ? Can it be deposited before hearing ?

• What if assessee only appeals for part of demand ? 7.5% of only that part which is appealed?

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WHAT WILL HAPPEN NOW?

• SCN issued on 1-6-2015 for levy of service tax on Supply of Tangible Goods

• Service Tax =Rs 20 lacs

• Interest + Penalty under Section 76, 77 & 78.

• Period from 1-10-2009 to 30-9-2014 (i.e. 5 years)

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• Chain of Events:• Reply to Show Cause Notice on 30-6-2015• Hearing before AC = After 1 years• Case decided against assessee on 30-6-

2016.

• Total Demand :• Service Tax = Rs 20 lacs• Interest = Rs 16.2 lacs• Penalty = Rs 20 lacs

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• Chain of Events:• Going for Appeal to Commissioner Appeals• Deposit 7.5% of Tax + Penalty = Rs 3 lacs• Appeal filed on 29-8-2016• Hearing before Cx (A)= After 2 years• Order against assessee = 30-8-2018

• Total Amount Due • Tax = Rs 20 lacs• Interest = Rs 28 lacs• Penalty = Rs 20 lacs

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• Chain of Events:• Going for Appeal to CESTAT• Deposit 10% of Tax + Penalty = Rs 4 lacs

(Additional = Rs 1 lac)• Appeal filed on 29-11-2018• Hearing before CESTAT= After 2 years• Order against assessee = 30-11-2020

• Total Amount Due • Tax = Rs 20 lacs• Interest = Rs 43 lacs• Penalty = Rs 20 lacs

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End Result = Rs 83 lac total liability. (Against 20 lacs)

• Penalty cannot be waived.• Interest becomes more than Tax Payable• Mandatory Pre-Deposit.• If for subsequent period tax is not deposited

then the risk for further period increases. • If for subsequent period tax is deposited

then the given case becomes weak.

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STRINGENT COMPLIANCE MECHANISM

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Section 73: Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded.

Section 73(4A): (Omitted)• Where during the course of any audit, investigation or verification, it is found• Any service tax has not been levied or paid or erroneously refunded, but• the true and complete details of transactions are available in the specified

records, • the person chargeable to service tax pays the service tax along with interest

and penalty equal to 1% of such tax, for each month, up to a maximum of 25%. of the tax amount,

• before service of notice on him and inform the Central Excise Officer of such payment in writing,

• No notice shall be served in respect of the amount so paid and proceedings in respect of the said amount of service tax shall be deemed to have been concluded.

© Dhadda & Co Implication : Merged with Section 76 of the Act

ADJUSTMENT OF EXCESS AMOUNT PAID

1. Rule 6(3) - If the service is not provided wholly or partially, or where the amount is renegotiated due to deficiency in service or any terms contained in a contract, the assessee may take the credit of such excess tax paid , if the assessee

Has refunded the payment or part thereof or Had issued a credit note

2. Rule 6(4A) -where the assessee has paid any amount in excess of the amount required to be paid, the assessee may adjust such excess amount paid against his service tax liability for the succeeding month or quarter provided the excess amount paid under rule 6(4A) is not because of interpretation of law , taxability, classification, valuation or applicability of any exemption notification.

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SECTION 15A OF CENTRAL EXCISE ACT

• Section 15A is being inserted so as to empower the Central Government to prescribe an authority or agency to whom the information return shall be filed by the specified persons such as

• Income Tax Authorities, • State Electricity Boards, • VAT or Sales Tax Authorities, • Registrar of Companies. • Information can be collected for the purposes of

the Act, such as, to identify tax evaders or recover confirmed dues. It is also proposed to insert a new section

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BUT ROVING SUMMONS ?

• Circular No : F. No. 207/07/2014-CX-6 dated 20.01.2015.

• It has been brought to the notice of the Board that in some instances, the summons under Section 14 of the Central Excise Act, 1944 have been issued by the field formations to the top senior officials of the companies in a routine manner to call for material evidence/ documents. Besides, summons have been issued to enforce recovery of dues, which are under dispute.

• It is desirable that summons need not always be issued when a simple letter, politely worded, can also serve the purpose of securing documents relevant to investigation. It is emphasized that the use of summons be made only as a last resort when it is absolutely required.

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LITTLE EASE OF DOING BUSINESS

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Rule 4– Time Limit of taking CENVAT on Input Services

EXISITING RULERULE 4 (7). Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after six months of the date of issue of any of the documents specified in sub-rule (1) of rule 9

AMENDEMENT IN RULE (w.e.f. 1-3-2015) "Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after 1 year of the date of issue of any of the documents specified in sub-rule (1) of rule 9".

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IMPLICATIONRestriction on time limit for availing CENVAT Credit of Inputs reduced from 6 months to 1 year.

ISSUE

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Should these provisions be applicable for all the invoices issued before 1-9-2014 of which CENVAT was not taken before 1-9-2014, when the restriction to CENVAT Credit was not there ?

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Yes, in light of OSRAM SURYA (P) LTD. Vs C. Cex, Indore 2002 (142) ELT 5 (SC) : (In relation to CE Rules 1944)

Amendment does not take away any vested right but merely introduces limitations for availment of credit - Amendment is not retrospective in operation since it does not cancel the credit nor does it effect the right of the persons who have already taken credit


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CENVAT Credit of Service Tax paid under RCM

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Particulars Existing Rule Amended Rule (w.e.f. 1-3-15)

Under 100% RCM time of taking credit

On payment of Service Tax On payment of Service Tax

Under Partial RCM time of taking credit

When whole ST (in invoice and RCM) + invoice amount is paid

For RCM: When ST payable as receiver of service is paid.For ST in invoice: Date of receipt of invoice

If ST or invoice amount not paid within 3 months

Under Partial RCM: Whole CENAVT to be reversed.

Under Partial RCM: Only CENVAT to the extent of ST mentioned in invoice to be reversed.

S T R O N G I N D I C AT I O N S O F G E TT I N G R E A DY

ALINGMENT WITH GST

INCREASING THE SERVICE TAX BASE

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SECTION 66D: NEGATIVE LIST

EXISTING PROVISIONSection 66D(a) services by Government or a local authority excluding the following services to the extent they are not covered elsewhere—(i) services by……….;(ii) services in………. ;(iii) transport………….; or(iv) support services, other than services covered under clauses (i) to (iii)

above, provided to business entities;

NEW PROVISIONSection 66D(a)(iv) : any services, other than services covered under clauses (i) to

(iii) above, provided to business entities

IMPLICATIONAll services provided by the Government or local authority to a business entity, except the services that are specifically exempted, or covered by any another entry in the Negative List, shall be liable to service tax. © Dhadda & Co


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Government Defined – Section 65(B)(26A)

NEW DefinitionGovernment” means the• Departments of the Central Government, • a State Government and its Departments and• a Union territory and its Departments,

but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or the rules made thereunder;

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ISSUE

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• Security Services provided by police for an additional consideration?

• Mining Rights provided by Government?

• Fees paid to Ministry of Corporate Affairs

• Debris Charges paid by Builders?

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Explanation 1(B) to definition of service : (B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity

Not Taxable

Not Taxable

Not Taxable

Taxable


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Notification No 25/2012-ST : Servies to Government

EXISTING CLAUSE12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

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

(b) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958;(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) water supply (ii) water treatment, or (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 65B of the said Act; © Dhadda & Co


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Notification No 25/2012-ST : Servies to Government

NEW CLAUSE (w.e.f. 1st April, 2015)12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –(Following Clauses to be omitted)

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

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

(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 65B of the said Act; © Dhadda & Co

ISSUES

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• Construction of building for Service Tax Department

• Construction of Government Schools

• Construction of Bungalow for Government officers

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Taxable

Taxable

Exempt, Single Residential Unit

VALUATION

CONCEPT OF CONSIDERATION

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Section 67: Valuation of taxable services for charging service tax

Explanation : Consideration includes (i) any amount that is payable for the taxable services provided or to be provided;

(ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed; (Decision INTERCONTINENTAL CONSULTANTS & TECHNOCRATS PVT. LTD.)

(iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket.’. (Decision of MARTIN LOTTERY AGENCIES LTD). © Dhadda & Co

RATIONALIZTAION OF ABATEMENTS

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Description of Service Old Taxable Value New Taxable Value

Services of goods transport agency in relation to transportation of goods.

25% 30%

Services provided in relation to chit 70% 100% (CENVAT allowed)

Transport of goods in a vessel 40% 30%

EXPANDING REVERSE CHARGE MECHANISM(APPLICABLE FROM 1.4.2015)

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Particulars % of ST payable by person providing the service

% of ST payable by any person liable for paying ST other than SP

Services by a mutual fund agent or distributor, to a mutual fund or asset management company

NIL 100%

Service by a selling or marketing agent of lottery tickets to a lottery distributor or selling agent

NIL 100%

Services by way of supply of manpower for any purpose or Security Service

25%NIL

75%100%

Services by Government or local authority by way of support services excluding…..(applicable from date notified after enactment of FA 15)

NIL 100%(Business Entity)

ISSUE-1 (MANPOWER SUPPLY VS LABOUR CONTRACT)

• A company hires a contractor to do a specific work at their factory (with use of his own labor, whose salary is paid by contractor only). The work is an integral production process and payment is made to contractor on piece-rate basis. The work is done on machinery of company only. The quality of work is responsibility of contractor only. Whether it shall constitute as manpower supply service by contractor or a specific job work? Whether Reverse Charge Mechanism shall be applicable?

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ISSUE-2 (DIRECTORSHIP SERVICES)

• A company has Mr X as Director in the company who looks after day to day affairs of business. His is paid Rs. 2 lacs per month as remuneration along with 2% of turnover as remuneration. TDS on his remuneration is deducted under Section 192 of the Income Tax Act 1961. Service Tax department is insisting on depositing service tax on such remuneration paid by company under reverse charge mechanism.

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ISSUE-3 (GTA SERVICES)

• A partnership firm M/s B in Bikaner has purchased few goods from a dealer M/s X, based outside Rajasthan. The goods are being sent by dealer in truck through road. The freight has been paid by M/s X and same has been charged in bill by Ms X to M/s B in purchase invoice.

• Service Tax department is asking for service tax on full value (without abatement) from M/s B of Bikaner.

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ISSUE-4 (A) (WORKS CONTRACT SERVICES)

• M/s. N Ltd. has been engaged by a cement factory for putting up a new factory in Bikener. The total contract value is ` 5 crores. The contract value excludes cement which would be supplied free of cost by the client. The Department is of the view that the value of the cement supplied free of cost should be included in the contract value in terms of the new service tax regime introduced from 1-7-2012.

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For Rule 2A of Determination of Value Rules 2006 for works contract:

(b) “total amount” means the sum total of the gross amount charged for the works contract and the fair market value of all goods and services supplied in or in relation to the execution of the works contract, whether or not supplied under the same contract or any other contract, after deducting- (i) the amount charged for such goods or services, if any; and (ii) the value added tax or sales tax, if any, levied thereon :

Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles.

ISSUE-6 (IMPORT OF SERVICE-FOREIGN BANK CHARGES)

• ABC Ltd an Indian Co is engaged in manufacturing and export of handicrafts from India. Sale consideration is received by it in foreign currency. The payment is send by buyer in foreign currency through his bank in UK which in turn charges bank charges from buyer. Then it intimates the Indian bank of ABC Ltd and remits the payment to such bank after deduction of some charges from total payment. The Indian Bank in turn informs the ABC Ltd about the payment and remits the amount after deduction of two types of charges

Recovery of charges which it paid to Foreign Bank in Foreign Currency.

Own charges leviable for facilitating such payments.

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by ca yash dhadda, jaipur compliances under service tax raipur branch of circ of icai saturday, 30...

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