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Presentation on Service Tax Amendments
An introduction to changes made by Finance Act,2012-
Effective from 01st July, 2012
Compiled By:
Rahul AgarwalS.P. NAGRATH & CO.CHARTERED ACCOUNTANTS
A-380, Defence Colony
New Delhi-110024
India-+91(11) 49800000
www.spnagrath.com
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Flow of Presentation
Service Tax
Key Features at a Glance
Negative List
Exemptions
Reverse charge mechanism
New abatement scheme
Amendments
(i) Procedural
(ii) Point of Taxation Rules
(iii) Cenvat Credit
(iv) Others
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SERVICE TAX
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Key features at a Glance Tax rate increased from 10% to 12%
Negative list (of 17 heads) based approach introduced, positive list based
approach discontinued
Huge list of services which have been exempted, vide Notification No.12/2012-ST dated 17-03-2012.
Draft Place of Provision of Services Rules, 2012 proposed to enable the
negative list approach
Existing Export of Service Rules and Import Rules to be discontinued on
introduction of Place of Service Rules.
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Key features at a Glance (Contd) New sections 65B, 66B, 66C, 66D, 66E and 66F introduced
Above provisions will be applicable from 01.07.2012 vide Notification
No.19/2012-ST dated 05.06.2012.
Section Description
65B Definitions
66B New charging section
66C Place of Provision of Service
66D Negative list of services
66E Declared services
66F Principles of interpretation of bundled services
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Key features at a Glance (Contd) New charging section under ST provisions (Sec.66B)
Any activity carried out by a person for another for consideration, and includes a
declared service (Sec.65B)
Declaredservices being- (i) renting of Immovable property
(ii) Construction related services
(iii) Temporary transfer of IPRs
(iv) service portion in WC Service
(v) transfer by way of hire purchase, leasing
Bundled service means a bundle of provision of various services wherein an
element of provision of one service is combined with an element of provision of
any other service(s) (Sec.66F)
Services are naturally bundled in ordinary course of business or not.
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Negative List Negative list shall comprise of the following services
Government or local authorities except
Department of Posts
Services in relation to an aircraft or a vessel, inside or outside the
precincts of a port or an airport Transport of goods or passengers
Support services to business entities
Reserve Bank of India
Foreign Diplomatic Missions located in India
Specified services relating to agriculture
Trading of goods
Process amounting to manufacture/ production
Space selling for advertisement (except radio or television)
Access to Road/ bridge for toll charges
Betting, gambling or lottery
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Negative List (Contd) Entertainment/ amusement
Transmission or distribution of electricity by a utility
Education namely, pre-school, higher secondary, curriculum/
qualification recognized by law, approved vocational courses
Renting of residential dwelling Interest/discount on deposits, loans or advances
Inter se-sales/ purchase of FOREX by Banks/ Authorized Dealers
Transportation of passengers by stage carriage, railway (not being 1st
class/AC,), metro, monorail, tram way, inland water ways, public
transport (not being for tourism), metered cabs, radio taxis and autorickshaws
Transportation of goods by road ( except by a GTA or courier), aircraft
or vessel from abroad to India, inland water base
Funeral, burial, crematorium or mortuary services including
transportation of the deceased
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Exemptions Retrospective exemptions granted
for repair of roads
to management, maintenance or repair services undertaken in relation to non
commercial Government buildings
for supply of taxable services by DTA units to authorized operations of SEZ
to services provided by Association of Dyeing units in relation to common
effluent treatment plants
Scheme for penalty waiver for renting of immovable property
Penalty would be waived for those tax payers who pay the service tax due on
the renting of immovable property service (as on 6 th day of March, 2012) in
full along with interest within 6 months.
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Exemptions (Contd) Some Proposed Exemptions of Services:
Given to UN and International Organisations
Healthcare services
Veterinary Clinics Charitable services under Income tax
Renting for religion
Advocates to individuals
Technical testing for clinical research
Training / Coaching in arts, culture, sports
Specified services to educational institutes
Specified services of a recognised sports body
Sponsorship of tournaments
Construction for Government etc.,
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New Reverse Charge mechanism The new scheme is being introduced for three services. The services and portion
of tax payable are as follows:
i.e.Now the recipient of above services is also required to get it self registered,
if recipient is a body corporate and provider is either an individual, firm or
LLP.
Sl.
No.
Description of service Service
recipient
Service
provider1. Hiring of a motor vehicle
designed to carry
passengers:
(a) with abatement
(b) without abatement
100%
40%
Nil
60%
2. Supply of manpower for
any purpose
75% 25%
3. Works contract service 50% 50%
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New abatement scheme The increase in taxable portion of some services covered under abatement
scheme are accompanied with liberalisation in input tax credits admissibility
Sl.
No.
Description of service Existing
taxable
portion
New
taxable
portion
Cenvat credit admissibility
1. Convention Centre or
mandap with catering
60% 70% All credits, except on inputs of
chapter 1to 22, now available
2. Pandal or Shamiana with
catering
70% 70% Same above
3. Coastal shipping 75% 50% No credit as at present
4. Accommodation in hotel etc. 50% 60% Credit on input services allowed
5. Railways:
Goods
Passengers
30%
New
levy
30%
30%
All credits will be allowed
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Amendments- Procedural Rule 4A of Service Tax Rule- Issuance of invoice
For all assessees
and 45 days for banks and other financial institutions
Self adjustment of service tax without any monetary limit and intimation to
department.
Normal limitation for issuing Show Cause Notice increased from 12 to 18 months.
Statement of tax due for subsequent period by referring to earlier Show Cause
Notice deemed to be proper Show Cause Notice.
Settlement of Service Tax disputes by Settlement Commission introduced
Revision Mechanism made applicable to Service Tax
Limitation period reduced from 90 to 60 days for filling appeals before
Commissioner Appeals
Offences can be compounded
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Amendments- PoTR, 2011 Definition of continuous supply of service is being amended to capture the
subject in a more wholesome manner
Rule 7 of PoTR amended
PoT on the basis of date of payment is also extended to individuals and firms
upto a turnover of Rs. 50 lakh.
In case of a new levy no tax if payment has been received and invoice issuedwithin a period of 14 days of the date of new levy
Before amendment After amendment
Rule 7 states PoT for:
(i) Export of Services
(ii) Specified Services by firms
(iii) Services, where tax is
payable under reverse
charge
Rule 7 states PoT for:
(i) Services, where tax is
payable under reverse charge
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Amendments Cenvat Credit Simplified procedure for refund of unutilized credit relating to exports.
Cenvat Credit now allowed on specified categories of motor vehicles used for all
taxable services.
Cenvat Credit to insurance companies on insurance and service station service
for re-insurance/third party insurance of motor vehicles.
Cenvat Credit to be taken on delivery of the inputs/capital goods to the service
provider.
Cenvat Reversal for exempt services increased from 5% to 6%
Cenvat Credit of Service tax on services in respect of multi-unit assessee to be:
exclusively allocated to a unit which wholly uses such input service.
proportionately distributed to all the units on pro-rata basis based on their
respective turnovers in case such service is used by all the units.
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Amendments- others Special rates in Service Tax:
For life insurance under Rule 6(7A)(ii) of STR, 1994
For money changing under Rule 6(7B) of STR, 1994
Gross amount of premium
charged
New Rate Old Rate
1st year 3% 1.5%
Gross Amount of
Currency Exchanged
New Rate Old Rate
Upto Rs. 100,000 0.12% subject to
maximum of Rs. 30
0.10% subject to
minimum of Rs. 25
Amount
>100,0001,000,000 Rs.660 and 0.012%
maximum of
Rs.6,000
Rs.550 and 0.01%
subject to maximum
of Rs.5,000
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Amendments- others (Contd) Works contract service , composition rate has been changed from 4% to 4.8%
Challan of payment of service tax to be a duty paying document for CENVAT
purposes where the service receiver pays the service tax on reverse charge basis.
Specific provision for Special Audit introduced as in Excise.
Amendment to Small scale exemption to provide that the first clearances uptoRs.10 lakhs will be considered on the basis of invoices issued and not merely on
payments received.
Revision in period of filing of appeal:
Earlier Now
Commissioner (A) 3 month 2 monthAppellate Tribunal 3 month 3 month
Departmental 3 month 4 month
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Amendments- others (Contd) Common Service Tax Return called EST (Excise and Service Tax)
(A) Quarterly (B) Monthly
(i) Individuals/Firms/LLP Other than covered in (A)(ii) Others whose tax liability < Rs. 25lakh (preceding yr.)
Common simplified registration for Central Excise and Service Tax
The above changes will come into force after inviting comments from
stakeholders.
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S. P. NAGRATH & CO.CHARTERED ACCOUNTANTS