gdp(2009 – 2010 ) service tax background service tax was introduced for first time in 1994. only 3...
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GDP(2009 – 2010 )
SERVICE TAX BACKGROUND
Service Tax was introduced for first time in 1994 .
only 3 services with 3,943 Assessees .tax collection was about Rs. 410 Crores.now covers about 117 services.
Finance Act, 1994.
Service Tax Rules.
Determina-tion of Value
Rules.Export of Services Rules.
Import of Services Rules.
Cenvat Rules.
SERVICE TAX CYCLE WHEEL
SERVICE TAX
Finance Act, 1994.Service Tax Rules.Determination of Value Rules.Export of Services Rules.Import of Services Rules.Cenvat.
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CONSTITUTION
Constitutional Authority:
CONSTITUTION OF
INDIA
LIST I LIST IICENTRAL
GOVERNMENTSTATE
GOVERNMENT
LIST - I
ENTRY NO 82 – Tax on Income other than Agriculture.
ENTRY NO 83 – Duty of Customs including export duties.
ENTRY NO 84 – Duties on Excise. ENTRY NO 85 – Corporation Tax. ENTRY NO 92C – Taxes on Services [NOT MADE
EFFECTIVE]. ENTRY NO 97 – Residual Entry.(COVERS SERVICE
TAX). Residual Entry applies to the matter not
enumerated in List II and List III.
CONSTITUTIONAL VALIDITY
(State Of West Bengal Vs Kesoram Industries)
Residual Entry applies to the matter not enumerated in List II and List III.
Same transaction may involve two or more taxable events in its different aspects.
Such Overlapping should not be considered. Two aspects of the same Transaction can be
utilized by two legislatures for two levies which may be taxes or fees.
Is Retrospective Amendment Valid?
Is Retrospective Amendment Valid?
YES, If it is Reasonable.
No, if it is Arbitrary.
Extent and Scope of Service Tax• extends to the Whole of India Except Jammu and Kashmir.
• India means:• Territorial Waters of India (i.e., up to 12 Nautical Miles
from the Coastal Land).• Continental Shelf and Exclusive Economic Zone of India, if
the service provided for the purpose of construction of installations, structures and vessels for the purpose of extracting or prospecting or production of mineral oil and natural gas and supply thereof.
• It also covers all the services provided by such installations or vessels or structures with the said activities.
SERVICE TAX APPLICABLE
SERVICE TAX
APPLICABLE
SERVICE TAX RATE Sec 66 (charging section) 12%
From 24.02.2009 the rate of tax is 10%.
Education Cess is 2%.
Secondary and Higher Education Cess is 1%
Therefore Effective Rate is 10.3%
Service means • a useful result or product of labour.
• If a thing is not capable of being transferred, delivered , stored and possessed , it is a service.
SERVICES• THERE MUST BE ATLEAST TWO PARTIES
Performances of Statutory Duties are not Service.
Sharing of expenses is not a provision of service
Concept of Mutuality
Service And Liable To Service Tax
Free Services taxable?
WHY FREE SERVICES NOT TAXABLE ? VALUE OF FREE SERVICE = 0
TAX @10.3% ON 0 = 0TOTAL SERVICE TAX = 0
Is There Any Service In The Joint Venture?
Accounting Standard 27– three types Jointly Controlled Operations. Jointly Controlled Assets. Jointly Controlled Entities.
Sale Or Services?
SINGLE CONTRACT
SALES OF GOODS
VAT
PROVISION OF SERVICES
SERVICE TAX
Composite Contract
Divisible
Value of Goods.
Value of Services
Indivisible
Dominant Nature Test
Services or Sales
Dominant Nature Test
EXAMPLES OF INDIVISIBLE CONTRACTS
• Works Contract Service.• hire purchase/lease contract.• catering contracts.• A supply of goods by any unincorporated
association or body of persons to a member
But These Contracts Have Been Declared As Divisible
By Amending The Articles.
The Scheme Of Service Tax
SP
SE
RV
IC
E
SRSE
RV
IC
E
SP
SE
RV
IC
E
GOVT
SE
RV
IC
E
AGREEMENT
SP Can Collect Tax From SR
SP Cannot CollectTax From SR
Can Service Provider Recover Tax from Service Receiver ?
CLASSIFICATION OF SERVICES, WHY?Whether the service provided fall on the
category for which the exemption applies. Whether abatement applies for the
services provided.Wrong Classification leads to wrong
claim of exemption and leads to penalty.
Principles of classification: [Sec 65A]:
1. service is prima facie classifiable under one category of service, Classify as Such Category.
Eg:
Principle 2 (Classifiable Under Two Or More Categories )
• Most Specific Description.Eg:
Management Consultancy Service
Management or Business Consultant ?
Service Of Chartered Accountant ?
Eg:
Principle 3 (Classifiable Under Two Or More Categories )
ESSENTIAL CHARACTER
GOODS TRANSPORT AGENCY ?
Principle 4 ( Not Classifiable Using Other Principles )
the category which occurs first in Clause(105) of Section65.
123456
Section 65A Does not Apply to The Port. Other Port. The Airport Or Civil Enclave.Any Services Provided within the Port Falls
Under The Port Services and Not Under Other Services.
Exemption To Principles
Valuation of Services:[Section67]:• If Consideration is only money,
The Gross Amount Charged is the Value.
• If Consideration is not Wholly or Partly in Money.
Value + Service Tax = Fair Market Value
Valuation of Services:[Section67]:
Valuation of Services:[Section67]:
• If Value Not Ascertainable , “Determination of Value Rules”
AB
Value of Service ?
Value of Taxable Services (if not ascertainable)
Value of similar services in the market. Equivalent money value of consideration,
but should not less than cost of provision.
Consideration received is not wholly or Partly consisting of money:
Inclusion in or exclusion from value of certain expenditure or costs:Reimbursement of expenses is not
includible: - Entry tax paid by carriage and freight
forwarding agent on behalf of owner of goods. - Ticket charges paid y Travel Agent and recovered from his customer.
Expenditure incurred by service provider as “pure agent” of service receiver is also not includible.
Pure Agent
Contractual agreement with recipient of services.
Neither intends to hold nor holds any title.
Does not use such goods or services. Receives only the actual amount
incurred.
Exclude from the Value of Taxable Service
Conditions:Service provider act as pure agent when he
makes payment to third partyRecipient of services uses the goods or serviceThe recipient of service is liable to make payment
to the third party.The recipient of service authorizes the service
provider to make payment on his behalf.Payment made by the service provider on behalf
of the recipient of service has been separately indicated in the invoice issued .
The goods or services procurred by the service provider from third party.
The following commission, costs are included:
Charged by a broker on the purchase or sale of securities.
Premium charged by the insurer from the policy holder.
The commission received by the air travel agent from the airline.
The commission, fee or any sum received by an actuary or insurance agent.
The following commission, costs are excluded,
The airfare collected by air travel agent .
The railfare collected by rail travel agent.
Initial deposit made by the subscriber at the time of application for telephone connection or FAX.
Taxable Event
TAXABLE EVENT
It happens when a taxable service is rendered.
Tax liability is required to pay as per POT rules,
Point of Taxation
Determination of Point of Taxation
If No If YesInvoice is issued with in 14 days
from the Date of Completion of Service.
Date of Completion of
Service or Payment
Whichever is earlier
Date of Invoice Or Payment Which ever is
earlier
ExamplesS.No
.Date of
completion of
service
Date of Invoice
Date on which
payment
received
Point of Taxation
Remarks
1 December 10,2011
December 20, 2011
December 30,2011
December 20,2011
Invoice issued in 14days and before receipt of payment.
2 December 10,2011
December 26, 2011
December 30, 2011
December 10,2011
Invoice not issued within 14 days and payment received after completion of service.
Determination of POT in case of change in effective rate of tax: No change in rate of service tax till now.
Payment of tax in cases of new services:
In case of continuous Supply of Service:
Services provided continuously – exceeding 3 months,or
Central Government Notification
The following 5 Taxable services have been notified as CSS;
Telecommunication serviceCommercial or industrial constructionConstruction of residential complexInternet Telecommunication ServiceWorks contract service.
POT in case of CSSInvoice is issued with in 14 days
If yes,Date of Invoice If No,
Date of Completion
POT in case of CSSPayment is received
with in 14 days
If yes,Date of receipt
of Payment
EXPLANATION FOR THE PURPOSE OF CSS Provision of the whole or part of the service is determined periodically on the completion of event
Date of Completion of such event
POT IN CASE OF SPECIFIED SERVICES OR PERSONS In this case, POT shall be the Date on which
payment is received. Specified Services: Export of Services In case of Reverse Charge.
INDIVDUALS OR PROPRIETARY FIRMS OR PARTNERSHIP FIRMS PROVIDING FOLLOWING SERVICES:
Architect services Interior Decorator Services Practicing CA/CWA/CS Services Scientific and Technical Consulting Services Legal Consulting Services.
POT in case of Copyrights, trademarks
Consideration is not ascertainable
Date of invoice or receipt of payment Whichever is earlier
Export of Service
Export of Service
In relation to Immovable
Property
In relation to location of
the recipient of services.
In relation to Performance of Services
Recipient is Outside
India
Personal purpose & recipient is
located outside india
In relation to Business or Commerce
Recipient has any office in
India
In relation to location of the recipient of services
Supply of Tangilble goods for Use Services
Import of ServicesServices provided in India from a country
outside India.Taxable event is the date of actual import.Importer of services is liable to pay service
tax as such he is service provider.(Reverse charge)
Only when received in India.
Importer of service is liable to pay service tax only when the service provider is not having any:- Place of business in India, or- Establishment in India, or- Permanent address in India.
ST will not be attracted as service provider is abroad and renders service outside India,
USA PVT LTD,USA
S LTD OF USA Subsidiary of
H LTD
H LTD an Indian
Company
IMPORT OF SERVICES RULES
Services in relation to immovable property located in India.
Services partly performed in India. Services received by recipient located in
India. Services which will never be treated as
import of services.
FEATURES OF SSI EXEMPTION
The exemption of SSI does not apply to taxable services provided by a person under a brand name or trade name, whether registered or not, of another person.
This SSI exemption is optional to the Service Provider. Hence, the service provider has the optional not avail the exemption.
Exemption to apply service-provider wise,not for each taxable service or each premises.
SSI EXEMPTION
Eligibility Limit Service Provided in the Preceding Financial
Year is less than Rs.10 lakhs.Exemption Limit: First Consecutive Payment Received Exceeds
Rs. 10 lakhs.
If Exceeds Rs. 10lakhs in the Current Year
Service Provider will be liable to pay service tax only on turnover exceeding Rs.10 Lakh
:ABATEMENT:
• Abatement is an exemption granted in respect of the value of taxable service.
Name of ServiceAbatement / deduction
Taxable
(i) Mandap Keeper 40% 60%
:ABATEMENT:-:conditions :-
• The assessee has not availed CENVAT Credit. • the value of goods and materials sold by the
service provider to the recipient of service should not be deducted from the value of goods.
PROCEDURES
• The main procedure to be followed by the service provider are
• i) Registration • ii)Preparation of Invoice • iii)Maintenance of Records• iv)Payment of Service Tax and • v)Submission of Return.
"Person liable for paying service tax“Notified by Government (Examples)
Telecommunication Service •The Director General of Posts and Telegraphs
•The Chairman-cum-Managing Director, Mahanagar Telephone Nigam Ltd, Delhi,
•Any other person who has been granted a licence by the Central Government
General Insurance the insurer or re-insurerInsurance Auxiliary Service by an insurance agent
person carrying on the general insurance business or the life insurance business in India
Import of Service Service Receiver (Reverse Charge)
REGISTRATION
• The Person liable to pay service tax/• Input Service Distributor/• Whose value of Services exceeds Rs.9 Lakhs • – Apply in Form ST-1 to the Superintendent of
Central Excise.• Made within 30 Days from the date which the
Service provider becomes liable under Service Tax.
• A Single Application is enough for all taxable services.
Documents Required For the Registration
• A Copy of PAN.• Proof Of Address.• Constitution Of The Applicant.
• The Application Must Be Signed By The Applicant/ The Authorized Person OF Such Applicant.
REGISTRATION CERTIFICATE
• Is issued in ST – 2.• Granted within 7 Days.• STC(Service Tax Code) – 15 digit number• Eg : AIJPS8765B ST 002• Premises Code• Commissionerate + Division + Range + Serial
Number.
CENTRALIZED REGISTRATION
• the person provides/receives service from more than one premises or offices (and)
• has centralized billing system or centralized accounting system in respect of such service and
• such centralized billing system are located in one or more premises.
• ALL THE PROCEDURES ARE SAME• ST-2 IS ISSUED BY THE COMMISSIONER• 7 DAYS DEADLINE IS NOT APPLICABLE.
PENALTY FOR NON REGISTRATION
• RS. 10,000 OR• RS.200 PER DAY• WHICHEVER IS HIGHER.
PREPARATION OF INVOICE• Contents of the Invoice
In case of Service Provider In case of Service Distributora. the name, address and the registration
number of such person.b. The name and address of the person
receiving taxable service.*c. Description, classification and value of
taxable service provided or to be provided.
d. The service tax payable thereon.
a. The name, address and registration number of the person providing input services and the serial number and date of invoice by such provider of input service.
b. The name, and address of the said input services distributor.
c. The name and address of the recipient of the credit distributed.
d. The amount of the credit distributed.
a. The consignment note number, and date and gross weight of the consignment (if transported by road transport)
In case the provider of taxable service is aircraft operator providing service or air transport of passenger, the invoice shall include ticket in any form by whatever name called.
If the service provider is a Goods Transport Agency, then he should issue consignment note to the recipient of the service. However, where any taxable service is wholly exempted, the goods transport agency shall not be required to issue the consignment note.
III. MAINTENANCE OF RECORDS:[RULE 5]:
a list of duplicate of• all records prepared or maintained by the assessee for
accounting of transactions in regard to –– providing of any service, whther taxable or exempted;– receipt or procurement of input services and payment for such
input services;– receipt, purchase, manufacture, storage, sale, or delivery, as
the case may be, in regard of inputs and capital goods;– other activities, such as manufacture and sale of goods, if any.
• all other financial records maintained by him in the normal course of business.
PAYMENT OF SERVICE TAXAssessee Duration of
PaymentTime of Payment
Individual, Proprietary firm, or a Partnership firm
Quarterly 1.Electronic Payment - 6th of the month
2.Other Cases – 5th of the month immediately following the quarter in which the service is deemed to be provided(i.e., Point Of Taxation Rules)
Any Other Assessee
Monthly 1.Electronic Payment - 6th of the month
2.Other Cases – 5th of the month immediately following the month in which the service is deemed to be provided(i.e., Point Of Taxation Rules)
Services deemed to be provided in month/quarter ending on 31st March – Payable by 31st March itself.
Filing of Returns:[Section70 Of Finance Act,1994 and Rules 7, 7B and 7C of the Service Tax
Rules,1994]:Assessee Authority to
whom filedDuration of Return
Form No Of Copies
Time of Filing Return
All Assessees Superintendent Half-Yearly ST – 3 or ST – 3A
Triplicate By 25th of the month following the end of the said Half – Year.
Input Service Distributor
Superintendent Half - Yearly ST - 3 Single By the last day of the month following the Half – Year period.
When the due date for filing return of service tax is a public holiday, then, the return may be filed on the succeeding working day.
e-filing is mandatory if the gross service tax liability is Rs.10Lakhs or more including the amount paid by utilization of CENVAT credit, in the preceding financial year.
Documents to be submitted along with return:
• Copies of GAR – 7 challans .• full details of the difference between the
amount of provisional amount of tax deposited and the actual amount payable for each month;
• The return may be filed by hand delivery or by registered post.
• In case of multiple service providers, a single return is enough but should give all the details of services.
• Even if no service has been provided and no service tax is payable during a half year, the assessee has to furnish “ Nil “Return.
Fees for delayed furnishing of returns:: [Rule 7C]:
Period delay in furnishing return
Fees to be Paid
15 days from the due date Rs.500Beyond 15 days but upto 30 days from the due date
Rs.1,000.
Beyond 30 days from the due date
Rs.1,000 + Rs.100 for every day from the 31st day till the date of furnishing of return; subject to a maximum of Rs.2,000.
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