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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