Executive Summary

Executive Summary
Threshold Exemption:
 As a step in direction of Goods and Service Tax (GST) from Financial
Year 2010 – 2011, it is suggested that the Notification conditions be
rationalized along the lines of Small Scale Industries exemption
under Central Excise viz. computation of exempted value of service,
includibility of export turnover of taxable services and increase in
the limit to Rs.15 lakhs.
Works Contract (Composition Scheme for payment of Service Tax)
Rules, 2007):
 It is suggested that under the increased rate, CENVAT credit on
inputs used for providing works contract service should also be
Matters arising due to proposed changes in the Finance Act, 1994:
 New Services:
Information Technology Software Service.
Section 65(105)(zzzze).
The acquisition involves the receipt of service and not
provision thereof. Therefore, the words “acquiring the
right” should be substituted to “granting the right”
and/or such other suitable words.
“Customized Software” is chargeable under the VAT
law of various states. Accordingly, if software is treated
as goods, notifying it as “service” means conceptual
contradiction and also dual taxation. It is suggested to
resolve the issue to avoid double taxation.
Transfer of right to use tangible goods:
It is suggested that the aspect of mutual exclusivity of
applicability of VAT and service tax be specified either
by modifying the definition or by inserting an
Section 67 Valuation of taxable services.
It is suggested that a time limit be prescribed beyond
which a person would be required to pay service tax on
the basis of book entry.
Section 72 Best Judgment Assessment
It is suggested to prescribe the time limit within which
the assessment can be done.
To prescribe the authority for carrying out the said Best
Judgement Assessment.
Section 77 Penalty for specific contraventions:
It is suggested that in both the above cases, the
maximum penalty be limited to Rs.5,000/-. If it is
already intended to limit the penalty to Rs.5,000/-, the
provision should be worded as –
“Rupees two hundred for every day after the due date till the
actual date of compliance but not exceeding rupees five
Matters arising due to amendments in Service Tax Rules, 1994.
 Rule 6(1A):
It is suggested that the requirement of intimating to the
Superintendent, Central Excise within 15 days should be
done away with and disclosure in the immediately
subsequent return of service tax should be considered
sufficient. (Avoidable interaction with the Departmental
Officers should be facilitated by doing away with the
Also to consider introduction of PLA System (like Excise)
for advance payment of service tax
 Rule 6(4A)
It is suggested that the words “succeeding month or
quarter” be substituted to “any subsequent month/s or
 Rule 6(4B) – Increase in monetary limit.
It is suggested that no monetary limit should be
prescribed and suo motu adjustment of any excess
amount paid and detected later should be permitted.
Requirement of filing details and reasons for adjustment
with the Superintendent should be removed as disclosure
of the said adjustment in the service tax return should be
considered sufficient compliance. (In this case also,
departmental interaction is avoidable).
 Rule 7B – Extension of time limit for filing the revised return
from 60 days to 90 days.
It is suggested that the time limit be extended to one year
on the lines of the provisions existing under other laws.
 Rule 7C:
It is suggested that penalty for delay in filing return
having Nil service tax liability should be waived without
any condition.
CENVAT Credit Rules, 2004:
 Rule 6(3)
It is suggested to:
Take into account the trading and/or treasury activity.
Clarify as regards unearned income such as
interest/dividend so as to avoid hardship to assessees.
Simplify the formulae prescribed in sub-clauses (b)(ii)
and (b)(iii) of the aforesaid sub-rule (3A) of Rule 6.
In cases where proportionate credit option is exercised,
also specify that 100% credit would be available in regard
to input/input services availed specifically for dutiable
goods / taxable services.
Specify as to whether option would apply to an assessee
for all registrations combined to an entity or qua a
registration separately;
Service Tax Dispute Resolution Scheme, 2008.
It is suggested that –
The limit of Rs.25,000/- be revised to Rs.1 lakh.
The cases pending as on 30th June, 2008 instead of 1st
March, 2008 should be covered.
The Scheme should consider minimum penalty instead of
maximum penalty.
Education Cess / Secondary & higher education Cess:
Refund mechanism for exporters:
It is suggested as follows:
 Benefit needs to be extended to the following services:
Business Auxiliary Services
Business Support Services
 Procedural / documentation compliances need to be
simplified [for e.g. export invoice reference on each L/R in
case of ST paid on GTRA etc.]
Instructions / guidelines may be
acceptance of detailed CA Certificate
Reduction in CENVAT Rate from 16% to 14% Consequential amendments need to be carried out in
regard to DTA Clearances by 100% EOU, SEZ etc.
Downward Revision in Abatements for products under
RSP levy disproportionate in some cases resulting in
distortions. Corrective Actions need to be taken.
Increase in BCD % in case of DTA Clearances by 100%
EOU – Consequential amendment need to be carried out
in CENVAT Credit Rules wherein a formula is prescribed
for availment of Credit.
The increase in Penalties u/s 117 and 158 is too harsh & would
result in harassment it is suggested that the same should be