Executive Summary 1. 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. 2. 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 allowed. 3. Matters arising due to proposed changes in the Finance Act, 1994: New Services: (i) Information Technology Software Service. Section 65(105)(zzzze). (ii) 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: Sec.65(105)(zzzzj). 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 explanation. 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 thousand”. 4. 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 requirement). 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 quarter/s”. 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: 5. 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. 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 – 7. 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. Others: 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 issued prescribing 8. 9. CENTRAL EXCISE 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. CUSTOMS The increase in Penalties u/s 117 and 158 is too harsh & would result in harassment it is suggested that the same should be rationalized.