By
CA Manish Gadia
21st January, 2012
21.01.2012
CA Manish Gadia
1
Coverage
•
•
•
•
Point of Taxation
Export of Service
Import of Service
Valuation of
Services
21.01.2012
CA Manish Gadia
2
Point of Taxation
21.01.2012
CA Manish Gadia
3
• Applicable from 1-4-11
• Option to assessee to adopt from 1-7-11
• POT not applicable
If the provision of service are completed or
The invoices are issued
Up to 31-3/30-6-11
21.01.2012
CA Manish Gadia
4
POT
POT at the earliest of
Invoice issued within 14 days
Date of Invoice
Receipt of payment
21.01.2012
CA Manish Gadia
Not issued with in 14 days
Date of Completion of
Service
5
Point of Taxation
Date of
Date
complet
of
ion of
invoic
service
e
Date on
which
payment
recd
Point of
Taxation
Remarks
April 20,
11
May 2,
11
May 12, 11
May 2, 11
Invoice issued in 14
days & before receipt of
payment
April 20,
11
May 6,
11
May 10, 11
April 20, 11
Invoice not issued
within 14 days &
payment received after
completion of service
April 20,
11
May 2,
11
April 25, 11
April 25, 11
Invoice issued in 14
days but payment
received before invoice
April 20,
11
May 6,
11
April 5, 11
(part) &
May 2, 11
remaining
21.01.2012
April 5, 11
& April 20, 11
for respective
CA Manish Gadia
amounts
Invoice not issued in 14
days. Part payment
before completion,
6
remaining later
Completion of Service
• includes
• not only the physical part of providing the service
• but also the completion of all other auxiliary activities that
enable the service provider to be in a position to issue the
invoice.
144/13/2011 – ST dated 18th July, 2011
• auxiliary activities include
• activities like measurement, quality testing etc which may be
essential pre-requisites for identification of completion of
service.
• the test for the determination whether a service has been
completed would be the completion of all the related
activities that place the service provider in a situation to be
able to issue an invoice.
• however such activities do not include flimsy or irrelevant
grounds for delay in issuance of invoice.
21.01.2012
CA Manish Gadia
7
Details on Invoice
• Within 14 days
• Serially numbered
• The name, address and the registration
number of service provider
• The name and address of the person
receiving such taxable service
• Description, classification and value of
taxable service provided or to be provided
• 21.01.2012
The service tax payable
thereon
CA Manish Gadia
8
Change in the effective rate of Tax
PROVISION
OF
SERVICE
ISSUE
RECEIPT
OF
OF
INVOICE PAYMENT
APPLICABLE RATE
Before
After
After
Date of Invoice or Receipt of
Payment, whichever is earlier.
Before
Before
After
Date of Issue of Invoice
Before
After
Before
Date of Receipt of Payment
After
Before
Before
Date of Invoice or Receipt of
Payment, whichever is earlier.
After
Before
After
Date of Receipt of Payment
After
After
Before
Date of Issue of Invoice
21.01.2012
CA Manish Gadia
9
Payment of Tax in case of New
Services
No Service Tax
Invoice is issued and
payment for such
invoice is received
before introduction
Payment is received
before introduction &
invoice is issued
within 14 days of
receipt of payment or
Date of provision of Services provision of service,
has no relevance
whichever is earlier
21.01.2012
CA Manish Gadia
10
• Service provided or to be provided continuously
under a contract for a period of more than 3
months or as prescribed
• POT at the earliest of
 Issue of Invoice
 Receipt of Payment
 Invoice not issued within 14 days
 Date of Completion of event in terms of a
contract, which requires the service receiver
to make any payment to service provider
21.01.2012
CA Manish Gadia
11
• Following taxable services shall be treated
as Continuous Supply of Service
Commercial or Industrial Construction
Residential Complex Construction
Telecommunication Services
Internet Telecommunication Services
Works Contract Services
21.01.2012
CA Manish Gadia
12
• Professionals
• Export of Services
• Payment under reverse charge
Mechanism
• Associated Enterprise
Provider outside India
Provider within India
21.01.2012
CA Manish Gadia
13
Professionals
• POT shall be on receipt of payment in case of
individuals, proprietary firms or partnership
firms for providing below-mentioned services
 Consulting Engineer’s Services
 Architect’s Services
LLP?
 Interior Decorator’s Services
 Practicing Chartered Accountant’s Services
 Practicing Cost Accountant’s Services
 Practicing Company secretary’s Services
 Scientific or Technical Consultancy Service
 Legal Consultancy Services
21.01.2012
CA Manish Gadia
14
• POT shall be on receipt of payment for services
exported
• if the payment for exports is not received within
the period specified by the RBI
• then the point of taxation shall be as per normal
rule of POT
• if the services are exported on 1st August, 2011
and up to 31st July, 2012 payment is not
received, then the service tax liability would be
counted as due in the month of August 2011
• What about Payment of Interest?
• Later on receipt of payment refund is available?
21.01.2012
CA Manish Gadia
15
Amount is
Ascertainable
At the time of
Performance
21.01.2012
Amount is not
ascertainable
Receipt
Issue of
Invoice
Whichever is earlier
CA Manish Gadia
16




Adjustment u/r 6(3)
assessee is allowed to adjust
against his subsequent period's liability
the excess service tax paid
for services which is not wholly or
partially Provided or amount is
renegotiated
 provided he has refunded the amount
charged along with Service Tax
 Issue Credit Note
 to the client
21.01.2012
CA Manish Gadia
17
21.01.2012
CA Manish Gadia
18
Export Of Service Rules
Export of Services
Immovable Property
[Rule 3(1)(i)]
Provided in relation to
an Immovable property
situated outside India
Place of Performance
[Rule 3(1)(ii)]
Wholly / Partly
performed outside
India
Location of recipient
[Rule 3(1)(iii)]
In relation to business
Recipient of Service
is located outside India
Other than business
Recipient of Service
is located outside India
at the time of provision of
service
Recipient has office in India than order for provision from
service is made from outside India
21.01.2012
CA Manish Gadia
19
Location of Goods
• Location of goods or
immovable property in
respect of following
Services
 management,
maintenance or repair
 technical testing and
analysis, and
 technical inspection and
certification
21.01.2012
From
1.4.2011
recategorised
under 3(iii)
CA Manish Gadia
20
Australia
21.01.2012
CA Manish Gadia
India
21
Supply of Tangible
Goods for Use
Australia
India
21.01.2012
31-01-2010
CA Manish Gadia
22
Services
Criterion prior to 1st Criterion w.e.f.
April, 2011
April, 2011
Special Services
provided by Builders
Location of Recipient
Location of Immovable
Property
Credit Rating Agency
Place of Performance
Location of Recipient
Market Research
Agency
Place of Performance
Location of Recipient
Technical Testing and
Analysis
Place of Performance
Location of Recipient
TPT of Goods by
Aircraft
Place of Performance
Location of Recipient
GTA
Place of Performance
Location of Recipient
Opinion Poll Agency
Place of Performance
Location of Recipient
TPT of Goods by Rail
Place of Performance
Location of Recipient
Rail Travel Agent
Location of Recipient
Place of Performance
Health Check up and
Treatment
21.01.2012
Location of Recipient
Place of Performance
CA Manish Gadia
1st
23
Export Of Service Rules
Provided from India
wef 01.03.2007
•
•
Such service is delivered and used
outside India. And Omitted wef 27.2.2010
Payment for such service Provided out
side India is received by the service
provider in convertible foreign
exchange.
wef 01.06.2007
21.01.2012
CA Manish Gadia
24
India Includes (W.E.F. 19-8-2009)
21.01.2012
CA Manish Gadia
25
Payment of Tax
• May Export the
Services without
Payment of Service Tax
• Rebate of Service Tax
21.01.2012
CA Manish Gadia
26
Important Judicial
Rulings
21.01.2012
CA Manish Gadia
27
Export (Courier)
• TNT India Pvt. Ltd. versus CST,
Banglore [2007 (7) S.T.R. 142
(Tri. - Bang.)]
• U.B.Xpress (South) (P.) Ltd. Vs.
Commissioner of Central Excise,
Coimbatore. [2008 (15) STT
242] (AHD-CESTAT)
• PROFESSIONAL COURIERS
Versus COMMR. OF SERVICE
TAX, CHENNAI [2008 (10)
S.T.R. 125 (Tri. - Chennai)]
21.01.2012
CA Manish Gadia
28
Export (BAS)
• BLUE STAR LTD.
versus CCE,
BANGALORE [2008
(11) S.T.R. 23 (Tri. Bang.)
• ABS INDIA LTD.
Versus CST,
BANGALORE [2009
(13) S.T.R. 65 (Tri. Bang.)
21.01.2012
CA Manish Gadia
29
Export (Foreign Currency)
• National Engg. Industries Ltd. Versus CCE,
JAIPUR [2008 (11) S.T.R. 156 (Tri. - Del.)]
• Nipuna Services Ltd. Vs. Commissioner of
Central Excise, Cus and ST (A-II)
Hyderabad. [2009 (14) STR 706] (TriBang).
• M/S Suprasesh General Insurance Services
& Brokers Pvt Ltd Vs Commissioner Of
Service Tax, Chennai [2009-TIOL-338CESTAT-MAD] CA Manish Gadia
21.01.2012
30
Export (Performance)
• CST, Ahmedabad Vs M/S
B A Research India Ltd
[2009-TIOL-1981CESTAT-AHM]
21.01.2012
CA Manish Gadia
31
Import Of Service
Import of Services
Immovable Property
[Rule 3(i)]
Provided in relation to
an Immovable property
situated in India
Place of Performance
[Rule 3(ii)]
Wholly / Partly
performed in India
Location of recipient
[Rule 3(iii)]
Recipient of Service
is located in India for
use in relation to
Business or Commerce
Recipient is an individual and such service is received
by him otherwise than for the purpose of use in any
business or commerce, he will not be taxed under
21.01.2012
CA Manish Gadia
32
reverse
charge mechanism
Location of Goods
• Location of goods or
immovable property in
respect of following
Services
 management,
maintenance or repair
 technical testing and
analysis, and
 technical inspection and
certification
21.01.2012
From
1.4.2011
recategorised
under 3(iii)
CA Manish Gadia
33 33
Australia
21.01.2012
CA Manish Gadia
India
34
Supply of Tangible
Goods for Use
Australia
India
21.01.2012
19-3-2011
CA Manish Gadia
35
Services
Criterion prior to 1st Criterion w.e.f.
April, 2011
April, 2011
Special Services
provided by Builders
Location of Recipient
Location of Immovable
Property
Credit Rating Agency
Place of Performance
Location of Recipient
Market Research
Agency
Place of Performance
Location of Recipient
Technical Testing and
Analysis
Place of Performance
Location of Recipient
TPT of Goods by
Aircraft
Place of Performance
Location of Recipient
GTA
Place of Performance
Location of Recipient
Opinion Poll Agency
Place of Performance
Location of Recipient
TPT of Goods by Rail
Place of Performance
Location of Recipient
Rail Travel Agent
Location of Recipient
Place of Performance
Health Check up and
Treatment
21.01.2012
Location of Recipient
Place of Performance
CA Manish Gadia
1st
36
India Includes (W.E.F. 7-7-2009)
21.01.2012
CA Manish Gadia
37
Does not cover
• Air transport of
passengers
embarking in India for
International journey
• Transport of persons
by a cruise ship
embarking in any port
in India
21.01.2012
CA Manish Gadia
38 38
Reverse Charge Mechanism
• Recipient Shall make
an application for
registration
• Not applicable
otherwise than for the
purpose of use in any
business or commerce
• When to pay service tax
• Not output service for
CENVAT
21.01.2012
CA Manish Gadia
39
Issues
M/s Phantom Ltd. desires to have ECB from
a foreign bank. It directly approaches
foreign bank to provide support in ECB
matters. ECB is issued on 20th June 2005.
For this M/s Phantom pays some fees to
foreign bank.
•Similarly M/s Phantom raises another ECB
in July 2007.
•Is M/s Phantom is liable to pay service tax
under reverse charge mechanism, if yes for
which period?
21.01.2012
19-3-2011
CA
CAManish
Manish Gadia
Gadia
40 40
Where a person is carrying on a business through a PE in
India and through another PE outside India, such PE shall be
treated as separate persons for the purposes of this section.
-A person carrying on a business through a branch/agency in
any country shall be treated as having a BE in that country
66A (2)
• Indian branch of the foreign bank approaches
M/s Phantom for said ECB issue. Foreign bank
arranges to share its fees with Indian branch, in
this case, whether service tax will be payable
under reverse charge mechanism, if Yes, by
whom?
21.01.2012
19-3-2011
CA
CAManish
Manish Gadia
Gadia
41 41
• Payment of Service tax under Import of Service
Rules would be eligible for credit under Cenvat
Credit Rule? If we refer to Rule 3(1)(ix) of CENVAT
Credit Rules, 2004, it refers to “the service tax
leviable under section 66” and not section 66A.
Please clarify.
File No.137/72/2008-CX.4
it must be kept in mind that taking of credit and its utilization
is a substantive right of a taxpayer under value added
taxation scheme.
Therefore, in the absence of a clear legal prohibition, this
right cannot be denied.
File No.354/148/2009-TRU
21.01.2012
19-3-2011
CA
CAManish
Manish Gadia
Gadia
42 42
• Travel Agent is engaged in travel and
tourism. It is registered as an air travel
agent and a tour operator. It sells
outbound tour packages to Indian
customers say to US, Europe for a
lumpsum of say Rs. 1,00,000/- (a part
of which is received in convertible
foreign exchange in India from the
travellers’ foreign currency say to the
extent of Rs. 50000/-). Would Travel
agent be entitled to any export
exemption in respect of the above
transaction?
21.01.2012
19-3-2011
117/11/2009-ST
CA
CAManish
Manish Gadia
Gadia
43 43
21.01.2012
CA Manish Gadia
44
Value of Taxable Service
Consideration for service is
Wholly in money
Gross amount
charged
Not wholly/partly
in money
Consideration in money
+
Money Value of
Consideration in kind
Service Tax payable
Similar does not mean
identical but it means
corresponding to or
resembling to in many
respects
21.01.2012
Not ascertainable
a.
Gross
amount
charged to provide
similar service to
any other person
Value
cannot
be
determined
in
accordance with (a),
Equivalent money value of
such consideration which shall,
CAS be at least equal to the cost
CA Manish Gadia
45
4
Some Explanations
• Consideration includes any amount that is payable for the
taxable services provided or to be provided.
• Money includes any currency, cheque, promissory note,
letter of credit, draft, pay order, travellers cheque, money
order, postal remittance and other similar instruments but
does not include currency that is held for its numismatic
value.
• Gross amount charged includes payment by cheque,
credit card, deduction from account and any form of
payment by issue of credit notes or debit notes and book
adjustment and any amount credited or debited, as the case
may be, to any account, whether called “Suspense account”
or by any other name, in the books of account of a person
liable to pay service tax, where the transaction of taxable
service is with any associated enterprise .
21.01.2012
CA Manish Gadia
46
Value for work contract service
 Excludes:
Value of transfer of property in goods
VAT/sales tax paid
Gannon Dunkerley & Co.
 Includes
v. State of Rajasthan
[1993] 66 Taxman 229(SC)
Labour charges
sub-contractor for labour & Services
planning, designing and architect’s fees
hire Charges of machinery and tools
Cost of consumables such as water, electricity,
fuel.
Cost of establishment of the contractor
Other similar expenses relatable to supply of
labour
Profit
earned relatable
to Gadia
supply of labour and 47
21.01.2012
CA Manish
services
Service Tax on Forex Dealer
• the gross amount of currency exchanged for an
Amount in Rs.
Minimum
Up to 100,000
25
100,000 to 10,00,000 Rs. 100
Above 10,00,000
21.01.2012
Maximum
0.1%
Rs 100+
0.05%
Rs. 550+ 0.01% 5,000
CA Manish Gadia
48
Foreign Currency
• RBI reference rate is available
units of foreign currency exchanged multiplied by
the difference in the RBI reference rate for that
currency for that day and the buying rate or the
selling rate.
• RBI reference rate is not available
the value will be 1% of amount in Indian National
Rupees that has been bought or sold.
• Neither of the currencies exchanged is INR
the value shall be equal to 1% of the lesser of the
two amounts
21.01.2012
CA Manish Gadia
49
Transport of passenger by Air
Service
From 1st April,
2011
Rs. 100 Per Rs. 150 Per
Journey
Journey
Domestic (other than Rs. 100 Per 10% on Value
Economy)
Journey
of Ticket
International (Economy) Rs. 500 Per Rs. 750 Per
Journey
Journey
Sr Particulars
No
1 Domestic (Economy)
2
3
21.01.2012
Existing
How to Disclose in the
Return
CA Manish Gadia
50
Composition Schemes
Air Travel Agent
21.01.2012
Life Insurance
CA Manish Gadia
51
Optional Composition Scheme
Rate of Tax: 4% on the
gross amount charged
Gross amount Charged =
Value of Goods used
+ Value of service
– VAT/CST
- Cost of M/C & Tools used
CENVAT
Inputs: No
Input Service: Yes
Capital Goods: Yes
21.01.2012
CA Manish Gadia
52
Gross amount charged is
inclusive of Service Tax
When the service provided is inclusive of
service tax payable, the value of such
taxable service would be:
Value of
= Gross amount charged * 100
taxable service
110.30
Gem Star Enterprises P. Ltd
v. CCE & C, Calicut
2007 (7) STR 342 (Tri.- Bang.)
21.01.2012
CA Manish Gadia
53
Power of CEO
call for information and documents
by issuing Show Cause notice
to satisfy himself
After giving reasonable opportunity of being
heard
he may determine the value of taxable
service
AC/DC written instruction for verification
 Show cause notice after commissioner
approval
21.01.2012
Para 4.1.6 of F.No.
CA
Manish Gadia – TRU 19-4-6
B1/4/2006
54
Value of Taxable Service
Inclusions:
All expenditure or costs
Telecommunication
Exclusion:
All expenditure or cost incurred by
service provider as a pure agent
subject to certain conditions
21.01.2012
CA Manish Gadia
55
Pure Agent
enters into a contractual agreement
neither intends to hold nor holds any
title to the goods or services
does not use such goods or services
so procured
receives only the actual amount
21.01.2012
CA Manish Gadia
56
Exclusion from Value of
Taxable Service
 Conditions for exclusion from the value
 acts as a pure agent while making payment
 recipient of service receives and uses the goods or
services so procured
 recipient of service is liable to make payment to the third
party
 authorises
 Knows payment has been made
 separately indicated in the invoice
 Actual amount to be recovered
 are in addition to the services he provides
21.01.2012
CA Manish Gadia
57
Commission, costs, etc.,
will be included or excluded
Cases which were listed in Rule 6(1) &
(2) were almost similar, except
The cost of unexposed film, unrecorded
magnetic tape sold
The cost of sale of material sold
Notificatio
n No.
12/2003
ST 20-621.01.2012
03
BSNL V.
UOI 2006
(2) STR
Manish Gadia
161CA(SC)
Imagic
Creative P. Ltd
V. CCT 2008
(9) STR 337
(SC)
58
Value where Taxable Service
provided from outside
• value of service would be actual amount of
consideration charged for the service
provided or to be provided.
• Where the services listed in Rule 3(ii) of the
Taxation of Services (Provided from Outside
India and Received in India) Rules, 2006
are performed partly in India.
• value of service would be =
total consideration paid by the recipient +
the value of service partly performed
outside India.
21.01.2012
CA Manish Gadia
59
Issues
21.01.2012
CA Manish Gadia
60
Issues
 Vivah charitable trust provides Hall for
marriages on rental basis and issues
receipt of Rs, 25,000 towards rental for
marriage function and Rs. 75,000/towards donation to the corpus of the trust.
The trustees of the trust now wants to
know on which amount it should pay the
service tax?
21.01.2012
Cultural Society of angamally V.
CCE Chochin
2007 (8) STR 25
CA Manish Gadia
(Tri-Bang)
61
Issues
 Online Stock Broking Ltd. (OSBL) is a brokerage house.
OSBL charges following charges to its clients and such
charges were separately disclosed in the bill or invoice
issued to their clients.
Brokerage
0.500%
Other Charges
0.005%
Transaction Charges
0.010%
Stamp Duty & STT
0.076%
Up to 17.04.2006, Company was paying service tax only on
Brokerage. Management wants to know, out of the above
component, which component would now attract service
tax?
21.01.2012
First Securities Pvt. Ltd. V. CST, Bangalore
2007
(7) STR
CA Manish
Gadia 690 (Tri-Bang)
62
Issues
Aditya College of Competitive Exams
Vs CCE, Visakhapatnam [2009(16)
STR154 (Tri. Bang)]
 Smart Coaching Classes provides coaching
to Standard V to Standard X. They incur
expenditure towards books, class bag &
food. Theses charges they recover
separately from every student, while they
recover coaching fees. Management is of
the view that service tax would be attracted
only on the coaching fees and not on the
charges recovered for books, bag & food
Circular No. 59/8/2003 ST., Dt 20-6-03
21.01.2012
CA Manish Gadia
63
•
Issue
M/s Tyrevala is engaged in the business of
retreading old used tyres. During the course of
retreading, material such as tread rubber,
vulcanizing solution is used. M/s Tyrevala
collected Rs. 10 Lakhs towards retreading
charges from its customers which included
Rs. 6 Lakhs towards material used in
retreading. What will be the Service Tax
liability of Tyrevala?
Chkita Rajni Udyam Vs CCE, Cus
&ST, Mysore [2009(16)STR 172 (Tri.Bang)
21.01.2012
CA Manish Gadia
64
Questions
21.01.2012
19-3-2011
CA
CAManish
Manish Gadia
Gadia
65 65
Opinions or views
are like wrist
watches.
Every watch shows
different time from
others.
But every one
believes that their
time is right!
21.01.2012
CA Manish Gadia
66
CA Manish Gadia
Ph : (022) 61919200
Email: manish@gmj.co.in
21.01.2012
CA Manish Gadia
67