RAIPUR BRANCH OF CIRC OF ICAI
Saturday, 30th May, 2015
COMPLIANCES UNDER SERVICE TAX
BY CA YASH DHADDA, JAIPUR
COMPLIANCES IN
SERVICE TAX
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CHANGE IN RATE OF SERVICE TAX
Point of Difference
Till 31-5-2015
From 1-6-2015
(Noti-14/2015-ST)
Rate of Service Tax (Sec 66B)
12 %
14%
Swachh Bharat Cess **
(vide Ch VI of Finance Bill 2015)
Nil
2%** on all or any
Taxable Services
Education Cess
(vide FA 2004)
2%
Nil
Secondary & Higher Education Cess
(vide FA 2007)
1%
Nil
Effective Rate of ST
12.36%
14%
Date of Implementation
Swachh Bharat Cess ** (vide Ch VI of Finance Bill 2015) = 2%** on all or any
3
Taxable Services (Not Notified Yet)
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SWACHH BHARAT CESS
Issues:
1. Shall SBC be applicable on all services?
2. It will be applicable on taxable value of services or on
value of taxable service?
3. Will is be available as CENVAT Credit?
Chapter VI Clause 117(2) : There shall be levied and collected in accordance
with the provisions of this Chapter, a cess to be called the Swachh Bharat
Cess, as service tax on all or any of the taxable services at the rate of two
per cent. on the value of such services for the purposes of financing and
promoting Swachh Bharat initiatives or for any other purpose relating thereto.
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EASING REGISTRATION
WELCOME CHANGES
EASE OF DOING BUSINESS
Order No 1/2015-Service Tax w.e.f 01.03.2015
Procedure for filing of registration applications for SINGLE PREMISES,
File the application online on(ACES) website
www.aces.gov.in in Form ST-1.
(PAN mandatory for registration except for Government Deptt )
-On successful filing of complete application, registration would
be granted online in 2 days.
-Applicant would be enabled to pay tax with such online
registration.
-Downloaded Registration from ACES shall be valid reg.
Self attested copy of specified documents to be
submitted within 7 days of filing of ST-1 in concerned
Division for verification purpose.
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DOCUMENTS RQEUIRED
• Copy of the PAN Card of the proprietor or the legal entity registered.
• Photograph and proof of identity of the person filing the application
• Document to establish possession of the premises to be registered
• Details of the main Bank Account.
• Memorandum/Articles of Association/List of Directors.
• Authorisation by the Board of Directors/Partners/Proprietor Business
transaction numbers obtained from other Government departments
or agencies
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PRECAUIONARY ALSO SUBMIT
• A brief note about the nature of business.
• A list of documents & records to be
maintained.
• A brief note about the exemptions to be
claimed.
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Registration
WHO IS LIABLE FOR REGISTRATION
Section 69 read with Rule 4 of Service Tax Rules
Person Liable to pay Service Tax
Person providing a taxable service and aggregate
value of taxable service in a F.Y. has crossed Rs 9
lacs
Input Service Distributer
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TYPES OF REGISTRATION
Single Premise Registration
Centralized Registration
Input Service Distributer
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ISSUES:
1. Whether category of service under which service recipient is liable to pay
tax is to be mentioned in the RC of Service Tax?
Yes, same has to mentioned. Else service tax return for that category
cannot be filed.
2. A service provider is providing a service which is exempt under service
tax is registration mandatory ?
No.
3. An individual receives commission in Individual name and rent in name of
its proprietorship concern. Should it take a single registration for same?
It should take separate registration for proprietorship concern and
Individual.
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ISSUES:
1. Whether declaration is to be submitted of not crossing turnover of Rs 9
lacs or not claiming SSI Exemption?
No such requirement envisaged in list of documents required for
verification purposes. Hence not required.
2. Whether audited financial statements are compulsorily required to be
submitted?
No such requirement envisaged in list of documents required for
verification purposes. Hence not required.
3. If registration granted, tax deposited and later registration is revoked?
Whether adjustment of tax in new registration code shall be allowed?
Currently there is no such mechanism existing
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TIME LIMIT FOR ISSUING RC
- Except Single Premise Registration:
• 7 days from date of making application
-What if RC is not issued within 7 days?
• Deemed Registration
- Practical Issue- Payment of Service Tax?
• Not possible due to e-payment being mandatory.
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REGISTRATION
• Amendment in Certificate
• Changes must be informed within 30 days
• Intimation in writing to jurisdictional AC or DC.
• Transferability of Certificate
• Non- Transferable
•
•
•
•
•
•
•
New Certificate is must in following situations :
Proprietorship concern is changed to partnership concern and vice versa
Proprietorship concern is changed to company
Where business is inherited
Division of HUF
Merger or Demerger
Sale or lease of business
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SURRENDER OF REGISTRATION
• Surrender of Certificate
• If ceased to provide taxable service
• An online application along with letter and last filed returns
• What is to be done before Surrender?
• Pay all taxes and File all returns
•
•
•
•
Situation for Surrender of Certificate
Value of Taxable service is less than 9 Lakhs
Closure of Business
Merger with another entity.
Can department ask for an affidavit at time of surrender?
It is not mentioned anywhere in the statue. But practically they do ask for it.
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PAYMENT OF SERVICE TAX
• Periodicity of payment
Category of assessee
Periodicity of payment
In case of Individual, proprietorship,
partnership firm, LLP
Quarterly
Other assessees
Monthly
• Due date of payment
Payment is to be made electronically only
6th of next month/ next month
of the quarter
In case month/quarter ending 31st March
31st March
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IS SERVICE RECEIVER LIABLE TO PAY ST
TO SERVICE PROVIDER?
• BHAGWATI SECURITY SERVICES (REGD.)
• Versus
• UNION OF INDIA
• 2013 (31) S.T.R. 537 (All.)
• Reimbursement of Service Tax - Security services provided by
petitioner to BSNL under agreement - Petitioner deposited
Service Tax with the Government and applied before
respondent for reimbursement of Service Tax which was
denied on the ground that same was not contemplated in the
agreement - Service Tax is statutory liability - Statute is
imposing the tax upon the person to whom service is being
provided and the service provider is merely a collecting
agency - Respondent No. 2 directed to make reimbursement
of Service Tax to petitioner. [paras 5, 7]
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POINT OF TAXATION-SPECIFIC CATEGORIES
• Point of taxation is the date of payment for individuals and
partnership firms (including LLP) up to a turnover of Rs 50 Lac in a
financial year provided the taxable turnover did not exceed this
limit in the previous financial year.
• The point of taxation in respect of the persons required to pay tax
as recipients of service shall be the date on which payment is
made.
• where the payment is not made within a period of three months of
the date of invoice, the point of taxation shall be determined as if
this rule does not exist.
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PAYMENT UNDER SPECIFIED CODES
• Circular No. 165/16/2012-S.T., dated 20-11-2012.
• Post Negative Lit Regime also, Service Tax has to be
paid under Specific Code as mentioned in the
circular.
• Reason:
• For Statistical Purpose of Department.
• For deciding Abatements/Exemptions/Taxability.
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ISSUES
• Service Tax is paid under Wrong accounting Code? Will
it be treated as valid tax paid?
• Commissionerate of Service Tax -I Trade Notice No.
21/13-14-ST-I, Dated: March 11, 2014 (Mumbai)
• Can be rectified as the assessee should inform Deputy
Commissioner (Technical], in writing along with copy of
Service Tax payment Challan and by giving information
in a prescribed format.
• Service Tax is paid under Wrong assessee Code? Will it
be treated as valid tax paid?
• No. It shall be treated as Service Tax not paid.
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SSI EXEMPTION
No requirement to pay Service Tax in CY
upto Rs 10 lacs
• If
In previous F.Y. Value of
taxable service provided
is less than Rs 10 lacs
• and
Service not provided under
a Brand Name
&
CENVAT not availed till
exemption is claimed.
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ISSUES
Nature of Service
Works Contract Service
Total amount received in Current
Year
27 lacs
Total amount received in Previous
Year
24 lacs
Abatement
60%
Value on Service Tax levaible
40%
Is SSI exemption available in this case ?
Yes, Because under Determination of Value Rules 2006, the taxable value for
the purpose of service tax is value after abatement.
Mechanism : PY = 24*40% = 9.6 Lacs = Value of Taxable Service
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CY = 27*40% = 10.8
Lacs&–Co10 Lacs = 80000 = Taxable Value 23
ISSUES
Nature of Service
Construction Service
Total amount received in Current
Year
45 lacs
Total amount received in Previous
Year
37 lacs
Abatement
75%
Value on Service Tax levaible
25%
Is SSI exemption available in this case ?
No, because under Notification 26/2012-ST, the taxable value does not
change. Only conditional exemption is provided.
Mechanism : PY = 45-10 = 35 *25% = 8.75 lacs (ST payable on this value)
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Co payable on this value)
CY = 37*25% = 9.25
Lacs&(ST
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ISSUE (SSI EXEMPTION VS COOWNERSHIP)
• Mr. Raj Kishore, Mrs. Raj Kishore, Mr. Anil Kishore and Ms. Reeta Kishore
are co-owners of a property which has been let out to a bank. The
total monthly rent is ` 3,00,000/- per month. In terms of the agreement
the tenant agrees that he is paying the rent to all the four co-owners
but through a single cheque to Mr. Raj Kishore. Raj Kishore also agrees
that he is collecting the rent for himself as well as for and on behalf of
the other three owners. The cheque is banked in a specific bank
account where automatic transfer instructions are given and the
respective rents are transferred to the other account holders. All four
claim the basic threshold exemption. The Department wants to levy
tax on the entire rental by taking a position that an association of
persons has been created. Advise.
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INVOICES- RULE 4A & 4B
 Every person providing taxable service shall
Issue
Invoice
not later than 30 days from
date of completion or receipt of
payment
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CONTENTS OF INVOICE
Such invoice/bill/challan shall be serially numbered and
shall contain the following:
• The name, address and the registration no. of such
person;
• The name and address of the person receiving taxable
service;
• Description and value of taxable service provided or
agreed to be provided ; and
• The service tax payable thereon.
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EASE OF DOING BUSINESS
RULE 4C OF SERVICE TAX RULES 1994
DIGITAILY SIGNED INVOICES
Authentication by digital signature(1) Any invoice, bill or challan issued under rule 4A or
(2) consignment note issued under rule 4B
may be authenticated by means of a digital signature.
Benefit : CENVAT Credit shall be allowed on basis of such invoices.
RULE 5 OF SERVICE TAX RULES 1994: RECORDS
Records as required under Rule 5 may be preserved in electronic form and
every page of the record so preserved shall be authenticated by means of a
digital signature.
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FILING OF RETURN
Period of Delay
Penalty
Upto 15 days
Rs. 500/-
More than 15 days
but upto 30 days
Rs 1,000/-
More than 30 days
Rs. 1,000/- + Rs 100/- per day for every
day from the 30 days till the date of filing
of the return (Maximum Penalty can be
Rs 20,000/-)
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REVISION OF RETURN – RULE 7B
• A return in ST-3 to correct a mistake or omission
within a period of 90 days from the date of
submission of return under rule 7.
Explanation: Where an assessee submits a revise
return the relevant date for the purpose of recovery
of service tax under section 73 of the act shall be
date of submission of such revise return.
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RETURN NOT FILED/LATE FILED
• Whether penalty can be waived under Rule 7 of STR
• It is late fees or penalty?
• It is required to be paid at time of filing of return?
• Is it required to be paid when return is not filed
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NO SERCVICE TAX LIABILITY-RETURN
• Is return compulsorily required to be filed in case of
NIL tax liability?
• Rule 7C (Proviso) of STR provides a waiver, if
satisfactory reason is provided by assessee
• Kolkata Tribunal Decision in case of Suchak
Marketing (36 STR)
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STRINGENT COMPLIANCE
INTEREST RATE ON LATE PAYMENT OF
SERVICE TAX
N/No.: 12/2014 w.e.f. 01/10/2014 – Rule 6
To encourage prompt payment of service tax, it is being proposed to introduce
interest rates which would vary on the extent of delay. Simple interest rates per
annum payable on delayed payments under section 75, are prescribed as
follows:
Extent Of Delay
Simple interest rate per annum
Up to six months
18%
More than six months &
up to one year
18% for first six months, and 24% for the
period of delay beyond six months
More than one year
18% for first six months, 24% for second six
months, and 30% for the period of delay
beyond one year
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PENALTIES UNDER SERVICE TAX
Section
76
Section 80Bonafide belief
has been
Scrapped
Section
77
Section
78
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SECTION 77-PENALTIES
Contravention
Amount of penalty
Penalty for failure to take registration [Sec.
77 (1)(a)]
Upto Rs 10,000/-
Penalty for failure to keep books of
accounts [Sec. 77 (1)(b)]
Upto Rs 10,000/-
Penalty for failure to furnish
information/produce document/appear
before officer [Sec.77 (1)(c)]
Extend to Rs 10,000/- or Rs
200/- per day (Which ever is
higher)
Penalty for failure to pay the tax
electronically[Sec. 77 (1)(d)]
Upto Rs 10,000/-
Penalty for issuance of invoice with
incorrect details [Sec. 77 (1)(e)]
Upto Rs 10,000/-
Penalty for contravention of rules and
provisions of act for which no penalty is
specified elsewhere [Sec. 77(2)]
Upto Rs 10,000/-
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RATIONALIZING PENALTY PROVISIONS
Section 76
Section 78
Cases where Service Tax is not paid due
to reasons other than fraud or collusion
or wilful mis-statement or
suppression of facts or contravention
with the intent to evade payment of
service tax.
Cases where Service Tax is not paid
due to reasons of fraud or collusion or
wilful mis-statement or suppression of
facts or contravention with the intent to
evade payment of service tax
Maximum Penalty =
10% of Service Tax Amount
Maximum Penalty = Penalty leviable
100% of Service Tax Amount (Shall
always be demanded as 100% of tax)
Minimum Penalty= NIL, if service tax
and interest is paid within 30 days of
service of notice.
Minimum Penalty= 15% of Service Tax
Amount, if service tax + interest +
15% of Service Tax as penalty is paid
within 30 days of service of notice.
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RATIONALIZING PENALTY PROVISIONS
Section 76
Section 78
Reduced Penalty = 25% of Penalty
imposed by CE officer if:
• Service Tax +
• Interest +
• 25% of Penalty imposed
is paid within 30 days from receipt of
order of Central Excise Officer.
Reduced Penalty = 25% of Service Tax
demanded by CE officer if:
• Service Tax +
• Interest +
• 25% of Service Tax demanded
is paid within 30 days from receipt of
order of Central Excise Officer.
At Appellate forums, if service tax
demand is modified, the penalty will
also be modified accordingly.
At Appellate forums, if service tax
demand is modified, the penalty will also
be modified accordingly.
Benefit of reduced penalty against
appellate orders shall be available like
above.
Benefit of reduced penalty against
appellate orders shall be available like
above.
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TRANSITION PROVISION FOR PENALTY
SECTION: 78B
New Sec 76 and 78
shall be applicable
to cases where
Old Sec 73(4A) shall
be applicable to
cases where
No SCN has been Served
before date of enactment
of FA 2015
SCN has been Served
before date of enactment
of FA 2015
SCN has been served but
no order ha been passed
before date of enactment
of FA 2015
SCN has been served but no
order ha been passed
before date of enactment of
FA 2015
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OMMISSION OF SECTION 80
SECTION 80: Penalty not to be imposed in certain cases.
EXISTING PROVISION
[(1)] Notwithstanding anything contained in the provisions of section 76, [ or
section 77], no penalty shall be imposable on the assessee for any failure
referred to in the said provisions if the assessee proves that there was
reasonable cause for the said failure.
IMPLICATION
•
•
•
•
•
•
Now, in following cases benefit of reasonable cause cannot be taken
Failing to take registration when required or fails to pay tax.
Fails to keep, maintain or retain books of account and other documents.
Fails to furnish information, produce documents, appear against summons
Fails to pay tax electronically, through internet banking
Fails to issue correct or complete invoice or fails to account for invoice
General Failure not specified in any specific provision
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BONA FIDE BELIEF STILL VAILD ?
• CEMENT MARKETING CO. OF INDIA LTD. Versus ASSISTANT COMMISIONER OF SALES TAX
1980 (6) E.L.T. 295 (S.C.)
• Amounts and Returns - False return - A return cannot be false unless there is
an element of declaration.
• - If the assessee entertained belief that he was not liable to include the
amount of freight in the taxable turnover, it could not be said to be mala fide
or unreasonable nor it can be dubbed as frivolous contention taken up
merely for the purpose of avoiding liability to pay tax. What the law requires is
that the assessee should not have filed a false return. A return cannot be said
to be `false’ unless there is an element of deliberation in it. It is true that where
the incorrectness of the return is claimed to be due to want of care on the
part of assessee and there is no reasonable explanation forthcoming from him
for such want of care, the court may in a given case infer deliberateness and
the return may be treated as a false return. But, where the assessee does not
include a particular item in the taxable turnover under a bona fide belief that
he is not liable so to include it, it would not be right to brand the return as a
`false return’ inviting penalty. [para
5] & Co
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CERTAIN PROVISIONS OF EXCISE
APPLICABLE TO SERVICE TAX
SECTION: 35F of Central Excise Act, 1944
.
NEW PROVISION
Section 35F of the Central Excise Act is now being substituted with a new section
which prescribes a mandatory fixed pre-deposit of 7.5% of the duty demanded or
penalty imposed or both, for filing appeal before the Commissioner (Appeals)
or the Tribunal at the first stage and 10% of the duty demanded or penalty
imposed or both, for filing the second stage appeal before the Tribunal. The
amount of predeposit payable would be subject to a ceiling of Rs.10 Crore. All
pending appeals/stay applications would be governed by the statutory provisions
prevailing at the time of filing such stay applications/appeals. When the amended
section 35F in the Central Excise Act comes into force, it would, mutatis mutandis,
apply to service tax by virtue of section 83 of the Finance Act, 1994.
IMPLICATION
Mandatory pre deposit is required for appeal to appellate authority.
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ISSUE
PRE DEPOSIT ?
• What does the word “or” means?
• Can assessee pay only tax demanded and apply for grant
of waiver ?
• Whether it is 7.5% at Cx (A) and 17.5% at CESTAT?
• What if the amount is not deposited with appeal ? Can it be
deposited before hearing ?
• What if assessee only appeals for part of demand ? 7.5%
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of only that part which is appealed?
WHAT WILL HAPPEN NOW?
• SCN issued on 1-6-2015 for levy of service tax on
Supply of Tangible Goods
• Service Tax =Rs 20 lacs
• Interest + Penalty under Section 76, 77 & 78.
• Period from 1-10-2009 to 30-9-2014 (i.e. 5 years)
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WHAT WILL HAPPEN NOW?
•
•
•
•
Chain of Events:
Reply to Show Cause Notice on 30-6-2015
Hearing before AC = After 1 years
Case decided against assessee on 30-6-2016.
•
•
•
•
Total Demand :
Service Tax = Rs 20 lacs
Interest = Rs 16.2 lacs
Penalty = Rs 20 lacs
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WHAT WILL HAPPEN NOW?
•
•
•
•
•
•
Chain of Events:
Going for Appeal to Commissioner Appeals
Deposit 7.5% of Tax + Penalty = Rs 3 lacs
Appeal filed on 29-8-2016
Hearing before Cx (A)= After 2 years
Order against assessee = 30-8-2018
•
•
•
•
Total Amount Due
Tax = Rs 20 lacs
Interest = Rs 28 lacs
Penalty = Rs 20 lacs
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WHAT WILL HAPPEN NOW?
• Chain of Events:
• Going for Appeal to CESTAT
• Deposit 10% of Tax + Penalty = Rs 4 lacs (Additional
= Rs 1 lac)
• Appeal filed on 29-11-2018
• Hearing before CESTAT= After 2 years
• Order against assessee = 30-11-2020
• Total Amount Due
• Tax = Rs 20 lacs
• Interest = Rs 43 lacs
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WHAT WILL HAPPEN NOW?
End Result = Rs 83 lac total liability. (Against 20 lacs)
Penalty cannot be waived.
Interest becomes more than Tax Payable
Mandatory Pre-Deposit.
If for subsequent period tax is not deposited then the
risk for further period increases.
• If for subsequent period tax is deposited then the
given case becomes weak.
•
•
•
•
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STRINGENT COMPLIANCE MECHANISM
Section 73: Recovery of service tax not levied or paid or
short-levied or short-paid or erroneously refunded.
Section 73(4A): (Omitted)
• Where during the course of any audit, investigation or verification, it is found
• Any service tax has not been levied or paid or erroneously refunded, but
• the true and complete details of transactions are available in the specified
records,
• the person chargeable to service tax pays the service tax along with interest
and penalty equal to 1% of such tax, for each month, up to a maximum of
25%. of the tax amount,
• before service of notice on him and inform the Central Excise Officer of such
payment in writing,
• No notice shall be served in respect of the amount so paid and proceedings
in respect of the said amount of service tax shall be deemed to have been
concluded.
Implication : Merged with Section 76 of the Act
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ADJUSTMENT OF EXCESS AMOUNT PAID
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SECTION 15A OF CENTRAL EXCISE ACT
• Section 15A is being inserted so as to empower the
Central Government to prescribe an authority or
agency to whom the information return shall be
filed by the specified persons such as
• Income Tax Authorities,
• State Electricity Boards,
• VAT or Sales Tax Authorities,
• Registrar of Companies.
• Information can be collected for the purposes of
the Act, such as, to identify tax evaders or recover
confirmed dues. It is also proposed to insert a new
section
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BUT ROVING SUMMONS ?
• Circular No : F. No. 207/07/2014-CX-6 dated 20.01.2015.
• It has been brought to the notice of the Board that in some
instances, the summons under Section 14 of the Central Excise
Act, 1944 have been issued by the field formations to the top
senior officials of the companies in a routine manner to call
for material evidence/ documents. Besides, summons have
been issued to enforce recovery of dues, which are under
dispute.
• It is desirable that summons need not always be issued when
a simple letter, politely worded, can also serve the purpose of
securing documents relevant to investigation. It is emphasized
that the use of summons be made only as a last resort when it
is absolutely required.
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LITTLE
EASE OF DOING BUSINESS
Rule 4– Time Limit of taking CENVAT on Input Services
EXISITING RULE
RULE 4 (7).
Provided also that the manufacturer or the provider of output
service shall not take CENVAT credit after six months of the date of issue of
any of the documents specified in sub-rule (1) of rule 9
AMENDEMENT IN RULE (w.e.f. 1-3-2015)
"Provided also that the manufacturer or the provider of output service shall not take
CENVAT credit after 1 year of the date of issue of any of the documents
specified in sub-rule (1) of rule 9".
IMPLICATION
Restriction on time limit for availing CENVAT Credit of Inputs reduced from 6
months to 1 year.
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ISSUE
Should these provisions be applicable for all the invoices
issued before 1-9-2014 of which CENVAT was not taken
before 1-9-2014, when the restriction to CENVAT Credit was
not there ?
Yes, in light of OSRAM SURYA (P) LTD. Vs C. Cex, Indore 2002 (142)
ELT 5 (SC) : (In relation to CE Rules 1944)
Amendment does not take away any vested right but merely
introduces limitations for availment of credit - Amendment is not
retrospective in operation since it does not cancel the credit nor
does it effect the right of the persons who have already taken
credit
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EASE OF DOING BUSINESS
CENVAT Credit of Service Tax paid under RCM
Particulars
Existing Rule
Amended Rule (w.e.f. 1-3-15)
Under 100% RCM
On payment of Service Tax
time of taking credit
On payment of Service Tax
Under Partial RCM When whole ST (in
time of taking credit invoice and RCM) +
invoice amount is paid
For RCM: When ST payable
as receiver of service is paid.
For ST in invoice: Date of
receipt of invoice
If ST or invoice
amount not paid
within 3 months
Under Partial RCM: Only
CENVAT to the extent of ST
mentioned in invoice to be
reversed.
Under Partial RCM: Whole
CENAVT to be reversed.
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ALINGMENT WITH GST
STRONG INDICATIONS OF GETTING READY
INCREASING THE SERVICE TAX BASE
SECTION 66D: NEGATIVE LIST
EXISTING PROVISION
Section 66D(a) services by Government or a local authority excluding the
following services to the extent they are not covered elsewhere—
(i)
services by……….;
(ii)
services in………. ;
(iii)
transport………….; or
(iv)
support services, other than services covered under clauses (i) to (iii)
above, provided to business entities;
NEW PROVISION
Section 66D(a)(iv) : any services, other than services covered under clauses (i) to
(iii) above, provided to business entities
IMPLICATION
All services provided by the Government or local authority to a business entity,
except the services that are specifically exempted, or covered by any another
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entry in the Negative List, shall be liable to service tax.
INCREASING THE SERVICE TAX BASE
Government Defined – Section 65(B)(26A)
NEW Definition
Government” means the
• Departments of the Central Government,
• a State Government and its Departments and
• a Union territory and its Departments,
but shall not include any entity, whether created by a statute or otherwise, the
accounts of which are not required to be kept in accordance with article 150 of the
Constitution or the rules made thereunder;
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ISSUE
• Security Services provided by police for an additional
consideration?
Not Taxable
• Mining Rights provided by Government?
Not Taxable
• Fees paid to Ministry of Corporate Affairs
Not Taxable
• Debris Charges paid by Builders?
Taxable
Explanation 1(B) to definition of service : (B) the duties performed by any
person who holds any post in pursuance of the provisions of the
Constitution in that capacity
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59
INCREASING THE SERVICE TAX BASE
Notification No 25/2012-ST : Servies to Government
EXISTING CLAUSE
12. Services provided to the Government, a local authority or a governmental authority by
way of construction, erection, commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of –
a)
(b)
(c)
(d)
(e)
(f)
a civil structure or any other original works meant predominantly for use
other than for commerce, industry, or any other business or profession;
a historical monument, archaeological site or remains of national
importance, archaeological excavation, or antiquity specified under the Ancient
Monuments and Archaeological Sites and Remains Act, 1958;
a structure meant predominantly for use as (i) an educational, (ii) a clinical,
or (iii) an art or cultural establishment;
canal, dam or other irrigation works;
pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage
treatment or disposal; or
a residential complex predominantly meant for self-use or the use of their
employees or other persons specified in the Explanation 1 to clause 44 of
60
section 65B of the said Act;
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INCREASING THE SERVICE TAX BASE
Notification No 25/2012-ST : Servies to Government
NEW CLAUSE (w.e.f. 1st April, 2015)
12. Services provided to the Government, a local authority or a governmental
authority by way of construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance, renovation, or alteration of –
(Following Clauses to be omitted)
(a)
a civil structure or any other original works meant predominantly for use
other than for commerce, industry, or any other business or profession;
(c)
a structure meant predominantly for use as (i) an educational, (ii) a
clinical, or (iii) an art or cultural establishment;
(f)
a residential complex predominantly meant for self-use or the use of
their employees or other persons specified in the Explanation 1 to
clause 44 of section 65B of the said Act;
61
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ISSUES
• Construction of building for Service Tax Department
Taxable
• Construction of Government Schools
Taxable
• Construction of Bungalow for Government officers
Exempt, Single Residential Unit
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62
VALUATION
CONCEPT OF CONSIDERATION
Section 67: Valuation of taxable services for charging
service tax
Explanation : Consideration includes
(i) any amount that is payable for the taxable services provided or to be provided;
(ii) any reimbursable expenditure or cost incurred by the service provider
and charged, in the course of providing or agreeing to provide a taxable
service, except in such circumstances, and subject to such conditions, as
may be prescribed; (Decision INTERCONTINENTAL CONSULTANTS &
TECHNOCRATS PVT. LTD.)
(iii) any amount retained by the lottery distributor or selling agent from gross
sale amount of lottery ticket in addition to the fee or commission, if any, or,
as the case may be, the discount received, that is to say, the difference in the
face value of lottery ticket and the price at which the distributor or selling agent
64
gets such ticket.’. (Decision of MARTIN LOTTERY AGENCIES LTD).
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RATIONALIZTAION OF ABATEMENTS
Description of Service
Old Taxable Value
New Taxable Value
Services of goods transport agency in 25%
relation to transportation of goods.
30%
Services provided in relation to chit
70%
100%
(CENVAT allowed)
Transport of goods in a vessel
40%
30%
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65
EXPANDING REVERSE CHARGE MECHANISM
(APPLICABLE FROM 1.4.2015)
Particulars
% of ST
payable by
person
providing the
service
% of ST
payable by any
person liable
for paying ST
other than SP
Services by a mutual fund agent or distributor,
to a mutual fund or asset management
company
NIL
100%
Service by a selling or marketing agent of
lottery tickets to a lottery distributor or selling
agent
NIL
100%
Services by way of supply of manpower for
any purpose or Security Service
25%
NIL
75%
100%
Services by Government or local authority by
way of support services excluding…..
(applicable from date notified after© Dhadda & Co
enactment of FA 15)
NIL
100%
(Business Entity)
66
ISSUE-1 (MANPOWER SUPPLY VS
LABOUR CONTRACT)
• A company hires a contractor to do a specific work at
their factory (with use of his own labor, whose salary is
paid by contractor only). The work is an integral
production process and payment is made to contractor
on piece-rate basis. The work is done on machinery of
company only. The quality of work is responsibility of
contractor only. Whether it shall constitute as manpower
supply service by contractor or a specific job work?
Whether
Reverse Charge
Mechanism shall
be
applicable?
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ISSUE-2 (DIRECTORSHIP SERVICES)
• A company has Mr X as Director in the company who
looks after day to day affairs of business. His is paid Rs. 2
lacs per month as remuneration along with 2% of turnover
as remuneration. TDS on his remuneration is deducted
under Section 192 of the Income Tax Act 1961. Service Tax
department is insisting on depositing service tax on such
remuneration paid by company under reverse charge
mechanism.
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ISSUE-3 (GTA SERVICES)
• A partnership firm M/s B in Bikaner has purchased few
goods from a dealer M/s X, based outside Rajasthan. The
goods are being sent by dealer in truck through road.
The freight has been paid by M/s X and same has been
charged in bill by Ms X to M/s B in purchase invoice.
• Service Tax department is asking for service tax on full
value (without abatement) from M/s B of Bikaner.
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ISSUE-4 (A) (WORKS CONTRACT
SERVICES)
• M/s. N Ltd. has been engaged by a cement factory for putting up a new
factory in Bikener. The total contract value is ` 5 crores. The contract value
excludes cement which would be supplied free of cost by the client. The
Department is of the view that the value of the cement supplied free of cost
should be included in the contract value in terms of the new service tax
regime introduced from 1-7-2012.
For Rule 2A of Determination of Value Rules 2006 for works contract:
(b) “total amount” means the sum total of the gross amount charged
for the works contract and the fair market value of all goods and services
supplied in or in relation to the execution of the works contract, whether
or not supplied under the same contract or any other contract, after
deducting(i)
the amount charged for such goods or services, if any; and
7
(ii) ©the
value added tax or sales tax, if any, levied thereon :
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0
Provided that the fair market value of goods and services so supplied
may be determined in accordance with the generally accepted
ISSUE-6 (IMPORT OF SERVICE-FOREIGN
BANK CHARGES)
• ABC Ltd an Indian Co is engaged in manufacturing and export of
handicrafts from India. Sale consideration is received by it in foreign
currency. The payment is send by buyer in foreign currency through his
bank in UK which in turn charges bank charges from buyer. Then it
intimates the Indian bank of ABC Ltd and remits the payment to such
bank after deduction of some charges from total payment. The Indian
Bank in turn informs the ABC Ltd about the payment and remits the
amount after deduction of two types of charges
 Recovery of charges which it paid to Foreign Bank in Foreign
Currency.
 Own charges leviable for facilitating such payments.
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